Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized in the tables below:

September 30, 2012

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

21,552

259

21,811

States, municipalities and political subdivisions

10,723

10,812

Asset-backed:

Residential mortgage-backed

5,653

437

6,090

Commercial mortgage-backed

1,571

117

1,688

Other asset-backed

595

371

966

Total asset-backed

7,819

925

8,744

U.S. Treasury and obligations of government- sponsored enterprises

168

192

Foreign government

139

475

614

Redeemable preferred stock

115

Fixed maturities available-for-sale

336

40,653

1,299

42,288

Fixed maturities, trading

141

Total fixed maturities

336

40,701

1,392

42,429

Equity securities available-for-sale

112

260

Equity securities, trading

748

759

Total equity securities

846

112

1,019

Short term investments

4,833

1,223

6,064

Other invested assets

Receivables

Life settlement contracts

113

Separate account business

338

345

Payable to brokers

(69

)

(18

)

(93

)


December 31, 2011	Level 1			Level 2			Level 3			Total
(In millions)

Fixed maturity securities:
Corporate and other bonds				$	20,396		$	482		$	20,878
States, municipalities and political subdivisions					9,611			171			9,782
Asset-backed:
Residential mortgage-backed					5,323			452			5,775
Commercial mortgage-backed					1,295			59			1,354
Other asset-backed					612			343			955

Total asset-backed					7,230			854			8,084
U.S. Treasury and obligations of government- sponsored enterprises	$	451			42						493
Foreign government		92			544						636
Redeemable preferred stock		5			53						58

Fixed maturities available-for-sale		548			37,876			1,507			39,931
Fixed maturities, trading					8			101			109

Total fixed maturities	$	548		$	37,884		$	1,608		$	40,040


Equity securities available-for-sale	$	124		$	113		$	67		$	304
Equity securities, trading		609						14			623

Total equity securities	$	733		$	113		$	81		$	927


Short term investments	$	4,570		$	508		$	27		$	5,105
Other invested assets								11			11
Receivables					79			8			87
Life settlement contracts								117			117
Separate account business		21			373			23			417
Payable to brokers		(32	)		(20	)		(23	)		(75	)

Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2012 and 2011:


	Balance, July 1		Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at September 30
2012	Balance, July 1		Included in Net Income			Included in OCI			Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	488	$	1		$	(4	)	$	50	$	(5	)	$	(11	)	$		$	(260	)	$	259	$	(1	)
States, municipalities and political subdivisions		89																					89
Asset-backed:
Residential mortgage-backed		443		(17	)		20			21					(8	)				(22	)		437		(18	)
Commercial mortgage-backed		166		4			6			12					(17	)		11		(65	)		117
Other asset-backed		434		2			5			143		(117	)		(34	)				(62	)		371

Total asset-backed		1,043		(11	)		31			176		(117	)		(59	)		11		(149	)		925		(18	)
Redeemable preferred stock		27					(1	)															26

Fixed maturities available-for-sale		1,647		(10	)		26			226		(122	)		(70	)		11		(409	)		1,299		(19	)
Fixed maturities, trading		94										(1	)										93

Total fixed maturities	$	1,741	$	(10	)	$	26		$	226	$	(123	)	$	(70	)	$	11	$	(409	)	$	1,392	$	(19	)


Equity securities available-for-sale	$	93	$	(19	)	$	(10	)											$	(14	)	$	50	$	(19	)
Equity securities trading		9		2																			11		3

Total equity securities	$	102	$	(17	)	$	(10	)	$	—	$	—		$	—		$	—	$	(14	)	$	61	$	(16	)


Short term investments	$	4							$	7	$	(4	)				$	1				$	8
Other invested assets		11																					11
Life settlement contracts		116	$	7										$	(10	)							113
Separate account business		3																					3
Derivative financial instruments, net		12		(1	)	$	(5	)							(1	)							5	$	(2	)


2011	Balance, July 1			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30			Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at September 30
2011	Balance, July 1			Included in Net Income			Included in OCI			Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	812		$	(7	)	$	(3	)	$	113	$	(107	)	$	(47	)	$	12	$	(154	)	$	619		$	(10	)
States, municipalities and political subdivisions		179									3													182
Asset-backed:
Residential mortgage-backed		687			1			(5	)		73		(81	)		(13	)				(31	)		631
Commercial mortgage-backed		95						(7	)		76										(5	)		159
Other asset-backed		491			(5	)		(6	)		114		(105	)		(25	)		2		(37	)		429			(4	)

Total asset-backed		1,273			(4	)		(18	)		263		(186	)		(38	)		2		(73	)		1,219			(4	)

Fixed maturities available-for-sale		2,264			(11	)		(21	)		379		(293	)		(85	)		14		(227	)		2,020			(14	)
Fixed maturities, trading		114			(3	)																		111			(3	)

Total fixed maturities	$	2,378		$	(14	)	$	(21	)	$	379	$	(293	)	$	(85	)	$	14	$	(227	)	$	2,131		$	(17	)


Equity securities available-for-sale	$	36										$	(1	)						$	(3	)	$	32
Equity securities trading		16		$	(4	)																		12		$	(4	)

Total equity securities	$	52		$	(4	)	$	—		$	—	$	(1	)	$	—		$	—	$	(3	)	$	44		$	(4	)


Short term investments	$	6																					$	6
Other invested assets		10																						10
Life settlement contracts		129		$	11										$	(15	)							125		$	(1	)
Separate account business		37										$	(2	)										35
Derivative financial instruments, net		(37	)		(13	)	$	11								11								(28	)		(1	)


