FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

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.

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, 2022
(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		$	29,547		$	1,165		$	0		$	30,712
Municipalities		0			2,776			0			2,776
Mortgage- and asset-backed securities		0			1,048			318			1,366
Public utilities		0			8,604			585			9,189
Sovereign and supranational		0			994			41			1,035
Banks/financial institutions		0			10,626			60			10,686
Other corporate		0			33,911			290			34,201
Total fixed maturity securities		29,547			59,124			1,294			89,965
Equity securities		1,166			83			166			1,415
Other investments		1,747			0			0			1,747
Cash and cash equivalents		4,275			0			0			4,275
Other assets:
Foreign currency swaps		0			141			0			141
Foreign currency forwards		0			977			0			977
Foreign currency options		0			8			0			8
Total other assets		0			1,126			0			1,126
Total assets		$	36,735		$	60,333		$	1,460		$	98,528
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	432		$	0		$	432
Foreign currency forwards		0			812			0			812
Interest rate swaps		0			216			0			216
Total liabilities		$	0		$	1,460		$	0		$	1,460

	December 31, 2021
(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		$	32,532		$	1,288		$	0		$	33,820
Municipalities		0			3,036			0			3,036
Mortgage- and asset-backed securities		0			955			291			1,246
Public utilities		0			9,558			493			10,051
Sovereign and supranational		0			1,072			43			1,115
Banks/financial institutions		0			11,546			45			11,591
Other corporate		0			37,411			426			37,837
Total fixed maturity securities		32,532			64,866			1,298			98,696
Equity securities		1,340			90			173			1,603
Other investments		1,726			0			0			1,726
Cash and cash equivalents		5,051			0			0			5,051
Other assets:
Foreign currency swaps		0			137			0			137
Foreign currency forwards		0			791			0			791
Foreign currency options		0			8			0			8
Total other assets		0			936			0			936
Total assets		$	40,649		$	65,892		$	1,471		$	108,012
Liabilities:
Other liabilities:
Foreign currency swaps		$	0		$	427		$	0		$	427
Foreign currency forwards		0			1,138			0			1,138
Interest rate swaps		0			54			0			54
Total liabilities		$	0		$	1,619		$	0		$	1,619

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, 2022
(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		$	19,814		$	23,315		$	211		$	0		$	23,526
Municipalities		315			0			398			0			398
Public utilities		40			0			50			0			50
Sovereign and    supranational		483			0			584			0			584
Other corporate		20			0			27			0			27
Commercial mortgage and     other loans		12,312			0			0			12,356			12,356
Other investments (1)		25			0			25			0			25
Total assets		$	33,009		$	23,315		$	1,295		$	12,356		$	36,966
Liabilities:
Other policyholders’ funds		$	6,705		$	0		$	0		$	6,595		$	6,595
Notes payable    (excluding leases)		7,628			0			7,602			244			7,846
Total liabilities		$	14,333		$	0		$	7,602		$	6,839		$	14,441

(1) Excludes policy loans of $224 and equity method investments of $1,964, at carrying value

	December 31, 2021
(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		$	21,086		$	25,469		$	230		$	0		$	25,699
Municipalities		335			0			436			0			436
Public utilities		43			0			55			0			55
Sovereign and    supranational		514			0			650			0			650
Other corporate		22			0			29			0			29
Commercial mortgage and     other loans		11,786			0			0			11,996			11,996
Other investments (1)		22			0			22			0			22
Total assets		$	33,808		$	25,469		$	1,422		$	11,996		$	38,887
Liabilities:
Other policyholders’ funds		$	7,072		$	0		$	0		$	6,957		$	6,957
Notes payable    (excluding leases)		7,839			0			8,280			259			8,539
Total liabilities		$	14,911		$	0		$	8,280		$	7,216		$	15,496

(1) Excludes policy loans of $236 and equity method investments of $1,858, at carrying value

Fair Value of Financial Instruments

Fixed maturity and equity securities

The Company determines the fair values of fixed maturity securities and public 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), in-house valuations and non-binding price quotes the Company obtains from outside brokers.

