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Fair Value (Tables)
 9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Assets and liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis are summarized below.
September 30, 2013
 
 
 
 
 
 
Total
Assets/(Liabilities)
at Fair Value
(In millions)
Level 1
 
Level 2
 
Level 3
 
Assets
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
Corporate and other bonds
$
27

 
$
20,945

 
$
211

 
$
21,183

States, municipalities and political subdivisions
—

 
11,364

 
95

 
11,459

Asset-backed:
 
 
 
 
 
 
 
Residential mortgage-backed
—

 
4,449

 
370

 
4,819

Commercial mortgage-backed
—

 
1,860

 
157

 
2,017

Other asset-backed
—

 
523

 
433

 
956

Total asset-backed
—

 
6,832

 
960

 
7,792

U.S. Treasury and obligations of government-sponsored enterprises
144

 
29

 
—

 
173

Foreign government
81

 
480

 
—

 
561

Redeemable preferred stock
48

 
58

 
—

 
106

Total fixed maturity securities
300

 
39,708

 
1,266

 
41,274

Equity securities
135

 
51

 
13

 
199

Other invested assets
—

 
55

 
—

 
55

Short term investments
992

 
430

 
—

 
1,422

Life settlement contracts, included in Other assets
—

 
—

 
90

 
90

Separate account business
12

 
199

 
2

 
213

Total assets
$
1,439

 
$
40,443

 
$
1,371

 
$
43,253

Liabilities
 
 
 
 
 

 
 

Derivative financial instruments, included in Other liabilities
$
—

 
$
(1
)
 
$
—

 
$
(1
)
Total liabilities
$
—

 
$
(1
)
 
$
—

 
$
(1
)
December 31, 2012
 
 
 
 
 
 
Total
Assets/(Liabilities)
at Fair Value
(In millions)
Level 1
 
Level 2
 
Level 3
 
Assets
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
Corporate and other bonds
$
6

 
$
22,011

 
$
219

 
$
22,236

States, municipalities and political subdivisions
—

 
10,687

 
96

 
10,783

Asset-backed:
 
 
 
 
 
 
 

Residential mortgage-backed
—

 
5,507

 
413

 
5,920

Commercial mortgage-backed
—

 
1,693

 
129

 
1,822

Other asset-backed
—

 
584

 
368

 
952

Total asset-backed
—

 
7,784

 
910

 
8,694

U.S. Treasury and obligations of government-sponsored enterprises
158

 
24

 
—

 
182

Foreign government
140

 
473

 
—

 
613

Redeemable preferred stock
40

 
59

 
26

 
125

Total fixed maturity securities
344

 
41,038

 
1,251

 
42,633

Equity securities
117

 
98

 
34

 
249

Other invested assets
—

 
58

 
1

 
59

Short term investments
987

 
799

 
6

 
1,792

Life settlement contracts, included in Other assets
—

 
—

 
100

 
100

Separate account business
4

 
306

 
2

 
312

Total assets
$
1,452

 
$
42,299

 
$
1,394

 
$
45,145

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments, included in Other liabilities
$
—

 
$
(2
)
 
$
(1
)
 
$
(3
)
Total liabilities
$
—

 
$
(2
)
 
$
(1
)
 
$
(3
)
Table of reconciliation for assets and liablities measured at fair value on a recurring basis using significant unobservable inputs
The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30, 2013 and 2012.
Level 3
(In millions)
Balance at
July 1,
2013
 
Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*
 
Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)
 
Purchases
 
Sales
 
Settlements
 
Transfers into
Level 3
 
Transfers out
of Level 3
 
Balance at
September 30,
2013
 
Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2013 recognized in net income (loss)*
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and other bonds
$
202

 
$
1

 
$
—

 
$
6

 
$
(6
)
 
$
(8
)
 
$
17

 
$
(1
)
 
$
211

 
$
—

States, municipalities and political subdivisions
140

 
—

 
(3
)
 
—

 
—

 
(15
)
 
—

 
(27
)
 
95

 
—

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Residential mortgage-backed
428

 
—

 
(20
)
 
5

 
—

 
(21
)
 
—

 
(22
)
 
370

 
(1
)
Commercial mortgage-backed
165

 
(1
)
 
(2
)
 
10

 
—

 
(1
)
 
—

 
(14
)
 
157

 
—

Other asset-backed
387

 
—

 
1

 
56

 
—

 
(6
)
 
—

 
(5
)
 
433

 
(1
)
Total asset-backed
980

 
(1
)
 
(21
)
 
71

 
—

 
(28
)
 
—

 
(41
)
 
960

 
(2
)
Redeemable preferred stock
25

 
(1
)
 
1

 
—

 
—

 
(25
)
 
—

 
—

 
—

 
—

Total fixed maturity securities
1,347

 
(1
)
 
(23
)
 
77

 
(6
)
 
(76
)
 
17

 
(69
)
 
1,266

 
(2
)
Equity securities
13

 
(2
)
 
2

 
—

 
—

 
—

 
—

 
—

 
13

 
(2
)
Life settlement contracts
91

 
3

 
—

 
—

 
—

 
(4
)
 
