FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 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:



	September 30, 2012				December 31, 2011
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed-maturity securities	$	109,970	$	111,172	$	88,588	$	88,039
Fixed-maturity securities - consolidated variable interest entities	6,332		6,333		5,993		5,916
Perpetual securities	4,132		4,132		5,149		5,149
Perpetual securities - consolidated variable interest entities	587		587		1,290		1,290
Equity securities	24		24		25		25
Derivatives	384		384		375		375
Liabilities:
Notes payable (excluding capitalized leases)	4,391		5,014		3,275		3,536
Derivatives	447		447		531		531
Obligation to Japanese policyholder protection corporation	26		26		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.



	September 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	$	13,845	$	814	$	0	$	14,659
Municipalities	0		1,196		0		1,196
Mortgage- and asset-backed securities	0		820		385		1,205
Public utilities	0		7,858		449		8,307
Sovereign and supranational	0		2,127		460		2,587
Banks/financial institutions	0		6,860		1,423		8,283
Other corporate	0		18,938		1,073		20,011
Total fixed maturities	13,845		38,613		3,790		56,248
Perpetual securities:
Banks/financial institutions	0		3,978		370		4,348
Other corporate	0		371		0		371
Total perpetual securities	0		4,349		370		4,719
Equity securities	13		7		4		24
Other assets:
Interest rate swaps	0		0		39		39
Foreign currency swaps	0		16		312		328
Foreign currency forwards	0		17		0		17
Total other assets	0		33		351		384
Cash and cash equivalents	2,985		0		0		2,985
Total assets	$	16,843	$	43,002	$	4,515	$	64,360
Liabilities:
Interest rate swaps	$	0	$	0	$	5	$	5
Foreign currency swaps	0		11		349		360
Credit default swaps	0		0		82		82
Total liabilities	$	0	$	11	$	436	$	447



	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.



	September 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	$	35,501	$	0	$	0	$	35,501
Municipalities	0		592		0		592
Mortgage- and asset-backed securities	0		35		79		114
Public utilities	0		5,756		0		5,756
Sovereign and supranational	0		3,863		0		3,863
Banks/financial institutions	0		10,298		0		10,298
Other corporate	0		5,133		0		5,133
Total assets	$	35,501	$	25,677	$	79	$	61,257
Liabilities:
Notes payable (excluding capital leases)	$	0	$	0	$	5,014	$	5,014
Obligation to Japanese policyholder protection corporation	0		0		26		26
Total liabilities	$	0	$	0	$	5,040	$	5,040



	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 fair value of our available-for-sale investments and derivatives classified as Level 3.



Three Months Ended September 30, 2012
	Fixed Maturities												Perpetual Securities			Equity Securities		Derivatives ⁽¹⁾
(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	$	379		$	418	$	436	$	1,114		$	1,031	$	307		$	4	$	27	$	(113	)	$	(107	)	$	3,496
Realized investment gains (losses) included in earnings	0			0		0		0			0		(27		)	0		7		76			25			81
Unrealized gains (losses) included in other comprehensive income (loss)	11			31		24		103			42		90			0		0		2			0			303
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	(5		)	0		0		0			0		0			0		0		(2		)	0			(7		)
Transfers into Level 3	0			0		0		206		⁽²⁾	0		0			0		0		0			0			206
Transfers out of Level 3	0			0		0		0			0		0			0		0		0			0			0
Balance, end of period	$	385		$	449	$	460	$	1,423		$	1,073	$	370		$	4	$	34	$	(37	)	$	(82	)	$	4,079
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	0		$	0	$	0	$	0		$	0	$	(27	)	$	0	$	7	$	76		$	25		$	81

⁽¹⁾ Derivative assets and liabilities are presented net

⁽²⁾Due to a lack of visibility to observe significant inputs to price



Three Months Ended September 30, 2011
	Fixed Maturities															Perpetual Securities		Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			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	$	257		$	0	$	4		$	0	$	398		$	0	$	0	$	4	$	0	$	164		$	(253	)	$	574
Realized investment gains (losses) included in earnings	(1		)	0		(1		)	0		0			0		0		0		0		(138		)	(75		)	(215		)
Unrealized gains (losses) included in other comprehensive income (loss)	18			0		0			0		3			0		0		0		0		(2		)	0			19
Purchases, issuances, sales and settlements:
Purchases	0			0		0			0		0			0		0		0		0		0			0			0
Issuances	0			0		0			0		0			0		0		0		0		0			0			0
Sales	0			0		(3		)	0		0			0		0		0		0		0			0			(3		)
Settlements	(2		)	0		0			0		0			0		0		0		0		0			134			132
Transfers into Level 3⁽²⁾	0			0		0			0		0			0		0		0		59		(90		)	0			(31		)
Transfers out of Level 3⁽³⁾	(4		)	0		0			0		(376		)	0		0		0		0		0			0			(380		)
Balance, end of period	$	268		$	0	$	0		$	0	$	25		$	0	$	0	$	4	$	59	$	(66	)	$	(194	)	$	96
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	(1	)	$	0	$	0		$	0	$	0		$	0	$	0	$	0	$	0	$	(138	)	$	(31	)	$	(170	)

⁽¹⁾Derivative assets and liabilities are presented net

⁽²⁾Due to a lack of visibility to observe significant inputs to price

⁽³⁾ A result of changing our pricing methodology to using a third party pricing vendor for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers



Nine Months Ended September 30, 2012
	Fixed Maturities													Perpetual Securities			Equity Securities		Derivatives ⁽¹⁾
(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 investment gains (losses) included in earnings	(3		)	0		0		0			2			22			0		4		58			48			131
Unrealized gains (losses) included in other comprehensive income (loss)	10			27		26		143			0			78			0		0		(6		)	0			278
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	(16		)	0		0		0			0			0			0		0		(33		)	0			(49		)
Transfers into Level 3	0			0		0		206		⁽²⁾	0			0			0		0		0			0			206
Transfers out of Level 3	0			0		0		0			0			0			0		0		0			0			0
Balance, end of period	$	385		$	449	$	460	$	1,423		$	1,073		$	370		$	4	$	34	$	(37	)	$	(82	)	$	4,079
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	(3	)	$	0	$	0	$	0		$	0		$	(27	)	$	0	$	4	$	58		$	48		$	80

⁽¹⁾ Derivative assets and liabilities are presented net

⁽²⁾Due to a lack of visibility to observe significant inputs to price



Nine Months Ended September 30, 2011
	Fixed Maturities															Perpetual Securities		Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			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	$	267		$	0	$	5		$	0	$	386		$	0	$	0	$	4	$	0	$	241		$	(343	)	$	560
Realized investment gains (losses) included in earnings	(7		)	0		(2		)	0		1			0		0		0		0		(177		)	(113		)	(298		)
Unrealized gains (losses) included in other comprehensive income (loss)	20			0		0			0		14			0		0		0		0		(40		)	0			(6		)
Purchases, issuances, sales and settlements:
Purchases	0			0		0			0		0			0		0		0		0		0			0			0
Issuances	0			0		0			0		0			0		0		0		0		0			0			0
Sales	0			0		(3		)	0		0			0		0		0		0		0			0			(3		)
Settlements	(8		)	0		0			0		0			0		0		0		0		0			262			254
Transfers into Level 3⁽²⁾	0			0		0			0		0			0		0		0		59		(90		)	0			(31		)
Transfers out of Level 3⁽³⁾	(4		)	0		0			0		(376		)	0		0		0		0		0			0			(380		)
Balance, end of period	$	268		$	0	$	0		$	0	$	25		$	0	$	0	$	4	$	59	$	(66	)	$	(194	)	$	96
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses)	$	(7	)	$	0	$	0		$	0	$	1		$	0	$	0	$	0	$	0	$	(177	)	$	(46	)	$	(229	)

⁽¹⁾Derivative assets and liabilities are presented net

⁽²⁾Due to a lack of visibility to observe significant inputs to price

⁽³⁾ A result of changing our pricing methodology to using a third party pricing vendor for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers

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		$	(986	)		+50 bps		$	(1,005	)		+50 %		$	(27	)
	-50 bps		1,025				-50 bps		1,020				-50 %		5

The fair values of our held-to-maturity fixed-maturity securities valued by our DCF pricing model totaled $24.1 billion at September 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		$	(1,461	)		+50 bps		$	(1,364	)		+50 %		$	(126	)
	-50 bps		1,423				-50 bps		1,341				-50 %		152

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.



September 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	$	385	Consensus pricing	Offered quotes	N/A	^(e)
Public utilities	449		Discounted cash flow	Historical volatility	5.30%
Sovereign and supranational	460		Discounted cash flow	Historical volatility	5.30%
Banks/financial institutions	613		Discounted cash flow	Historical volatility	5.30%
	810		Consensus pricing	Offered quotes	N/A	^(e)
Other corporate	626		Discounted cash flow	Historical volatility	5.30%
	447		Consensus pricing	Offered quotes	N/A	^(e)
Perpetual securities:
Banks/financial institutions	370		Discounted cash flow	Historical volatility	5.30%
Equity securities	4		Net asset value	Offered quotes	$0-$1,051 ($9)
Other assets:
Interest rate swaps	39		Discounted cash flow	Base correlation	47% - 59%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	20% - 70% (40%)
Foreign currency swaps	109		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				CDS spreads	16 - 115 bps
				Foreign exchange rates	20.22%	^(d)
	69		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				CDS spreads	21 - 128 bps
	134		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				Foreign exchange rates	20.22%	^(d)
Total assets	$	4,515

(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices

(b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps

(d) Based on 10 year volatility of JPY/USD exchange rate

(e) N/A represents securities where we receive unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs.

Fair Value Inputs Liabilities Quantitative Information



September 30, 2012
(In millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Liabilities:
Interest rate swaps	$	5	Discounted cash flow	Base correlation	47% - 59%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	20% - 70% (40%)
Foreign currency swaps	72		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				CDS spreads	24 - 140 bps
				Foreign exchange rates	20.22%	^(d)
	17		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				CDS spreads	49 - 259 bps
	260		Discounted cash flow	Interest rates (USD)	1.70% - 2.63%	^(b)
				Interest rates (JPY)	.77% - 1.75%	^(c)
				Foreign exchange rates	20.22%	^(d)
Credit default swaps	82		Discounted cash flow	Base correlations	47% - 59%	^(a)
				CDS spreads	84 - 192 bps
				Recovery rate	20% - 70% (40%)
Total liabilities	$	436

(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices

(b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps

(d) Based on 10 year volatility of JPY/USD exchange rate

- 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.

+ References+ Details

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

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Reference 4: http://www.xbrl.org/2003/role/presentationRef

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-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-Publisher FASB

-Name Accounting Standards Codification

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-SubTopic 10

-Section 50

-Paragraph 11

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Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-SubTopic 10

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-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

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-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

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+ Details