Fair Value (Tables)

12 Months Ended

Dec. 31, 2013

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:

December 31, 2013

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

20,625

204

20,862

States, municipalities and political subdivisions

11,486

11,557

Asset-backed:

Residential mortgage-backed

4,640

331

4,971

Commercial mortgage-backed

1,912

151

2,063

Other asset-backed

509

446

955

Total asset-backed

7,061

928

7,989

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

116

144

Foreign government

462

543

Redeemable preferred stock

102

Fixed maturities available-for-sale

275

39,719

1,203

41,197

Fixed maturities, trading

123

Total fixed maturities

275

39,762

1,283

41,320

Equity securities available-for-sale

126

185

Equity securities, trading

678

686

Total equity securities

804

871

Short term investments

6,162

563

6,725

Other invested assets

Receivables

Life settlement contracts

Separate account business

171

181

Payable to brokers

(40

)

(52)


December 31, 2012	Level 1			Level 2			Level 3			Total

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	6		$	21,982		$	219		$	22,207
States, municipalities and political subdivisions					10,687			96			10,783
Asset-backed:
Residential mortgage-backed					5,507			413			5,920
Commercial mortgage-backed					1,693			129			1,822
Other asset-backed					584			368			952

Total asset-backed					7,784			910			8,694
U.S. Treasury and obligations of government-sponsored enterprises		158			24						182
Foreign government		140			473						613
Redeemable preferred stock		40			59			26			125

Fixed maturities available-for-sale		344			41,009			1,251			42,604
Fixed maturities, trading					72			89			161

Total fixed maturities	$	344		$	41,081		$	1,340		$	42,765


Equity securities available-for-sale	$	117		$	98		$	34		$	249
Equity securities, trading		642						7			649

Total equity securities	$	759		$	98		$	41		$	898


Short term investments	$	4,990		$	799		$	6		$	5,795
Other invested assets					58			1			59
Receivables					32			11			43
Life settlement contracts								100			100
Separate account business		4			306			2			312
Payable to brokers		(95	)		(11	)		(6	)		(112)

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 years ended December 31, 2013 and 2012:


2013	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, December 31		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at December 31
2013	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, December 31

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	219	$	3			$	123	$	(97)	$	(44)	$	51	$	(51)	$	204	$	(2)
States, municipalities and political subdivisions		96		(2)	$	4		122		(79)		(61)		18		(27)		71
Asset-backed:
Residential mortgage-backed		413		4		(14)		116		(10)		(75)		4		(107)		331		(3)
Commercial mortgage-backed		129				11		107		(3)		(11)		21		(103)		151
Other asset-backed		368		5		(4)		314		(197)		(35)				(5)		446		(2)

Total asset-backed		910		9		(7)		537		(210)		(121)		25		(215)		928		(5)
Redeemable preferred stock		26		(1)								(25)						-

Fixed maturities available-for-sale		1,251		9		(3)		782		(386)		(251)		94		(293)		1,203		(7)
Fixed maturities, trading		89		(4)				19		(24)								80		(4)

Total fixed maturities	$	1,340	$	5	$	(3)	$	801	$	(410)	$	(251)	$	94	$	(293)	$	1,283	$	(11)


Equity securities available-for-sale	$	34	$	(27)	$	3	$	2							$	(1)	$	11	$	(27)
Equity securities, trading		7		(5)				6										8		(5)

Total equity securities	$	41	$	(32)	$	3	$	8	$	-	$	-	$	-	$	(1)	$	19	$	(32)


Short term investments	$	6							$	(6)							$	-
Other invested assets		1								(1)								-
Life settlement contracts		100	$	13							$	(25)						88	$	(2)
Separate account business		2					$	1		(2)								1
Derivative financial instruments, net		5		8	$	(9)		(2)		1		(6)						(3)		1


2012	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, December 31		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at December 31
2012	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, December 31

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	482	$	6	$	4	$	230	$	(135)	$	(88)	$	45	$	(325)	$	219	$	(3)
States, municipalities and political subdivisions		171						14				(89)						96
Asset-backed:
Residential mortgage-backed		452		(14)		2		97				(40)				(84)		413		(18)
Commercial mortgage-backed		59		8		14		165		(12)		(28)		13		(90)		129
Other asset-backed		343		11		8		615		(365)		(128)				(116)		368

Total asset-backed		854		5		24		877		(377)		(196)		13		(290)		910		(18)
Redeemable preferred stock		-				(1)		53		(26)								26

Fixed maturities available-for-sale		1,507		11		27		1,174		(538)		(373)		58		(615)		1,251		(21)
Fixed maturities, trading		101		(6)				1		(7)								89		(6)

Total fixed maturities	$	1,608	$	5	$	27	$	1,175	$	(545)	$	(373)	$	58	$	(615)	$	1,340	$	(27)


Equity securities available-for-sale	$	67	$	(36)	$	6	$	27	$	(16)					$	(14)	$	34	$	(38)
Equity securities, trading		14		(6)						(1)								7		(6)

Total equity securities	$	81	$	(42)	$	6	$	27	$	(17)	$	-	$	-	$	(14)	$	41	$	(44)


Short term investments	$	27					$	23	$	(4)	$	(41)	$	1			$	6
Other invested assets		11										(10)						1
Life settlement contracts		117	$	53								(70)						100	$	11
Separate account business		23								(21)								2
Derivative financial instruments, net		(15)		(4)	$	30				(6)								5		(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.

December 31, 2013

Fair Value

Valuation
Technique(s)

Unobservable

Input(s)

Range

(Weighted

Average)

(In millions)

Assets

Fixed maturity securities

142

Discounted cash flow

Credit spread

1.74% – 19.90%(3.98%)

Equity securities

Market approach

Private offering price

$360.12 – $4,267.66 per
share ($1,147.95 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

70% – 743%(191.6%)

December 31, 2012

Assets

Fixed maturity securities

121

Discounted cash flow

Expected call date

3.3 – 5.3 years (4.3 years)

Credit spread adjustment

0.02% – 0.48%(0.17%)

Market approach

Private offering price

$42.39 – $102.32($100.11)

Equity securities

Market approach

Private offering price

$4.54 – $3,842.00 per share

($571.17 per share)

Life settlement contracts

100

Discounted cash flow

Discount rate risk premium

Mortality assumption

69% – 883%(208.9%)

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

The carrying amounts reported on the Consolidated 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.

December 31, 2013

Carrying

Estimated Fair Value

Amount

Level 1

Level 2

Level 3

Total

(In millions)

Financial assets:

Other invested assets, primarily mortgage loans

$ 508

$ 515

Financial liabilities:

Premium deposits and annuity contracts

Short term debt

838

$ 852

872

Long term debt

9,995

10,387

182

10,569

December 31, 2012

Financial assets:

Other invested assets, primarily mortgage loans

$ 401

$ 418

Financial liabilities:

Premium deposits and annuity contracts

100

104

Short term debt

$ 13

Long term debt

9,191

10,170

202

10,372

- 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, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details