4. Investments

Available-for-Sale securities distributed by type were as follows:

	March 31, 2013
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,725	$	2,005	$	(10	)	$	16,720	$	2
Residential mortgage backed securities	3,419		210		(52		)	3,577		(21		)
Commercial mortgage backed securities	2,578		248		(1		)	2,825		—
State and municipal obligations	967		178		(28		)	1,117		—
Asset backed securities	797		72		(2		)	867		—
Foreign government bonds and obligations	184		30		—			214		—
U.S. government and agencies obligations	41		7		—			48		—
Total fixed maturities	22,711		2,750		(93		)	25,368		(19		)
Common stocks	2		2		—			4		1
Total	$	22,713	$	2,752	$	(93	)	$	25,372	$	(18	)

	December 31, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,881	$	2,167	$	(7	)	$	17,041	$	—
Residential mortgage backed securities	3,446		233		(58		)	3,621		(24		)
Commercial mortgage backed securities	2,717		287		—			3,004		—
State and municipal obligations	976		180		(34		)	1,122		—
Asset backed securities	808		66		(3		)	871		—
Foreign government bonds and obligations	188		36		—			224		—
U.S. government and agencies obligations	42		7		—			49		—
Total fixed maturities	23,058		2,976		(102		)	25,932		(24		)
Common stocks	2		2		—			4		1
Total	$	23,060	$	2,978	$	(102	)	$	25,936	$	(23	)

(1) Represents the amount of other-than-temporary impairment (“OTTI”) losses in accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities subsequent to the initial impairment measurement date. These amounts are included in gross unrealized gains and losses as of the end of the period.

At both March 31, 2013 and December 31, 2012, fixed maturity securities comprised approximately 84% of the Company’s total investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At March 31, 2013 and December 31, 2012, approximately $1.4 billion and $1.5 billion, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC using criteria similar to those used by NRSROs.

A summary of fixed maturity securities by rating was as follows:

	March 31, 2013						December 31, 2012
Ratings	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	5,405	$	5,846	23	%	$	5,680	$	6,198	24	%
AA	1,173		1,381		5		1,102		1,273		5
A	4,338		4,944		20		4,262		4,849		19
BBB	10,269		11,670		46		10,409		12,019		46
Below investment grade	1,526		1,527		6		1,605		1,593		6
Total fixed maturities	$	22,711	$	25,368	100	%	$	23,058	$	25,932	100	%

At March 31, 2013 and December 31, 2012, approximately 34% and 32%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities. No holdings of any other issuer were greater than 10% of total equity.

The following tables provide information about Available-for-Sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position:

	March 31, 2013
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	50	$	546	$	(7	)	5	$	49	$	(3	)	55	$	595	$	(10	)
Residential mortgage backed securities	16	320		(5		)	51	250		(47		)	67	570		(52		)
State and municipal obligations	—	—		—			2	105		(28		)	2	105		(28		)
Asset backed securities	2	12		—			4	59		(2		)	6	71		(2		)
Commercial mortgage backed securities	6	48		(1		)	—	—		—			6	48		(1		)
Total	74	$	926	$	(13	)	62	$	463	$	(80	)	136	$	1,389	$	(93	)

	December 31, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	50	$	477	$	(4	)	6	$	70	$	(3	)	56	$	547	$	(7	)
Residential mortgage backed securities	6	107		—			56	293		(58		)	62	400		(58		)
State and municipal obligations	—	—		—			2	100		(34		)	2	100		(34		)
Asset backed securities	1	10		—			5	86		(3		)	6	96		(3		)
Total	57	$	594	$	(4	)	69	$	549	$	(98	)	126	$	1,143	$	(102	)

As part of the Company’s ongoing monitoring process, management determined that a majority of the gross unrealized losses on its Available-for-Sale securities are attributable to movement in credit spreads primarily related to non-agency residential mortgage backed securities purchased prior to 2008.

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income:

	Three Months Ended March 31,
	2013			2012
	(in millions)
Beginning balance	$	87		$	106
Credit losses for which an other-than-temporary impairment was previously recognized	1			1
Reductions for securities sold during the period (realized)	(13		)	(2		)
Ending balance	$	75		$	105

The change in net unrealized securities gains (losses) in other comprehensive income includes three components, net of tax: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period; (ii) (gains) losses that were previously unrealized, but have been recognized in current period net income due to sales of Available-for-Sale securities and due to the reclassification of noncredit other-than-temporary impairment losses to credit losses and (iii) other items primarily consisting of adjustments in asset and liability balances, such as DAC, deferred sales inducement costs (“DSIC”), benefit reserves and reinsurance recoverables, to reflect the expected impact on their carrying values had the unrealized gains (losses) been realized as of the respective balance sheet dates.

The following table presents a rollforward of the net unrealized securities gains on Available-for-Sale securities included in accumulated other comprehensive income:

	Net Unrealized Securities Gains			Deferred Income Tax			Accumulated Other Comprehensive Income Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2012	$	1,472		$	(515	)	$	957
Net unrealized securities gains arising during the period(1)	65			(23		)	42
Reclassification of net securities gains included in net income	(3		)	1			(2		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(5		)	2			(3		)
Balance at March 31, 2012	$	1,529		$	(535	)	$	994	(2)

Balance at January 1, 2013	$	1,930		$	(675	)	$	1,255
Net unrealized securities losses arising during the period(1)	(217		)	76			(141		)
Reclassification of net securities losses included in net income	1			(1		)	—
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	98			(34		)	64
Balance at March 31, 2013	$	1,812		$	(634	)	$	1,178	(2)

(1) Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income during the period.

(2) Includes $(12) million and $(18) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at March 31, 2013 and 2012, respectively.

Net realized gains and losses on Available-for-Sale securities, determined using the specific identification method, recognized in net realized investment gains (losses) were as follows:

	Three Months Ended March 31,
	2013			2012
	(in millions)
Gross realized investment gains	$	—		$	4
Other-than-temporary impairments	(1		)	(1		)
Total	$	(1	)	$	3

Other-than-temporary impairments for the three months ended March 31, 2013 and 2012 primarily related to credit losses on non-agency residential mortgage backed securities.

Available-for-Sale securities by contractual maturity at March 31, 2013 were as follows:

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,547	$	1,581
Due after one year through five years	4,099		4,437
Due after five years through 10 years	6,716		7,627
Due after 10 years	3,555		4,454
	15,917		18,099
Residential mortgage backed securities	3,419		3,577
Commercial mortgage backed securities	2,578		2,825
Asset backed securities	797		867
Common stocks	2		4
Total	$	22,713	$	25,372

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage backed securities, commercial mortgage backed securities and asset backed securities are not due at a single maturity date. As such, these securities, as well as common stocks, were not included in the maturities distribution.

Net investment income is summarized as follows:

	Three Months Ended March 31,
	2013		2012
	(in millions)
Income on fixed maturities	$	309	$	342
Income on mortgage loans	51		35
Other investments	6		6
	366		383
Less: investment expenses	8		6
Total	$	358	$	377