XML 72 R12.htm IDEA: XBRL DOCUMENT
v2.4.0.6

FAIR VALUE MEASUREMENTS | 3 Months Ended
--- | ---
Mar. 31, 2013
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair Value Hierarchy GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs create three valuation hierarchy levels. Level 1 valuations reflect quoted market prices for identical assets or liabilities in active markets. Level 2 valuations reflect quoted market prices for similar assets or liabilities in an active market, quoted market prices for identical or similar assets or liabilities in non-active markets or model-derived valuations in which all significant valuation inputs are observable in active markets. Level 3 valuations reflect valuations in which one or more of the significant inputs are not observable in an active market. The following tables present the fair value hierarchy levels of the Company's assets and liabilities that are measured and carried at fair value on a recurring basis.
| March 31, 2013
(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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 12,190 |  |  |  |  | $ | 704 |  |  |  |  | $ | 0 |  |  |  |  | $ | 12,894 |  |
Municipalities |  | 0 |  |  |  |  | 1,161 |  |  |  |  | 0 |  |  |  |  | 1,161 |  |
Mortgage- and asset-backed securities |  | 0 |  |  |  |  | 515 |  |  |  |  | 439 |  |  |  |  | 954 |  |
Public utilities |  | 0 |  |  |  |  | 8,150 |  |  |  |  | 0 |  |  |  |  | 8,150 |  |
Sovereign and supranational |  | 0 |  |  |  |  | 1,752 |  |  |  |  | 0 |  |  |  |  | 1,752 |  |
Banks/financial institutions |  | 0 |  |  |  |  | 6,945 |  |  |  |  | 26 |  |  |  |  | 6,971 |  |
Other corporate |  | 0 |  |  |  |  | 24,394 |  |  |  |  | 0 |  |  |  |  | 24,394 |  |
Total fixed maturities |  | 12,190 |  |  |  |  | 43,621 |  |  |  |  | 465 |  |  |  |  | 56,276 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 0 |  |  |  |  | 2,915 |  |  |  |  | 0 |  |  |  |  | 2,915 |  |
Other corporate |  | 0 |  |  |  |  | 218 |  |  |  |  | 0 |  |  |  |  | 218 |  |
Total perpetual securities |  | 0 |  |  |  |  | 3,133 |  |  |  |  | 0 |  |  |  |  | 3,133 |  |
Equity securities |  | 15 |  |  |  |  | 5 |  |  |  |  | 4 |  |  |  |  | 24 |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 26 |  |
Foreign currency swaps |  | 0 |  |  |  |  | 251 |  |  |  |  | 130 |  |  |  |  | 381 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 19 |  |  |  |  | 0 |  |  |  |  | 19 |  |
Foreign currency options |  | 0 |  |  |  |  | 2 |  |  |  |  | 0 |  |  |  |  | 2 |  |
Credit default swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 2 |  |  |  |  | 2 |  |
Total other assets |  | 0 |  |  |  |  | 272 |  |  |  |  | 158 |  |  |  |  | 430 |  |
Cash and cash equivalents |  | 2,596 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 2,596 |  |
Total assets |  | $ | 14,801 |  |  |  |  | $ | 47,031 |  |  |  |  | $ | 627 |  |  |  |  | $ | 62,459 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 1 |  |  |  |  | $ | 1 |  |
Foreign currency swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 314 |  |  |  |  | 314 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 272 |  |  |  |  | 0 |  |  |  |  | 272 |  |
Credit default swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 56 |  |  |  |  | 56 |  |
Total liabilities |  | $ | 0 |  |  |  |  | $ | 272 |  |  |  |  | $ | 371 |  |  |  |  | $ | 643 |  |
| December 31, 2012
(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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 12,265 |  |  |  |  | $ | 732 |  |  |  |  | $ | 0 |  |  |  |  | $ | 12,997 |  |
Municipalities |  | 0 |  |  |  |  | 1,195 |  |  |  |  | 0 |  |  |  |  | 1,195 |  |
Mortgage- and asset-backed securities |  | 0 |  |  |  |  | 693 |  |  |  |  | 338 |  |  |  |  | 1,031 |  |
Public utilities |  | 0 |  |  |  |  | 8,077 |  |  |  |  | 420 |  |  |  |  | 8,497 |  |
Sovereign and supranational |  | 0 |  |  |  |  | 1,654 |  |  |  |  | 418 |  |  |  |  | 2,072 |  |
Banks/financial institutions |  | 0 |  |  |  |  | 6,610 |  |  |  |  | 1,024 |  |  |  |  | 7,634 |  |
Other corporate |  | 0 |  |  |  |  | 22,841 |  |  |  |  | 986 |  |  |  |  | 23,827 |  |
Total fixed maturities |  | 12,265 |  |  |  |  | 41,802 |  |  |  |  | 3,186 |  |  |  |  | 57,253 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 0 |  |  |  |  | 3,735 |  |  |  |  | 215 |  |  |  |  | 3,950 |  |
Other corporate |  | 0 |  |  |  |  | 352 |  |  |  |  | 0 |  |  |  |  | 352 |  |
Total perpetual securities |  | 0 |  |  |  |  | 4,087 |  |  |  |  | 215 |  |  |  |  | 4,302 |  |
Equity securities |  | 13 |  |  |  |  | 6 |  |  |  |  | 4 |  |  |  |  | 23 |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 32 |  |  |  |  | 32 |  |
Foreign currency swaps |  | 0 |  |  |  |  | 154 |  |  |  |  | 157 |  |  |  |  | 311 |  |
Credit default swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 2 |  |  |  |  | 2 |  |
Total other assets |  | 0 |  |  |  |  | 154 |  |  |  |  | 191 |  |  |  |  | 345 |  |
Cash and cash equivalents |  | 2,041 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 2,041 |  |
Total assets |  | $ | 14,319 |  |  |  |  | $ | 46,049 |  |  |  |  | $ | 3,596 |  |  |  |  | $ | 63,964 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 3 |  |  |  |  | $ | 3 |  |
Foreign currency swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 329 |  |  |  |  | 329 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 535 |  |  |  |  | 0 |  |  |  |  | 535 |  |
Credit default swaps |  | 0 |  |  |  |  | 0 |  |  |  |  | 67 |  |  |  |  | 67 |  |
Total liabilities |  | $ | 0 |  |  |  |  | $ | 535 |  |  |  |  | $ | 399 |  |  |  |  | $ | 934 |  |
The following tables present the carrying amount and fair value categorized by fair value hierarchy level for the Company's financial instruments that are not carried at fair value.
