U.S. 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.



	June 30, 2019
(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 maturity securities:
Government and agencies		$	36,573		$	1,587		$	0		$	38,160
Municipalities		0			1,975			0			1,975
Mortgage- and asset-backed securities		0			233			183			416
Public utilities		0			6,601			204			6,805
Sovereign and supranational		0			1,152			0			1,152
Banks/financial institutions		0			10,128			24			10,152
Other corporate		0			33,576			199			33,775
Total fixed maturity securities		36,573			55,252			610			92,435
Equity securities		949			73			65			1,087
Other investments		677			0			0			677
Cash and cash equivalents		3,019			0			0			3,019
Other assets:
Foreign currency swaps		0			88			201			289
Foreign currency forwards		0			222			0			222
Interest rate swaps		0			15			0			15
Total other assets		0			325			201			526
Total assets		$	41,218		$	55,650		$	876		$	97,744
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	107		$	107		$	214
Foreign currency forwards		0			128			0			128
Foreign currency options		0			2			0			2
Interest rate swaptions		0			3			0			3
Total liabilities		$	0		$	240		$	107		$	347



	December 31, 2018
(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 maturity securities:
Government and agencies		$	32,993		$	1,349		$	0		$	34,342
Municipalities		0			1,863			0			1,863
Mortgage- and asset-backed securities		0			162			177			339
Public utilities		0			7,062			109			7,171
Sovereign and supranational		0			1,260			0			1,260
Banks/financial institutions		0			8,895			23			8,918
Other corporate		0			28,789			213			29,002
Total fixed maturity securities		32,993			49,380			522			82,895
Equity securities		874			67			46			987
Other investments		152			0			0			152
Cash and cash equivalents		4,337			0			0			4,337
Other assets:
Foreign currency swaps		0			103			182			285
Foreign currency forwards		0			126			0			126
Foreign currency options		0			3			0			3
Interest rate swaps		0			3			0			3
Total other assets		0			235			182			417
Total assets		$	38,356		$	49,682		$	750		$	88,788
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	132		$	102		$	234
Foreign currency forwards		0			151			0			151
Foreign currency options		0			1			0			1
Interest rate swaptions		0			1			0			1
Total liabilities		$	0		$	285		$	102		$	387



	June 30, 2019
(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 maturity securities:
Government and agencies		$	22,611		$	28,852		$	365		$	0		$	29,217
Municipalities		836			0			1,110			0			1,110
Mortgage and asset-backed securities		19			0			7			13			20
Public utilities		2,762			0			3,148			0			3,148
Sovereign and supranational		1,188			0			1,380			0			1,380
Banks/financial institutions		978			0			1,076			0			1,076
Other corporate		2,613			0			3,084			0			3,084
Commercial mortgage and other loans		7,622			0			0			7,663			7,663
Other investments ⁽¹⁾		33			0			33			0			33
Total assets		$	38,662		$	28,852		$	10,203		$	7,676		$	46,731
Liabilities:
Other policyholders’ funds		$	7,403		$	0		$	0		$	7,320		$	7,320
Notes payable (excluding leases)		6,098			0			5,763			278			6,041
Total liabilities		$	13,501		$	0		$	5,763		$	7,598		$	13,361



	December 31, 2018
(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 maturity securities:
Government and agencies		$	21,712		$	27,030		$	8		$	0		$	27,038
Municipalities		359			0			469			0			469
Mortgage and asset-backed securities		14			0			0			15			15
Public utilities		2,727			0			2,973			0			2,973
Sovereign and supranational		1,551			0			1,840			0			1,840
Banks/financial institutions		1,445			0			1,583			0			1,583
Other corporate		2,510			0			2,804			0			2,804
Commercial mortgage and other loans		6,919			0			0			6,893			6,893
Other investments ⁽¹⁾		26			0			26			0			26
Total assets		$	37,263		$	27,030		$	9,703		$	6,908		$	43,641
Liabilities:
Other policyholders’ funds		$	7,146		$	0		$	0		$	7,067		$	7,067
Notes payable (excluding leases)		5,765			0			5,606			270			5,876
Total liabilities		$	12,911		$	0		$	5,606		$	7,337		$	12,943

A third party pricing vendor has developed valuation models to determine fair values of privately issued securities to reflect the impact of the persistent economic environment and the changing regulatory framework. These models are discounted cash flow (DCF) valuation models, but also use information from related markets, specifically the 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 security by discounting those loss adjusted cash flows. In cases where a credit curve cannot be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable security(ies) 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 the Company obtains from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the vendor. Additionally, the Company may compare the inputs to relevant market indices and other performance measurements. Based on management's analysis, the valuation is

The fixed maturity securities classified as Level 3 consist of securities with limited or no observable valuation inputs. For Level 3 securities, the Company estimates 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. The Company considers these inputs to be unobservable. The Company also considers 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, the Company has determined that certain pricing assumptions and data used by its 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.



