FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2012

Dec. 31, 2011

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 carried and measured at fair value on a recurring basis as of December 31.



	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		$	12,265		$	732		$	0		$	12,997
Municipalities		0			1,195			0			1,195
Mortgage- and asset-backed securities		0			693			338			1,031
Public utilities		0			8,077			420			8,497
Sovereign and supranational		0			1,654			418			2,072
Banks/financial institutions		0			6,610			1,024			7,634
Other corporate		0			22,841			986			23,827
Total fixed maturities		12,265			41,802			3,186			57,253
Perpetual securities:
Banks/financial institutions		0			3,735			215			3,950
Other corporate		0			352			0			352
Total perpetual securities		0			4,087			215			4,302
Equity securities		13			6			4			23
Other assets:
Interest rate swaps		0			0			32			32
Foreign currency swaps		0			154			157			311
Credit default swaps		0			0			2			2
Total other assets		0			154			191			345
Cash and cash equivalents		2,041			0			0			2,041
Total assets		$	14,319		$	46,049		$	3,596		$	63,964
Liabilities:
Interest rate swaps		$	0		$	0		$	3		$	3
Foreign currency swaps		0			0			329			329
Foreign currency forwards		0			535			0			535
Credit default swaps		0			0			67			67
Total liabilities		$	0		$	535		$	399		$	934



	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 carrying amount and fair value categorized by fair value hierarchy level for the Company's financial instruments that are not carried at fair value as of December 31.



	2012
(In millions)	Carrying Value			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		$	32,043		$	32,332		$	0		$	0		$	32,332
Municipalities		492			0			520			0			520
Mortgage- and asset-backed securities		90			0			30			64			94
Public utilities		4,924			0			5,051			0			5,051
Sovereign and supranational		3,209			0			3,317			0			3,317
Banks/financial institutions		9,211			0			8,991			0			8,991
Other corporate		4,457			0			4,536			0			4,536
Total assets		$	54,426		$	32,332		$	22,445		$	64		$	54,841
Liabilities:
Notes payable (excluding capital leases)		$	4,343		$	0		$	0		$	4,992		$	4,992
Obligation to Japanese policyholder protection corporation		23			0			0			23			23
Total liabilities		$	4,366		$	0		$	0		$	5,015		$	5,015



				2011
(In millions)	Carrying Value			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		$	18,775		$	19,071		$	0		$	0		$	19,071
Municipalities		553			0			584			0			584
Mortgage- and asset-backed securities		129			0			39			95			134
Public utilities		5,615			0			5,637			0			5,637
Sovereign and supranational		4,200			0			4,165			0			4,165
Banks/financial institutions		12,389			0			11,480			0			11,480
Other corporate		5,348			0			5,312			0			5,312
Total assets		$	47,009		$	19,071		$	27,217		$	95		$	46,383
Liabilities:
Notes payable (excluding capital leases)		$	3,275		$	0		$	0		$	3,536		$	3,536
Obligation to Japanese policyholder protection corporation		71			0			0			71			71
Total liabilities		$	3,346		$	0		$	0		$	3,607		$	3,607

Fair Value Assets Available-for-Sale Securities Primary Pricing Sources

The following tables present the pricing sources for the fair values of our fixed maturities, perpetual securities, and equity securities as of December 31.



	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:
Third party pricing vendor		$	12,265		$	685		$	0		$	12,950
DCF pricing model		0			47			0			47
Total government and agencies		12,265			732			0			12,997
Municipalities:
Third party pricing vendor		0			1,177			0			1,177
DCF pricing model		0			18			0			18
Total municipalities		0			1,195			0			1,195
Mortgage- and asset-backed securities:
Third party pricing vendor		0			682			0			682
DCF pricing model		0			11			0			11
Broker/other		0			0			338			338
Total mortgage- and asset-backed securities		0			693			338			1,031
Public utilities:
Third party pricing vendor		0			5,144			0			5,144
DCF pricing model		0			2,908			420			3,328
Broker/other		0			25			0			25
Total public utilities		0			8,077			420			8,497
Sovereign and supranational:
Third party pricing vendor		0			540			0			540
DCF pricing model		0			619			418			1,037
Broker/other		0			495			0			495
Total sovereign and supranational		0			1,654			418			2,072
Banks/financial institutions:
Third party pricing vendor		0			4,257			0			4,257
DCF pricing model		0			2,136			444			2,580
Broker/other		0			217			580			797
Total banks/financial institutions		0			6,610			1,024			7,634
Other corporate:
Third party pricing vendor		0			18,093			0			18,093
DCF pricing model		0			4,747			575			5,322
Broker/other		0			1			411			412
Total other corporate		0			22,841			986			23,827
Total fixed maturities		12,265			41,802			3,186			57,253
Perpetual securities:
Banks/financial institutions:
Third party pricing vendor		0			283			0			283
DCF pricing model		0			3,452			215			3,667
Total banks/financial institutions		0			3,735			215			3,950



