FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2012

Carrying Value and Fair Value of Financial Instruments Disclosure

The carrying values and estimated fair values of the Company’s financial instruments were as follows:



	June 30, 2012				December 31, 2011
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed-maturity securities	$	96,134	$	96,265	$	88,588	$	88,039
Fixed-maturity securities - consolidated variable interest entities	6,060		6,056		5,993		5,916
Perpetual securities	3,966		3,966		5,149		5,149
Perpetual securities - consolidated variable interest entities	766		766		1,290		1,290
Equity securities	23		23		25		25
Interest rate, foreign currency, and credit default swaps	306		306		375		375
Liabilities:
Notes payable (excluding capitalized leases)	3,663		4,138		3,275		3,536
Interest rate, foreign currency, and credit default swaps	482		482		531		531
Obligation to Japanese policyholder protection corporation	48		48		71		71

Fair Value Hierarchy, Assets and Liabilities Measured on Recurring Basis

The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and carried at fair value on a recurring basis.



	June 30, 2012
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturities:
Government and agencies	$	11,741	$	793	$	0	$	12,534
Municipalities	0		1,189		0		1,189
Mortgage- and asset-backed securities	0		894		379		1,273
Public utilities	0		7,156		418		7,574
Sovereign and supranational	0		2,124		436		2,560
Banks/financial institutions	0		6,602		1,114		7,716
Other corporate	0		15,904		1,031		16,935
Total fixed maturities	11,741		34,662		3,378		49,781
Perpetual securities:
Banks/financial institutions	0		4,083		307		4,390
Other corporate	0		342		0		342
Total perpetual securities	0		4,425		307		4,732
Equity securities	13		6		4		23
Other assets:
Interest rate swaps	0		0		31		31
Foreign currency swaps	0		25		250		275
Total other assets	0		25		281		306
Cash and cash equivalents	2,130		0		0		2,130
Total assets	$	13,884	$	39,118	$	3,970	$	56,972
Liabilities:
Interest rate swaps	$	0	$	0	$	4	$	4
Foreign currency swaps	0		8		363		371
Credit default swaps	0		0		107		107
Total liabilities	$	0	$	8	$	474	$	482



	December 31, 2011
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Securities available for sale, carried at fair value:
Fixed maturities:
Government and agencies	$	11,092	$	721	$	0	$	11,813
Municipalities	0		1,159		0		1,159
Mortgage- and asset-backed securities	0		944		394		1,338
Public utilities	0		6,803		422		7,225
Sovereign and supranational	0		1,874		434		2,308
Banks/financial institutions	0		6,379		1,074		7,453
Other corporate	0		15,171		1,105		16,276
Total fixed maturities	11,092		33,051		3,429		47,572
Perpetual securities:
Banks/financial institutions	0		5,552		526		6,078
Other corporate	0		361		0		361
Total perpetual securities	0		5,913		526		6,439
Equity securities	15		6		4		25
Other assets:
Interest rate swaps	0		0		34		34
Foreign currency swaps	0		0		341		341
Total other assets	0		0		375		375
Cash and cash equivalents	2,249		0		0		2,249
Total assets	$	13,356	$	38,970	$	4,334	$	56,660
Liabilities:
Interest rate swaps	$	0	$	0	$	4	$	4
Foreign currency swaps	0		0		397		397
Credit default swaps	0		0		130		130
Total liabilities	$	0	$	0	$	531	$	531

Fair Value Hierarchy Levels of Assets and Liabilities Carried at Cost or Amortized Cost

The following tables present the fair values categorized by hierarchy levels for the Company's assets and liabilities that are carried at cost or amortized cost and for which fair value is disclosed.



	June 30, 2012
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Government and agencies	$	27,527	$	0	$	0	$	27,527
Municipalities	0		574		0		574
Mortgage- and asset-backed securities	0		35		85		120
Public utilities	0		5,426		0		5,426
Sovereign and supranational	0		3,698		0		3,698
Banks/financial institutions	0		10,332		0		10,332
Other corporate	0		4,863		0		4,863
Total assets	$	27,527	$	24,928	$	85	$	52,540
Liabilities:
Notes payable (excluding capital leases)	$	0	$	0	$	4,138	$	4,138
Obligation to Japanese policyholder protection corporation	0		0		48		48
Total liabilities	$	0	$	0	$	4,186	$	4,186



	December 31, 2011
(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Government and agencies	$	19,071	$	0	$	0	$	19,071
Municipalities	0		584		0		584
Mortgage- and asset-backed securities	0		39		95		134
Public utilities	0		5,637		0		5,637
Sovereign and supranational	0		4,165		0		4,165
Banks/financial institutions	0		11,480		0		11,480
Other corporate	0		5,312		0		5,312
Total assets	$	19,071	$	27,217	$	95	$	46,383
Liabilities:
Notes payable (excluding capital leases)	$	0	$	0	$	3,536	$	3,536
Obligation to Japanese policyholder protection corporation	0		0		71		71
Total liabilities	$	0	$	0	$	3,607	$	3,607

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables present the changes in our available-for-sale investments and derivatives classified as Level 3.



