Investments (Tables)

6 Months Ended

Jun. 30, 2013

Investments

Schedule for fixed income securities at amortized cost, gross unrealized gains and losses and fair value

($ in millions)		Amortized		Gross unrealized					Fair
		cost		Gains		Losses			value
June 30, 2013
U.S. government and agencies	$	3,001	$	205	$	(2	)	$	3,204
Municipal		10,220		601		(105	)		10,716
Corporate		45,969		2,159		(512	)		47,616
Foreign government		2,099		141		(16	)		2,224
Asset-backed securities (“ABS”)		3,467		86		(77	)		3,476
Residential mortgage-backed securities (“RMBS”)		2,423		119		(57	)		2,485
Commercial mortgage-backed securities (“CMBS”)		1,273		50		(32	)		1,291
Redeemable preferred stock		23		4		--			27
Total fixed income securities	$	68,475	$	3,365	$	(801	)	$	71,039
December 31, 2012
U.S. government and agencies	$	4,387	$	326	$	--		$	4,713
Municipal		12,139		1,038		(108	)		13,069
Corporate		44,943		3,721		(127	)		48,537
Foreign government		2,290		228		(1	)		2,517
ABS		3,623		108		(107	)		3,624
RMBS		3,000		142		(110	)		3,032
CMBS		1,510		65		(77	)		1,498
Redeemable preferred stock		23		4		--			27
Total fixed income securities	$	71,915	$	5,632	$	(530	)	$	77,017

Schedule for fixed income securities based on contractual maturities

($ in millions)		Amortized cost		Fair value
Due in one year or less	$	2,816	$	2,859
Due after one year through five years		25,101		25,901
Due after five years through ten years		22,450		23,243
Due after ten years		10,945		11,784
		61,312		63,787
ABS, RMBS and CMBS		7,163		7,252
Total	$	68,475	$	71,039

Schedule of net investment income

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2013			2012			2013			2012
Fixed income securities	$	740		$	818		$	1,502		$	1,624
Equity securities		39			24			64			45
Mortgage loans		93			92			191			185
Limited partnership interests		126			107			233			216
Short-term investments		1			1			3			2
Other		39			34			76			64
Investment income, before expense		1,038			1,076			2,069			2,136
Investment expense		(54	)		(50	)		(102	)		(99	)
Net investment income	$	984		$	1,026		$	1,967		$	2,037

Schedule of realized capital gains and losses by asset type

($ in millions)		Three months ended June 30,						Six months ended June 30,
		2013			2012			2013			2012
Fixed income securities	$	79		$	6		$	151		$	(23	)
Equity securities		283			13			312			172
Mortgage loans		(6	)		9			25			8
Limited partnership interests		(8	)		3			(3	)		13
Derivatives		14			7			10			28
Other		--			(11	)		(2	)		(3	)
Realized capital gains and losses	$	362		$	27		$	493		$	195

Schedule of realized capital gains and losses by transaction type

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Impairment write-downs	$	(33)	$	(49)	$	(43)	$	(88)
Change in intent write-downs		(27)		(1)		(54)		(45)
Net other-than-temporary impairment losses recognized in earnings		(60)		(50)		(97)		(133)
Sales		408		70		580		299
Valuation of derivative instruments		3		(10)		(1)		1
Settlements of derivative instruments		11		17		11		28
Realized capital gains and losses	$	362	$	27	$	493	$	195

Schedule of other-than-temporary impairment losses by asset type

($ in millions)		Three months ended June 30, 2013						Six months ended June 30, 2013
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Municipal	$	(4)	$	(3)	$	(7)	$	(17)	$	(5)	$	(22)
ABS		--		(1)		(1)		--		(1)		(1)
RMBS		(1)		(1)		(2)		(1)		(2)		(3)
CMBS		(1)		--		(1)		(20)		(7)		(27)
Total fixed income securities		(6)		(5)		(11)		(38)		(15)		(53)
Equity securities		(32)		--		(32)		(51)		--		(51)
Mortgage loans		(9)		--		(9)		17		--		17
Limited partnership interests		(8)		--		(8)		(8)		--		(8)
Other		--		--		--		(2)		--		(2)
Other-than-temporary impairment losses	$	(55)	$	(5)	$	(60)	$	(82)	$	(15)	$	(97)

