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INVESTMENTS | 3 Months Ended
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Mar. 31, 2014
Investments [Abstract] |
INVESTMENTS | INVESTMENTS Investment Holdings The amortized cost for our investments in debt and perpetual securities, the cost for equity securities and the fair values of these investments are shown in the following tables.
| March 31, 2014
(In millions) | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies |  | $ | 18,152 |  |  |  |  | $ | 608 |  |  |  |  | $ | 3 |  |  |  |  | $ | 18,757 |  |
Mortgage- and asset-backed securities |  | 444 |  |  |  |  | 33 |  |  |  |  | 0 |  |  |  |  | 477 |  |
Public utilities |  | 2,223 |  |  |  |  | 96 |  |  |  |  | 24 |  |  |  |  | 2,295 |  |
Sovereign and supranational |  | 937 |  |  |  |  | 125 |  |  |  |  | 0 |  |  |  |  | 1,062 |  |
Banks/financial institutions |  | 2,926 |  |  |  |  | 235 |  |  |  |  | 218 |  |  |  |  | 2,943 |  |
Other corporate |  | 4,051 |  |  |  |  | 184 |  |  |  |  | 163 |  |  |  |  | 4,072 |  |
Total yen-denominated |  | 28,733 |  |  |  |  | 1,281 |  |  |  |  | 408 |  |  |  |  | 29,606 |  |
Dollar-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | 141 |  |  |  |  | 10 |  |  |  |  | 2 |  |  |  |  | 149 |  |
Municipalities |  | 998 |  |  |  |  | 103 |  |  |  |  | 4 |  |  |  |  | 1,097 |  |
Mortgage- and asset-backed securities |  | 169 |  |  |  |  | 20 |  |  |  |  | 0 |  |  |  |  | 189 |  |
Public utilities |  | 5,156 |  |  |  |  | 577 |  |  |  |  | 102 |  |  |  |  | 5,631 |  |
Sovereign and supranational |  | 396 |  |  |  |  | 86 |  |  |  |  | 0 |  |  |  |  | 482 |  |
Banks/financial institutions |  | 3,340 |  |  |  |  | 526 |  |  |  |  | 17 |  |  |  |  | 3,849 |  |
Other corporate |  | 22,392 |  |  |  |  | 1,611 |  |  |  |  | 725 |  |  |  |  | 23,278 |  |
Total dollar-denominated |  | 32,592 |  |  |  |  | 2,933 |  |  |  |  | 850 |  |  |  |  | 34,675 |  |
Total fixed maturities |  | 61,325 |  |  |  |  | 4,214 |  |  |  |  | 1,258 |  |  |  |  | 64,281 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 2,644 |  |  |  |  | 165 |  |  |  |  | 250 |  |  |  |  | 2,559 |  |
Other corporate |  | 214 |  |  |  |  | 15 |  |  |  |  | 0 |  |  |  |  | 229 |  |
Dollar-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 199 |  |  |  |  | 35 |  |  |  |  | 6 |  |  |  |  | 228 |  |
Total perpetual securities |  | 3,057 |  |  |  |  | 215 |  |  |  |  | 256 |  |  |  |  | 3,016 |  |
Equity securities |  | 17 |  |  |  |  | 5 |  |  |  |  | 1 |  |  |  |  | 21 |  |
Total securities available for sale |  | $ | 64,399 |  |  |  |  | $ | 4,434 |  |  |  |  | $ | 1,515 |  |  |  |  | $ | 67,318 |  |
| March 31, 2014
(In millions) | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies |  | $ | 23,461 |  |  |  |  | $ | 1,668 |  |  |  |  | $ | 0 |  |  |  |  | $ | 25,129 |  |
Municipalities |  | 409 |  |  |  |  | 46 |  |  |  |  | 0 |  |  |  |  | 455 |  |
Mortgage- and asset-backed securities |  | 58 |  |  |  |  | 3 |  |  |  |  | 0 |  |  |  |  | 61 |  |
Public utilities |  | 3,993 |  |  |  |  | 189 |  |  |  |  | 107 |  |  |  |  | 4,075 |  |
Sovereign and supranational |  | 3,011 |  |  |  |  | 163 |  |  |  |  | 56 |  |  |  |  | 3,118 |  |
Banks/financial institutions |  | 6,398 |  |  |  |  | 174 |  |  |  |  | 295 |  |  |  |  | 6,277 |  |
Other corporate |  | 3,528 |  |  |  |  | 221 |  |  |  |  | 48 |  |  |  |  | 3,701 |  |
Total yen-denominated |  | 40,858 |  |  |  |  | 2,464 |  |  |  |  | 506 |  |  |  |  | 42,816 |  |
Total securities held to maturity |  | $ | 40,858 |  |  |  |  | $ | 2,464 |  |  |  |  | $ | 506 |  |  |  |  | $ | 42,816 |  |
| December 31, 2013
(In millions) | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies |  | $ | 14,936 |  |  |  |  | $ | 431 |  |  |  |  | $ | 33 |  |  |  |  | $ | 15,334 |  |
Mortgage- and asset-backed securities |  | 558 |  |  |  |  | 29 |  |  |  |  | 0 |  |  |  |  | 587 |  |
