FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels. Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets. Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets. Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active market.

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.

	March 31, 2013
(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		$	12,190		$	704		$	0		$	12,894
Municipalities		0			1,161			0			1,161
Mortgage- and asset-backed securities		0			515			439			954
Public utilities		0			8,150			0			8,150
Sovereign and supranational		0			1,752			0			1,752
Banks/financial institutions		0			6,945			26			6,971
Other corporate		0			24,394			0			24,394
Total fixed maturities		12,190			43,621			465			56,276
Perpetual securities:
Banks/financial institutions		0			2,915			0			2,915
Other corporate		0			218			0			218
Total perpetual securities		0			3,133			0			3,133
Equity securities		15			5			4			24
Other assets:
Interest rate swaps		0			0			26			26
Foreign currency swaps		0			251			130			381
Foreign currency forwards		0			19			0			19
Foreign currency options		0			2			0			2
Credit default swaps		0			0			2			2
Total other assets		0			272			158			430
Cash and cash equivalents		2,596			0			0			2,596
Total assets		$	14,801		$	47,031		$	627		$	62,459
Liabilities:
Interest rate swaps		$	0		$	0		$	1		$	1
Foreign currency swaps		0			0			314			314
Foreign currency forwards		0			272			0			272
Credit default swaps		0			0			56			56
Total liabilities		$	0		$	272		$	371		$	643

	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

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.

	March 31, 2013
(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		$	24,606		$	26,760		$	0		$	0		$	26,760
Municipalities		452			0			517			0			517
Mortgage and asset-backed securities		77			0			26			55			81
Public utilities		4,532			0			4,512			0			4,512
Sovereign and supranational		2,953			0			3,073			0			3,073
Banks/financial institutions		8,480			0			7,953			0			7,953
Other corporate		4,104			0			4,151			0			4,151
Total assets		$	45,204		$	26,760		$	20,232		$	55		$	47,047
Liabilities:
Notes payable (excluding capital leases)		$	4,276		$	0		$	0		$	4,924		$	4,924
Obligation to Japanese policyholder protection corporation		2			0			0			2			2
Total liabilities		$	4,278		$	0		$	0		$	4,926		$	4,926

	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

Fair Value of Financial Instruments

U.S. GAAP requires disclosure of the fair value of certain financial instruments including those that are not carried at fair value. The carrying amounts for cash and cash equivalents, receivables, accrued investment income, accounts payable, cash collateral and payables for security transactions approximated their fair values due to the short-term nature of these instruments. Liabilities for future policy benefits and unpaid policy claims are not financial instruments as defined by GAAP.

Fixed maturities, perpetual securities, and equity securities

We determine the fair values of our fixed maturity securities, perpetual securities, and privately issued equity securities using the following approaches or techniques: price quotes and valuations from third party pricing vendors (including quoted market prices readily available from public exchange markets) and non-binding price quotes we obtain from outside brokers.

Prior to March 31, 2013, we had used a discounted cash flow (DCF) pricing model to value certain of our privately issued securities. Our DCF pricing model incorporated an option adjusted spread and utilized various market inputs we obtained from both active and inactive markets.The estimated fair values developed by the DCF pricing model were most sensitive to prevailing credit spreads, the level of interest rates (yields) and interest rate volatility.Credit spreads were derived from a widely used global bond index to create a credit matrix which took into account the current credit spread, ratings and remaining time to maturity, and subordination levels for securities that were included in the bond index.The index provided a broad-based measure of the global fixed-income bond market. Beginning March 31, 2013, to reflect the impact of the persistent economic environment and the changing regulatory framework, we engaged a third party pricing vendor to develop valuation models to determine fair values of these securities. These models were also DCF models, but also use information from related markets, specifically the credit default swap (CDS) market to estimate expected cash flows. These models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve.This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the bond by discounting those loss adjusted cash flows. In cases where a credit curve can not be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable bond(s) of the issuer; 2) issuer-specific CDS spreads; 3) bonds or CDS spreads of comparable issuers with similar characteristics such as rating, geography, or sector; or 4) bond indices that are comparative in rating, industry, maturity and region.