($ in millions)		Three months ended June 30, 2012						Six months ended June 30, 2012
		Gross		Included in OCI		Net		Gross		Included in OCI		Net
Fixed income securities:
Municipal	$	(25)	$	17	$	(8)	$	(26)	$	17	$	(9)
Corporate		--		(1)		(1)		(18)		(1)		(19)
RMBS		(12)		--		(12)		(55)		4		(51)
CMBS		(9)		3		(6)		(15)		3		(12)
Total fixed income securities		(46)		19		(27)		(114)		23		(91)
Equity securities		(20)		--		(20)		(36)		--		(36)
Mortgage loans		7		--		7		4		--		4
Limited partnership interests		(1)		--		(1)		(3)		--		(3)
Other		(9)		--		(9)		(7)		--		(7)
Other-than-temporary impairment losses	$	(69)	$	19	$	(50)	$	(156)	$	23	$	(133)

Schedule of other-than-temporary impairment losses on fixed income securities included in Accumulated Other Comprehensive Income

($ in millions)		June 30, 2013		December 31, 2012
Municipal	$	(10)	$	(20)
Corporate		(1)		(1)
ABS		(10)		(14)
RMBS		(158)		(182)
CMBS		(12)		(19)
Total	$	(191)	$	(236)

Schedule of credit losses on fixed income securities recognized in earnings

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Beginning balance	$	(600)	$	(820)	$	(617)	$	(944)
Additional credit loss for securities previously other-than-temporarily impaired		(10)		(16)		(24)		(36)
Additional credit loss for securities not previously other-than-temporarily impaired		(1)		(10)		(17)		(19)
Reduction in credit loss for securities disposed or collected		46		65		93		211
Reduction in credit loss for securities the Company has made the decision to sell or more likely than not will be required to sell		--		--		--		7
Change in credit loss due to accretion of increase in cash flows		1		--		1		--
Ending balance	$	(564)	$	(781)	$	(564)	$	(781)

Schedule of unrealized net capital gains and losses

($ in millions)		Fair		Gross unrealized			Unrealized net
June 30, 2013		value		Gains		Losses	gains (losses)
Fixed income securities	$	71,039	$	3,365	$	(801)	$	2,564
Equity securities		4,505		362		(94)		268
Short-term investments		2,646		--		--		--
Derivative instruments (1)		(7)		3		(15)		(12)
EMA limited partnerships (2)								--
Unrealized net capital gains and losses, pre-tax								2,820
Amounts recognized for:
Insurance reserves (3)								(76)
DAC and DSI (4)								(199)
Amounts recognized								(275)
Deferred income taxes								(894)
Unrealized net capital gains and losses, after-tax							$	1,651

(1) Included in the fair value of derivative instruments are $(1) million classified as assets and $6 million classified as liabilities.

(2) Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income.  Fair value and gross gains and losses are not applicable.

(3)   The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency.  Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.

(4) The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

		Fair		Gross unrealized			Unrealized net
December 31, 2012		value		Gains		Losses	gains (losses)
Fixed income securities	$	77,017	$	5,632	$	(530)	$	5,102
Equity securities		4,037		494		(34)		460
Short-term investments		2,336		--		--		--
Derivative instruments (1)		(17)		2		(24)		(22)
EMA limited partnerships								7
Unrealized net capital gains and losses, pre-tax								5,547
Amounts recognized for:
Insurance reserves								(771)
DAC and DSI								(412)
Amounts recognized								(1,183)
Deferred income taxes								(1,530)
Unrealized net capital gains and losses, after-tax							$	2,834

(1)  Included in the fair value of derivative instruments are $2 million classified as assets and $19 million classified as liabilities.

