INVESTMENTS

Investment Holdings

The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.



	March 31, 2013
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	12,035		$	748		$	0		$	12,783
Mortgage- and asset-backed securities		671			44			1			714
Public utilities		2,928			116			53			2,991
Sovereign and supranational		1,120			61			7			1,174
Banks/financial institutions		2,952			183			236			2,899
Other corporate		4,892			189			256			4,825
Total yen-denominated		24,598			1,341			553			25,386
Dollar-denominated:
U.S. government and agencies		95			16			0			111
Municipalities		1,018			149			6			1,161
Mortgage- and asset-backed securities		182			58			0			240
Public utilities		4,581			609			31			5,159
Sovereign and supranational		468			112			2			578
Banks/financial institutions		3,578			502			8			4,072
Other corporate		18,259			1,581			271			19,569
Total dollar-denominated		28,181			3,027			318			30,890
Total fixed maturities		52,779			4,368			871			56,276
Perpetual securities:
Yen-denominated:
Banks/financial institutions		3,080			73			525			2,628
Other corporate		285			0			67			218
Dollar-denominated:
Banks/financial institutions		268			25			6			287
Total perpetual securities		3,633			98			598			3,133
Equity securities		18			6			0			24
Total securities available for sale		$	56,430		$	4,472		$	1,469		$	59,433



	March 31, 2013
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	24,606		$	2,154		$	0		$	26,760
Municipalities		452			65			0			517
Mortgage- and asset-backed securities		77			4			0			81
Public utilities		4,532			202			222			4,512
Sovereign and supranational		2,953			220			100			3,073
Banks/financial institutions		8,480			163			690			7,953
Other corporate		4,104			249			202			4,151
Total yen-denominated		45,204			3,057			1,214			47,047
Total securities held to maturity		$	45,204		$	3,057		$	1,214		$	47,047



	December 31, 2012
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities available for sale, carried at fair value:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	12,612		$	349		$	81		$	12,880
Mortgage- and asset-backed securities		746			40			1			785
Public utilities		3,608			116			72			3,652
Sovereign and supranational		1,404			71			0			1,475
Banks/financial institutions		3,455			233			180			3,508
Other corporate		5,656			241			153			5,744
Total yen-denominated		27,481			1,050			487			28,044
Dollar-denominated:
U.S. government and agencies		93			24			0			117
Municipalities		1,045			156			6			1,195
Mortgage- and asset-backed securities		188			58			0			246
Public utilities		4,204			658			17			4,845
Sovereign and supranational		476			123			2			597
Banks/financial institutions		3,626			506			6			4,126
Other corporate		16,300			1,878			95			18,083
Total dollar-denominated		25,932			3,403			126			29,209
Total fixed maturities		53,413			4,453			613			57,253
Perpetual securities:
Yen-denominated:
Banks/financial institutions		3,635			193			161			3,667
Other corporate		309			43			0			352
Dollar-denominated:
Banks/financial institutions		269			23			9			283
Total perpetual securities		4,213			259			170			4,302
Equity securities		20			4			1			23
Total securities available for sale		$	57,646		$	4,716		$	784		$	61,578



	December 31, 2012
(In millions)	Cost or Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Securities held to maturity, carried at amortized cost:
Fixed maturities:
Yen-denominated:
Japan government and agencies		$	32,043		$	356		$	67		$	32,332
Municipalities		492			30			2			520
Mortgage- and asset-backed securities		90			4			0			94
Public utilities		4,924			233			106			5,051
Sovereign and supranational		3,209			192			84			3,317
Banks/financial institutions		9,211			211			431			8,991
Other corporate		4,457			187			108			4,536
Total yen-denominated		54,426			1,213			798			54,841
Total securities held to maturity		$	54,426		$	1,213		$	798		$	54,841

The methods of determining the fair values of our investments in fixed-maturity securities, perpetual securities and equity securities, including a change in valuation methodology for determining fair value of privately issued securities as of March 31, 2013, are described in Note 5.

During the first quarter of 2013, we did not reclassify any investments from the held-to-maturity portfolio to the available-for-sale portfolio. During the first quarter of 2012, we reclassified one investment from the held-to-maturity portfolio to the available-for-sale portfolio as a result of a significant decline in the issuer's creditworthiness. At the time of the transfer, the security had an amortized cost of $122 million and an unrealized loss of $23 million.