Public utilities |  | 2,261 |  |  |  |  | 100 |  |  |  |  | 18 |  |  |  |  | 2,343 |  |
Sovereign and supranational |  | 978 |  |  |  |  | 85 |  |  |  |  | 28 |  |  |  |  | 1,035 |  |
Banks/financial institutions |  | 2,799 |  |  |  |  | 220 |  |  |  |  | 242 |  |  |  |  | 2,777 |  |
Other corporate |  | 3,956 |  |  |  |  | 151 |  |  |  |  | 185 |  |  |  |  | 3,922 |  |
Total yen-denominated |  | 25,488 |  |  |  |  | 1,016 |  |  |  |  | 506 |  |  |  |  | 25,998 |  |
Dollar-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and agencies |  | 92 |  |  |  |  | 10 |  |  |  |  | 4 |  |  |  |  | 98 |  |
Municipalities |  | 992 |  |  |  |  | 71 |  |  |  |  | 12 |  |  |  |  | 1,051 |  |
Mortgage- and asset-backed securities |  | 163 |  |  |  |  | 21 |  |  |  |  | 0 |  |  |  |  | 184 |  |
Public utilities |  | 4,931 |  |  |  |  | 471 |  |  |  |  | 183 |  |  |  |  | 5,219 |  |
Sovereign and supranational |  | 404 |  |  |  |  | 85 |  |  |  |  | 1 |  |  |  |  | 488 |  |
Banks/financial institutions |  | 3,318 |  |  |  |  | 447 |  |  |  |  | 33 |  |  |  |  | 3,732 |  |
Other corporate |  | 21,123 |  |  |  |  | 1,347 |  |  |  |  | 1,170 |  |  |  |  | 21,300 |  |
Total dollar-denominated |  | 31,023 |  |  |  |  | 2,452 |  |  |  |  | 1,403 |  |  |  |  | 32,072 |  |
Total fixed maturities |  | 56,511 |  |  |  |  | 3,468 |  |  |  |  | 1,909 |  |  |  |  | 58,070 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 2,582 |  |  |  |  | 151 |  |  |  |  | 217 |  |  |  |  | 2,516 |  |
Other corporate |  | 209 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 209 |  |
Dollar-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Banks/financial institutions |  | 196 |  |  |  |  | 35 |  |  |  |  | 9 |  |  |  |  | 222 |  |
Total perpetual securities |  | 2,987 |  |  |  |  | 186 |  |  |  |  | 226 |  |  |  |  | 2,947 |  |
Equity securities |  | 17 |  |  |  |  | 5 |  |  |  |  | 1 |  |  |  |  | 21 |  |
Total securities available for sale |  | $ | 59,515 |  |  |  |  | $ | 3,659 |  |  |  |  | $ | 2,136 |  |  |  |  | $ | 61,038 |  |
| December 31, 2013
(In millions) | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities held to maturity, carried at amortized cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies |  | $ | 27,362 |  |  |  |  | $ | 1,347 |  |  |  |  | $ | 1 |  |  |  |  | $ | 28,708 |  |
Municipalities |  | 399 |  |  |  |  | 41 |  |  |  |  | 0 |  |  |  |  | 440 |  |
Mortgage- and asset-backed securities |  | 58 |  |  |  |  | 3 |  |  |  |  | 0 |  |  |  |  | 61 |  |
Public utilities |  | 3,900 |  |  |  |  | 150 |  |  |  |  | 122 |  |  |  |  | 3,928 |  |
Sovereign and supranational |  | 2,941 |  |  |  |  | 171 |  |  |  |  | 72 |  |  |  |  | 3,040 |  |
Banks/financial institutions |  | 6,310 |  |  |  |  | 146 |  |  |  |  | 328 |  |  |  |  | 6,128 |  |
Other corporate |  | 3,445 |  |  |  |  | 183 |  |  |  |  | 87 |  |  |  |  | 3,541 |  |
Total yen-denominated |  | 44,415 |  |  |  |  | 2,041 |  |  |  |  | 610 |  |  |  |  | 45,846 |  |
Total securities held to maturity |  | $ | 44,415 |  |  |  |  | $ | 2,041 |  |  |  |  | $ | 610 |  |  |  |  | $ | 45,846 |  |
The methods of determining the fair values of our investments in fixed-maturity securities, perpetual securities and equity securities are described in Note 5. During the first quarter of 2014, we reclassified one investment from the held-to-maturity portfolio to the available-for-sale portfolio as a result of the issuer being downgraded to below investment grade. At the time of transfer, the security had an amortized cost of $63 million and an unrealized loss of $8 million. During the first quarter of 2013, we did not reclassify any investments from the held-to-maturity portfolio to the available-for-sale portfolio. Contractual and Economic Maturities The contractual maturities of our investments in fixed maturities at March 31, 2014, were as follows:
| Aflac Japan |  | Aflac U.S.