| March 31, 2013
(In millions) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 24,606 |  |  |  | $ | 26,760 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 26,760 |  |
Municipalities |  | 452 |  |  |  | 0 |  |  |  |  | 517 |  |  |  |  | 0 |  |  |  |  | 517 |  |
Mortgage and asset-backed securities |  | 77 |  |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 55 |  |  |  |  | 81 |  |
Public utilities |  | 4,532 |  |  |  | 0 |  |  |  |  | 4,512 |  |  |  |  | 0 |  |  |  |  | 4,512 |  |
Sovereign and supranational |  | 2,953 |  |  |  | 0 |  |  |  |  | 3,073 |  |  |  |  | 0 |  |  |  |  | 3,073 |  |
Banks/financial institutions |  | 8,480 |  |  |  | 0 |  |  |  |  | 7,953 |  |  |  |  | 0 |  |  |  |  | 7,953 |  |
Other corporate |  | 4,104 |  |  |  | 0 |  |  |  |  | 4,151 |  |  |  |  | 0 |  |  |  |  | 4,151 |  |
Total assets |  | $ | 45,204 |  |  |  | $ | 26,760 |  |  |  |  | $ | 20,232 |  |  |  |  | $ | 55 |  |  |  |  | $ | 47,047 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes payable (excluding capital leases) |  | $ | 4,276 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 4,924 |  |  |  |  | $ | 4,924 |  |
Obligation to Japanese policyholder protection corporation |  | 2 |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 2 |  |  |  |  | 2 |  |
Total liabilities |  | $ | 4,278 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 4,926 |  |  |  |  | $ | 4,926 |  |
| December 31, 2012
(In millions) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 32,043 |  |  |  | $ | 32,332 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 32,332 |  |
Municipalities |  | 492 |  |  |  | 0 |  |  |  |  | 520 |  |  |  |  | 0 |  |  |  |  | 520 |  |
Mortgage and asset-backed securities |  | 90 |  |  |  | 0 |  |  |  |  | 30 |  |  |  |  | 64 |  |  |  |  | 94 |  |
Public utilities |  | 4,924 |  |  |  | 0 |  |  |  |  | 5,051 |  |  |  |  | 0 |  |  |  |  | 5,051 |  |
Sovereign and supranational |  | 3,209 |  |  |  | 0 |  |  |  |  | 3,317 |  |  |  |  | 0 |  |  |  |  | 3,317 |  |
Banks/financial institutions |  | 9,211 |  |  |  | 0 |  |  |  |  | 8,991 |  |  |  |  | 0 |  |  |  |  | 8,991 |  |
Other corporate |  | 4,457 |  |  |  | 0 |  |  |  |  | 4,536 |  |  |  |  | 0 |  |  |  |  | 4,536 |  |
Total assets |  | $ | 54,426 |  |  |  | $ | 32,332 |  |  |  |  | $ | 22,445 |  |  |  |  | $ | 64 |  |  |  |  | $ | 54,841 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes payable (excluding capital leases) |  | $ | 4,343 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 4,992 |  |  |  |  | $ | 4,992 |  |
Obligation to Japanese policyholder protection corporation |  | 23 |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 23 |  |  |  |  | 23 |  |
Total liabilities |  | $ | 4,366 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 5,015 |  |  |  |  | $ | 5,015 |  |
Fair Value of Financial Instruments U.S. GAAP requires disclosure of the fair value of certain financial instruments including those that are not carried at fair value. The carrying amounts for cash and cash equivalents, receivables, accrued investment income, accounts payable, cash collateral and payables for security transactions approximated their fair values due to the short-term nature of these instruments. Liabilities for future policy benefits and unpaid policy claims are not financial instruments as defined by GAAP. Fixed maturities, perpetual securities, and equity securities We determine the fair values of our fixed maturity securities, perpetual securities, and privately issued equity securities using the following approaches or techniques: price quotes and valuations from third party pricing vendors (including quoted market prices readily available from public exchange markets) and non-binding price quotes we obtain from outside brokers. Prior to March 31, 2013, we had used a discounted cash flow (DCF) pricing model to value certain of our privately issued securities. Our DCF pricing model incorporated an option adjusted spread and utilized various market inputs we obtained from both active and inactive markets. The estimated fair values developed by the DCF pricing model were most sensitive to prevailing credit spreads, the level of interest rates (yields) and interest rate volatility. Credit spreads were derived from a widely used global bond index to create a credit matrix which took into account the current credit spread, ratings and remaining time to maturity, and subordination levels for securities that were included in the bond index. The index provided a broad-based measure of the global fixed-income bond market. Beginning March 31, 2013, to reflect the impact of the persistent economic environment and the changing regulatory framework, we engaged a third party pricing vendor to develop valuation models to determine fair values of these securities. These models were also DCF models, but also use information from related markets, specifically the credit default swap (CDS) market to estimate expected cash flows. These models take into consideration any unique characteristics of the securities and make various adjustments to arrive at an appropriate issuer-specific loss adjusted credit curve. This credit curve is then used with the relevant recovery rates to