Three Months Ended June 30, 2012
	Fixed Maturities												Perpetual Securities			Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate			Banks/ Financial Institutions					Interest Rate Swaps			Foreign Currency Swaps			Credit Default Swaps			Total
Balance, beginning of period	$	367		$	409	$	418	$	1,097	$	1,035		$	325		$	4	$	28		$	(79	)	$	(97	)	$	3,507
Realized gains or losses included in earnings	(3		)	0		0		0		0			0			0		(1		)	(31		)	(10		)	(45		)
Unrealized gains or losses included in other comprehensive income	22			9		18		17		(4		)	(18		)	0		0			4			0			48
Purchases, issuances, sales and settlements:
Purchases	0			0		0		0		0			0			0		0			0			0			0
Issuances	0			0		0		0		0			0			0		0			0			0			0
Sales	0			0		0		0		0			0			0		0			0			0			0
Settlements	(7		)	0		0		0		0			0			0		0			(7		)	0			(14		)
Transfers into Level 3	0			0		0		0		0			0			0		0			0			0			0
Transfers out of Level 3	0			0		0		0		0			0			0		0			0			0			0
Balance, end of period	$	379		$	418	$	436	$	1,114	$	1,031		$	307		$	4	$	27		$	(113	)	$	(107	)	$	3,496
Change in unrealized gains (losses) still held⁽¹⁾	$	(3	)	$	0	$	0	$	0	$	0		$	0		$	0	$	(1	)	$	(31	)	$	(10	)	$	(45	)

⁽¹⁾Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) relating to assets classified as

Level 3 that were still held at June 30, 2012



Three Months Ended June 30, 2011
	Fixed Maturities															Perpetual Securities		Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			Sovereign and Supranational		Banks/ Financial Institutions			Other Corporate		Banks/ Financial Institutions				Foreign Currency Swaps		Credit Default Swaps			Total
Balance, beginning of period	$	248		$	0	$	5		$	0	$	420		$	0	$	0	$	4	$	126	$	(338	)	$	465
Realized gains or losses included in earnings	0			0		(1		)	0		0			0		0		0		25		(43		)	(19		)
Unrealized gains or losses included in other comprehensive income	12			0		0			0		(22		)	0		0		0		13		0			3
Purchases, issuances, sales and settlements:
Purchases	0			0		0			0		0			0		0		0		0		0			0
Issuances	0			0		0			0		0			0		0		0		0		0			0
Sales	0			0		0			0		0			0		0		0		0		0			0
Settlements	(3		)	0		0			0		0			0		0		0		0		128			125
Transfers into Level 3	0			0		0			0		0			0		0		0		0		0			0
Transfers out of Level 3	0			0		0			0		0			0		0		0		0		0			0
Balance, end of period	$	257		$	0	$	4		$	0	$	398		$	0	$	0	$	4	$	164	$	(253	)	$	574
Change in unrealized gains (losses) still held⁽¹⁾	$	0		$	0	$	(1	)	$	0	$	0		$	0	$	0	$	0	$	25	$	(7	)	$	17

⁽¹⁾Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) relating to assets classified as

Level 3 that were still held at June 30, 2011



Six Months Ended June 30, 2012
	Fixed Maturities													Perpetual Securities			Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities			Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate			Banks/ Financial Institutions					Interest Rate Swaps			Foreign Currency Swaps			Credit Default Swaps			Total
Balance, beginning of period	$	394		$	422		$	434	$	1,074	$	1,105		$	526		$	4	$	30		$	(56	)	$	(130	)	$	3,803
Realized gains or losses included in earnings	(3		)	0			0		0		2			49			0		(3		)	(18		)	23			50
Unrealized gains or losses included in other comprehensive income	(1		)	(4		)	2		40		(42		)	(12		)	0		0			(8		)	0			(25		)
Purchases, issuances, sales and settlements:
Purchases	0			0			0		0		0			0			0		0			0			0			0
Issuances	0			0			0		0		0			0			0		0			0			0			0
Sales	0			0			0		0		(34		)	(256		)	0		0			0			0			(290		)
Settlements	(11		)	0			0		0		0			0			0		0			(31		)	0			(42		)
Transfers into Level 3	0			0			0		0		0			0			0		0			0			0			0
Transfers out of Level 3	0			0			0		0		0			0			0		0			0			0			0
Balance, end of period	$	379		$	418		$	436	$	1,114	$	1,031		$	307		$	4	$	27		$	(113	)	$	(107	)	$	3,496
Change in unrealized gains (losses) still held⁽¹⁾	$	(3	)	$	0		$	0	$	0	$	0		$	0		$	0	$	(3	)	$	(18	)	$	23		$	(1	)

⁽¹⁾Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) relating to assets classified as