	Balance, January 1			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at September 30
2012	Balance, January 1			Included in Net Income			Included in OCI			Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	482		$	7		$	2		$	196	$	(117	)	$	(43	)	$	42	$	(310	)	$	259	$	(1	)
States, municipalities and political subdivisions		171						3								(85	)							89
Asset-backed:
Residential mortgage-backed		452			(15	)		(2	)		81					(24	)				(55	)		437		(18	)
Commercial mortgage-backed		59			6			14			141		(12	)		(21	)		11		(81	)		117
Other asset-backed		343			8			8			501		(293	)		(93	)				(103	)		371

Total asset-backed		854			(1	)		20			723		(305	)		(138	)		11		(239	)		925		(18	)
Redeemable preferred stock								(1	)		53		(26	)										26

Fixed maturities available-for-sale		1,507			6			24			972		(448	)		(266	)		53		(549	)		1,299		(19	)
Fixed maturities, trading		101			(7	)					1		(2	)										93		(7	)

Total fixed maturities	$	1,608		$	(1	)	$	24		$	973	$	(450	)	$	(266	)	$	53	$	(549	)	$	1,392	$	(26	)


Equity securities available-for-sale	$	67		$	(19	)	$	6		$	26	$	(16	)						$	(14	)	$	50	$	(21	)
Equity securities trading		14			(3	)																		11		(1	)

Total equity securities	$	81		$	(22	)	$	6		$	26	$	(16	)	$	—		$	—	$	(14	)	$	61	$	(22	)


Short term investments	$	27								$	23	$	(4	)	$	(39	)	$	1				$	8
Other invested assets		11																						11
Life settlement contracts		117		$	30											(34	)							113	$	3
Separate account business		23											(20	)										3
Derivative financial instruments, net		(15	)		(5	)	$	29					(6	)		2								5		(1	)


2011	Balance, January 1			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)																						Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
																		Transfers		Transfers
				Included in Net Income			Included in OCI			Purchases		Sales			Settlements			into Level 3		out of Level 3			Balance, September 30			Held at September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	624		$	(5	)	$	(6	)	$	459	$	(157	)	$	(144	)	$	52	$	(204	)	$	619		$	(11	)
States, municipalities and political subdivisions		266									3					(87	)							182
Asset-backed:
Residential mortgage-backed		767			(11	)		9			170		(164	)		(54	)				(86	)		631			(15	)
Commercial mortgage-backed		73			3			11			81		(4	)							(5	)		159
Other asset-backed		359						(6	)		441		(236	)		(80	)		2		(51	)		429			(4	)

Total asset-backed		1,199			(8	)		14			692		(404	)		(134	)		2		(142	)		1,219			(19	)
Redeemable preferred stock		3			3			(3	)				(3	)

Fixed maturities available-for-sale		2,092			(10	)		5			1,154		(564	)		(365	)		54		(346	)		2,020			(30	)
Fixed maturities, trading		184			(1	)							(72	)										111			6

Total fixed maturities	$	2,276		$	(11	)	$	5		$	1,154	$	(636	)	$	(365	)	$	54	$	(346	)	$	2,131		$	(24	)

Equity securities available-for-sale	$	26		$	(2	)	$	(1	)	$	19	$	(12	)				$	5	$	(3	)	$	32		$	(3	)
Equity securities trading		6			(9	)					1								14					12			(9	)

Total equity securities	$	32		$	(11	)	$	(1	)	$	20	$	(12	)	$	—		$	19	$	(3	)	$	44		$	(12	)

Short term investments	$	27								$	12				$	(23	)			$	(10	)	$	6
Other invested assets		26		$	3							$	(19	)										10		$	1
Life settlement contracts		129			20											(24	)							125			2
Separate account business		41											(6	)										35
Derivative financial instruments, net		(21	)		(32	)	$	(5	)							30								(28	)		(1	)

Quantitative Information About Significant Unobservable Inputs Utilized by Company Fair Value Measurements of Level 3 Assets

The quantitative detail of unobservable inputs from these broker quotes is neither provided nor reasonably available to the Company.


September 30, 2012	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
(In millions)

Assets

Fixed maturity securities	$	98	Discounted cash flow	Expected maturity date	3.6 – 5.6 years (4.6 years)
		61	Market approach	Private offering price	$60.00 – $105.00 ($101.49)
Equity securities		33	Market approach	Private offering price	$0.10 – $3,842.00 per share
					($583.95 per share)
		17	Income approach	EBITDA(a) projection	$80 million
				EBITDA(a) multiple	1.82
Life settlement contracts		113	Discounted cash flow	Discount rate risk premium	9%
				Mortality assumption	65% – 928% (185%)

(a)	Earnings before interest, tax, depreciation and amortization

Carrying Amount and Estimated Fair Value of Financial Instrument Assets and Liabilities Not Measured at Fair Value

listed in the tables below. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.

Carrying

Estimated Fair Value

September 30, 2012

Amount

Level 1

Level 2

Level 3

Total

(In millions)

Financial Assets:

Other invested assets, primarily

mortgage loans

358

374

Financial Liabilities:

Premium deposits and annuity contracts

103

108

Short term debt

Long term debt

8,848

9,693

285

9,978


December 31, 2011	Carrying Amount		Estimated Fair Value
(In millions)

Financial assets:
Other invested assets, primarily mortgage loans	$	234	$	247

Financial liabilities:
Premium deposits and annuity contracts		109		114
Short term debt		88		90
Long term debt		8,913		9,533

- 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 (loss), 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, issues, 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.

+ References+ Details

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

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Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

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