Contractual and Economic Maturities

The contractual maturities of our investments in fixed maturities at March 31, 2013, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Available for sale:
Due in one year or less		$	715		$	724		$	107		$	110
Due after one year through five years		1,963			2,065			316			359
Due after five years through 10 years		8,295			8,615			1,336			1,548
Due after 10 years		30,805			32,172			8,245			9,562
Mortgage- and asset-backed securities		813			903			40			51
Total fixed maturities available for sale		$	42,591		$	44,479		$	10,044		$	11,630
Held to maturity:
Due in one year or less		$	321		$	322		$	0		$	0
Due after one year through five years		624			672			0			0
Due after five years through 10 years		2,924			3,127			0			0
Due after 10 years		41,258			42,845			0			0
Mortgage- and asset-backed securities		77			81			0			0
Total fixed maturities held to maturity		$	45,204		$	47,047		$	0		$	0

At March 31, 2013, the Parent Company had a portfolio of investment-grade available-for-sale fixed-maturity securities totaling $144 million at amortized cost and $167 million at fair value, which is not included in the table above.

Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.

The majority of our perpetual securities are subordinated to other debt obligations of the issuer, but rank higher than the issuer's equity securities. Perpetual securities have characteristics of both debt and equity investments, along with unique features that create economic maturity dates for the securities. Although perpetual securities have no contractual maturity date, they have stated interest coupons that were fixed at their issuance and subsequently change to a floating short-term interest rate of 125 to more than 300 basis points above an appropriate market index, generally by the 25th year after issuance, thereby creating an economic maturity date. The economic maturities of our investments in perpetual securities, which were all reported as available for sale at March 31, 2013, were as follows:



	Aflac Japan						Aflac U.S.
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in one year or less		$	0		$	0		$	0		$	0
Due after one year through five years		1,147			968			5			5
Due after five years through 10 years		285			218			0			0
Due after 10 years		2,037			1,771			159			171
Total perpetual securities available for sale		$	3,469		$	2,957		$	164		$	176

Investment Concentrations

Our investment process begins with an independent approach to underwriting each issuer's fundamental credit quality. We evaluate independently those factors which we believe could influence an issuer's ability to make payments under the contractual terms of our instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). We further determine the appropriateness of the investment considering broad business and portfolio management objectives, asset/liability needs, portfolio diversification, and expected income.

Banks and Financial Institutions

After Japanese government bonds (JGBs), our second largest investment concentration as of March 31, 2013, was banks and financial institutions. Within the countries we approve for investment opportunities, we primarily invest in financial institutions that are strategically crucial to each approved country's economy. The bank and financial institution sector is a highly regulated industry and plays a strategic role in the global economy.

Our total investments in the bank and financial institution sector, including those classified as perpetual securities, were as follows:



	March 31, 2013						December 31, 2012
	Total Investments in Banks and Financial Institutions Sector (in millions)			Percentage of Total Investment Portfolio			Total Investments in Banks and Financial Institutions Sector (in millions)			Percentage of Total Investment Portfolio
Fixed maturities:
Amortized cost		$	15,010		15	%		$	16,292		14	%
Fair value		14,924			14			16,625			14
Perpetual securities:
Upper Tier II:
Amortized cost		$	2,340		2	%		$	2,825		3	%
Fair value		2,059			2			2,919			3
Tier I:
Amortized cost		1,008			1			1,079			1
Fair value		856			1			1,031			1
Total:
Amortized cost		$	18,358		18	%		$	20,196		18	%
Fair value		17,839			17			20,575			18

Realized Investment Gains and Losses

Information regarding pretax realized gains and losses from investments is as follows:



	Three Months Ended March 31,
(In millions)	2013				2012
Realized investment gains (losses) on securities:
Fixed maturities:
Available for sale:
Gross gains from sales		$	119			$	14
Gross losses from sales		(6		)		(1		)
Net gains (losses) from redemptions		6				0
Other-than-temporary impairment losses		(54		)		(63		)
Held to maturity:
Net gains (losses) from redemptions		0				0
Total fixed maturities		65				(50		)
Perpetual securities:
Available for sale:
Gross gains from sales		0				70
Gross losses from sales		0				(65		)
Net gains (losses) from redemptions		0				60
Other-than-temporary impairment losses		0				(140		)
Total perpetual securities		0				(75		)
Equity securities:
Other-than-temporary impairment losses		(1		)		0
Total equity securities		(1		)		0
Derivatives and other:
Derivative gains (losses)		87				80
Other		5				0
Total derivatives and other		92				80
Total realized investment gains (losses)		$	156			$	(45	)