(In millions) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 607 |  |  |  |  | $ | 616 |  |  |  |  | $ | 50 |  |  |  |  | $ | 52 |  |
Due after one year through five years |  | 1,819 |  |  |  |  | 1,953 |  |  |  |  | 565 |  |  |  |  | 662 |  |
Due after five years through 10 years |  | 10,783 |  |  |  |  | 10,868 |  |  |  |  | 1,562 |  |  |  |  | 1,653 |  |
Due after 10 years |  | 36,378 |  |  |  |  | 37,916 |  |  |  |  | 8,675 |  |  |  |  | 9,608 |  |
Mortgage- and asset-backed securities |  | 509 |  |  |  |  | 553 |  |  |  |  | 38 |  |  |  |  | 47 |  |
Total fixed maturities available for sale |  | $ | 50,096 |  |  |  |  | $ | 51,906 |  |  |  |  | $ | 10,890 |  |  |  |  | $ | 12,022 |  |
Held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 101 |  |  |  |  | $ | 102 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |
Due after one year through five years |  | 1,605 |  |  |  |  | 1,756 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Due after five years through 10 years |  | 2,180 |  |  |  |  | 2,316 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Due after 10 years |  | 36,914 |  |  |  |  | 38,581 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Mortgage- and asset-backed securities |  | 58 |  |  |  |  | 61 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Total fixed maturities held to maturity |  | $ | 40,858 |  |  |  |  | $ | 42,816 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |
At March 31, 2014, the Parent Company had a portfolio of available-for-sale fixed-maturity securities totaling $339 million at amortized cost and $353 million at fair value, which is not included in the table above. Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call premiums or prepayment penalties. The majority of our perpetual securities are subordinated to other debt obligations of the issuer, but rank higher than the issuer's equity securities. Perpetual securities have characteristics of both debt and equity investments, along with unique features that create economic maturity dates for the securities. Although perpetual securities have no contractual maturity date, they have stated interest coupons that were fixed at their issuance and subsequently change to a floating short-term interest rate of 125 to more than 300 basis points above an appropriate market index, generally by the 25th year after issuance, thereby creating an economic maturity date. The economic maturities of our investments in perpetual securities, which were all reported as available for sale at March 31, 2014, were as follows:
| Aflac Japan |  | Aflac U.S.
(In millions) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Due in one year or less |  | $ | 291 |  |  |  |  | $ | 275 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |
Due after one year through five years |  | 730 |  |  |  |  | 701 |  |  |  |  | 5 |  |  |  |  | 5 |  |
Due after five years through 10 years |  | 214 |  |  |  |  | 229 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Due after 10 years |  | 1,718 |  |  |  |  | 1,698 |  |  |  |  | 99 |  |  |  |  | 108 |  |
Total perpetual securities available for sale |  | $ | 2,953 |  |  |  |  | $ | 2,903 |  |  |  |  | $ | 104 |  |  |  |  | $ | 113 |  |
Investment Concentrations Our investment process begins with an independent approach to underwriting each issuer's fundamental credit quality. We evaluate independently those factors which we believe could influence an issuer's ability to make payments under the contractual terms of our instruments. This includes a thorough analysis of a variety of items including the issuer's country of domicile (including political, legal, and financial considerations); the industry in which the issuer competes (with an analysis of industry structure, end-market dynamics, and regulation); company specific issues (such as management, assets, earnings, cash generation, and capital needs); and contractual provisions of the instrument (such as financial covenants and position in the capital structure). We further evaluate the investment considering broad business and portfolio management objectives, including asset/liability needs, portfolio diversification, and expected income. Banks and Financial Institutions One of our largest investment sector concentrations as of March 31, 2014, was banks and financial institutions. Within the countries we approve for investment opportunities, we primarily invest in financial institutions that are strategically crucial to each approved country's economy. The bank and financial institution sector is a highly regulated industry and plays a strategic role in the global economy. Our total investments in the bank and financial institution sector, including those classified as perpetual securities, were as follows:
| March 31, 2014 |  | December 31, 2013
| Total Investments in Banks and Financial Institutions Sector (in millions) |  | Percentage of Total Investment Portfolio |  | Total Investments in Banks and Financial Institutions Sector (in millions) |  | Percentage of Total Investment Portfolio
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 12,664 |  |  |  |  | 12 | % |  |  |  | $ | 12,427 |  |  |  |  | 12 | % |