The pricing data and market quotes we obtain from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, we will re-examine the inputs and assess the reasonableness of the pricing data with the vendor. Additionally, we may compare the inputs to relevant market indices and other performance measurements. The output of this analysis is presented to the Company's Credit Subcommittee, or CSC. Based on the analysis provided to the CSC, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data. With the implementation of the pricing change associated with private placements previously noted, we have performed verification of the inputs and calculations in the models to confirm that the valuations represent reasonable estimates of fair value.

The fixed maturities classified as Level 3 consist of securities for which there are limited or no observable valuation inputs. For Level 3 securities that are investment grade, we estimate the fair value of these securities by obtaining non-binding broker quotes from a limited number of brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market conditions. We consider these inputs to be unobservable. For Level 3 investments that are below-investment-grade securities, we consider a variety of significant valuation inputs in the valuation process, including forward exchange rates, yen swap rates, dollar swap rates, interest rate volatilities, credit spread data on specific issuers, assumed default and default recovery rates, and certain probability assumptions. In obtaining these valuation inputs, we have determined that certain pricing assumptions and data used by our pricing sources are difficult to validate or corroborate by the market and/or appear to be internally developed rather than observed in or corroborated by the market. The use of these unobservable valuation inputs causes more subjectivity in the valuation process for these securities.

Historically, we have not adjusted the quotes or prices we obtain from the pricing services and brokers we use.

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

	March 31, 2013
(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		$	12,190		$	704		$	0		$	12,894
Total government and agencies		12,190			704			0			12,894
Municipalities:
Third party pricing vendor		0			1,161			0			1,161
Total municipalities		0			1,161			0			1,161
Mortgage- and asset-backed securities:
Third party pricing vendor		0			515			0			515
Broker/other		0			0			439			439
Total mortgage- and asset-backed securities		0			515			439			954
Public utilities:
Third party pricing vendor		0			8,125			0			8,125
Broker/other		0			25			0			25
Total public utilities		0			8,150			0			8,150
Sovereign and supranational:
Third party pricing vendor		0			1,420			0			1,420
Broker/other		0			332			0			332
Total sovereign and supranational		0			1,752			0			1,752
Banks/financial institutions:
Third party pricing vendor		0			6,945			0			6,945
Broker/other		0			0			26			26
Total banks/financial institutions		0			6,945			26			6,971
Other corporate:
Third party pricing vendor		0			24,256			0			24,256
Broker/other		0			138			0			138
Total other corporate		0			24,394			0			24,394
Total fixed maturities		12,190			43,621			465			56,276
Perpetual securities:
Banks/financial institutions:
Third party pricing vendor		0			2,915			0			2,915
Total banks/financial institutions		0			2,915			0			2,915
Other corporate:
Third party pricing vendor		0			218			0			218
Total other corporate		0			218			0			218
Total perpetual securities		0			3,133			0			3,133
Equity securities:
Third party pricing vendor		15			5			0			20
Broker/other		0			0			4			4
Total equity securities		15			5			4			24
Total securities available for sale		$	12,205		$	46,759		$	469		$	59,433

	March 31, 2013
(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		$	26,760		$	0		$	0		$	26,760
Total government and agencies		26,760			0			0			26,760
Municipalities:
Third party pricing vendor		0			517			0			517
Total municipalities		0			517			0			517
Mortgage- and asset-backed securities:
Third party pricing vendor		0			26			0			26
Broker/other		0			0			55			55
Total mortgage- and asset-backed securities		0			26			55			81
Public utilities:
Third party pricing vendor		0			4,512			0			4,512
Total public utilities		0			4,512			0			4,512
Sovereign and supranational:
Third party pricing vendor		0			3,073			0			3,073
Total sovereign and supranational		0			3,073			0			3,073
Banks/financial institutions:
Third party pricing vendor		0			7,953			0			7,953
Total banks/financial institutions		0			7,953			0			7,953
Other corporate:
Third party pricing vendor		0			4,151			0			4,151
Total other corporate		0			4,151			0			4,151
Total securities held to maturity		$	26,760		$	20,232		$	55		$	47,047

	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
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

	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
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

The following is a discussion of the determination of fair value of our remaining financial instruments.