(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
Other corporate:
DCF pricing model		0			352			0			352
Total other corporate		0			352			0			352
Total perpetual securities		0			4,087			215			4,302
Equity securities:
Third party pricing vendor		13			0			0			13
DCF pricing model		0			6			0			6
Broker/other		0			0			4			4
Total equity securities		13			6			4			23
Total securities available for sale		$	12,278		$	45,895		$	3,405		$	61,578



	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
Securities available for sale, carried at fair value:
Fixed maturities:
Government and agencies:
Third party pricing vendor		$	11,092		$	721		$	0		$	11,813
Total government and agencies		11,092			721			0			11,813
Municipalities:
Third party pricing vendor		0			1,142			0			1,142
DCF pricing model		0			17			0			17
Total municipalities		0			1,159			0			1,159
Mortgage- and asset-backed securities:
Third party pricing vendor		0			932			0			932
DCF pricing model		0			12			0			12
Broker/other		0			0			394			394
Total mortgage- and asset-backed securities		0			944			394			1,338
Public utilities:
Third party pricing vendor		0			3,908			0			3,908
DCF pricing model		0			2,895			422			3,317
Total public utilities		0			6,803			422			7,225
Sovereign and supranational:
Third party pricing vendor		0			491			0			491
DCF pricing model		0			1,383			434			1,817
Total sovereign and supranational		0			1,874			434			2,308
Banks/financial institutions:
Third party pricing vendor		0			3,612			0			3,612
DCF pricing model		0			2,722			552			3,274
Broker/other		0			45			522			567
Total banks/financial institutions		0			6,379			1,074			7,453
Other corporate:
Third party pricing vendor		0			10,351			0			10,351
DCF pricing model		0			4,763			605			5,368
Broker/other		0			57			500			557
Total 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:
Third party pricing vendor		0			292			0			292
DCF pricing model		0			5,260			317			5,577
Broker/other		0			0			209			209
Total banks/financial institutions		0			5,552			526			6,078
Other corporate:
DCF pricing model		0			361			0			361
Total other corporate		0			361			0			361
Total perpetual securities		0			5,913			526			6,439



(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
Equity securities:
Third party pricing vendor		15			0			0			15
DCF pricing model		0			6			0			6
Broker/other		0			0			4			4
Total equity securities		15			6			4			25
Total securities available for sale		$	11,107		$	38,970		$	3,959		$	54,036

Fair Value Assets Held-To-Maturity Securities Primary Pricing Sources



		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
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Government and agencies:
Third party pricing vendor		$	32,332		$	0		$	0		$	32,332
Total government and agencies		32,332			0			0			32,332
Municipalities:
Third party pricing vendor		0			464			0			464
DCF pricing model		0			56			0			56
Total municipalities		0			520			0			520
Mortgage- and asset-backed securities:
Third party pricing vendor		0			30			0			30
Broker/other		0			0			64			64
Total mortgage- and asset-backed securities		0			30			64			94
Public utilities:
Third party pricing vendor		0			58			0			58
DCF pricing model		0			4,993			0			4,993
Total public utilities		0			5,051			0			5,051
Sovereign and supranational:
Third party pricing vendor		0			370			0			370
DCF pricing model		0			2,947			0			2,947
Total sovereign and supranational		0			3,317			0			3,317
Banks/financial institutions:
Third party pricing vendor		0			254			0			254
DCF pricing model		0			8,737			0			8,737
Total banks/financial institutions		0			8,991			0			8,991
Other corporate:
Third party pricing vendor		0			122			0			122
DCF pricing model		0			4,414			0			4,414
Total other corporate		0			4,536			0			4,536
Total securities held to maturity		$	32,332		$	22,445		$	64		$	54,841



		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
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Government and agencies:
Third party pricing vendor		$	19,071		$	0		$	0		$	19,071
Total government and agencies		19,071			0			0			19,071
Municipalities:
Third party pricing vendor		0			524			0			524
DCF pricing model		0			60			0			60
Total municipalities		0			584			0			584
Mortgage- and asset-backed securities:
Third party pricing vendor		0			39			0			39
Broker/other		0			0			95			95
Total mortgage- and asset-backed securities		0			39			95			134
Public utilities:
Third party pricing vendor		0			65			0			65
DCF pricing model		0			5,572			0			5,572
Total public utilities		0			5,637			0			5,637
Sovereign and supranational:
Third party pricing vendor		0			257			0			257
DCF pricing model		0			3,772			0			3,772
Broker/other		0			136			0			136
Total sovereign and supranational		0			4,165			0			4,165
Banks/financial institutions:
Third party pricing vendor		0			285			0			285
DCF pricing model		0			11,195			0			11,195
Total banks/financial institutions		0			11,480			0			11,480
Other corporate:
Third party pricing vendor		0			116			0			116
DCF pricing model		0			5,176			0			5,176
Broker/other		0			20			0			20
Total other corporate		0			5,312			0			5,312
Total securities held to maturity		$	19,071		$	27,217		$	95		$	46,383