Fair value |  | 13,069 |  |  |  |  | 12 |  |  |  |  | 12,637 |  |  |  |  | 12 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Upper Tier II: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 1,967 |  |  |  |  | 2 | % |  |  |  | $ | 1,920 |  |  |  |  | 2 | % |
Fair value |  | 1,965 |  |  |  |  | 2 |  |  |  |  | 1,913 |  |  |  |  | 2 |  |
Tier I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 876 |  |  |  |  | 1 |  |  |  |  | 858 |  |  |  |  | 1 |  |
Fair value |  | 822 |  |  |  |  | 1 |  |  |  |  | 825 |  |  |  |  | 1 |  |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 15,507 |  |  |  |  | 15 | % |  |  |  | $ | 15,205 |  |  |  |  | 15 | % |
Fair value |  | 15,856 |  |  |  |  | 15 |  |  |  |  | 15,375 |  |  |  |  | 15 |  |
Realized Investment Gains and Losses Information regarding pretax realized gains and losses from investments is as follows:
| Three Months Ended March 31, |
(In millions) | 2014 |  | 2013 |
Realized investment gains (losses) on securities: |  |  |  |
Fixed maturities: |  |  |  |
Available for sale: |  |  |  |
Gross gains from sales | $ | 35 |  |  | $ | 119 |  |
Gross losses from sales | (1 | ) |  | (6 | ) |
Net gains (losses) from redemptions | 7 |  |  | 6 |  |
Other-than-temporary impairment losses | (3 | ) |  | (54 | ) |
Total fixed maturities | 38 |  |  | 65 |  |
Equity securities: |  |  |  |
Other-than-temporary impairment losses | 0 |  |  | (1 | ) |
Total equity securities | 0 |  |  | (1 | ) |
Derivatives and other: |  |  |  |
Derivative gains (losses) | (83 | ) |  | 87 |  |
Other | (1 | ) |  | 5 |  |
Total derivatives and other | (84 | ) |  | 92 |  |
Total realized investment gains (losses) | $ | (46 | ) |  | $ | 156 |  |
Other-than-temporary Impairment The fair values of our debt and perpetual security investments fluctuate based on changes in interest rates, foreign exchange, and credit spreads in the global financial markets. Fair values can also be heavily influenced by the values of the assets of the issuer and expected ultimate recovery values upon default, bankruptcy or other financial restructuring. Credit spreads are most impacted by the general credit environment and global market liquidity. Interest rates are driven by numerous factors including, but not limited to, supply and demand, governmental monetary actions, expectations of inflation and economic growth. We believe that fluctuations in the fair values of our investment securities related to general changes in the level of credit spreads or interest rates have little bearing on underlying credit quality of the issuer, and whether our investment is ultimately recoverable. Generally, we consider such declines in fair values to be temporary even in situations where an investment remains in an unrealized loss position for a year or more. However, in the course of our credit review process, we may determine that it is unlikely that we will recover our investment in an issuer due to factors specific to an individual issuer, as opposed to general changes in global credit spreads or interest rates. In this event, we consider such a decline in the investment's fair value, to the extent it is below the investment's cost or amortized cost, to be an other-than-temporary impairment of the investment and reduce the book value of the investment to its fair value. In addition to the usual investment risk associated with a debt instrument, our perpetual security holdings are largely issued by banks that are integral to the financial markets of the sovereign country of the issuer. As a result of the issuer's position within the economy of the sovereign country, our perpetual securities may be subject to a higher risk of nationalization of their issuers in connection with capital injections from an issuer's sovereign government. We cannot be assured that such capital support will extend to all levels of an issuer's capital structure. In addition, certain governments or regulators may consider imposing interest and principal payment restrictions on issuers of hybrid securities to preserve cash and preserve the issuer's capital. Beyond the cash flow impact that additional deferrals would have on our portfolio, such deferrals could result in ratings downgrades of the affected securities, which in turn could result in a reduction of fair value of the securities and increase our regulatory capital requirements. We consider these factors in our credit review process. When determining our intention to sell a security prior to recovery of its fair value to amortized cost, we evaluate facts and circumstances such as, but not limited to, future cash flow needs, decisions to reposition our security portfolio, and risk profile of individual investment holdings. We perform ongoing analyses of our liquidity needs, which includes cash flow testing of our policy liabilities, debt maturities, projected dividend payments and other cash flow and liquidity needs. Our cash flow testing includes extensive duration analysis of our investment portfolio and policy liabilities. Based on our analyses, we have concluded that we have sufficient excess cash flows to meet our liquidity needs without selling any of our investments prior to their maturity. The following table details our pretax other-than-temporary impairment losses by investment category that resulted from our impairment evaluation process.