Derivatives

We use derivative instruments to manage the risk associated with certain assets. However, the derivative instrument may not be classified in the same fair value hierarchy level as the associated asset. Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, and interest volatility.

The fair values of the foreign currency forwards associated with certain fixed-maturity securities, the foreign currency options, the foreign currency swaps associated with our senior notes and subordinated debentures, and the interest rate swap associated with our yen-denominated notes are based on the amounts we would expect to receive or pay. The determination of the fair value of these derivatives is based on observable market inputs, therefore they are classified as Level 2.

For derivatives associated with VIEs where we are the primary beneficiary, we are not the direct counterparty to the swap contracts. As a result, the fair value measurements incorporate the credit risk of the collateral associated with the VIE. We receive valuations from a third party pricing vendor for these derivatives. Based on an analysis of these derivatives and a review of the methodology employed by the pricing vendor, we determined that due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data. As a result, the derivatives associated with our consolidated VIEs are classified as Level 3 of the fair value hierarchy.

Notes payable

The fair values of our publicly issued notes payable classified as Level 3 were obtained from a limited number of independent brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market conditions. We consider these inputs to be unobservable. The fair values of our yen-denominated loans approximate their carrying values.

Obligation to Japanese policyholder protection corporation

The fair value of the obligation to the Japanese policyholder protection corporation classified as Level 3 is our estimated share of the industry's obligation calculated on a pro rata basis by projecting our percentage of the industry's premiums and reserves and applying that percentage to the total industry obligation payable in future years. We consider our inputs for this valuation to be unobservable.

Level 3 Rollforward and Transfers between Hierarchy Levels

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

Three Months Ended March 31, 2013
	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	$	338		$	420		$	418		$	1,024		$	986		$	215		$	4	$	29		$	(172	)	$	(65	)	$	3,197
Realized investment gains (losses) included in earnings	0			0			0			0			0			0			0		(4		)	(5		)	11			2
Unrealized gains (losses) included in other comprehensive income (loss)	(21		)	(20		)	0			(1		)	0			0			0		0			(7		)	0			(49		)
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			(400		)	0			0			0			0			0		0			0			0			(400		)
Settlements	(3		)	0			0			0			0			0			0		0			0			0			(3		)
Transfers into Level 3(2)	125			0			0			0			0			0			0		0			0			0			125
Transfers out of Level 3(3)	0			0			(418		)	(997		)	(986		)	(215		)	0		0			0			0			(2,616		)
Balance, end of period	$	439		$	0		$	0		$	26		$	0		$	0		$	4	$	25		$	(184	)	$	(54	)	$	256
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		$	0		$	0	$	(4	)	$	(5	)	$	11		$	2

⁽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 a valuation method that uses observable market data as significant inputs to estimate fair value

Three Months Ended March 31, 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	0			0			0			0		2			49			0		(2		)	13			33			95
Unrealized gains (losses) included in other comprehensive income (loss)	(23		)	(13		)	(16		)	23		(38		)	6			0		0			(12		)	0			(73		)
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	(4		)	0			0			0		0			0			0		0			(24		)	0			(28		)
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	$	367		$	409		$	418		$	1,097	$	1,035		$	325		$	4	$	28		$	(79	)	$	(97	)	$	3,507
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		$	0		$	0	$	(2	)	$	13		$	33		$	44

⁽¹⁾ Derivative assets and liabilities are presented net

Transfers into and/or out of Level 3 are attributable to a change in the observability of inputs. The most significant transfer out of Level 3 into Level 2 during the three-month period ended March 31, 2013 related to our callable reverse dual-currency bonds (RDCs). RDCs are securities that have principal denominated in yen while paying U.S. dollar (USD) coupons. The market standard approach is to use implied volatility to value options or instruments with optionality because historical volatility may not represent current market participants' expectations about future volatility. Under our previous valuation approach, we used historical foreign exchange volatility as an input for valuing these investments. Given the importance of this input to the overall valuation of these RDCs and the determination of this input to be unobservable, we made the decision at December 31, 2011 to move these holdings to Level 3 of the fair value hierarchy. During the first quarter of 2013, we implemented a new valuation methodology for these securities that relies on comparable bonds in the market, the observable forward foreign exchange curve and other market inputs. Given that the significant inputs to the valuation of these items are now based on observable data, effective March 31, 2013, we have transferred these bonds from Level 3 to Level 2 of the fair value hierarchy.