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



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			49			0		(1		)	(61		)	65			51
Unrealized gains (losses) included in other comprehensive income (loss)	(33		)	(2		)	(16		)	70				(87		)	33			0		0			(22		)	0			(57		)
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			(326		)		(34		)	(393		)	0		0			0			0			(753		)
Settlements	(20		)	0			0			0				0			0			0		0			(33		)	0			(53		)
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	$	338		$	420		$	418		$	1,024			$	986		$	215		$	4	$	29		$	(172	)	$	(65	)	$	3,197
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		$	0		$	0	$	(1	)	$	(61	)	$	65		$	0

⁽¹⁾Derivative assets and liabilities are presented net

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



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	(16		)	0		(2		)	0		1			0		0		0		(33		)	(160		)	(64		)	(274		)
Unrealized gains (losses) included in other comprehensive income (loss)	18			0		0			0		15			0		0		0		0			(33		)	0			0
Purchases, issuances, sales and settlements:
Purchases	0			0		0			0		0			0		0		0		0			(6		)	0			(6		)
Issuances	0			0		0			0		0			0		0		0		0			0			0			0
Sales	0			0		(3		)	0		0			0		0		0		0			0			15			12
Settlements	(10		)	0		0			0		0			0		0		0		4			(8		)	262			248
Transfers into Level 3⁽²⁾	139			422		0			434		1,048			1,105		526		0		59			(90		)	0			3,643
Transfers out of Level 3⁽³⁾	(4		)	0		0			0		(376		)	0		0		0		0			0			0			(380		)
Balance, end of period	$	394		$	422	$	0		$	434	$	1,074		$	1,105	$	526	$	4	$	30		$	(56	)	$	(130	)	$	3,803
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)	$	(16	)	$	0	$	0		$	0	$	1		$	0	$	0	$	0	$	(33	)	$	(160	)	$	(64	)	$	(272	)

⁽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 values instead of obtaining pricing of the securities from brokers or arrangers

Discounted Cash Flow Pricing Model Sensitivity Analysis

The fair values of our available-for-sale fixed-maturity and perpetual securities valued by our DCF pricing model totaled $16.4 billion at December 31, 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		$	(825	)		+50 bps		$	(820	)		+50 %		$	(12	)
	-50 bps		864				-50 bps		843				-50 %		25

The fair values of our held-to-maturity fixed-maturity securities valued by our DCF pricing model totaled $21.1 billion at December 31, 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		$	(1,308	)		+50 bps		$	(1,223	)		+50 %		$	(110	)
	-50 bps		1,287				-50 bps		1,203				-50 %		117

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.

December 31, 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

338

Consensus pricing

Offered quotes

N/A

^(e)

Public utilities

420

Discounted cash flow

Historical volatility

7.36%

Sovereign and supranational

418

Discounted cash flow

Historical volatility

7.36%

Banks/financial institutions

444

Discounted cash flow

Historical volatility

7.36%

580

Consensus pricing

Offered quotes

N/A

^(e)

Other corporate

575

Discounted cash flow

Historical volatility

7.36%

411

Consensus pricing

Offered quotes

N/A

^(e)

Perpetual securities:

Banks/financial institutions

215

Discounted cash flow

Historical volatility

7.36%

Equity securities

Net asset value

Offered quotes

$2-$943 ($8)

Other assets:

Interest rate swaps

Discounted cash flow

Base correlation

49% - 50%

^(a)

CDS spreads

91 - 152 bps

Recovery rate

37.00%

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

CDS spreads

12 - 117 bps

Foreign exchange rates

20.65%

^(d)

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

CDS spreads

12 - 126 bps

102

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

Foreign exchange rates

20.65%

^(d)

Credit default swaps

Discounted cash flow

Base correlation

49% - 50%

^(a)

CDS spreads

91 - 152 bps

Recovery rate

37.00%

Total assets

3,596

(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

December 31, 2012

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Liabilities:

Interest rate swaps

Discounted cash flow

Base correlation

49% - 50%

^(a)

CDS spreads

91 - 152 bps

Recovery rate

37.00%

Foreign currency swaps

118

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

CDS spreads

22 - 141 bps

Foreign exchange rates

20.65%

^(d)

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

CDS spreads

25 - 186 bps

151

Discounted cash flow

Interest rates (USD)

1.84% - 2.84%

^(b)

Interest rates (JPY)

.84% - 2.05%

^(c)

Foreign exchange rates

20.65%

^(d)

Credit default swaps

Discounted cash flow

Base correlations

49% - 50%

^(a)

CDS spreads

91 - 152 bps

Recovery rate

37.00%

Total liabilities

399

(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