| Three Months Ended March 31, |
(In millions) | 2014 |  | 2013 |
Corporate bonds | $ | 3 |  |  | $ | 38 |  |
Sovereign and supranational | 0 |  |  | 16 |  |
Equity securities | 0 |  |  | 1 |  |
Total other-than-temporary impairment losses realized (1) | $ | 3 |  |  | $ | 55 |  |
(1) Includes $0 and $1 for the three-month periods ended March 31, 2014 and 2013, respectively, for impairments due to severity and duration of decline in fair value and $3 and $54 for the three-month periods ended March 31, 2014 and 2013, respectively, from change in intent to sell securities Unrealized Investment Gains and Losses Effect on Shareholders’ Equity The net effect on shareholders’ equity of unrealized gains and losses from investment securities was as follows:
(In millions) | March 31, 2014 |  | December 31, 2013
Unrealized gains (losses) on securities available for sale |  | $ | 2,919 |  |  |  |  | $ | 1,523 |  |
Unamortized unrealized gains on securities transferred to held to maturity |  | 10 |  |  |  |  | 11 |  |
Deferred income taxes |  | (985 | ) |  |  |  | (499 | ) |
Shareholders’ equity, unrealized gains (losses) on investment securities |  | $ | 1,944 |  |  |  |  | $ | 1,035 |  |
Gross Unrealized Loss Aging The following tables show the fair values and gross unrealized losses of our available-for-sale and held-to-maturity investments that were in an unrealized loss position, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.
| March 31, 2014
| Total |  | Less than 12 months |  | 12 months or longer
(In millions) | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated |  | $ | 1,014 |  |  |  |  | $ | 3 |  |  |  |  | $ | 1,009 |  |  |  |  | $ | 3 |  |  |  |  | $ | 5 |  |  |  |  | $ | 0 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 91 |  |  |  |  | 4 |  |  |  |  | 70 |  |  |  |  | 2 |  |  |  |  | 21 |  |  |  |  | 2 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 1,700 |  |  |  |  | 102 |  |  |  |  | 1,342 |  |  |  |  | 70 |  |  |  |  | 358 |  |  |  |  | 32 |  |
Yen-denominated |  | 1,959 |  |  |  |  | 131 |  |  |  |  | 1,119 |  |  |  |  | 47 |  |  |  |  | 840 |  |  |  |  | 84 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 13 |  |  |  |  | 0 |  |  |  |  | 13 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Yen-denominated |  | 887 |  |  |  |  | 56 |  |  |  |  | 358 |  |  |  |  | 2 |  |  |  |  | 529 |  |  |  |  | 54 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 381 |  |  |  |  | 17 |  |  |  |  | 283 |  |  |  |  | 11 |  |  |  |  | 98 |  |  |  |  | 6 |  |
Yen-denominated |  | 4,665 |  |  |  |  | 513 |  |  |  |  | 1,187 |  |  |  |  | 28 |  |  |  |  | 3,478 |  |  |  |  | 485 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 11,291 |  |  |  |  | 725 |  |  |  |  | 7,334 |  |  |  |  | 371 |  |  |  |  | 3,957 |  |  |  |  | 354 |  |
Yen-denominated |  | 2,685 |  |  |  |  | 211 |  |  |  |  | 598 |  |  |  |  | 24 |  |  |  |  | 2,087 |  |  |  |  | 187 |  |
U.S. government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 88 |  |  |  |  | 2 |  |  |  |  | 88 |  |  |  |  | 2 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Total fixed maturities |  | 24,774 |  |  |  |  | 1,764 |  |  |  |  | 13,401 |  |  |  |  | 560 |  |  |  |  | 11,373 |  |  |  |  | 1,204 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 63 |  |  |  |  | 6 |  |  |  |  | 56 |  |  |  |  | 4 |  |  |  |  | 7 |  |  |  |  | 2 |  |
Yen-denominated |  | 1,485 |  |  |  |  | 250 |  |  |  |  | 349 |  |  |  |  | 4 |  |  |  |  | 1,136 |  |  |  |  | 246 |  |
Total perpetual securities |  | 1,548 |  |  |  |  | 256 |  |  |  |  | 405 |  |  |  |  | 8 |  |  |  |  | 1,143 |  |  |  |  | 248 |  |
Equity securities |  | 5 |  |  |  |  | 1 |  |  |  |  | 5 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 1 |  |
Total |  | $ | 26,327 |  |  |  |  | $ | 2,021 |  |  |  |  | $ | 13,811 |  |  |  |  | $ | 568 |  |  |  |  | $ | 12,516 |  |  |  |  | $ | 1,453 |  |
| December 31, 2013
| Total |  | Less than 12 months |  | 12 months or longer
(In millions) | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yen-denominated |  | $ | 8,869 |  |  |  |  | $ | 34 |  |  |  |  | $ | 8,869 |  |  |  |  | $ | 34 |  |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 177 |  |  |  |  | 12 |  |  |  |  | 145 |  |  |  |  | 8 |  |  |  |  | 32 |  |  |  |  | 4 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 2,023 |  |  |  |  | 183 |  |  |  |  | 1,740 |  |  |  |  | 143 |  |  |  |  | 283 |  |  |  |  | 40 |  |
Yen-denominated |  | 2,519 |  |  |  |  | 140 |  |  |  |  | 1,816 |  |  |  |  | 54 |  |  |  |  | 703 |  |  |  |  | 86 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 12 |  |  |  |  | 1 |  |  |  |  | 12 |  |  |  |  | 1 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Yen-denominated |  | 1,152 |  |  |  |  | 100 |  |  |  |  | 791 |  |  |  |  | 34 |  |  |  |  | 361 |  |  |  |  | 66 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 547 |  |  |  |  | 33 |  |  |  |  | 454 |  |  |  |  | 23 |  |  |  |  | 93 |  |  |  |  | 10 |  |