estimate expected cash flows and modeling of additional features, including illiquidity adjustments, if necessary, to price the bond by discounting those loss adjusted cash flows. In cases where a credit curve can not be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable bond(s) of the issuer; 2) issuer-specific CDS spreads; 3) bonds or CDS spreads of comparable issuers with similar characteristics such as rating, geography, or sector; or 4) bond indices that are comparative in rating, industry, maturity and region. The pricing data and market quotes we obtain from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, we will re-examine the inputs and assess the reasonableness of the pricing data with the vendor. Additionally, we may compare the inputs to relevant market indices and other performance measurements. The output of this analysis is presented to the Company's Credit Subcommittee, or CSC. Based on the analysis provided to the CSC, the valuation is confirmed or may be revised if there is evidence of a more appropriate estimate of fair value based on available market data. With the implementation of the pricing change associated with private placements previously noted, we have performed verification of the inputs and calculations in the models to confirm that the valuations represent reasonable estimates of fair value. The fixed maturities classified as Level 3 consist of securities for which there are limited or no observable valuation inputs. For Level 3 securities that are investment grade, we estimate the fair value of these securities by obtaining non-binding broker quotes from a limited number of brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market conditions. We consider these inputs to be unobservable. For Level 3 investments that are below-investment-grade securities, we consider a variety of significant valuation inputs in the valuation process, including forward exchange rates, yen swap rates, dollar swap rates, interest rate volatilities, credit spread data on specific issuers, assumed default and default recovery rates, and certain probability assumptions. In obtaining these valuation inputs, we have determined that certain pricing assumptions and data used by our pricing sources are difficult to validate or corroborate by the market and/or appear to be internally developed rather than observed in or corroborated by the market. The use of these unobservable valuation inputs causes more subjectivity in the valuation process for these securities. Historically, we have not adjusted the quotes or prices we obtain from the pricing services and brokers we use. The following tables present the pricing sources for the fair values of our fixed maturities, perpetual securities, and equity securities.
|  | March 31, 2013
(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
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 12,190 |  |  |  |  | $ | 704 |  |  |  |  | $ | 0 |  |  |  |  | $ | 12,894 |  |
Total government and agencies |  |  | 12,190 |  |  |  |  | 704 |  |  |  |  | 0 |  |  |  |  | 12,894 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,161 |  |  |  |  | 0 |  |  |  |  | 1,161 |  |
Total municipalities |  |  | 0 |  |  |  |  | 1,161 |  |  |  |  | 0 |  |  |  |  | 1,161 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 515 |  |  |  |  | 0 |  |  |  |  | 515 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 439 |  |  |  |  | 439 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 515 |  |  |  |  | 439 |  |  |  |  | 954 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 8,125 |  |  |  |  | 0 |  |  |  |  | 8,125 |  |
Broker/other |  |  | 0 |  |  |  |  | 25 |  |  |  |  | 0 |  |  |  |  | 25 |  |
Total public utilities |  |  | 0 |  |  |  |  | 8,150 |  |  |  |  | 0 |  |  |  |  | 8,150 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,420 |  |  |  |  | 0 |  |  |  |  | 1,420 |  |
Broker/other |  |  | 0 |  |  |  |  | 332 |  |  |  |  | 0 |  |  |  |  | 332 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,752 |  |  |  |  | 0 |  |  |  |  | 1,752 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 6,945 |  |  |  |  | 0 |  |  |  |  | 6,945 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 26 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 6,945 |  |  |  |  | 26 |  |  |  |  | 6,971 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 24,256 |  |  |  |  | 0 |  |  |  |  | 24,256 |  |
Broker/other |  |  | 0 |  |  |  |  | 138 |  |  |  |  | 0 |  |  |  |  | 138 |  |
Total other corporate |  |  | 0 |  |  |  |  | 24,394 |  |  |  |  | 0 |  |  |  |  | 24,394 |  |
Total fixed maturities |  |  | 12,190 |  |  |  |  | 43,621 |  |  |  |  | 465 |  |  |  |  | 56,276 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 2,915 |  |  |  |  | 0 |  |  |  |  | 2,915 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 2,915 |  |  |  |  | 0 |  |  |  |  | 2,915 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 218 |  |  |  |  | 0 |  |  |  |  | 218 |  |
Total other corporate |  |  | 0 |  |  |  |  | 218 |  |  |  |  | 0 |  |  |  |  | 218 |  |
Total perpetual securities |  |  | 0 |  |  |  |  | 3,133 |  |  |  |  | 0 |  |  |  |  | 3,133 |  |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 15 |  |  |  |  | 5 |  |  |  |  | 0 |  |  |  |  | 20 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 4 |  |  |  |  | 4 |  |
