FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2011

Fair Value Hierarchy, Assets and Liabilities Measured on Recurring Basis

The following tables present the fair value hierarchy levels of the Company’s assets and liabilities that are measured at fair value on a recurring basis.


	September 30, 2011
(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
Government and agencies	$	15,484	$	729	$	0	$	16,213
Municipalities		0		1,154		0		1,154
Mortgage- and asset-backed securities		0		1,179		268		1,447
Public utilities		0		6,252		0		6,252
Collateralized debt obligations		0		0		0		0
Sovereign and supranational		0		2,343		0		2,343
Banks/financial institutions		0		7,623		25		7,648
Other corporate		0		15,818		0		15,818
Total fixed maturities		15,484		35,098		293		50,875
Perpetual securities:
Banks/financial institutions		0		6,213		0		6,213
Other corporate		0		317		0		317
Total perpetual securities		0		6,530		0		6,530
Equity securities		16		4		4		24
Other assets:
Interest rate swaps		0		0		99		99
Foreign currency swaps		0		0		308		308
Total other assets		0		0		407		407
Total assets	$	15,500	$	41,632	$	704	$	57,836

Liabilities:
Interest rate swaps	$	0	$	0	$	40	$	40
Foreign currency swaps		0		0		374		374
Credit default swaps		0		0		194		194
Total liabilities	$	0	$	0	$	608	$	608


	December 31, 2010
(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
Government and agencies	$	16,534	$	679	$	0	$	17,213
Municipalities		0		973		0		973
Mortgage- and asset-backed securities		0		1,539		267		1,806
Public utilities		0		5,369		0		5,369
Collateralized debt obligations		0		0		5		5
Sovereign and supranational		0		1,394		0		1,394
Banks/financial institutions		0		8,047		386		8,433
Other corporate		0		13,162		0		13,162
Total fixed maturities		16,534		31,163		658		48,355
Perpetual securities:
Banks/financial institutions		0		7,169		0		7,169
Other corporate		0		343		0		343
Total perpetual securities		0		7,512		0		7,512
Equity securities		14		5		4		23
Other assets:
Interest rate swaps		0		124		0		124
Foreign currency swaps		0		151		289		440
Total other assets		0		275		289		564
Total assets	$	16,548	$	38,955	$	951	$	56,454

Liabilities:
Interest rate swaps	$	0	$	70	$	0	$	70
Foreign currency swaps		0		280		48		328
Credit default swaps		0		0		343		343
Total liabilities	$	0	$	350	$	391	$	741

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

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


Three Months Ended September 30, 2011
	Fixed Maturities															Perpetual Securities		Equities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			Sovereign and Supranational		Banks/ Financial Institutions			Other Corporate		Banks/ Financial Institutions				Interest Rate Swaps		Foreign Currency Swaps			Credit Default Swaps			Total

Balance, beginning of period	$	257		$	0	$	4		$	0	$	398		$	0	$	0	$	4	$	0	$	164		$	(253	)	$	574
Realized gains or losses included in earnings		(1	)		0		(1	)		0		0			0		0		0		0		(138	)		(75	)		(215	)
Unrealized gains or losses included in other comprehensive income		18			0		0			0		3			0		0		0		0		(2	)		0			19
Purchases, issuances, sales and settlements:
Purchases		0			0		0			0		0			0		0		0		0		0			0			0
Issuances		0			0		0			0		0			0		0		0		0		0			0			0
Sales		0			0		(3	)		0		0			0		0		0		0		0			0			(3	)
Settlements		(2	)		0		0			0		0			0		0		0		0		0			134			132
Transfers into Level 3⁽¹⁾		0			0		0			0		0			0		0		0		59		(90	)		0			(31	)
Transfers out of Level 3⁽²⁾		(4	)		0		0			0		(376	)		0		0		0		0		0			0			(380	)

Balance, end of period	$	268		$	0	$	0		$	0	$	25		$	0	$	0	$	4	$	59	$	(66	)	$	(194	)	$	96