Yen-denominated |  | 4,533 |  |  |  |  | 570 |  |  |  |  | 2,322 |  |  |  |  | 107 |  |  |  |  | 2,211 |  |  |  |  | 463 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 11,588 |  |  |  |  | 1,170 |  |  |  |  | 8,504 |  |  |  |  | 733 |  |  |  |  | 3,084 |  |  |  |  | 437 |  |
Yen-denominated |  | 3,372 |  |  |  |  | 272 |  |  |  |  | 2,296 |  |  |  |  | 152 |  |  |  |  | 1,076 |  |  |  |  | 120 |  |
U.S. government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 36 |  |  |  |  | 4 |  |  |  |  | 36 |  |  |  |  | 4 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Total fixed maturities |  | 34,828 |  |  |  |  | 2,519 |  |  |  |  | 26,985 |  |  |  |  | 1,293 |  |  |  |  | 7,843 |  |  |  |  | 1,226 |  |
Perpetual securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dollar-denominated |  | 59 |  |  |  |  | 9 |  |  |  |  | 52 |  |  |  |  | 8 |  |  |  |  | 7 |  |  |  |  | 1 |  |
Yen-denominated |  | 1,322 |  |  |  |  | 217 |  |  |  |  | 748 |  |  |  |  | 74 |  |  |  |  | 574 |  |  |  |  | 143 |  |
Total perpetual securities |  | 1,381 |  |  |  |  | 226 |  |  |  |  | 800 |  |  |  |  | 82 |  |  |  |  | 581 |  |  |  |  | 144 |  |
Equity securities |  | 5 |  |  |  |  | 1 |  |  |  |  | 5 |  |  |  |  | 1 |  |  |  |  | 0 |  |  |  |  | 0 |  |
Total |  | $ | 36,214 |  |  |  |  | $ | 2,746 |  |  |  |  | $ | 27,790 |  |  |  |  | $ | 1,376 |  |  |  |  | $ | 8,424 |  |  |  |  | $ | 1,370 |  |
Analysis of Securities in Unrealized Loss Positions The unrealized losses on our investments have been primarily related to general market changes in interest rates, foreign exchange rates, and/or the levels of credit spreads rather than specific concerns with the issuer's ability to pay interest and repay principal. In addition, in the first quarter of 2013, we refined our methodology for valuing certain privately issued securities (see Note 5). For any significant declines in fair value, we perform a more focused review of the related issuers' credit profile. For corporate issuers, we evaluate their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, we analyze all sources of credit support, including issuer-specific factors. We utilize information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. We also consider ratings from the Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security we own including seniority in the issuer's capital structure, covenant protections, or other relevant features. From these reviews, we evaluate the issuers' continued ability to service our investment through payment of interest and principal. The following table provides more information on our unrealized loss positions.
|  | March 31, 2014 |  |  | December 31, 2013 |
(In millions) | Percentage of Total Investments in an Unrealized Loss Position | Percentage of Gross Unrealized Losses | Percentage of Gross Unrealized Losses for Investment Grade Securities | Percentage of Total Investments in an Unrealized Loss Position | Percentage of Gross Unrealized Losses | Percentage of Gross Unrealized Losses for Investment Grade Securities
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Japan government and agencies |  | 4 | % |  |  | 0 | % |  |  | 100 | % |  |  | 25 | % |  |  | 1 | % |  |  | 100 | % |
Public utilities |  | 14 |  |  |  | 12 |  |  |  | 96 |  |  |  | 13 |  |  |  | 12 |  |  |  | 98 |  |
Sovereign and supranational |  | 4 |  |  |  | 3 |  |  |  | 100 |  |  |  | 3 |  |  |  | 4 |  |  |  | 100 |  |
Banks/financial institutions |  | 19 |  |  |  | 26 |  |  |  | 62 |  |  |  | 14 |  |  |  | 22 |  |  |  | 64 |  |
Other corporate |  | 53 |  |  |  | 46 |  |  |  | 87 |  |  |  | 41 |  |  |  | 53 |  |  |  | 91 |  |
Total fixed maturities |  | 94 | % |  |  | 87 | % |  |  |  |  |  | 96 | % |  |  | 92 | % |  |  |  |
Perpetual securities |  | 6 |  |  |  | 13 |  |  |  | 91 |  |  |  | 4 |  |  |  | 8 |  |  |  | 90 |  |
Total |  | 100 | % |  |  | 100 | % |  |  |  |  |  | 100 | % |  |  | 100 | % |  |  |  |
Assuming no credit-related factors develop, as investments near maturity, the unrealized gains or losses are expected to diminish. Based on our credit analysis, we believe that the issuers of our investments in the sectors shown in the table above have the ability to service their obligations to us. Perpetual Securities The majority of our investments in Upper Tier II and Tier I perpetual securities were in highly-rated global financial institutions. Upper Tier II securities have more debt-like characteristics than Tier I securities and are senior to Tier I securities, preferred stock, and common equity of the issuer. Conversely, Tier I securities have more equity-like characteristics, but are senior to the common equity of the issuer. They may also be senior to certain preferred shares, depending on the individual security, the issuer's capital structure and the regulatory jurisdiction of the issuer. Details of our holdings of perpetual securities were as follows: Perpetual Securities