Total equity securities |  |  | 15 |  |  |  |  | 5 |  |  |  |  | 4 |  |  |  |  | 24 |  |
Total securities available for sale |  |  | $ | 12,205 |  |  |  |  | $ | 46,759 |  |  |  |  | $ | 469 |  |  |  |  | $ | 59,433 |  |
|  | March 31, 2013
(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
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 26,760 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 26,760 |  |
Total government and agencies |  |  | 26,760 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 26,760 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 517 |  |  |  |  | 0 |  |  |  |  | 517 |  |
Total municipalities |  |  | 0 |  |  |  |  | 517 |  |  |  |  | 0 |  |  |  |  | 517 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 0 |  |  |  |  | 26 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 55 |  |  |  |  | 55 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 55 |  |  |  |  | 81 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 4,512 |  |  |  |  | 0 |  |  |  |  | 4,512 |  |
Total public utilities |  |  | 0 |  |  |  |  | 4,512 |  |  |  |  | 0 |  |  |  |  | 4,512 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 3,073 |  |  |  |  | 0 |  |  |  |  | 3,073 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 3,073 |  |  |  |  | 0 |  |  |  |  | 3,073 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 7,953 |  |  |  |  | 0 |  |  |  |  | 7,953 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 7,953 |  |  |  |  | 0 |  |  |  |  | 7,953 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 4,151 |  |  |  |  | 0 |  |  |  |  | 4,151 |  |
Total other corporate |  |  | 0 |  |  |  |  | 4,151 |  |  |  |  | 0 |  |  |  |  | 4,151 |  |
Total securities held to maturity |  |  | $ | 26,760 |  |  |  |  | $ | 20,232 |  |  |  |  | $ | 55 |  |  |  |  | $ | 47,047 |  |
|  | December 31, 2012
(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
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 12,265 |  |  |  |  | $ | 685 |  |  |  |  | $ | 0 |  |  |  |  | $ | 12,950 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 47 |  |  |  |  | 0 |  |  |  |  | 47 |  |
Total government and agencies |  |  | 12,265 |  |  |  |  | 732 |  |  |  |  | 0 |  |  |  |  | 12,997 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,177 |  |  |  |  | 0 |  |  |  |  | 1,177 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 18 |  |  |  |  | 0 |  |  |  |  | 18 |  |
Total municipalities |  |  | 0 |  |  |  |  | 1,195 |  |  |  |  | 0 |  |  |  |  | 1,195 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 682 |  |  |  |  | 0 |  |  |  |  | 682 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 11 |  |  |  |  | 0 |  |  |  |  | 11 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 338 |  |  |  |  | 338 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 693 |  |  |  |  | 338 |  |  |  |  | 1,031 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 5,144 |  |  |  |  | 0 |  |  |  |  | 5,144 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 2,908 |  |  |  |  | 420 |  |  |  |  | 3,328 |  |
Broker/other |  |  | 0 |  |  |  |  | 25 |  |  |  |  | 0 |  |  |  |  | 25 |  |
Total public utilities |  |  | 0 |  |  |  |  | 8,077 |  |  |  |  | 420 |  |  |  |  | 8,497 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 540 |  |  |  |  | 0 |  |  |  |  | 540 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 619 |  |  |  |  | 418 |  |  |  |  | 1,037 |  |
Broker/other |  |  | 0 |  |  |  |  | 495 |  |  |  |  | 0 |  |  |  |  | 495 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,654 |  |  |  |  | 418 |  |  |  |  | 2,072 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 4,257 |  |  |  |  | 0 |  |  |  |  | 4,257 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 2,136 |  |  |  |  | 444 |  |  |  |  | 2,580 |  |
Broker/other |  |  | 0 |  |  |  |  | 217 |  |  |  |  | 580 |  |  |  |  | 797 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 6,610 |  |  |  |  | 1,024 |  |  |  |  | 7,634 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 18,093 |  |  |  |  | 0 |  |  |  |  | 18,093 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 4,747 |  |  |  |  | 575 |  |  |  |  | 5,322 |  |
Broker/other |  |  | 0 |  |  |  |  | 1 |  |  |  |  | 411 |  |  |  |  | 412 |  |
Total other corporate |  |  | 0 |  |  |  |  | 22,841 |  |  |  |  | 986 |  |  |  |  | 23,827 |  |
Total fixed maturities |  |  | 12,265 |  |  |  |  | 41,802 |  |  |  |  | 3,186 |  |  |  |  | 57,253 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 283 |  |  |  |  | 0 |  |  |  |  | 283 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 3,452 |  |  |  |  | 215 |  |  |  |  | 3,667 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 3,735 |  |  |  |  | 215 |  |  |  |  | 3,950 |  |
(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
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
DCF pricing model |  |  | 0 |  |  |  |  | 352 |  |  |  |  | 0 |  |  |  |  | 352 |  |
Total other corporate |  |  | 0 |  |  |  |  | 352 |  |  |  |  | 0 |  |  |  |  | 352 |  |