Level 3 that were still held at June 30, 2012



Six Months Ended June 30, 2011
	Fixed Maturities														Perpetual Securities		Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate		Banks/ Financial Institutions				Foreign Currency Swaps			Credit Default Swaps			Total
Balance, beginning of period	$	267		$	0	$	5		$	0	$	386	$	0	$	0	$	4	$	241		$	(343	)	$	560
Realized gains or losses included in earnings	(6		)	0		(1		)	0		1		0		0		0		(39		)	(38		)	(83		)
Unrealized gains or losses included in other comprehensive income	2			0		0			0		11		0		0		0		(38		)	0			(25		)
Purchases, issuances, sales and settlements:
Purchases	0			0		0			0		0		0		0		0		0			0			0
Issuances	0			0		0			0		0		0		0		0		0			0			0
Sales	0			0		0			0		0		0		0		0		0			0			0
Settlements	(6		)	0		0			0		0		0		0		0		0			128			122
Transfers into Level 3	0			0		0			0		0		0		0		0		0			0			0
Transfers out of Level 3	0			0		0			0		0		0		0		0		0			0			0
Balance, end of period	$	257		$	0	$	4		$	0	$	398	$	0	$	0	$	4	$	164		$	(253	)	$	574
Change in unrealized gains (losses) still held⁽¹⁾	$	(6	)	$	0	$	(1	)	$	0	$	1	$	0	$	0	$	0	$	(39	)	$	(15	)	$	(60	)

⁽¹⁾Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) relating to assets classified as

Level 3 that were still held at June 30, 2011

Discounted Cash Flow Pricing Model Sensitivity Analysis

The estimated effect of potential changes in interest rates, credit spreads and interest rate volatility on these fair values as of such date is as follows:



	Interest Rates						Credit Spreads						Interest Rate Volatility
Factor Change		Change in fair value (in millions)				Factor change		Change in fair value (in millions)				Factor change		Change in fair value (in millions)
	+50 bps		$	(983	)		+50 bps		$	(972	)		+50 %		$	(8	)
	-50 bps		1,035				-50 bps		1,034				-50 %		24

The fair values of our held-to-maturity fixed-maturity securities valued by our DCF pricing model totaled $23.5 billion at June 30, 2012. The estimated effect of potential changes in interest rates, credit spreads and interest rate volatility on these fair values as of such date is as follows:



	Interest Rates						Credit Spreads						Interest Rate Volatility
Factor Change		Change in fair value (in millions)				Factor change		Change in fair value (in millions)				Factor change		Change in fair value (in millions)
	+50 bps		$	(1,452	)		+50 bps		$	(1,354	)		+50 %		$	(119	)
	-50 bps		1,459				-50 bps		1,334				-50 %		139

Fair Value Inputs Assets Quantitative Information

The following tables summarize the significant unobservable inputs used in the valuation of our Level 3 available-for-sale investments and derivatives. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.



June 30, 2012
(In millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets:
Securities available for sale, carried at fair value:
Fixed maturities:
Mortgage- and asset-backed securities	$	379	Consensus pricing	Offered quotes	N/A	^(e)
Public utilities	418		Discounted cash flow	Historical volatility	7.43%
Sovereign and supranational	436		Discounted cash flow	Historical volatility	7.43%
Banks/financial institutions	580		Discounted cash flow	Historical volatility	7.43%
	534		Consensus pricing	Offered quotes	N/A	^(e)
Other corporate	602		Discounted cash flow	Historical volatility	7.43%
	429		Consensus pricing	Offered quotes	N/A	^(e)
Perpetual securities:
Banks/financial institutions	307		Discounted cash flow	Historical volatility	7.43%
Equity securities	4		Net asset value	Offered quotes	$0-$993 ($4)
Other assets:
Interest rate swaps	31		Discounted cash flow	Base correlation	44% - 54%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	25% - 70% (40%)
Foreign currency swaps	87		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				CDS spreads	21 - 138 bps
				Foreign exchange rates	20.38%	^(b)
	35		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				CDS spreads	30 - 137 bps
	128		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				Foreign exchange rates	20.38%	^(b)
Total assets	$	3,970

Fair Value Inputs Liabilities Quantitative Information



June 30, 2012
(In millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Liabilities:
Interest rate swaps	$	4	Discounted cash flow	Base correlation	44% - 54%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	25% - 70% (40%)
Foreign currency swaps	92		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				CDS spreads	41 - 164 bps
				Foreign exchange rates	20.38%	^(b)
	32		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				CDS spreads	66 - 294 bps
	239		Discounted cash flow	Interest rates (USD)	1.78% - 2.52%	^(c)
				Interest rates (JPY)	.84% - 1.80%	^(d)
				Foreign exchange rates	20.38%	^(b)
Credit default swaps	107		Discounted cash flow	Base correlations	44% - 54%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	25% - 70% (40%)
Total liabilities	$	474

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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