|  |  | March 31, 2014 |  | December 31, 2013
(In millions) | Credit Rating |  | Amortized Cost |  | Fair Value |  | Unrealized Gain (Loss) |  | Amortized Cost |  | Fair Value |  | Unrealized Gain (Loss)
Upper Tier II: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| A |  |  | $ | 149 |  |  |  |  | $ | 185 |  |  |  |  | $ | 36 |  |  |  |  | $ | 145 |  |  |  |  | $ | 183 |  |  |  |  | $ | 38 |  |
| BBB |  |  | 1,601 |  |  |  |  | 1,582 |  |  |  |  | (19 | ) |  |  |  | 1,563 |  |  |  |  | 1,532 |  |  |  |  | (31 | ) |
| BB or lower |  |  | 217 |  |  |  |  | 198 |  |  |  |  | (19 | ) |  |  |  | 212 |  |  |  |  | 198 |  |  |  |  | (14 | ) |
Total Upper Tier II |  |  | 1,967 |  |  |  |  | 1,965 |  |  |  |  | (2 | ) |  |  |  | 1,920 |  |  |  |  | 1,913 |  |  |  |  | (7 | ) |
Tier I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| BBB |  |  | 764 |  |  |  |  | 696 |  |  |  |  | (68 | ) |  |  |  | 746 |  |  |  |  | 706 |  |  |  |  | (40 | ) |
| BB or lower |  |  | 112 |  |  |  |  | 126 |  |  |  |  | 14 |  |  |  |  | 112 |  |  |  |  | 119 |  |  |  |  | 7 |  |
Total Tier I |  |  |  | 876 |  |  |  |  | 822 |  |  |  |  | (54 | ) |  |  |  | 858 |  |  |  |  | 825 |  |  |  |  | (33 | ) |
Other subordinated - non-banks: | BB or lower |  |  | 214 |  |  |  |  | 229 |  |  |  |  | 15 |  |  |  |  | 209 |  |  |  |  | 209 |  |  |  |  | 0 |  |
Total |  |  |  | $ | 3,057 |  |  |  |  | $ | 3,016 |  |  |  |  | $ | (41 | ) |  |  |  | $ | 2,987 |  |  |  |  | $ | 2,947 |  |  |  |  | $ | (40 | ) |
Assuming no credit-related factors develop, as investments near maturity, the unrealized gains or losses are expected to diminish. Based on our credit analysis, we believe that the issuers of our investments in these sectors have the ability to service their obligations to us. Variable Interest Entities (VIEs) As a condition to our involvement or investment in a VIE, we enter into certain protective rights and covenants that preclude changes in the structure of the VIE that would alter the creditworthiness of our investment or our beneficial interest in the VIE. Our involvement with all of the VIEs in which we have an interest is passive in nature, and we are not the arranger of these entities. We have not been involved in establishing these entities, except as it relates to our review and evaluation of the structure of these VIEs in the normal course of our investment decision-making process. Further, we are not, nor have we been, required to purchase any securities issued in the future by these VIEs. Our ownership interest in the VIEs is limited to holding the obligations issued by them. All of the VIEs in which we invest are static with respect to funding and have no ongoing forms of funding after the initial funding date. We have no direct or contingent obligations to fund the limited activities of these VIEs, nor do we have any direct or indirect financial guarantees related to the limited activities of these VIEs. We have not provided any assistance or any other type of financing support to any of the VIEs we invest in, nor do we have any intention to do so in the future. The weighted-average lives of our notes are very similar to the underlying collateral held by these VIEs where applicable. Our risk of loss related to our interests in any of our VIEs is limited to our investment in the debt securities issued by them. VIEs - Consolidated The following table presents the amortized cost, fair value and balance sheet caption in which the assets and liabilities of consolidated VIEs are reported. Investments in Consolidated Variable Interest Entities
| March 31, 2014 |  | December 31, 2013
(In millions) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities, available for sale |  | $ | 3,896 |  |  |  |  | $ | 4,662 |  |  |  |  | $ | 4,109 |  |  |  |  | $ | 4,843 |  |
Perpetual securities, available for sale |  | 475 |  |  |  |  | 478 |  |  |  |  | 463 |  |  |  |  | 468 |  |
Fixed maturities, held to maturity |  | 243 |  |  |  |  | 240 |  |  |  |  | 237 |  |  |  |  | 236 |  |
Other assets |  | 107 |  |  |  |  | 107 |  |  |  |  | 106 |  |  |  |  | 106 |  |
Total assets of consolidated VIEs |  | $ | 4,721 |  |  |  |  | $ | 5,487 |  |  |  |  | $ | 4,915 |  |  |  |  | $ | 5,653 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other liabilities |  | $ | 194 |  |  |  |  | $ | 194 |  |  |  |  | $ | 207 |  |  |  |  | $ | 207 |  |