Other-than-temporary Impairment

The fair values of our debt and perpetual security investments fluctuate based on changes in interest rates and credit spreads in the global financial markets. Fair values can also be heavily influenced by the values of the assets of the issuer and expected ultimate recovery values upon default, bankruptcy or other financial restructuring. Credit spreads are most impacted by the general credit environment and global market liquidity. Interest rates are driven by numerous factors including, but not limited to, supply and demand, governmental monetary actions, expectations of inflation and economic growth. We believe that fluctuations in the fair value of our investment securities related to changes in credit spreads or interest rates have little bearing on underlying credit quality of the issuer, and whether our investment is ultimately recoverable. Generally, we consider such declines in fair values to be temporary even in situations where an investment remains in an unrealized loss position for a year or more.

However, in the course of our credit review process, we may determine that it is unlikely that we will recover our investment in an issuer due to factors specific to an individual issuer, as opposed to general changes in global credit spreads or interest rates. In this event, we consider such a decline in the investment's fair value, to the extent it is below the investment's cost or amortized cost, to be an other-than-temporary impairment of the investment and reduce the book value of the investment to its fair value.

In addition to the usual investment risk associated with a debt instrument, our perpetual security holdings are largely issued by banks that are integral to the financial markets of the corresponding sovereign country of the issuer. As a result of the issuer's position within the economy of the sovereign country, our perpetual securities may be subject to a higher risk of nationalization of their issuers in connection with capital injections from an issuer's sovereign government. We cannot be assured that such capital support will extend to all levels of an issuer's capital structure. In addition, certain governments or regulators may consider imposing interest and principal payment restrictions on issuers of hybrid securities to preserve cash and preserve the issuer's capital. Beyond the cash flow impact that additional deferrals would have on our portfolio, such deferrals could result in ratings downgrades of the affected securities, which in turn could result in a reduction of fair value of the securities and increase our regulatory capital requirements. We consider these factors in our credit review process.

When determining our intention to sell a security prior to recovery of its fair value to amortized cost, we evaluate facts and circumstances such as, but not limited to, sales of securities to meet cash flow needs and decisions to reposition our security portfolio. We perform ongoing analyses of our liquidity needs, which includes cash flow testing of our policy liabilities, debt maturities, projected dividend payments and other cash flow and liquidity needs. Our cash flow testing includes extensive duration matching of our investment portfolio and policy liabilities. Based on our analyses, we have concluded that we have sufficient excess cash flows to meet our liquidity needs without selling any of our investments prior to their maturity. Recently, we have been repositioning our security portfolio in an effort to enhance diversification and our credit profile by reducing our risk exposure through opportunistic investment transactions.

The following table details our pretax other-than-temporary impairment losses by investment category that resulted from our impairment evaluation process.



	Three Months Ended March 31,
(In millions)	2013			2012
Perpetual securities	$	0		$	140
Corporate bonds	38			63
Sovereign and supranational	16			0
Equity securities	1			0
Total other-than-temporary impairment losses realized	$	55	⁽¹⁾	$	203	⁽¹⁾

⁽¹⁾Includes $0 and $28 for the three-month periods ended March 31, 2013 and 2012, respectively, for credit-related impairments; $54 and $175 for the three-month periods ended March 31, 2013 and 2012, respectively, from change in intent to sell securities; and $1 for the three-month period ended March 31, 2013 for impairments due to severity and duration of decline in fair value

Unrealized Investment Gains and Losses

Effect on Shareholders’ Equity

The net effect on shareholders’ equity of unrealized gains and losses from investment securities was as follows:



(In millions)	March 31, 2013				December 31, 2012
Unrealized gains (losses) on securities available for sale		$	3,003			$	3,932
Unamortized unrealized gains on securities transferred to held to maturity		17				20
Deferred income taxes		(1,039		)		(1,382		)
Shareholders’ equity, unrealized gains (losses) on investment securities		$	1,981			$	2,570

Gross Unrealized Loss Aging

The following tables show the fair values and gross unrealized losses of our available-for-sale and held-to-maturity investments that were in an unrealized loss position, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.



	March 31, 2013
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed Maturities:
Japan government and agencies:
Yen-denominated		$	5		$	0		$	5		$	0		$	0		$	0
Municipalities:
Dollar-denominated		34			6			0			0			34			6
Mortgage- and asset- backed securities:
Dollar-denominated		9			0			9			0			0			0
Yen-denominated		125			1			0			0			125			1
Public utilities:
Dollar-denominated		1,154			31			1,144			31			10			0
Yen-denominated		3,052			275			1,779			120			1,273			155
Sovereign and supranational:
Dollar-denominated		33			2			0			0			33			2
Yen-denominated		903			107			515			17			388			90
Banks/financial institutions:
Dollar-denominated		347			8			318			7			29			1
Yen-denominated		6,537			926			3,178			171			3,359			755
Other corporate:
Dollar-denominated		7,478			271			7,350			263			128			8
Yen-denominated		4,847			458			3,509			265			1,338			193
Total fixed maturities		24,524			2,085			17,807			874			6,717			1,211
Perpetual securities:
Dollar-denominated		18			6			0			0			18			6
Yen-denominated		2,045			592			1,349			325			696			267
Total perpetual securities		2,063			598			1,349			325			714			273
Equity securities		1			0			0			0			1			0
Total		$	26,588		$	2,683		$	19,156		$	1,199		$	7,432		$	1,484



	December 31, 2012
	Total						Less than 12 months						12 months or longer
(In millions)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Fixed Maturities:
Japan government and agencies:
Yen-denominated		$	17,342		$	148		$	17,342		$	148		$	0		$	0
Municipalities:
Dollar-denominated		34			6			1			0			33			6
Yen-denominated		56			2			56			2			0			0
Mortgage- and asset- backed securities:
Dollar-denominated		10			0			10			0			0			0
Yen-denominated		136			1			0			0			136			1
Public utilities:
Dollar-denominated		736			17			736			17			0			0
Yen-denominated		3,920			178			1,339			31			2,581			147
Sovereign and supranational:
Dollar-denominated		31			2			0			0			31			2
Yen-denominated		1,244			84			507			13			737			71
Banks/financial institutions:
Dollar-denominated		276			6			180			3			96			3
Yen-denominated		6,918			611			1,935			28			4,983			583
Other corporate:
Dollar-denominated		4,534			95			4,404			86			130			9
Yen-denominated		4,013			261			1,635			40			2,378			221
Total fixed maturities		39,250			1,411			28,145			368			11,105			1,043
Perpetual securities:
Dollar-denominated		136			9			120			0			16			9
Yen-denominated		1,315			161			0			0			1,315			161
Total perpetual securities		1,451			170			120			0			1,331			170
Equity securities		6			1			3			0			3			1
Total		$	40,707		$	1,582		$	28,268		$	368		$	12,439		$	1,214

Analysis of Securities in Unrealized Loss Positions

The unrealized losses on our investments have been primarily related to general market changes in foreign exchange rates or the levels of credit spreads or interest rates rather than specific concerns with the issuer's ability to pay interest and repay principal. In addition, in the first quarter of 2013, we refined our methodology for valuing certain privately issued securities (see Note 5). The change in valuation methodology resulted in an increase in gross unrealized losses as of March 31, 2013, compared with December 31, 2012. The following summarizes our evaluation of investment categories with significant unrealized losses and securities that were rated below investment grade as of March 31, 2013.

General Review of Credit Considerations

For any significant declines in fair value, we perform a more focused review of the related issuers' credit profile. We evaluate their ratings from the Nationally Recognized Statistical Rating Organizations (NRSROs), their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. We utilize information available in the public domain as well as consultations with issuers themselves. For non-corporate issuers, the analysis will focus on all sources of credit support including macro-economic variables and issuer specific factors. From these reviews, we evaluate the issuer's continued ability to service our investment through their payment of interest and principal.

Public Utilities

As of March 31, 2013, 85% of the unrealized losses on investments in the public utilities sector were related to investments that were investment grade, compared with 69% at December 31, 2012. We have determined that the majority of the unrealized losses in the public utilities sector as of March 31, 2013 were caused by general market changes. Based on our credit analysis, we believe that the issuers of our investments in this sector have the ability to service their obligations to us.

Sovereign and Supranational

As of March 31, 2013, 99% of the unrealized losses on investment securities in the sovereign and supranational sector were related to investments that were investment grade, compared with 96% at December 31, 2012. We have determined that the majority of the unrealized losses on the investments in the sovereign and supranational sector as of March 31, 2013 were caused by general market changes. Based on our credit analysis, we believe that the issuers of our investments in this sector have the ability to service their obligations to us.

Bank and Financial Institutions

The following table shows the composition of our investments in an unrealized loss position in the bank and financial institution sector by fixed-maturity securities and perpetual securities. The table reflects those securities in that sector that were in an unrealized loss position as a percentage of our total investment portfolio in an unrealized loss position. The table also reflects the respective unrealized losses in this sector as a percentage of total unrealized losses in our investment portfolio.