Change in unrealized gains (losses) still held⁽³⁾	$	(1	)	$	0	$	0		$	0	$	0		$	0	$	0	$	0	$	0	$	(138	)	$	(31	)	$	(170	)

⁽¹⁾

Due to a lack of visibility to observe significant inputs to price

⁽²⁾

A result of changing our pricing methodology to using a third party pricing vendor for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers

⁽³⁾

Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) relating to assets classified as Level 3 that were still held at September 30, 2011


Three Months Ended September 30, 2010
	Fixed Maturities															Perpetual Securities		Equities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities			Collateralized Debt Obligations		Sovereign and Supranational		Banks/ Financial Institutions		Other Corporate			Banks/ Financial Institutions				Foreign Currency Swaps		Credit Default Swaps			Total

Balance, beginning of period	$	282		$	27		$	4	$	0	$	352	$	52		$	0	$	4	$	0	$	(357	)	$	364
Realized gains or losses included in earnings		(1	)		0			1		0		0		0			0		0		0		30			30
Unrealized gains or losses included in other comprehensive income		17			0			0		0		65		0			0		0		0		0			82
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		0		0			0		0		0		0			0
Settlements		(2	)		0			0		0		0		0			0		0		0		0			(2	)
Transfers into Level 3⁽¹⁾		18			0			0		0		0		0			0		0		54		0			72
Transfers out of Level 3⁽²⁾		(44	)		(27	)		0		0		0		(52	)		0		0		0		0			(123	)

Balance, end of period	$	270		$	0		$	5	$	0	$	417	$	0		$	0	$	4	$	54	$	(327	)	$	423

Change in unrealized gains (losses) still held⁽³⁾	$	0		$	0		$	0	$	0	$	0	$	0		$	0	$	0	$	0	$	30		$	30

⁽¹⁾

Due to a lack of visibility to observe significant inputs to price and credit events of respective issuers of securities to below investment grade

⁽²⁾

A result of changing our pricing methodology to using a pricing index for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers

⁽³⁾


Nine Months Ended September 30, 2011
	Fixed Maturities															Perpetual Securities		Equities		Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities		Collateralized Debt Obligations			Sovereign and Supranational		Banks/ Financial Institutions			Other Corporate		Banks/ Financial Institutions				Interest Rate Swaps		Foreign Currency Swaps			Credit Default Swaps			Total

Balance, beginning of period	$	267		$	0	$	5		$	0	$	386		$	0	$	0	$	4	$	0	$	241		$	(343	)	$	560
Realized gains or losses included in earnings		(7	)		0		(2	)		0		1			0		0		0		0		(177	)		(113	)		(298	)
Unrealized gains or losses included in other comprehensive income		20			0		0			0		14			0		0		0		0		(40	)		0			(6	)
Purchases, issuances, sales and settlements:
Purchases		0			0		0			0		0			0		0		0		0		0			0			0
Issuances		0			0		0			0		0			0		0		0		0		0			0			0
Sales		0			0		(3	)		0		0			0		0		0		0		0			0			(3	)
Settlements		(8	)		0		0			0		0			0		0		0		0		0			262			254
Transfers into Level 3⁽¹⁾		0			0		0			0		0			0		0		0		59		(90	)		0			(31	)
Transfers out of Level 3⁽²⁾		(4	)		0		0			0		(376	)		0		0		0		0		0			0			(380	)

Balance, end of period	$	268		$	0	$	0		$	0	$	25		$	0	$	0	$	4	$	59	$	(66	)	$	(194	)	$	96

Change in unrealized gains (losses) still held⁽³⁾	$	(7	)	$	0	$	0		$	0	$	1		$	0	$	0	$	0	$	0	$	(177	)	$	(46	)	$	(229	)

⁽¹⁾

Due to a lack of visibility to observe significant inputs to price

⁽²⁾

A result of changing our pricing methodology to using a third party pricing vendor for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers.

