PART II ITEM 8 Financial Statements and Supplementary Data Variable Interest Entities NOTE 14 provide health care services to the Medicare Advantage customers and the Company provides medical management and administrative services to the IPAs. The Company is not the primary beneficiary and does not consolidate these entities because either: When the Company becomes involved with a variable interest entity and when the nature of the Company’s involvement with the entity changes, in order to determine if the Company is the primary beneficiary and must consolidate the entity, it evaluates: In the normal course of its investing activities, the Company makes passive investments in securities that are issued by variable interest entities for which the Company is not the sponsor or manager. These investments are predominantly asset-backed securities primarily collateralized by foreign bank obligations or mortgage-backed securities. The asset-backed securities largely represent fixed-rate debt securities issued by trusts that hold perpetual floating-rate subordinated notes issued by foreign banks. The mortgage-backed securities represent senior interests in pools of commercial or residential mortgages created and held by special-purpose entities to provide investors with diversified exposure to these assets. The Company owns senior securities issued by several entities and receives fixed-rate cash flows from the underlying assets in the pools. The Company has not provided, and does not intend to provide, financial support to these entities that it is not contractually required to provide. The Company performs ongoing qualitative analyses of its involvement with these variable interest entities to determine if consolidation is required. The Company’s maximum potential exposure to loss related to the investment entities is limited to the carrying amount of its investment reported in fixed maturities and equity securities, and its aggregate ownership interest is insignificant relative to the total principal amount issued by these entities. The Company’s maximum exposure to loss related to the IPA arrangements is limited to the liability for incurred but not reported claims for the Company’s Medicare Advantage customers. These liabilities are not material and are generally secured by deposits maintained by the IPAs. In order to provide certain services to its Medicare Advantage customers, the Company contracts with independent physician associations (IPAs) that are variable interest entities. Physicians The components of pre-tax net investment income for the years ended December 31 were as follows: A. Net Investment Income Investment Income and Gains and Losses NOTE 15 (In millions) 2012 2011 2010 Fixed maturities $ 843 $ 817 $ 788 Equity securities 4 6 6 Commercial mortgage loans 192 218 221 Policy loans 74 86 90 Real estate (2) (2) (2) Other long-term investments 59 48 29 Short-term investments and cash 14 10 11 1,184 1,183 1,143 Less investment expenses 40 37 38 NET INVESTMENT INCOME $ 1,144 $ 1,146 $ 1,105 CIGNA CORPORATION -  2012 Form  10-K 109 it had no power to direct the activities that most significantly impact the entities’ economic performance; or GLYPH<127> it had neither the right to receive benefits nor the obligation to absorb losses that could be significant to these variable interest entities. GLYPH<127> the structure and purpose of the entity; GLYPH<127> the risks and rewards created by and shared through the entity; and GLYPH<127> the entity’s participants’ ability to direct its activities, receive its benefits and absorb its losses. Participants include the entity’s sponsors, equity holders, guarantors, creditors and servicers. GLYPH<127>