Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

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, 2014

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

18,938

173

19,144

States, municipalities and political subdivisions

12,379

12,459

Asset-backed:

Residential mortgage-backed

4,986

160

5,146

Commercial mortgage-backed

2,061

2,158

Other asset-backed

588

642

1,230

Total asset-backed

7,635

899

8,534

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

Foreign government

424

471

Redeemable preferred stock

Fixed maturities available-for-sale

137

39,391

1,152

40,680

Fixed maturities, trading

124

Total fixed maturities

137

39,424

1,243

40,804

Equity securities available-for-sale

141

211

Equity securities, trading

540

543

Total equity securities

681

754

Short term investments

6,047

612

6,659

Other invested assets

102

146

Receivables

Life settlement contracts

Payable to brokers

(409)

(5)

(414)


December 31, 2013	Level 1			Level 2			Level 3			Total

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	33		$	20,625		$	204		$	20,862
States, municipalities and political subdivisions					11,486			71			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			28						144
Foreign government		81			462						543
Redeemable preferred stock		45			57						102

Fixed maturities available-for-sale		275			39,719			1,203			41,197
Fixed maturities, trading					43			80			123

Total fixed maturities	$	275		$	39,762		$	1,283		$	41,320


Equity securities available-for-sale	$	126		$	48		$	11		$	185
Equity securities, trading		678						8			686

Total equity securities	$	804		$	48		$	19		$	871


Short term investments	$	6,134		$	563					$	6,697
Other invested assets					54						54
Receivables					3						3
Life settlement contracts							$	88			88
Separate account business		9			171			1			181
Payable to brokers		(40	)		(1	)		(3	)		(44)
Assets of discontinued operations		28			2			2			32
Liabilities of discontinued operations					(6	)		(2	)		(8)

Reconciliation of 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, 2014 and 2013:


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2014	July 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	194			$	(1)	$	4			$	(3)			$	(21)	$	173
States, municipalities and political subdivisions		79				1												80
Asset-backed:
Residential mortgage-backed		185	$	1								(17)	$	11		(20)		160
Commercial mortgage-backed		59		2		(2)		28				(21)		31				97
Other asset-backed		626		1		(4)		80				(25)				(36)		642

Total asset-backed		870		4		(6)		108	$	-		(63)		42		(56)		899	$	-

Fixed maturities available-for-sale		1,143		4		(6)		112				(66)		42		(77)		1,152
Fixed maturities, trading		91																91

Total fixed maturities	$	1,234	$	4	$	(6)	$	112	$	-	$	(66)	$	42	$	(77)	$	1,243	$	-


Equity securities available-for-sale	$	2			$	(1)	$	16									$	17
Equity securities trading		4						(1)										3

Total equity securities	$	6	$	-	$	(1)	$	15	$	-	$	-	$	-	$	-	$	20	$	-


Life settlement contracts	$	86	$	1							$	(1)					$	86	$	1
Derivative financial instruments, net		-																-		(1)


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2013	July 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	202	$	1			$	6	$	(6)	$	(8)	$	17	$	(1)	$	211
States, municipalities and political subdivisions		140			$	(3)						(15)				(27)		95
Asset-backed:
Residential mortgage-backed		428				(20)		5				(21)				(22)		370	$	(1)
Commercial mortgage-backed		165		(1)		(2)		10				(1)				(14)		157
Other asset-backed		387				1		56				(6)				(5)		433		(1)

Total asset-backed		980		(1)		(21)		71		-		(28)		-		(41)		960		(2)
Redeemable preferred stock		25		(1)		1						(25)						-

Fixed maturities available-for-sale		1,347		(1)		(23)		77		(6)		(76)		17		(69)		1,266		(2)
Fixed maturities, trading		87		(8)						(1)								78		(8)

Total fixed maturities	$	1,434	$	(9)	$	(23)	$	77	$	(7)	$	(76)	$	17	$	(69)	$	1,344	$	(10)


Equity securities available-for-sale	$	13	$	(2)	$	2											$	13	$	(2)
Equity securities trading		2																2

Total equity securities	$	15	$	(2)	$	2	$	-	$	-	$	-	$	-	$	-	$	15	$	(2)


Life settlement contracts	$	91	$	3							$	(4)					$	90
Separate account business		2																2
Derivative financial instruments, net		5		2	$	(4)			$	(2)		(1)						-