	March 31, 2013						December 31, 2012
	Percentage of Total Investments in an Unrealized Loss Position			Percentage of Total Unrealized Losses			Percentage of Total Investments in an Unrealized Loss Position			Percentage of Total Unrealized Losses
Fixed maturities		26	%		35	%		18	%		39	%
Perpetual securities:
Upper Tier II		5			13			2			4
Tier I		2			7			2			7
Total perpetual securities		7			20			4			11
Total		33	%		55	%		22	%		50	%

As of March 31, 2013, 83% of the $1.5 billion in unrealized losses on investments in the bank and financial institution sector, including perpetual securities, were related to investments that were investment grade, compared with 81% at December 31, 2012. Of the $8.7 billion in total investments, at fair value, in this sector in an unrealized loss position at March 31, 2013, only $617 million, which had $255 million in unrealized losses, was below investment grade. Three issuers of investments comprised the $255 million unrealized loss.

Based on our credit analysis, we have determined that the majority of the unrealized losses on the investments in this sector as of March 31, 2013 were caused by wider credit spreads, the downturn in the global economic environment and, to a lesser extent, changes in foreign exchange rates. Further, unrealized gains or losses relating to prevailing interest rate environments are impacted by the remaining time to maturity of an investment. Assuming no credit-related factors develop, as investments near maturity, the unrealized gains or losses can be expected to diminish. Based on our credit analysis, we believe that the issuers of our investments in this sector have the ability to service their obligations to us.

Other Corporate

As of March 31, 2013, 88% of the unrealized losses on investments in the other corporate sector were related to investments that were investment grade, compared with 72% at December 31, 2012. We have determined that the majority of the unrealized losses on the investments in the other corporate sector as of March 31, 2013 were caused by general market changes. Based on our credit analysis, we believe that the issuers of our investments in this sector have the ability to service their obligations to us.

Perpetual Securities

As of March 31, 2013, 88% of the unrealized losses on investments in perpetual securities were related to investments that were investment grade, compared with 100% at December 31, 2012. The majority of our investments in Upper Tier II and Tier I perpetual securities were in highly-rated global financial institutions. Upper Tier II securities have more debt-like characteristics than Tier I securities and are senior to Tier I securities, preferred stock, and common equity of the issuer. Conversely, Tier I securities have more equity-like characteristics, but are senior to the common equity of the issuer. They may also be senior to certain preferred shares, depending on the individual security, the issuer's capital structure and the regulatory jurisdiction of the issuer.

Details of our holdings of perpetual securities were as follows:

Perpetual Securities



		March 31, 2013										December 31, 2012
(In millions)	Credit Rating	Amortized Cost			Fair Value			Unrealized Gain (Loss)				Amortized Cost			Fair Value			Unrealized Gain (Loss)
Upper Tier II:
	A		$	164		$	181		$	17			$	460		$	488		$	28
	BBB		1,911			1,684			(227		)		2,077			2,129			52
	BB or lower		265			194			(71		)		288			302			14
Total Upper Tier II			2,340			2,059			(281		)		2,825			2,919			94
Tier I:
	BBB		835			669			(166		)		966			904			(62		)
	BB or lower		173			187			14				113			127			14
Total Tier I			1,008			856			(152		)		1,079			1,031			(48		)
Other subordinated - non-banks	BBB		285			218			(67		)		309			352			43
Total			$	3,633		$	3,133		$	(500	)		$	4,213		$	4,302		$	89

With the exception of the Icelandic bank securities that we completely impaired in 2008, none of the perpetual securities we own were in default on interest and principal payments at March 31, 2013.

During the first three months of 2013, our aggregate holdings in perpetual securities moved from an unrealized gain of $89 million to an unrealized loss of $500 million. This change is primarily due to a refinement in our methodology for valuing privately issued securities, including perpetual securities, that was implemented in the first quarter of 2013 (see Note 5).

For those securities with unrealized losses as of March 31, 2013, we believe the losses are principally due to a temporary widening of the applicable discount rate through a combination of interest rates and/or credit spreads. Based on our reviews, we do not believe the ability of these issuers to service our investments has been compromised. Assuming no unforeseen credit factors develop, as the investments near their expected economic maturity, the unrealized gains or losses should lessen. Based on our analysis, we believe the issuers of our holdings in this sector have the ability to service their obligations to us.

Variable Interest Entities (VIEs)

As a condition to our involvement or investment in a VIE, we enter into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of our investment or our beneficial interest in the VIE.