A third party pricing vendor has developed valuation models to determine fair values of privately issued securities. Starting in June 2021, these models and associated processes and controls were transitioned to and executed by Company personnel. These models are discounted cash flow (DCF) valuation 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 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

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 confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market

data. The Company has performed verification of the inputs and calculations in any valuation models to confirm that the valuations represent reasonable estimates of fair value.

For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses.

The following tables present the pricing sources for the fair values of the Company's fixed maturity and equity securities.

	March 31, 2022
(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		$	29,547		$	730		$	0		$	30,277
Internal		0			435			0			435
Total government and agencies		29,547			1,165			0			30,712
Municipalities:
Third party pricing vendor		0			2,035			0			2,035
Internal		0			741			0			741
Total municipalities		0			2,776			0			2,776
Mortgage- and asset-backed securities:
Third party pricing vendor		0			981			0			981
Broker/other		0			67			318			385
Total mortgage- and asset-backed securities		0			1,048			318			1,366
Public utilities:
Third party pricing vendor		0			4,066			0			4,066
Internal		0			4,537			0			4,537
Broker/other		0			1			585			586
Total public utilities		0			8,604			585			9,189
Sovereign and supranational:
Third party pricing vendor		0			257			0			257
Internal		0			737			0			737
Broker/other		0			0			41			41
Total sovereign and supranational		0			994			41			1,035
Banks/financial institutions:
Third party pricing vendor		0			4,922			0			4,922
Internal		0			5,704			18			5,722
Broker/other		0			0			42			42
Total banks/financial institutions		0			10,626			60			10,686
Other corporate:
Third party pricing vendor		0			26,989			0			26,989
Internal		0			6,922			24			6,946
Broker/other		0			0			266			266
Total other corporate		0			33,911			290			34,201
Total securities available for sale		$	29,547		$	59,124		$	1,294		$	89,965
Equity securities, carried at fair value:
Third party pricing vendor		$	1,166		$	83		$	0		$	1,249
Broker/other		0			0			166			166
Total equity securities		$	1,166		$	83		$	166		$	1,415

	March 31, 2022
(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		$	23,315		$	211		$	0		$	23,526
Total government and agencies		23,315			211			0			23,526
Municipalities:
Third party pricing vendor		0			398			0			398
Total municipalities		0			398			0			398
Public utilities:
Third party pricing vendor		0			50			0			50
Total public utilities		0			50			0			50
Sovereign and supranational:
Third party pricing vendor		0			283			0			283
Broker/other		0			301			0			301
Total sovereign and supranational		0			584			0			584
Other corporate:
Third party pricing vendor		0			27			0			27
Total other corporate		0			27			0			27
Total securities held to maturity		$	23,315		$	1,270		$	0		$	24,585

	December 31, 2021
(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		$	32,532		$	808		$	0		$	33,340
Internal		0			480			0			480
Total government and agencies		32,532			1,288			0			33,820
Municipalities:
Third party pricing vendor		0			2,222			0			2,222
Internal		0			814			0			814
Total municipalities		0			3,036			0			3,036
Mortgage- and asset-backed securities:
Third party pricing vendor		0			955			0			955
Broker/other		0			0			291			291
Total mortgage- and asset-backed securities		0			955			291			1,246
Public utilities:
Third party pricing vendor		0			4,527			0			4,527
Internal		0			5,031			0			5,031
Broker/other		0			0			493			493
Total public utilities		0			9,558			493			10,051
Sovereign and supranational:
Third party pricing vendor		0			273			0			273
Internal		0			799			0			799
Broker/other		0			0			43			43
Total sovereign and supranational		0			1,072			43			1,115
Banks/financial institutions:
Third party pricing vendor		0			5,237			0			5,237
Internal		0			6,309			0			6,309
Broker/other		0			0			45			45
Total banks/financial institutions		0			11,546			45			11,591
Other corporate:
Third party pricing vendor		0			29,495			0			29,495
Internal		0			7,916			0			7,916
Broker/other		0			0			426			426
Total other corporate		0			37,411			426			37,837
Total securities available for sale		$	32,532		$	64,866		$	1,298		$	98,696
Equity securities, carried at fair value:
Third party pricing vendor		$	1,340		$	90		$	0		$	1,430
Broker/other		0			0			173			173
Total equity securities		$	1,340		$	90		$	173		$	1,603