Total perpetual securities |  |  | 0 |  |  |  |  | 4,087 |  |  |  |  | 215 |  |  |  |  | 4,302 |  |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 13 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 13 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 6 |  |  |  |  | 0 |  |  |  |  | 6 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 4 |  |  |  |  | 4 |  |
Total equity securities |  |  | 13 |  |  |  |  | 6 |  |  |  |  | 4 |  |  |  |  | 23 |  |
Total securities available for sale |  |  | $ | 12,278 |  |  |  |  | $ | 45,895 |  |  |  |  | $ | 3,405 |  |  |  |  | $ | 61,578 |  |
|  | December 31, 2012
(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
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 32,332 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 32,332 |  |
Total government and agencies |  |  | 32,332 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 32,332 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 464 |  |  |  |  | 0 |  |  |  |  | 464 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 56 |  |  |  |  | 0 |  |  |  |  | 56 |  |
Total municipalities |  |  | 0 |  |  |  |  | 520 |  |  |  |  | 0 |  |  |  |  | 520 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 30 |  |  |  |  | 0 |  |  |  |  | 30 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 64 |  |  |  |  | 64 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 30 |  |  |  |  | 64 |  |  |  |  | 94 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 58 |  |  |  |  | 0 |  |  |  |  | 58 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 4,993 |  |  |  |  | 0 |  |  |  |  | 4,993 |  |
Total public utilities |  |  | 0 |  |  |  |  | 5,051 |  |  |  |  | 0 |  |  |  |  | 5,051 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 370 |  |  |  |  | 0 |  |  |  |  | 370 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 2,947 |  |  |  |  | 0 |  |  |  |  | 2,947 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 3,317 |  |  |  |  | 0 |  |  |  |  | 3,317 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 254 |  |  |  |  | 0 |  |  |  |  | 254 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 8,737 |  |  |  |  | 0 |  |  |  |  | 8,737 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 8,991 |  |  |  |  | 0 |  |  |  |  | 8,991 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 122 |  |  |  |  | 0 |  |  |  |  | 122 |  |
DCF pricing model |  |  | 0 |  |  |  |  | 4,414 |  |  |  |  | 0 |  |  |  |  | 4,414 |  |
Total other corporate |  |  | 0 |  |  |  |  | 4,536 |  |  |  |  | 0 |  |  |  |  | 4,536 |  |
Total securities held to maturity |  |  | $ | 32,332 |  |  |  |  | $ | 22,445 |  |  |  |  | $ | 64 |  |  |  |  | $ | 54,841 |  |
The following is a discussion of the determination of fair value of our remaining financial instruments. Derivatives We use derivative instruments to manage the risk associated with certain assets. However, the derivative instrument may not be classified in the same fair value hierarchy level as the associated asset. Inputs used to value derivatives include, but are not limited to, interest rates, credit spreads, foreign currency forward and spot rates, and interest volatility. The fair values of the foreign currency forwards associated with certain fixed-maturity securities, the foreign currency options, the foreign currency swaps associated with our senior notes and subordinated debentures, and the interest rate swap associated with our yen-denominated notes are based on the amounts we would expect to receive or pay. The determination of the fair value of these derivatives is based on observable market inputs, therefore they are classified as Level 2. For derivatives associated with VIEs where we are the primary beneficiary, we are not the direct counterparty to the swap contracts. As a result, the fair value measurements incorporate the credit risk of the collateral associated with the VIE. We receive valuations from a third party pricing vendor for these derivatives. Based on an analysis of these derivatives and a review of the methodology employed by the pricing vendor, we determined that due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data. As a result, the derivatives associated with our consolidated VIEs are classified as Level 3 of the fair value hierarchy. Notes payable The fair values of our publicly issued notes payable classified as Level 3 were obtained from a limited number of independent brokers. These brokers base their quotes on a combination of their knowledge of the current pricing environment and market conditions. We consider these inputs to be unobservable. The fair values of our yen-denominated loans approximate their carrying values. Obligation to Japanese policyholder protection corporation The fair value of the obligation to the Japanese policyholder protection corporation classified as Level 3 is our estimated share of the industry's obligation calculated on a pro rata basis by projecting our percentage of the industry's premiums and reserves and applying that percentage to the total industry obligation payable in future years. We consider our inputs for this valuation to be unobservable. Level 3 Rollforward and Transfers between Hierarchy Levels The following tables present the changes in fair value of our available-for-sale investments and derivatives classified as Level 3.