Our involvement with all of the VIEs in which we have an interest is passive in nature, and we are not the arranger of these entities. We have not been involved in establishing these entities, except as it relates to our review and evaluation of the structure of these VIEs in the normal course of our investment decision-making process. Further, we are not, nor have we been, required to purchase any securities issued in the future by these VIEs.

Our ownership interest in the VIEs is limited to holding the obligations issued by them. All of the VIEs in which we invest are static with respect to funding and have no ongoing forms of funding after the initial funding date. We have no direct or contingent obligations to fund the limited activities of these VIEs, nor do we have any direct or indirect financial guarantees related to the limited activities of these VIEs. We have not provided any assistance or any other type of financing support to any of the VIEs we invest in, nor do we have any intention to do so in the future. The weighted-average lives of our notes are very similar to the underlying collateral held by these VIEs where applicable.

Our risk of loss related to our interests in any of our VIEs is limited to our investment in the debt securities issued by them.

VIEs - Consolidated

The following table presents the amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported.

Investments in Consolidated Variable Interest Entities



	March 31, 2013						December 31, 2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	4,721		$	5,377		$	5,058		$	5,787
Perpetual securities, available for sale		520			455			559			574
Fixed maturities, held to maturity		266			259			289			287
Other assets		158			158			191			191
Total assets of consolidated VIEs		$	5,665		$	6,249		$	6,097		$	6,839
Liabilities:
Other liabilities		$	371		$	371		$	399		$	399
Total liabilities of consolidated VIEs		$	371		$	371		$	399		$	399

We are substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, we have the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and are therefore considered to be the primary beneficiary of the VIEs that we consolidate. We also participate in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding debt and perpetual securities and interest rate, foreign currency, and/or credit default swaps (CDSs), as appropriate, and utilizing the cash flows from these securities to service our investment. Neither we nor any of our creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event. For those VIEs that contain a swap, we are not a direct counterparty to the swap contracts and have no control over them. Our loss exposure to these VIEs is limited to our original investment. Our consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable. With the exception of our investment in senior secured bank loans through unit trust structures, the underlying collateral assets and funding of our consolidated VIEs are generally static in nature and the underlying collateral and the reference corporate entities covered by any CDS contracts were all investment grade at the time of issuance.

We are exposed to credit losses within any consolidated collateralized debt obligations (CDOs) that could result in principal losses to our investments. We have mitigated our risk of credit loss through the structure of the VIE, which contractually requires the subordinated tranches within these VIEs to absorb the majority of the expected losses from the underlying credit default swaps. We currently own only senior mezzanine CDO tranches. Based on our statistical analysis models and the current subordination levels in our CDOs, each of these VIEs can sustain a reasonable number of defaults in the underlying reference entities in the CDSs with no loss to our investment.

VIEs-Not Consolidated

The table below reflects the amortized cost, fair value and balance sheet caption in which our investment in VIEs not consolidated are reported.

Investments in Variable Interest Entities Not Consolidated



	March 31, 2013						December 31, 2012
(In millions)	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Assets:
Fixed maturities, available for sale		$	6,907		$	7,287		$	7,738		$	8,350
Perpetual securities, available for sale		413			392			736			751
Fixed maturities, held to maturity		3,521			3,522			3,829			3,922
Total investments in VIEs not consolidated		$	10,841		$	11,201		$	12,303		$	13,023

The VIEs that we are not required to consolidate are investments that are limited to loans in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents. These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the international capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. We do not have the power to direct the activities that most significantly impact the entity's economic performance, nor do we have (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. As such, we are not the primary beneficiary of these VIEs and are therefore not required to consolidate them. These VIE investments comprise securities from 143 separate issuers with an average credit rating of BBB.

Securities Lending

We lend fixed-maturity securities to financial institutions in short-term security-lending transactions. These short-term security-lending arrangements increase investment income with minimal risk. Our security lending policy requires that the fair value of the securities and/or unrestricted cash received as collateral be 102% or more of the fair value of the loaned securities. The following table presents our security loans outstanding and the corresponding collateral held:



(In millions)	March 31, 2013			December 31, 2012
Security loans outstanding, fair value		$	202		$	6,122
Cash collateral on loaned securities		207			6,277

The balance of our security loans outstanding was significantly lower at March 31, 2013, compared with that at December 31, 2012, due to the conclusion of a six-month securities lending program that began in the third quarter of 2012. For this particular securities lending program, we invested the cash collateral in JGBs with maturities that corresponded with the conclusion of the program.