	December 31, 2021
(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		$	25,469		$	230		$	0		$	25,699
Total government and agencies		25,469			230			0			25,699
Municipalities:
Third party pricing vendor		0			436			0			436
Total municipalities		0			436			0			436
Public utilities:
Third party pricing vendor		0			55			0			55
Total public utilities		0			55			0			55
Sovereign and supranational:
Third party pricing vendor		0			313			0			313
Broker/other		0			337			0			337
Total sovereign and supranational		0			650			0			650
Other corporate:
Third party pricing vendor		0			29			0			29
Total other corporate		0			29			0			29
Total securities held to maturity		$	25,469		$	1,400		$	0		$	26,869

The following is a discussion of the determination of fair value of the Company's remaining financial instruments.

Derivatives

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 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 Company uses present value techniques to value non-option based derivatives. It also uses option pricing models to value option based derivatives. Key inputs are as follows:

Instrument Type	Level 2
Interest rate derivatives	Swap yield curves Basic curves Interest rate volatility (1)
Foreign currency exchange rate derivatives - Non-VIES (forwards, swaps and options)	Foreign currency forward rates Swap yield curves Basis curves Foreign currency spot rates Cross foreign currency basis curves Foreign currency volatility (1)
Foreign currency exchange rate derivatives - VIEs (swaps)	Foreign currency spot rates Swap yield curves Credit default swap curves Basis curves Recovery rates Foreign currency forward rates Foreign cross currency basis curves

(1) Option-based only

The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are classified as Level 2.

The Parent Company has cross-currency swap agreements related to certain of its U.S. dollar-denominated senior notes to effectively convert a portion of the interest on the notes from U.S dollar to Japanese yen. Their fair values are 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 observable inputs, accordingly, they are classified as Level 2. For its interest rate swaptions, the Company estimates their fair values using observable market data, including interest rate curves and volatility. Their fair values are also classified as Level 2.

For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is not the direct counterparty to the swap contracts. Nevertheless, the Company has full transparency into the contracts to properly value the swaps for reporting purposes. Prior to October 1, 2021, these derivatives were classified as Level 3 because certain significant inputs were determined to be unobservable, primarily due to the long duration of the swaps which required extrapolation beyond the observable limits of the curve(s). However, due to the natural aging of the swap portfolio and the continued evolution of capital market inputs, especially the availability of long-term interest rates with tenors beyond 30 years, the Company has concluded that all significant inputs are now observable. As a result, effective October 1, 2021, the Company transferred the derivatives associated with its consolidated VIEs to Level 2 of the fair value hierarchy.

For forward bond purchase commitments with VIEs, the fair value of the derivative is based on the difference in the fixed purchase price and the current market value of the related bond prior to the settlement date. Since the bond is typically a public bond with readily available pricing, the derivatives associated with the forward purchase commitment are classified as Level 2 of the fair value hierarchy.

Commercial mortgage and other loans

Commercial mortgage and other loans include TREs, CMLs and MMLs. 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 floating-rate benchmark yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. 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.

Other investments

Other investments includes short-term investments that are measured at fair value where amortized cost approximates fair value.

Other policyholders' funds

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.

Notes payable

The fair values of the Company's publicly issued notes payable are determined by utilizing available sources of observable inputs from third party pricing vendors and are classified as Level 2. The fair values of the Company's yen-denominated loans approximate their carrying values and are classified as Level 3.