Three Months Ended March 31, 2013
| Fixed Maturities |  | Perpetual Securities |  | Equity Securities |  | Derivatives (1) |  |  |
(In millions) | Mortgage- and Asset- Backed Securities |  | Public Utilities |  | 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 | $ | 338 |  |  | $ | 420 |  |  | $ | 418 |  |  | $ | 1,024 |  |  | $ | 986 |  |  | $ | 215 |  |  | $ | 4 |  |  | $ | 29 |  |  | $ | (172 | ) |  | $ | (65 | ) |  | $ | 3,197 |  |
Realized investment gains (losses) included in earnings | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (4 | ) |  | (5 | ) |  | 11 |  |  | 2 |  |
Unrealized gains (losses) included in other comprehensive income (loss) | (21 | ) |  | (20 | ) |  | 0 |  |  | (1 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (7 | ) |  | 0 |  |  | (49 | ) |
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 |  |  | (400 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (400 | ) |
Settlements | (3 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (3 | ) |
Transfers into Level 3(2) | 125 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 125 |  |
Transfers out of Level 3(3) | 0 |  |  | 0 |  |  | (418 | ) |  | (997 | ) |  | (986 | ) |  | (215 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (2,616 | ) |
Balance, end of period | $ | 439 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 26 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 4 |  |  | $ | 25 |  |  | $ | (184 | ) |  | $ | (54 | ) |  | $ | 256 |  |
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses) | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (4 | ) |  | $ | (5 | ) |  | $ | 11 |  |  | $ | 2 |  |
(1) Derivative assets and liabilities are presented net (2) Due to a lack of visibility to observe significant inputs to price (3) A result of changing our pricing methodology to a valuation method that uses observable market data as significant inputs to estimate fair value
Three Months Ended March 31, 2012
| Fixed Maturities |  | Perpetual Securities |  | Equity Securities |  | Derivatives (1) |  |
(In millions) | Mortgage- and Asset- Backed Securities |  | Public Utilities |  | 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 | $ | 394 |  |  | $ | 422 |  |  | $ | 434 |  |  | $ | 1,074 |  |  | $ | 1,105 |  |  | $ | 526 |  |  | $ | 4 |  |  | $ | 30 |  |  | $ | (56 | ) |  | $ | (130 | ) |  | $ | 3,803 |
Realized investment gains (losses) included in earnings | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 2 |  |  | 49 |  |  | 0 |  |  | (2 | ) |  | 13 |  |  | 33 |  |  | 95 |
Unrealized gains (losses) included in other comprehensive income (loss) | (23 | ) |  | (13 | ) |  | (16 | ) |  | 23 |  |  | (38 | ) |  | 6 |  |  | 0 |  |  | 0 |  |  | (12 | ) |  | 0 |  |  | (73 | )
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 |  |  | (34 | ) |  | (256 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (290 | )
Settlements | (4 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (24 | ) |  | 0 |  |  | (28 | )
Transfers into Level 3 | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Transfers out of Level 3 | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Balance, end of period | $ | 367 |  |  | $ | 409 |  |  | $ | 418 |  |  | $ | 1,097 |  |  | $ | 1,035 |  |  | $ | 325 |  |  | $ | 4 |  |  | $ | 28 |  |  | $ | (79 | ) |  | $ | (97 | ) |  | $ | 3,507 |
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in realized investment gains (losses) | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (2 | ) |  | $ | 13 |  |  | $ | 33 |  |  | $ | 44 |
(1) Derivative assets and liabilities are presented net Transfers into and/or out of Level 3 are attributable to a change in the observability of inputs. The most significant transfer out of Level 3 into Level 2 during the three-month period ended March 31, 2013 related to our callable reverse dual-currency bonds (RDCs). RDCs are securities that have principal denominated in yen while paying U.S. dollar (USD) coupons. The market standard approach is to use implied volatility to value options or instruments with optionality because historical volatility may not represent current market participants' expectations about future volatility. Under our previous valuation approach, we used historical foreign exchange volatility as an input for valuing these investments. Given the importance of this input to the overall valuation of these RDCs and the determination of this input to be unobservable, we made the decision at December 31, 2011 to move these holdings to Level 3 of the fair value hierarchy. During the first quarter of 2013, we implemented a new valuation methodology for these securities that relies on comparable bonds in the market, the observable forward foreign exchange curve and other market inputs. Given that the significant inputs to the valuation of these items are now based on observable data, effective March 31, 2013, we have transferred these bonds from Level 3 to Level 2 of the fair value hierarchy. In addition to the callable RDCs, we transferred certain other corporate securities from Level 3 to Level 2 in the first quarter of 2013. Prices for these securities were previously obtained from brokers and/or arrangers with minimal transparency around how the valuation was determined. Similar to the RDCs, these securities are now valued using the same methodology described above for our other privately issued securities. There were no transfers between Level 1 and 2 for the three-month periods ended March 31, 2013 and 2012. Fair Value Sensitivity Level 3 Significant Unobservable Input Sensitivity The following tables summarize the significant unobservable inputs used in the valuation of our Level 3 available-for-sale investments and derivatives. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
March 31, 2013
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Assets: |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Mortgage- and asset-backed securities |  |  | $ | 439 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (e)
Banks/financial institutions |  |  | 26 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (e)
Equity securities |  |  | 4 |  |  |  | Net asset value |  | Offered quotes |  | $1-$868 ($8) |
Other assets: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 26 |  |  |  | Discounted cash flow |  | Base correlation |  | 45% - 56% (50%) | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 143 (120) bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Foreign currency swaps |  |  | 35 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 22 - 129 bps |
|  |  |  |  |  |  |  | Foreign exchange rates |  | 21.10% | (d)
|  |  | 5 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 15 - 125 bps |
|  |  | 90 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | Foreign exchange rates |  | 21.10% | (d)
Credit default swaps |  |  | 2 |  |  |  | Discounted cash flow |  | Base correlation |  | 45% - 56% (50%) | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 143 (120) bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Total assets |  |  | $ | 627 |  |  |  |  |  |  |  |  |
(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps (d) Based on 10 year volatility of JPY/USD exchange rate (e) N/A represents securities where we receive unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs.