In addition to the callable RDCs, we transferred certain other corporate securities from Level 3 to Level 2 in the first quarter of 2013. Prices for these securities were previously obtained from brokers and/or arrangers with minimal transparency around how the valuation was determined. Similar to the RDCs, these securities are now valued using the same methodology described above for our other privately issued securities.

There were no transfers between Level 1 and 2 for the three-month periods ended March 31, 2013 and 2012.

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

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.

March 31, 2013
(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		$	439	Consensus pricing	Offered quotes	N/A	(e)
Banks/financial institutions		26		Consensus pricing	Offered quotes	N/A	(e)
Equity securities		4		Net asset value	Offered quotes	$1-$868 ($8)
Other assets:
Interest rate swaps		26		Discounted cash flow	Base correlation	45% - 56% (50%)	(a)
					CDS spreads	91 - 143 (120) bps
					Recovery rate	37.00%
Foreign currency swaps		35		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					CDS spreads	22 - 129 bps
					Foreign exchange rates	21.10%	(d)
		5		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					CDS spreads	15 - 125 bps
		90		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					Foreign exchange rates	21.10%	(d)
Credit default swaps		2		Discounted cash flow	Base correlation	45% - 56% (50%)	(a)
					CDS spreads	91 - 143 (120) bps
					Recovery rate	37.00%
Total assets		$	627

(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

(c) Inputs derived from Japan 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.

March 31, 2013
(In millions)	Fair Value			Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Liabilities:
Interest rate swaps		$	1	Discounted cash flow	Base correlation	45% - 56% (50%)	(a)
					CDS spreads	91 - 143 (120) bps
					Recovery rate	37.00%
Foreign currency swaps		114		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					CDS spreads	35 - 157 bps
					Foreign exchange rates	21.10%	(d)
		46		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					CDS spreads	19 - 204 bps
		154		Discounted cash flow	Interest rates (USD)	2.01% - 3.02%	(b)
					Interest rates (JPY)	.69% - 1.84%	(c)
					Foreign exchange rates	21.10%	(d)
Credit default swaps		56		Discounted cash flow	Base correlations	45% - 56% (50%)	(a)
					CDS spreads	91 - 143 (120) bps
					Recovery rate	37.00%
Total liabilities		$	371

(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

(c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps

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

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		4		Net asset value	Offered quotes	$2-$943 ($8)
Other assets:
Interest rate swaps		32		Discounted cash flow	Base correlation	49% - 50%	(a)
					CDS spreads	91 - 152 bps
					Recovery rate	37.00%
Foreign currency swaps		51		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)
		4		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		2		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

(c) Inputs derived from Japan 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.

December 31, 2012
(In millions)	Fair Value			Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Liabilities:
Interest rate swaps		$	3	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)
		60		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		67		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

(c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps

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

The following is a discussion of the significant unobservable inputs or valuation technique used in determining the fair value of securities and derivatives classified as Level 3.

Annualized Historical Foreign Exchange Volatility

We own a portfolio of callable reverse dual-currency bonds (RDCs). RDCs are securities that have principal denominated in yen while paying U.S. dollar (USD) coupons. The market standard approach is to use implied volatility to value options or instruments with optionality because historical volatility may not represent current market participants' expectations about future volatility. Our use of historical foreign exchange volatility as an input for valuing these investments could result in a significant increase or decrease in fair value measurement, given the importance of this input to the overall valuation. Prior to March 31, 2013, historical volatility was an unobservable input in the determination of fair value of public utilities, sovereign and supranational, certain banks/financial institutions, and certain other corporate investments. As of March 31, 2013, we are no longer using this input in the valuation of these securities due to a change in valuation methodology as discussed previously.

Net Asset Value

We hold certain unlisted equity securities whose fair value is derived based on the financial statements published by the investee. These securities do not trade on an active market and the valuations derived are dependent on the availability of timely financial reporting of the investee. Net asset value is an unobservable input in the determination of fair value ofequity securities.