Schedule of change in unrealized net capital gains and losses

The change in unrealized net capital gains and losses for the six months ended June 30, 2013 is as follows:

($ in millions)
Fixed income securities	$	(2,538)
Equity securities		(192)
Derivative instruments		10
EMA limited partnerships		(7)
Total		(2,727)
Amounts recognized for:
Insurance reserves		695
DAC and DSI		213
Amounts recognized		908
Deferred income taxes		636
Decrease in unrealized net capital gains and losses	$	(1,183)

Schedule of gross unrealized losses and fair value of available for sale securities by length of time

($ in millions)	Less than 12 months						12 months or more							Total
	Number		Fair		Unrealized		Number		Fair		Unrealized			unrealized
	of issues		value		losses		of issues		value		losses			losses
June 30, 2013
Fixed income securities
U.S. government and agencies	22	$	562	$	(2	)	--	$	--	$	--		$	(2	)
Municipal	334		2,360		(60	)	40		200		(45	)		(105	)
Corporate	827		12,084		(418	)	57		717		(94	)		(512	)
Foreign government	93		434		(16	)	--		--		--			(16	)
ABS	43		684		(8	)	71		741		(69	)		(77	)
RMBS	238		398		(10	)	318		380		(47	)		(57	)
CMBS	22		226		(5	)	21		133		(27	)		(32	)
Total fixed income securities	1,579		16,748		(519	)	507		2,171		(282	)		(801	)
Equity securities	265		1,596		(94	)	9		5		--			(94	)
Total fixed income and equity securities	1,844	$	18,344	$	(613	)	516	$	2,176	$	(282	)	$	(895	)
Investment grade fixed income securities	1,344	$	15,012	$	(460	)	373	$	1,371	$	(148	)	$	(608	)
Below investment grade fixed income securities	235		1,736		(59	)	134		800		(134	)		(193	)
Total fixed income securities	1,579	$	16,748	$	(519	)	507	$	2,171	$	(282	)	$	(801	)
December 31, 2012
Fixed income securities
U.S. government and agencies	6	$	85	$	--		--	$	--	$	--		$	--
Municipal	130		1,012		(13	)	80		717		(95	)		(108	)
Corporate	133		1,989		(33	)	70		896		(94	)		(127	)
Foreign government	22		190		(1	)	--		--		--			(1	)
ABS	12		145		(1	)	77		794		(106	)		(107	)
RMBS	117		50		(1	)	336		638		(109	)		(110	)
CMBS	11		68		--		44		357		(77	)		(77	)
Redeemable preferred stock	--		--		--		1		--		--			--
Total fixed income securities	431		3,539		(49	)	608		3,402		(481	)		(530	)
Equity securities	803		284		(27	)	96		69		(7	)		(34	)
Total fixed income and equity securities	1,234	$	3,823	$	(76	)	704	$	3,471	$	(488	)	$	(564	)
Investment grade fixed income securities	387	$	3,141	$	(39	)	409	$	2,172	$	(217	)	$	(256	)
Below investment grade fixed income securities	44		398		(10	)	199		1,230		(264	)		(274	)
Total fixed income securities	431	$	3,539	$	(49	)	608	$	3,402	$	(481	)	$	(530	)

Carrying value of non-impaired fixed and variable rate mortgage loans by debt service coverage ratio distribution

($ in millions)		June 30, 2013						December 31, 2012
Debt service coverage ratio distribution		Fixed rate mortgage loans		Variable rate mortgage loans		Total		Fixed rate mortgage loans		Variable rate mortgage loans		Total
Below 1.0	$	226	$	--	$	226	$	267	$	--	$	267
1.0 - 1.25		1,170		28		1,198		1,208		20		1,228
1.26 - 1.50		1,273		3		1,276		1,458		46		1,504
Above 1.50		3,470		173		3,643		3,268		148		3,416
Total non-impaired mortgage loans	$	6,139	$	204	$	6,343	$	6,201	$	214	$	6,415

Net carrying value of impaired mortgage loans

($ in millions)		June 30, 2013		December 31, 2012
Impaired mortgage loans with a valuation allowance	$	70	$	147
Impaired mortgage loans without a valuation allowance		--		8
Total impaired mortgage loans	$	70	$	155
Valuation allowance on impaired mortgage loans	$	21	$	42

Valuation allowance on impaired mortgage loans

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Beginning balance	$	15	$	60	$	42	$	63
Net increase (decrease) in valuation allowance		9		(7)		(17)		(4)
Charge offs		(3)		(5)		(4)		(11)
Ending balance	$	21	$	48	$	21	$	48

Carrying value of past due mortgage loans

($ in millions)		June 30, 2013		December 31, 2012
Less than 90 days past due	$	--	$	21
90 days or greater past due		3		4
Total past due		3		25
Current loans		6,410		6,545
Total mortgage loans	$	6,413	$	6,570