⁽³⁾


Nine Months Ended September 30, 2010
	Fixed Maturities																		Perpetual Securities			Equities			Derivatives
(In millions)	Mortgage- and Asset- Backed Securities			Public Utilities			Collateralized Debt Obligations			Sovereign and Supranational			Banks/ Financial Institutions			Other Corporate			Banks/ Financial Institutions						Foreign Currency Swaps		Credit Default Swaps			Total

Balance, beginning of period	$	62		$	497		$	267		$	293		$	1,240		$	1,248		$	1,441		$	9		$	0	$	0		$	5,057
Effect of change in accounting principle ⁽¹⁾		0			0			(263	)		0			0			0			0			0			0		(312	)		(575	)
Revised balance, beginning of period		62			497			4			293			1,240			1,248			1,441			9			0		(312	)		4,482
Realized gains or losses included in earnings		(1	)		0			1			0			5			0			108			0			0		(15	)		98
Unrealized gains or losses included in other comprehensive income		19			(9	)		0			5			99			6			51			0			0		0			171
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		(1	)		(2	)		0			0			(175	)		0			(585	)		0			0		0			(763	)
Settlements		(2	)		0			0			0			0			0			0			0			0		0			(2	)
Transfers into Level 3⁽²⁾		237			0			0			0			330			0			149			0			54		0			770
Transfers out of Level 3⁽³⁾		(44	)		(486	)		0			(298	)		(1,082	)		(1,254	)		(1,164	)		(5	)		0		0			(4,333	)

Balance, end of period	$	270		$	0		$	5		$	0		$	417		$	0		$	0		$	4		$	54	$	(327	)	$	423

Change in unrealized gains (losses) still held⁽⁴⁾	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	0	$	(15	)	$	(15	)

⁽¹⁾

Change in accounting for VIEs effective January 1, 2010. See Notes 1, 3, and 4 for additional information.

⁽²⁾

Due to a lack of visibility to observe significant inputs to price and credit events of respective issuers of securities to below investment grade

⁽³⁾

A result of changing our pricing methodology to using a pricing index for estimating fair value instead of obtaining pricing of the securities from brokers or arrangers

⁽⁴⁾

Carrying Value and Fair Value of Financial Instruments Disclosure

The carrying values and estimated fair values of the Company’s financial instruments were as follows:


	September 30, 2011				December 31, 2010
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed-maturity securities	$	86,209		$85,087	$	72,570	$	72,999
Fixed-maturity securities - consolidated variable interest entities		6,017		5,899		5,869		5,825
Perpetual securities		5,215		5,215		5,974		5,974
Perpetual securities - consolidated variable interest entities		1,315		1,315		1,538		1,538
Equity securities		24		24		23		23
Interest rate, foreign currency, and credit default swaps		407		407		564		564
Liabilities:
Notes payable (excluding capitalized leases)		3,293		3,423		3,032		3,248
Interest rate, foreign currency, and credit default swaps		608		608		741		741
Obligation to Japanese policyholder protection corporation		72		72		108		108

Discounted Cash Flow Pricing Model Sensitivity Analysis

The estimated effect of potential changes in interest rates, credit spreads and interest rate volatility on these fair values as of such date is as follows:

Interest Rates

Credit Spreads

Interest Rate Volatility

Factor change

Change in

fair value
(in millions)

Factor change

Change in

fair value
(in millions)

Factor change

Change in

fair value
(in millions)

+50 bps

$(980)

+50 bps

$(968)

+50%

$(181)

-50 bps

1,048

-50 bps

1,039

-50 %

The fair values of our held-to-maturity fixed-maturity securities valued by our DCF pricing model totaled $26.7 billion at September 30, 2011. The estimated effect of potential changes in interest rates, credit spreads and interest rate volatility on these fair values as of such date is as follows:

Interest Rates

Credit Spreads

Interest Rate Volatility

Factor change

Change in

fair value
(in millions)

Factor change

Change in

fair value
(in millions)

Factor change

Change in

fair value
(in millions)

+50 bps

$(1,682)

+50 bps

$(1,565)

+50%

$(250)

-50 bps

1,751

-50 bps

1,583

-50 %

238

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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