—

 
—

 
90

 
—

Separate account business
2

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

 
—

Total
$
1,453

 
$
—

 
$
(21
)
 
$
77

 
$
(6
)
 
$
(80
)
 
$
17

 
$
(69
)
 
$
1,371

 
$
(4
)

Level 3
(In millions)
Balance at
July 1,
2012
 
Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*
 
Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)
 
Purchases
 
Sales
 
Settlements
 
Transfers into
Level 3
 
Transfers out
of Level 3
 
Balance at
September 30,
2012
 
Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2012 recognized in net income (loss)*
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and other bonds
$
488

 
$
1

 
$
(4
)
 
$
50

 
$
(5
)
 
$
(11
)
 
$
—

 
$
(260
)
 
$
259

 
$
(1
)
States, municipalities and political subdivisions
89

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
89

 
—

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed
443

 
(17
)
 
20

 
21

 
—

 
(8
)
 
—

 
(22
)
 
437

 
(18
)
Commercial mortgage-backed
166

 
4

 
6

 
12

 
—

 
(17
)
 
11

 
(65
)
 
117

 
—

Other asset-backed
434

 
2

 
5

 
143

 
(117
)
 
(34
)
 
—

 
(62
)
 
371

 
—

Total asset-backed
1,043

 
(11
)
 
31

 
176

 
(117
)
 
(59
)
 
11

 
(149
)
 
925

 
(18
)
Redeemable preferred stock
27

 
—

 
(1
)
 
—

 
—

 
—

 
—

 
—

 
26

 
—

Total fixed maturity securities
1,647

 
(10
)
 
26

 
226

 
(122
)
 
(70
)
 
11

 
(409
)
 
1,299

 
(19
)
Equity securities
93

 
(19
)
 
(10
)
 
—

 
—

 
—

 
—

 
(14
)
 
50

 
(19
)
Other invested assets, including derivatives, net
10

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
10

 
—

Short term investments
4

 
—

 
—

 
7

 
(4
)
 
—

 
1

 
—

 
8

 
—

Life settlement contracts
116

 
7

 
—

 
—

 
—

 
(10
)
 
—

 
—

 
113

 
—

Separate account business
3

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
3

 
—

Total
$
1,873

 
$
(22
)
 
$
16

 
$
233

 
$
(126
)
 
$
(80
)
 
$
12

 
$
(423
)
 
$
1,483

 
$
(38
)
The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012.

Level 3
(In millions)
Balance at
January 1,
2013
 
Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*
 
Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)
 
Purchases
 
Sales
 
Settlements
 
Transfers into
Level 3
 
Transfers out
of Level 3
 
Balance at
September 30,
2013
 
Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2013 recognized in net income (loss)*
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and other bonds
$
219

 
$
2

 
$
(1
)
 
$
129

 
$
(96
)
 
$
(34
)
 
$
43

 
$
(51
)
 
$
211

 
$
(2
)
States, municipalities and political subdivisions
96

 
(3
)
 
1

 
122

 
(79
)
 
(20
)
 
5

 
(27
)
 
95

 
—

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Residential mortgage-backed
413

 
2

 
(21
)
 
116

 
(10
)
 
(53
)
 
4

 
(81
)
 
370

 
(3
)
Commercial mortgage-backed
129

 
—

 
7

 
88

 
—

 
(10
)
 
21

 
(78
)
 
157

 
—

Other asset-backed
368

 
3

 
(1
)
 
230

 
(132
)
 
(30
)
 
—

 
(5
)
 
433

 
(2
)
Total asset-backed
910

 
5

 
(15
)
 
434

 
(142
)
 
(93
)
 
25

 
(164
)
 
960

 
(5
)
Redeemable preferred stock
26

 
(1
)
 
—

 
—

 
—

 
(25
)
 
—

 
—

 
—

 
—

Total fixed maturity securities
1,251

 
3

 
(15
)
 
685

 
(317
)
 
(172
)
 
73

 
(242
)
 
1,266

 
(7
)
Equity securities
34

 
(22
)
 
2

 
—

 
—

 
—

 
—

 
(1
)
 
13

 
(22
)
Other invested assets, including derivatives, net
—

 
—

 
—

 
—

 
(1
)
 
1

 
—

 
—

 
—

 
—

Short term investments
6

 
—

 
—

 
—

 
(6
)
 
—

 
—

 
—

 
—

 
—

Life settlement contracts
100

 
14

 
—

 
—

 
—

 
(24
)
 
—

 
—

 
90

 
(1
)
Separate account business
2

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

 
—

Total
$
1,393

 
$
(5
)
 
$
(13
)
 
$
685

 
$
(324
)
 
$
(195
)
 
$
73

 
$
(243
)
 
$
1,371

 
$
(30
)

Level 3
(In millions)
Balance at
January 1,
2012
 
Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*
 
Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)
 
Purchases
 
Sales
 
Settlements
 
Transfers into
Level 3
 
Transfers out
of Level 3
 
Balance at
September 30,
2012
 
Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2012 recognized in net income (loss)*
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and other bonds
$
482