Transfers between Hierarchy Levels and Level 3 Rollforward

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. Effective October 1, 2021, the foreign exchange swaps discussed above were transferred from Level 3 to Level 2 because the significant inputs used for their valuation that were previously unobservable are now observable.

The following tables present the changes in fair value of the Company's investments and derivatives carried at fair value classified as Level 3. Derivative assets and liabilities are presented as a net value.

Three Months Ended March 31, 2022
	Fixed Maturity Securities										Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Foreign Currency Swaps		Total
Balance, beginning of period	$	291	$	493	$	43	$	45	$	426	$	173	$	0	$	1,471
Net investment gains (losses) included   in earnings	0		0		0		0		0		7		0		7
Unrealized gains (losses) included in   other comprehensive income (loss)	(15)		(37)		(2)		0		(18)		0		0		(72)
Purchases, issuances, sales   and settlements:
Purchases	76		9		0		0		0		10		0		95
Issuances	0		0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0		0
Settlements	(2)		(8)		0		(3)		(1)		(7)		0		(21)
Transfers into Level 3	0		128		0		18		24		0		0		170
Transfers out of Level 3	(32)		0		0		0		(141)		(17)		0		(190)
Balance, end of period	$	318	$	585	$	41	$	60	$	290	$	166	$	0	$	1,460
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	$	4	$	0	$	4

Three Months Ended March 31, 2021
	Fixed Maturity Securities										Equity Securities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities		Public Utilities		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate				Foreign Currency Swaps		Total
Balance, beginning of period	$	224	$	422	$	48	$	24	$	299	$	102	$	(98)	$	1,021
Net investment gains (losses) included   in earnings	0		0		0		0		0		9		19		28
Unrealized gains (losses) included in   other comprehensive income (loss)	(15)		(18)		(3)		(1)		(12)		0		(1)		(50)
Purchases, issuances, sales and   settlements:
Purchases	10		78		0		5		0		11		0		104
Issuances	0		0		0		0		0		0		0		0
Sales	0		0		0		0		0		0		0		0
Settlements	0		(3)		0		0		0		0		0		(3)
Transfers into Level 3	0		0		23		0		32		0		0		55
Transfers out of Level 3	(15)		0		0		0		0		0		0		(15)
Balance, end of period	$	204	$	479	$	68	$	28	$	319	$	122	$	(80)	$	1,140
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	$	0	$	19	$	19

Fair Value Sensitivity

Level 3 Significant Unobservable Input Sensitivity

The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments carried at fair value. 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, 2022
(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		$	318	Consensus pricing	Offered quotes	N/A	(a)
Public utilities		585		Discounted cash flow	Credit spreads	N/A	(a)
Sovereign and supranational		41		Discounted cash flow	Historical volatility	N/A	(a)
Banks/financial institutions		60		Consensus pricing	Offered quotes	N/A	(a)
Other corporate		290		Discounted cash flow	Credit spreads	N/A	(a)
Equity securities		166		Net asset value	Offered quotes	N/A	(a)
Total assets		$	1,460

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

December 31, 2021
(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		$	291	Consensus pricing	Offered quotes	N/A	(a)
Public utilities		493		Discounted cash flow	Credit spreads	N/A	(a)
Sovereign and supranational		43		Discounted cash flow	Historical volatility	N/A	(a)
Banks/financial institutions		45		Consensus pricing	Offered quotes	N/A	(a)
Other corporate		426		Discounted cash flow	Credit spreads	N/A	(a)
Equity securities		173		Net asset value	Offered quotes	N/A	(a)
Total assets		$	1,471

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

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

Net Asset Value

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.

Offered Quotes

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.

Interest Rates and CDS Spreads

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.

Effective October 1, 2021, the foreign exchange swaps mentioned above were transferred from Level 3 to Level 2 because the significant inputs used for their valuation that were previously unobservable are now observable.

For additional information on the Company's 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 the 2021 Annual Report.