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2014	January 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	204	$	2			$	30	$	(10)	$	(13)	$	8	$	(48)	$	173
States, municipalities and political subdivisions		71		1	$	3		1		(10)				14				80
Asset-backed:
Residential mortgage-backed		331		(22)		62		47		(174)		(57)		32		(59)		160
Commercial mortgage-backed		151		4		(2)		28		(60)		(23)		43		(44)		97
Other asset-backed		446		2				457		(111)		(115)				(37)		642	$	(1)

Total asset-backed		928		(16)		60		532		(345)		(195)		75		(140)		899		(1)

Fixed maturities available-for-sale		1,203		(13)		63		563		(365)		(208)		97		(188)		1,152		(1)
Fixed maturities, trading		80		11														91		11

Total fixed maturities	$	1,283	$	(2)	$	63	$	563	$	(365)	$	(208)	$	97	$	(188)	$	1,243	$	10


Equity securities available-for-sale	$	11	$	3	$	(5)	$	16	$	(8)							$	17
Equity securities trading		8						1		(6)								3

Total equity securities	$	19	$	3	$	(5)	$	17	$	(14)	$	-	$	-	$	-	$	20	$	-


Life settlement contracts	$	88	$	23							$	(25)					$	86	$	3
Separate account business		1													$	(1)		-
Derivative financial instruments, net		(3)		1			$	(2)	$	2						2		-		1


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2013	January 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	219	$	2	$	(1)	$	129	$	(96)	$	(34)	$	43	$	(51)	$	211	$	(2)
States, municipalities and political subdivisions		96		(3)		1		122		(79)		(20)		5		(27)		95
Asset-backed:
Residential mortgage-backed		413		2		(21)		116		(10)		(53)		4		(81)		370		(3)
Commercial mortgage-backed		129				7		88				(10)		21		(78)		157
Other asset-backed		368		3		(1)		230		(132)		(30)				(5)		433		(2)

Total asset-backed		910		5		(15)		434		(142)		(93)		25		(164)		960		(5)
Redeemable preferred stock		26		(1)								(25)						-

Fixed maturities available-for-sale		1,251		3		(15)		685		(317)		(172)		73		(242)		1,266		(7)
Fixed maturities, trading		89		(7)						(4)								78		(7)

Total fixed maturities	$	1,340	$	(4)	$	(15)	$	685	$	(321)	$	(172)	$	73	$	(242)	$	1,344	$	(14)


Equity securities available-for-sale	$	34	$	(22)	$	2									$	(1)	$	13	$	(22)
Equity securities trading		7		(5)														2		(5)

Total equity securities	$	41	$	(27)	$	2	$	-	$	-	$	-	$	-	$	(1)	$	15	$	(27)


Short term investments	$	6							$	(6)							$	-
Other invested assets		1								(1)								-
Life settlement contracts		100	$	14							$	(24)						90	$	(1)
Separate account business		2																2
Derivative financial instruments, net		5		7	$	(6)	$	1		(2)		(5)						-		1

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

The tables below present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the table below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of unobservable inputs from these broker quotes is neither provided nor reasonably available to the Company.

September 30, 2014

Fair Value

Valuation
Techniques

Unobservable

Inputs

Range

(Weighted

Average)

(In millions)

Assets

Fixed maturity securities

Discounted cash flow

Credit spread

2% – 12% (3%)

Equity securities

Market approach

Private offering price

$13 – $4,388 per share

($554 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

70% – 743% (193%)

December 31, 2013

Assets

Fixed maturity securities

142

Discounted cash flow

Credit spread

2% – 20% (4%)

Equity securities

Market approach

Private offering price

$360 – $4,268 per share

($1,148 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

70% – 743% (192%)

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

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, 2014	Amount		Level 1	Level 2		Level 3		Total
(In millions)

Financial Assets:
Other invested assets	$	556				$	576	$	576

Financial Liabilities:
Short term debt		850		$	813		51		864
Long term debt		10,040			10,191		420		10,611

December 31, 2013

Financial Assets:
Other invested assets	$	508				$	515	$	515

Financial Liabilities:
Premium deposits and annuity contracts		57					58		58
Short term debt		818		$	832		20		852
Long term debt		9,515			9,907		182		10,089
Long term debt included in discontinued operations		500			500				500

- 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