 
$
7

 
$
2

 
$
197

 
$
(118
)
 
$
(43
)
 
$
42

 
$
(310
)
 
$
259

 
$
(1
)
States, municipalities and political subdivisions
171

 
—

 
3

 
—

 
—

 
(85
)
 
—

 
—

 
89

 
—

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed
452

 
(15
)
 
(2
)
 
81

 
—

 
(24
)
 
—

 
(55
)
 
437

 
(18
)
Commercial mortgage-backed
59

 
6

 
14

 
141

 
(12
)
 
(21
)
 
11

 
(81
)
 
117

 
—

Other asset-backed
343

 
8

 
8

 
501

 
(293
)
 
(93
)
 
—

 
(103
)
 
371

 
—

Total asset-backed
854

 
(1
)
 
20

 
723

 
(305
)
 
(138
)
 
11

 
(239
)
 
925

 
(18
)
Redeemable preferred stock
—

 
—

 
(1
)
 
53

 
(26
)
 
—

 
—

 
—

 
26

 
—

Total fixed maturity securities
1,507

 
6

 
24

 
973

 
(449
)
 
(266
)
 
53

 
(549
)
 
1,299

 
(19
)
Equity securities
67

 
(19
)
 
6

 
26

 
(16
)
 
—

 
—

 
(14
)
 
50

 
(21
)
Other invested assets, including derivatives, net
10

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
10

 
—

Short term investments
27

 
—

 
—

 
23

 
(4
)
 
(39
)
 
1

 
—

 
8

 
—

Life settlement contracts
117

 
30

 
—

 
—

 
—

 
(34
)
 
—

 
—

 
113

 
3

Separate account business
23

 
—

 
—

 
—

 
(20
)
 
—

 
—

 
—

 
3

 
—

Total
$
1,751

 
$
17

 
$
30

 
$
1,022

 
$
(489
)
 
$
(339
)
 
$
54

 
$
(563
)
 
$
1,483

 
$
(37
)
Quantitative information about significant unobservable inputs in the fair value measurement of level 3 assets
The table below presents quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the table below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company.
Assets
(In millions)
Fair Value at September 30, 2013
 
Valuation Technique(s)
 
Unobservable Input(s)
 
Range
 (Weighted Average)
Fixed maturity securities
$
179

 
Discounted cash flow
 
Expected call date
 
2.1 - 5.3 years (3.8 years)
 
 
 
 
 
Credit spread
 
1.92% - 26.24% (3.80%)
Equity securities
$
13

 
Market approach
 
Private offering price
 
$289.80 - $4,273.77 per share
($1,337.14 per share)
Life settlement contracts
$
90

 
Discounted cash flow
 
Discount rate risk premium
 
9%
 
 
 
 
 
Mortality assumption
 
69% - 883% (208.8%)
Assets
(In millions)
Fair Value at December 31, 2012
 
Valuation Technique(s)
 
Unobservable Input(s)
 
Range
 (Weighted Average)
Fixed maturity securities
$
121

 
Discounted cash flow
 
Expected call date
 
3.3 - 5.3 years (4.3 years)
 
 
 
 
 
Credit spread adjustment
 
0.02% - 0.48% (0.17%)
 
$
72

 
Market approach
 
Private offering price
 
$42.39 - $102.32 ($100.11)
Equity securities
$
34

 
Market approach
 
Private offering price
 
$4.54 - $3,842.00 per share
($571.17 per share)
Life settlement contracts
$
100

 
Discounted cash flow
 
Discount rate risk premium
 
9%
 
 
 
 
 
Mortality assumption
 
69% - 883% (208.9%)
Carrying amount and estimated fair value of financial instrument assets and liabilities not measured at fair value
The carrying amount and estimated fair value of the Company's financial instrument assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are listed in the tables below.
September 30, 2013
Carrying
Amount
 
Estimated Fair Value
(In millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets
 
 
 
 
 
 
 
 
 
Notes receivable for the issuance of common stock
$
22

 
$
—

 
$
—

 
$
22

 
$
22

Mortgage loans
440

 
—

 
—

 
452

 
452

Financial liabilities
 
 
 
 
 
 
 
 
 
Premium deposits and annuity contracts
$
68

 
$
—

 
$
—

 
$
69

 
$
69

Long term debt
2,559

 
—

 
2,928

 
—

 
2,928

December 31, 2012
Carrying
Amount
 
Estimated Fair Value
(In millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets
 
 
 
 
 
 
 
 
 
Notes receivable for the issuance of common stock
$
21

 
$
—

 
$
—

 
$
21

 
$
21

Mortgage loans
401

 
—

 
—

 
418

 
418

Financial liabilities
 
 
 
 
 
 
 
 
 
Premium deposits and annuity contracts
$
100

 
$
—

 
$
—

 
$
104

 
$
104

Short term debt
13

 
—

 
13

 
—

 
13

Long term debt
2,557

 
—

 
3,016

 
—

 
3,016