Total liabilities of consolidated VIEs |  | $ | 194 |  |  |  |  | $ | 194 |  |  |  |  | $ | 207 |  |  |  |  | $ | 207 |  |
We are substantively the only investor in the consolidated VIEs listed in the table above. As the sole investor in these VIEs, we have the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and are therefore considered to be the primary beneficiary of the VIEs that we consolidate. We also participate in substantially all of the variability created by these VIEs. The activities of these VIEs are limited to holding debt and perpetual securities and interest rate, foreign currency, and/or credit default swaps (CDSs), as appropriate, and utilizing the cash flows from these securities to service our investment. Neither we nor any of our creditors are able to obtain the underlying collateral of the VIEs unless there is an event of default or other specified event. For those VIEs that contain a swap, we are not a direct counterparty to the swap contracts and have no control over them. Our loss exposure to these VIEs is limited to our original investment. Our consolidated VIEs do not rely on outside or ongoing sources of funding to support their activities beyond the underlying collateral and swap contracts, if applicable. With the exception of our investment in senior secured bank loans through unit trust structures, the underlying collateral assets and funding of our consolidated VIEs are generally static in nature and the underlying collateral and the reference corporate entities covered by any CDS contracts were all investment grade at the time of issuance. We are exposed to credit losses within any consolidated collateralized debt obligations (CDOs) that could result in principal losses to our investments. We have mitigated our risk of credit loss through the structure of the VIE, which contractually requires the subordinated tranches within these VIEs to absorb the majority of the expected losses from the underlying credit default swaps. We currently own only senior mezzanine CDO tranches. Based on our statistical analysis models and the current subordination levels in our CDOs, each of these VIEs can sustain a reasonable number of defaults in the underlying reference entities in the CDSs with no loss to our investment. VIEs-Not Consolidated The table below reflects the amortized cost, fair value and balance sheet caption in which our investment in VIEs not consolidated are reported. Investments in Variable Interest Entities Not Consolidated
| March 31, 2014 |  | December 31, 2013
(In millions) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities, available for sale |  | $ | 6,824 |  |  |  |  | $ | 7,191 |  |  |  |  | $ | 6,724 |  |  |  |  | $ | 6,916 |  |
Perpetual securities, available for sale |  | 379 |  |  |  |  | 395 |  |  |  |  | 370 |  |  |  |  | 378 |  |
Fixed maturities, held to maturity |  | 3,019 |  |  |  |  | 3,142 |  |  |  |  | 2,949 |  |  |  |  | 3,039 |  |
Total investments in VIEs not consolidated |  | $ | 10,222 |  |  |  |  | $ | 10,728 |  |  |  |  | $ | 10,043 |  |  |  |  | $ | 10,333 |  |
The VIEs that we are not required to consolidate are investments that are in the form of debt obligations from the VIEs that are irrevocably and unconditionally guaranteed by their corporate parents or sponsors. These VIEs are the primary financing vehicles used by their corporate sponsors to raise financing in the international capital markets. The variable interests created by these VIEs are principally or solely a result of the debt instruments issued by them. We do not have the power to direct the activities that most significantly impact the entity's economic performance, nor do we have (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. As such, we are not the primary beneficiary of these VIEs and are therefore not required to consolidate them. These VIE investments comprise securities from 174 separate issuers with an average credit rating of BBB. Securities Lending We lend fixed-maturity securities to financial institutions in short-term security-lending transactions. These short-term security-lending arrangements increase investment income with minimal risk. Our security lending policy requires that the fair value of the securities and/or unrestricted cash received as collateral be 102% or more of the fair value of the loaned securities. The following table presents our security loans outstanding and the corresponding collateral held:
(In millions) | March 31, 2014 |  | December 31, 2013
Security loans outstanding, fair value |  | $ | 3,234 |  |  |  |  | $ | 5,656 |  |
Cash collateral on loaned securities |  | 3,313 |  |  |  |  | 5,820 |  |

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