Offered Quotes

In circumstances where our valuation model price is overridden because it implies a value that is not consistent with current market conditions, we will solicit bids from a limited number of brokers. We also receive unadjusted prices from brokers for our mortgage and asset-backed securities. These quotes are non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial institutions, certain other corporate, and equity securities investments.

Interest Rates, CDS Spreads, Foreign Exchange Rates

The significant drivers of the valuation of the interest and foreign exchange swaps are interest rates, foreign exchange rates and CDS spreads. Our swaps have long maturities that increase the sensitivity of the swaps to interest rate fluctuations. Since most of our yen-denominated cross currency swaps are in a net liability position, an increase in interest rates will decrease the liabilities and increase the value of the swap.

Foreign exchange swaps also have a lump-sum final settlement of foreign exchange principal receivables at the termination of the swap. An increase in yen interest rates will decrease the value of the final settlement foreign exchange receivables and decrease the value of the swap, and an increase in USD interest rates increase the swap value.

A similar sensitivity pattern is observed for the foreign exchange rates. When the spot U.S. dollar/Japanese yen (USD/JPY) foreign exchange rate decreases and the swap is receiving a final exchange payment in JPY, the swap value will increase due to the appreciation of the JPY. Most of our swaps are designed to receive payments in JPY at the termination and will thus be impacted by the USD/JPY foreign exchange rate in this way. In cases where there is no final foreign exchange receivable in JPY and we are paying JPY as interest payments and receiving USD, a decrease in the foreign exchange rate will lead to a decrease in the swap value.

The extinguisher feature in most of our swaps results in a cessation of cash flows and no further payments between the parties to the swap in the event of a default on the referenced or underlying collateral. To price this feature, we apply the survival probability of the referenced entity to the projected cash flows. The survival probability uses the CDS spreads and recovery rates to adjust the present value of the cash flows. For extinguisher swaps with positive values, an increase in CDS spreads decreases the likelihood of receiving the final exchange payments and reduces the value of the swap.

Due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data.

Interest rates, CDS spreads, and foreign exchange rates are unobservable inputs in the determination of fair value of foreign currency swaps.

Base Correlations, CDS Spreads, Recovery Rates

Our CDOs are tranches on baskets of single-name credit default swaps. The risks in these types of synthetic CDOs come from the single-name CDS risk and the correlations between the single names. The valuation of synthetic CDOs is dependent on the calibration of market prices for interest rates, single name CDS default probabilities and base correlation using financial modeling tools. Since there is limited or no observable data available for these tranches, these base correlations must be obtained from commonly traded market tranches such as the CDX and iTraxx indices. From the historical prices of these indices, base correlations can be obtained to develop a pricing curve of CDOs with different seniorities. Since the reference entities of the market indices do not match those in our portfolio underlying the synthetic CDO to be valued, several processing steps are taken to map the securities in our portfolio to the indices. With the base correlation determined and the appropriate spreads selected, a valuation is calculated. An increase in the CDS spreads in the underlying portfolio leads to a decrease in the value due to higher probability of defaults and losses. The impact on the valuation due to base correlation depends on a number of factors, including the riskiness between market tranches and the modeled tranche based on our portfolio and the equivalence between detachment points in these tranches. Generally speaking, an increase in base correlation will decrease the value of the senior tranches while increasing the value of junior tranches. This may result in a positive or negative value change.

The CDO tranches in our portfolio are junior tranches and, due to the low level of credit support for these tranches, exhibit equity-like behavior. As a result, an increase in recovery rates tends to cause their values to decrease.

Our interest rate swaps are linked to the underlying synthetic CDOs. The valuation of these swaps is performed using a similar approach to that of the synthetic CDOs themselves; that is, the base correlation model is used to ensure consistency between the synthetic CDOs and the swaps.

Base correlations, CDS spreads, and recovery rates are unobservable inputs in the determination of fair value of credit default swaps and interest rate swaps.

For additional information on our investments and financial instruments, see the accompanying Notes 1, 3 and 4 and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2012.