FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 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 as of December 31.


	2011
(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:
Fixed maturities:
Government and agencies	$	11,092	$	721	$	0	$	11,813
Municipalities		0		1,159		0		1,159
Mortgage- and asset-backed securities		0		944		394		1,338
Public utilities		0		6,803		422		7,225
Collateralized debt obligations		0		0		0		0
Sovereign and supranational		0		1,874		434		2,308
Banks/financial institutions		0		6,379		1,074		7,453
Other corporate		0		15,171		1,105		16,276
Total fixed maturities		11,092		33,051		3,429		47,572
Perpetual securities:
Banks/financial institutions		0		5,552		526		6,078
Other corporate		0		361		0		361
Total perpetual securities		0		5,913		526		6,439
Equity securities		15		6		4		25
Other assets:
Interest rate swaps		0		0		34		34
Foreign currency swaps		0		0		341		341
Total other assets		0		0		375		375
Total assets	$	11,107	$	38,970	$	4,334	$	54,411

Liabilities:
Interest rate swaps	$	0	$	0	$	4	$	4
Foreign currency swaps		0		0		397		397
Credit default swaps		0		0		130		130
Total liabilities	$	0	$	0	$	531	$	531

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 for the years ended December 31.


	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		(16	)		0		(2	)		0		1			0		0		0		(33	)		(160	)		(64	)		(274	)
Unrealized gains or losses included in other comprehensive income		18			0		0			0		15			0		0		0		0			(33	)		0			0
Purchases, issuances, sales and settlements: Purchases		0			0		0			0		0			0		0		0		0			(6	)		0			(6	)
Sales		0			0		(3	)		0		0			0		0		0		0			0			15			12
Settlements		(10	)		0		0			0		0			0		0		0		4			(8	)		262			248
Transfers into Level 3⁽¹⁾		139			422		0			434		1,048			1,105		526		0		59			(90	)		0			3,643
Transfers out of Level 3⁽²⁾		(4	)		0		0			0		(376	)		0		0		0		0			0			0			(380	)

Balance, end of period	$	394		$	422	$	0		$	434	$	1,074		$	1,105	$	526	$	4	$	30		$	(56	)	$	(130	)	$	3,803

Change in unrealized gains (losses) still held⁽³⁾	$	(16	)	$	0	$	0		$	0	$	1		$	0	$	0	$	0	$	(33	)	$	(160	)	$	(64	)	$	(272	)

⁽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 December 31, 2011


	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			6			0			108			0			1		(31	)		84
Unrealized gains or losses included in other comprehensive income		20			(9	)		0			5			69			6			51			0			0		0			142
Purchases, issuances, sales and settlements:
Purchases		0			0			0			0			0			0			0			0			0		0			0
Sales		(3	)		(2	)		0			0			(175	)		0			(585	)		0			0		0			(765	)
Settlements		(4	)		0			0			0			(2	)		0			0			0			0		0			(6	)
Transfers into Level 3⁽²⁾		237			0			0			0			330			0			149			0			240		0			956
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	$	267		$	0		$	5		$	0		$	386		$	0		$	0		$	4		$	241	$	(343	)	$	560

Change in unrealized gains (losses) still held⁽⁴⁾	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	1	$	(31	)	$	(30	)

⁽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

⁽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 as of December 31 were as follows:


	2011				2010
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed-maturity securities	$	88,588	$	88,039	$	72,570	$	72,999
Fixed-maturity securities - consolidated variable interest entities		5,993		5,916		5,869		5,825
Perpetual securities		5,149		5,149		5,974		5,974
Perpetual securities - consolidated variable interest entities		1,290		1,290		1,538		1,538
Equity securities		25		25		23		23
Interest rate, foreign currency, and credit default swaps		375		375		564		564
Liabilities:
Notes payable (excluding capitalized leases)		3,275		3,536		3,032		3,248
Interest rate, foreign currency, and credit default swaps		531		531		741		741
Obligation to Japanese policyholder protection corporation		71		71		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	$	(1,035	)		+50 bps	$	(1,027	)		+50	%	$	(125	)
-50 bps		1,095			-50 bps		1,090			-50	%		6

The fair values of our held-to-maturity fixed-maturity securities valued by our DCF pricing model totaled $25.8 billion at December 31, 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	$	(1,596	)		+50 bps	$	(1,485	)		+50	%	$	(126	)
-50 bps		1,631			-50 bps		1,489			-50	%		165

- 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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