March 31, 2013
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | $ | 1 |  |  |  | Discounted cash flow |  | Base correlation |  | 45% - 56% (50%) | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 143 (120) bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Foreign currency swaps |  |  | 114 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 35 - 157 bps |
|  |  |  |  |  |  |  | Foreign exchange rates |  | 21.10% | (d)
|  |  | 46 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 19 - 204 bps |
|  |  | 154 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.01% - 3.02% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .69% - 1.84% | (c)
|  |  |  |  |  |  |  | Foreign exchange rates |  | 21.10% | (d)
Credit default swaps |  |  | 56 |  |  |  | Discounted cash flow |  | Base correlations |  | 45% - 56% (50%) | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 143 (120) bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Total liabilities |  |  | $ | 371 |  |  |  |  |  |  |  |  |
(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps (d) Based on 10 year volatility of JPY/USD exchange rate
December 31, 2012
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Assets: |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Mortgage- and asset-backed securities |  |  | $ | 338 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (e)
Public utilities |  |  | 420 |  |  |  | Discounted cash flow |  | Historical volatility |  | 7.36% |
Sovereign and supranational |  |  | 418 |  |  |  | Discounted cash flow |  | Historical volatility |  | 7.36% |
Banks/financial institutions |  |  | 444 |  |  |  | Discounted cash flow |  | Historical volatility |  | 7.36% |
|  |  | 580 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (e)
Other corporate |  |  | 575 |  |  |  | Discounted cash flow |  | Historical volatility |  | 7.36% |
|  |  | 411 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (e)
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  |  | 215 |  |  |  | Discounted cash flow |  | Historical volatility |  | 7.36% |
Equity securities |  |  | 4 |  |  |  | Net asset value |  | Offered quotes |  | $2-$943 ($8) |
Other assets: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 32 |  |  |  | Discounted cash flow |  | Base correlation |  | 49% - 50% | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 152 bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Foreign currency swaps |  |  | 51 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 12 - 117 bps |
|  |  |  |  |  |  |  | Foreign exchange rates |  | 20.65% | (d)
|  |  | 4 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 12 - 126 bps |
|  |  | 102 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | Foreign exchange rates |  | 20.65% | (d)
Credit default swaps |  |  | 2 |  |  |  | Discounted cash flow |  | Base correlation |  | 49% - 50% | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 152 bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Total assets |  |  | $ | 3,596 |  |  |  |  |  |  |  |  |
(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps (d) Based on 10 year volatility of JPY/USD exchange rate (e) N/A represents securities where we receive unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs.
December 31, 2012 |
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | $ | 3 |  |  |  | Discounted cash flow |  | Base correlation |  | 49% - 50% | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 152 bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Foreign currency swaps |  |  | 118 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 22 - 141 bps |
|  |  |  |  |  |  |  | Foreign exchange rates |  | 20.65% | (d)
|  |  | 60 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 25 - 186 bps |
|  |  | 151 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.84% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .84% - 2.05% | (c)
|  |  |  |  |  |  |  | Foreign exchange rates |  | 20.65% | (d)
Credit default swaps |  |  | 67 |  |  |  | Discounted cash flow |  | Base correlations |  | 49% - 50% | (a)
|  |  |  |  |  |  |  | CDS spreads |  | 91 - 152 bps |
|  |  |  |  |  |  |  | Recovery rate |  | 37.00% |
Total liabilities |  |  | $ | 399 |  |  |  |  |  |  |  |  |
(a) Weighted-average range of base correlations for our bespoke tranches for attachment and detachment points corresponding to market indices (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of our swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of our swaps (d) Based on 10 year volatility of JPY/USD exchange rate The following is a discussion of the significant unobservable inputs or valuation technique used in determining the fair value of securities and derivatives classified as Level 3. Annualized Historical Foreign Exchange Volatility We own a portfolio of callable reverse dual-currency bonds (RDCs). RDCs are securities that have principal denominated in yen while paying U.S. dollar (USD) coupons. The market standard approach is to use implied volatility to value options or instruments with optionality because historical volatility may not represent current market participants' expectations about future volatility. Our use of historical foreign exchange volatility as an input for valuing these investments could result in a significant increase or decrease in fair value measurement, given the importance of this input to the overall valuation. Prior to March 31, 2013, historical volatility was an unobservable input in the determination of fair value of public utilities, sovereign and supranational, certain banks/financial institutions, and certain other corporate investments. As of March 31, 2013, we are no longer using this input in the valuation of these securities due to a change in valuation methodology as discussed previously. Net Asset Value We hold certain unlisted equity securities whose fair value is derived based on the financial statements published by the investee. These securities do not trade on an active market and the valuations derived are dependent on the availability of timely financial reporting of the investee. Net asset value is an unobservable input in the determination of fair value of equity securities. Offered Quotes In circumstances where our valuation model price is overridden because it implies a value