	June 30, 2019
(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 maturity securities:
Government and agencies:
Third party pricing vendor		$	36,573		$	1,587		$	0		$	38,160
Total government and agencies		36,573			1,587			0			38,160
Municipalities:
Third party pricing vendor		0			1,975			0			1,975
Total municipalities		0			1,975			0			1,975
Mortgage- and asset-backed securities:
Third party pricing vendor		0			233			0			233
Broker/other		0			0			183			183
Total mortgage- and asset-backed securities		0			233			183			416
Public utilities:
Third party pricing vendor		0			6,601			0			6,601
Broker/other		0			0			204			204
Total public utilities		0			6,601			204			6,805
Sovereign and supranational:
Third party pricing vendor		0			1,152			0			1,152
Total sovereign and supranational		0			1,152			0			1,152
Banks/financial institutions:
Third party pricing vendor		0			9,970			0			9,970
Broker/other		0			158			24			182
Total banks/financial institutions		0			10,128			24			10,152
Other corporate:
Third party pricing vendor		0			33,576			0			33,576
Broker/other		0			0			199			199
Total other corporate		0			33,576			199			33,775
Total securities available for sale		$	36,573		$	55,252		$	610		$	92,435
Equity securities, carried at fair value:
Third party pricing vendor		$	949		$	73		$	0		$	1,022
Broker/other		0			0			65			65
Total equity securities		$	949		$	73		$	65		$	1,087



	June 30, 2019
(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 maturity securities:
Government and agencies:
Third party pricing vendor		$	28,852		$	365		$	0		$	29,217
Total government and agencies		28,852			365			0			29,217
Municipalities:
Third party pricing vendor		0			1,110			0			1,110
Total municipalities		0			1,110			0			1,110
Mortgage- and asset-backed securities:
Third party pricing vendor		0			7			0			7
Broker/other		0			0			13			13
Total mortgage- and asset-backed securities		0			7			13			20
Public utilities:
Third party pricing vendor		0			3,148			0			3,148
Total public utilities		0			3,148			0			3,148
Sovereign and supranational:
Third party pricing vendor		0			1,380			0			1,380
Total sovereign and supranational		0			1,380			0			1,380
Banks/financial institutions:
Third party pricing vendor		0			1,076			0			1,076
Total banks/financial institutions		0			1,076			0			1,076
Other corporate:
Third party pricing vendor		0			3,084			0			3,084
Total other corporate		0			3,084			0			3,084
Total securities held to maturity		$	28,852		$	10,170		$	13		$	39,035



	December 31, 2018
(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 maturity securities:
Government and agencies:
Third party pricing vendor		$	32,993		$	1,349		$	0		$	34,342
Total government and agencies		32,993			1,349			0			34,342
Municipalities:
Third party pricing vendor		0			1,863			0			1,863
Total municipalities		0			1,863			0			1,863
Mortgage- and asset-backed securities:
Third party pricing vendor		0			162			0			162
Broker/other		0			0			177			177
Total mortgage- and asset-backed securities		0			162			177			339
Public utilities:
Third party pricing vendor		0			7,062			0			7,062
Broker/other		0			0			109			109
Total public utilities		0			7,062			109			7,171
Sovereign and supranational:
Third party pricing vendor		0			1,260			0			1,260
Total sovereign and supranational		0			1,260			0			1,260
Banks/financial institutions:
Third party pricing vendor		0			8,895			0			8,895
Broker/other		0			0			23			23
Total banks/financial institutions		0			8,895			23			8,918
Other corporate:
Third party pricing vendor		0			28,789			0			28,789
Broker/other		0			0			213			213
Total other corporate		0			28,789			213			29,002
Total securities available for sale		$	32,993		$	49,380		$	522		$	82,895
Equity securities, carried at fair value:
Third party pricing vendor		$	874		$	67		$	0		$	941
Broker/other		0			0			46			46
Total equity securities		$	874		$	67		$	46		$	987



	December 31, 2018
(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 maturity securities:
Government and agencies:
Third party pricing vendor		$	27,030		$	8		$	0		$	27,038
Total government and agencies		27,030			8			0			27,038
Municipalities:
Third party pricing vendor		0			469			0			469
Total municipalities		0			469			0			469
Mortgage- and asset-backed securities:
Broker/other		0			0			15			15
Total mortgage- and asset-backed securities		0			0			15			15
Public utilities:
Third party pricing vendor		0			2,973			0			2,973
Total public utilities		0			2,973			0			2,973
Sovereign and supranational:
Third party pricing vendor		0			1,840			0			1,840
Total sovereign and supranational		0			1,840			0			1,840
Banks/financial institutions:
Third party pricing vendor		0			1,583			0			1,583
Total banks/financial institutions		0			1,583			0			1,583
Other corporate:
Third party pricing vendor		0			2,804			0			2,804
Total other corporate		0			2,804			0			2,804
Total securities held to maturity		$	27,030		$	9,677		$	15		$	36,722

The Company uses 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. The Company uses pricing models to determine the estimated fair value of derivatives. 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 significant inputs to pricing derivatives are generally observable in the market or can be derived by observable market data. When these inputs are observable, the derivatives are classified as Level 2.

The fair values of the foreign currency forwards and options associated with certain investments; the foreign currency forwards and options used to hedge foreign exchange risk from the Company's net investment in Aflac Japan and economically hedge certain portions of forecasted cash flows denominated in yen; and the foreign currency swaps associated with certain senior notes are based on the amounts the Company 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.

To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract, the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange since it maintains a daily margin to mitigate counterparties' credit risk. These derivatives are priced using

For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is 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. The Company receives 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, the Company 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 the Company's consolidated VIEs are classified as Level 3 of the fair value hierarchy.

Commercial mortgage and other loans include transitional real estate loans, commercial mortgage loans and middle market loans. The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or London Interbank Offered Rate (LIBOR) yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. These spreads are provided by the applicable asset managers based on their knowledge of the current loan pricing environment and market conditions. The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore, these investments have been assigned a Level 3 within the fair value hierarchy.

The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified this valuation as Level 3.



Three Months Ended June 30, 2019
	Fixed Maturity Securities												Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities				Banks/ Financial Institutions		Other Corporate						Foreign Currency Swaps		Credit Default Swaps		Total
Balance, beginning of period	$	178	$	85			$	23	$	284			$	46	$	70	$	0	$	686
Realized investment gains (losses) included in earnings	0		0				0		0				0		24		0		24
Unrealized gains (losses) included in other comprehensive income (loss)	5		5				1		6				0		0		0		17
Purchases, issuances, sales and settlements:
Purchases	0		0				0		25				0		0		0		25
Issuances	0		0				0		0				19		0		0		19
Sales	0		0				0		0				0		0		0		0
Settlements	0		(2		)		0		0				0		0		0		(2		)
Transfers into Level 3	0		116			⁽²⁾	0		0				0		0		0		116
Transfers out of Level 3	0		0				0		(116		)	⁽²⁾	0		0		0		(116		)
Balance, end of period	$	183	$	204			$	24	$	199			$	65	$	94	$	0	$	769
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0			$	0	$	0			$	0	$	24	$	0	$	24



Three Months Ended June 30, 2018
	Fixed Maturity Securities												Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities			Banks/ Financial Institutions			Other Corporate						Foreign Currency Swaps			Credit Default Swaps			Total
Balance, beginning of period	$	186		$	83		$	24		$	143		$	16		$	154		$	1		$	607
Realized investment gains (losses) included in earnings	0			0			0			0			0			(42		)	(1		)	(43		)
Unrealized gains (losses) included in other comprehensive income (loss)	(8		)	(1		)	(1		)	(1		)	0			(2		)	0			(13		)
Purchases, issuances, sales and settlements:
Purchases	0			24			0			56			1			0			0			81
Issuances	0			0			0			0			0			0			0			0
Sales	0			0			0			0			0			0			0			0
Settlements	0			0			0			(2		)	0			0			0			(2		)
Transfers into Level 3	0			0			0			0			0			0			0			0
Transfers out of Level 3	0			0			0			0			0			0			0			0
Balance, end of period	$	178		$	106		$	23		$	196		$	17		$	110		$	0		$	630
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0		$	0		$	0		$	0		$	0		$	(42	)	$	(1	)	$	(43	)



Six Months Ended June 30, 2019
	Fixed Maturity Securities												Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities				Banks/ Financial Institutions		Other Corporate						Foreign Currency Swaps			Credit Default Swaps		Total
Balance, beginning of period	$	177	$	109			$	23	$	213			$	46	$	80		$	0	$	648
Realized investment gains (losses) included in earnings	0		0				0		0				0		16			0		16
Unrealized gains (losses) included in other comprehensive income (loss)	6		6				1		7				0		(2		)	0		18
Purchases, issuances, sales and settlements:
Purchases	0		0				0		88				19		0			0		107
Issuances	0		0				0		0				0		0			0		0
Sales	0		0				0		(2		)		0		0			0		(2		)
Settlements	0		(2		)		0		0				0		0			0		(2		)
Transfers into Level 3	0		116			⁽²⁾	0		25			⁽²⁾	0		0			0		141
Transfers out of Level 3	0		(25		)	⁽²⁾	0		(132		)	^{(2), (3)}	0		0			0		(157		)
Balance, end of period	$	183	$	204			$	24	$	199			$	65	$	94		$	0	$	769
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0			$	0	$	0			$	0	$	16		$	0	$	16



Six Months Ended June 30, 2018
	Fixed Maturity Securities											Equity Securities		Derivatives ⁽¹⁾
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities			Banks/ Financial Institutions			Other Corporate					Foreign Currency Swaps		Credit Default Swaps			Total
Balance, beginning of period	$	175	$	68		$	25		$	146		$	16	$	22	$	1		$	453
Realized investment gains (losses) included in earnings	0		0			0			0			0		84		(1		)	83
Unrealized gains (losses) included in other comprehensive income (loss)	3		(2		)	(2		)	(3		)	0		4		0			0
Purchases, issuances, sales and settlements:
Purchases	0		40			0			56			1		0		0			97
Issuances	0		0			0			0			0		0		0			0
Sales	0		0			0			0			0		0		0			0
Settlements	0		0			0			(3		)	0		0		0			(3		)
Transfers into Level 3	0		0			0			0			0		0		0			0
Transfers out of Level 3	0		0			0			0			0		0		0			0
Balance, end of period	$	178	$	106		$	23		$	196		$	17	$	110	$	0		$	630
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings	$	0	$	0		$	0		$	0		$	0	$	84	$	(1	)	$	83

June 30, 2019

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Assets:

Securities available for sale, carried at fair value:

Fixed maturity securities:

Mortgage- and asset-backed securities

183

Consensus pricing

Offered quotes

N/A

^(a)

Public utilities

204

Discounted cash flow

Credit spreads

N/A

^(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(a)

Other corporate

199

Discounted cash flow

Credit spreads

N/A

^(a)

Equity securities

Net asset value

Offered quotes

N/A

^(a)

Other assets:

Foreign currency swaps

139

Discounted cash flow

Interest rates (USD)

1.98% - 2.20%

^(b)

Interest rates (JPY)

0.01% - 0.38%

^(c)

CDS spreads

11 - 110 bps

Discounted cash flow

Interest rates (USD)

1.98% - 2.20%

^(b)

Interest rates (JPY)

0.01% - 0.38%

^(c)

Total assets

876

Liabilities:

Other liabilities:

Foreign currency swaps

101

Discounted cash flow

Interest rates (USD)

1.98% - 2.20%

^(b)

Interest rates (JPY)

0.01% - 0.38%

^(c)

CDS spreads

30 - 187 bps

Discounted cash flow

Interest rates (USD)

1.98% - 2.20%

^(b)

Interest rates (JPY)

0.01% - 0.38%

^(c)

Total liabilities

107

December 31, 2018

(In millions)

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Assets:

Securities available for sale, carried at fair value:

Fixed maturity securities:

Mortgage- and asset-backed securities

177

Consensus pricing

Offered quotes

N/A

^(a)

Public utilities

109

Discounted cash flow

Credit spreads

N/A

^(a)

Banks/financial institutions

Consensus pricing

Offered quotes

N/A

^(a)

Other corporate

213

Discounted cash flow

Credit spreads

N/A

^(a)

Equity securities

Net asset value

Offered quotes

N/A

^(a)

Other assets:

Foreign currency swaps

125

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

CDS spreads

19 - 120 bps

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

Total assets

750

Liabilities:

Other liabilities:

Foreign currency swaps

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

CDS spreads

28 - 211 bps

Discounted cash flow

Interest rates (USD)

2.75% - 2.84%

^(b)

Interest rates (JPY)

.18% - .71%

^(c)

Total liabilities

102

The Company holds 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 of equity securities.

In circumstances where the Company's valuation model price is overridden because it implies a value that is not consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company also receives unadjusted prices from brokers for its 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.

The significant drivers of the valuation of the foreign exchange swaps are interest rates and CDS spreads. Some of the Company's swaps have long maturities that increase the sensitivity of the swaps to interest rate fluctuations. For the Company's foreign exchange or cross currency swaps that are in a net asset position, an increase in yen interest rates (all other factors held constant) will decrease the present value of the yen final settlement receivable (receive leg), thus decreasing the value of the swap as long as the derivative remains in a net asset position.

Foreign exchange swaps also have a lump-sum final settlement of foreign exchange principal amounts at the termination of the swap. Assuming all other factors are held constant, an increase in yen interest rates will decrease the receive leg and decrease the net value of the swap. Likewise, holding all other factors constant, an increase in U.S. dollar interest rates will increase the swap's net value due to the decrease in the present value of the dollar final settlement payable (pay leg).

The extinguisher feature in most of the Company's VIE 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, the Company applies 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.