that is not consistent with current market conditions, we will solicit bids from a limited number of brokers. We also receive unadjusted prices from brokers for our mortgage and asset-backed securities. These quotes are non-binding but are reflective of valuation best estimates at that particular point in time. Offered quotes are an unobservable input in the determination of fair value of mortgage- and asset-backed securities, certain banks/financial institutions, certain other corporate, and equity securities investments. Interest Rates, CDS Spreads, Foreign Exchange Rates The significant drivers of the valuation of the interest and foreign exchange swaps are interest rates, foreign exchange rates and CDS spreads. Our swaps have long maturities that increase the sensitivity of the swaps to interest rate fluctuations. Since most of our yen-denominated cross currency swaps are in a net liability position, an increase in interest rates will decrease the liabilities and increase the value of the swap. Foreign exchange swaps also have a lump-sum final settlement of foreign exchange principal receivables at the termination of the swap. An increase in yen interest rates will decrease the value of the final settlement foreign exchange receivables and decrease the value of the swap, and an increase in USD interest rates increase the swap value. A similar sensitivity pattern is observed for the foreign exchange rates. When the spot U.S. dollar/Japanese yen (USD/JPY) foreign exchange rate decreases and the swap is receiving a final exchange payment in JPY, the swap value will increase due to the appreciation of the JPY. Most of our swaps are designed to receive payments in JPY at the termination and will thus be impacted by the USD/JPY foreign exchange rate in this way. In cases where there is no final foreign exchange receivable in JPY and we are paying JPY as interest payments and receiving USD, a decrease in the foreign exchange rate will lead to a decrease in the swap value. The extinguisher feature in most of our swaps results in a cessation of cash flows and no further payments between the parties to the swap in the event of a default on the referenced or underlying collateral. To price this feature, we apply the survival probability of the referenced entity to the projected cash flows. The survival probability uses the CDS spreads and recovery rates to adjust the present value of the cash flows. For extinguisher swaps with positive values, an increase in CDS spreads decreases the likelihood of receiving the final exchange payments and reduces the value of the swap. Due to the long duration of these swaps and the need to extrapolate from short-term observable data to derive and measure long-term inputs, certain inputs, assumptions and judgments are required to value future cash flows that cannot be corroborated by current inputs or current observable market data. Interest rates, CDS spreads, and foreign exchange rates are unobservable inputs in the determination of fair value of foreign currency swaps. Base Correlations, CDS Spreads, Recovery Rates Our CDOs are tranches on baskets of single-name credit default swaps. The risks in these types of synthetic CDOs come from the single-name CDS risk and the correlations between the single names. The valuation of synthetic CDOs is dependent on the calibration of market prices for interest rates, single name CDS default probabilities and base correlation using financial modeling tools. Since there is limited or no observable data available for these tranches, these base correlations must be obtained from commonly traded market tranches such as the CDX and iTraxx indices. From the historical prices of these indices, base correlations can be obtained to develop a pricing curve of CDOs with different seniorities. Since the reference entities of the market indices do not match those in our portfolio underlying the synthetic CDO to be valued, several processing steps are taken to map the securities in our portfolio to the indices. With the base correlation determined and the appropriate spreads selected, a valuation is calculated. An increase in the CDS spreads in the underlying portfolio leads to a decrease in the value due to higher probability of defaults and losses. The impact on the valuation due to base correlation depends on a number of factors, including the riskiness between market tranches and the modeled tranche based on our portfolio and the equivalence between detachment points in these tranches. Generally speaking, an increase in base correlation will decrease the value of the senior tranches while increasing the value of junior tranches. This may result in a positive or negative value change. The CDO tranches in our portfolio are junior tranches and, due to the low level of credit support for these tranches, exhibit equity-like behavior. As a result, an increase in recovery rates tends to cause their values to decrease. Our interest rate swaps are linked to the underlying synthetic CDOs. The valuation of these swaps is performed using a similar approach to that of the synthetic CDOs themselves; that is, the base correlation model is used to ensure consistency between the synthetic CDOs and the swaps. Base correlations, CDS spreads, and recovery rates are unobservable inputs in the determination of fair value of credit default swaps and interest rate swaps. For additional information on our investments and financial instruments, see the accompanying Notes 1, 3 and 4 and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements in our annual report to shareholders for the year ended December 31, 2012.

X
- Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -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 Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-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 Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -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 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -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 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -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 157 -Paragraph 32, 33, 34 -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 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration