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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2019
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair Value Hierarchy U.S. 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 as of December 31.
| 2019
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 34,878 |  |  |  |  | $ | 1,522 |  |  |  |  | $ | 0 |  |  |  |  | $ | 36,400 |  |
Municipalities |  | 0 |  |  |  |  | 1,847 |  |  |  |  | 0 |  |  |  |  | 1,847 |  |
Mortgage- and asset-backed securities |  | 0 |  |  |  |  | 232 |  |  |  |  | 178 |  |  |  |  | 410 |  |
Public utilities |  | 0 |  |  |  |  | 6,556 |  |  |  |  | 224 |  |  |  |  | 6,780 |  |
Sovereign and supranational |  | 0 |  |  |  |  | 1,042 |  |  |  |  | 0 |  |  |  |  | 1,042 |  |
Banks/financial institutions |  | 0 |  |  |  |  | 10,264 |  |  |  |  | 23 |  |  |  |  | 10,287 |  |
Other corporate |  | 0 |  |  |  |  | 34,234 |  |  |  |  | 262 |  |  |  |  | 34,496 |  |
Total fixed maturity securities |  | 34,878 |  |  |  |  | 55,697 |  |  |  |  | 687 |  |  |  |  | 91,262 |  |
Equity securities |  | 642 |  |  |  |  | 80 |  |  |  |  | 80 |  |  |  |  | 802 |  |
Other investments |  | 628 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 628 |  |
Cash and cash equivalents |  | 4,896 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 4,896 |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | 0 |  |  |  |  | 72 |  |  |  |  | 169 |  |  |  |  | 241 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 238 |  |  |  |  | 0 |  |  |  |  | 238 |  |
Interest rate swaps |  | 0 |  |  |  |  | 3 |  |  |  |  | 0 |  |  |  |  | 3 |  |
Total other assets |  | 0 |  |  |  |  | 313 |  |  |  |  | 169 |  |  |  |  | 482 |  |
Total assets |  | $ | 41,044 |  |  |  |  | $ | 56,090 |  |  |  |  | $ | 936 |  |  |  |  | $ | 98,070 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | $ | 0 |  |  |  |  | $ | 78 |  |  |  |  | $ | 126 |  |  |  |  | $ | 204 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 377 |  |  |  |  | 0 |  |  |  |  | 377 |  |
Foreign currency options |  | 0 |  |  |  |  | 5 |  |  |  |  | 0 |  |  |  |  | 5 |  |
Total liabilities |  | $ | 0 |  |  |  |  | $ | 460 |  |  |  |  | $ | 126 |  |  |  |  | $ | 586 |  |
| 2018
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 32,993 |  |  |  |  | $ | 1,349 |  |  |  |  | $ | 0 |  |  |  |  | $ | 34,342 |  |
Municipalities |  | 0 |  |  |  |  | 1,863 |  |  |  |  | 0 |  |  |  |  | 1,863 |  |
Mortgage- and asset-backed securities |  | 0 |  |  |  |  | 162 |  |  |  |  | 177 |  |  |  |  | 339 |  |
Public utilities |  | 0 |  |  |  |  | 7,062 |  |  |  |  | 109 |  |  |  |  | 7,171 |  |
Sovereign and supranational |  | 0 |  |  |  |  | 1,260 |  |  |  |  | 0 |  |  |  |  | 1,260 |  |
Banks/financial institutions |  | 0 |  |  |  |  | 8,895 |  |  |  |  | 23 |  |  |  |  | 8,918 |  |
Other corporate |  | 0 |  |  |  |  | 28,789 |  |  |  |  | 213 |  |  |  |  | 29,002 |  |
Total fixed maturity securities |  | 32,993 |  |  |  |  | 49,380 |  |  |  |  | 522 |  |  |  |  | 82,895 |  |
Equity securities |  | 874 |  |  |  |  | 67 |  |  |  |  | 46 |  |  |  |  | 987 |  |
Other investments |  | 152 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 152 |  |
Cash and cash equivalents |  | 4,337 |  |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 4,337 |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | 0 |  |  |  |  | 103 |  |  |  |  | 182 |  |  |  |  | 285 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 126 |  |  |  |  | 0 |  |  |  |  | 126 |  |
Foreign currency options |  | 0 |  |  |  |  | 3 |  |  |  |  | 0 |  |  |  |  | 3 |  |
Interest rate swaps |  | 0 |  |  |  |  | 3 |  |  |  |  | 0 |  |  |  |  | 3 |  |
Total other assets |  | 0 |  |  |  |  | 235 |  |  |  |  | 182 |  |  |  |  | 417 |  |
Total assets |  | $ | 38,356 |  |  |  |  | $ | 49,682 |  |  |  |  | $ | 750 |  |  |  |  | $ | 88,788 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | $ | 0 |  |  |  |  | $ | 132 |  |  |  |  | $ | 102 |  |  |  |  | $ | 234 |  |
Foreign currency forwards |  | 0 |  |  |  |  | 151 |  |  |  |  | 0 |  |  |  |  | 151 |  |
Foreign currency options |  | 0 |  |  |  |  | 1 |  |  |  |  | 0 |  |  |  |  | 1 |  |
Interest rate swaptions |  | 0 |  |  |  |  | 1 |  |  |  |  | 0 |  |  |  |  | 1 |  |
Total liabilities |  | $ | 0 |  |  |  |  | $ | 285 |  |  |  |  | $ | 102 |  |  |  |  | $ | 387 |  |
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 as of December 31.
| 2019
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 22,241 |  |  |  | $ | 27,937 |  |  |  |  | $ | 354 |  |  |  |  | $ | 0 |  |  |  |  | $ | 28,291 |  |
Municipalities |  | 821 |  |  |  | 0 |  |  |  |  | 1,083 |  |  |  |  | 0 |  |  |  |  | 1,083 |  |
Mortgage and asset-backed securities |  | 16 |  |  |  | 0 |  |  |  |  | 7 |  |  |  |  | 10 |  |  |  |  | 17 |  |
Public utilities |  | 2,535 |  |  |  | 0 |  |  |  |  | 2,954 |  |  |  |  | 0 |  |  |  |  | 2,954 |  |
Sovereign and supranational |  | 1,123 |  |  |  | 0 |  |  |  |  | 1,320 |  |  |  |  | 0 |  |  |  |  | 1,320 |  |
Banks/financial institutions |  | 916 |  |  |  | 0 |  |  |  |  | 1,018 |  |  |  |  | 0 |  |  |  |  | 1,018 |  |
Other corporate |  | 2,433 |  |  |  | 0 |  |  |  |  | 2,911 |  |  |  |  | 0 |  |  |  |  | 2,911 |  |
Commercial mortgage and other loans |  | 9,569 |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 9,648 |  |  |  |  | 9,648 |  |
Other investments (1) |  | 30 |  |  |  | 0 |  |  |  |  | 30 |  |  |  |  | 0 |  |  |  |  | 30 |  |
Total assets |  | $ | 39,684 |  |  |  | $ | 27,937 |  |  |  |  | $ | 9,677 |  |  |  |  | $ | 9,658 |  |  |  |  | $ | 47,272 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other policyholders’ funds |  | $ | 7,317 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 7,234 |  |  |  |  | $ | 7,234 |  |
Notes payable (excluding leases) |  | 6,408 |  |  |  | 0 |  |  |  |  | 6,663 |  |  |  |  | 272 |  |  |  |  | 6,935 |  |
Total liabilities |  | $ | 13,725 |  |  |  | $ | 0 |  |  |  |  | $ | 6,663 |  |  |  |  | $ | 7,506 |  |  |  |  | $ | 14,169 |  |
(1) Excludes policy loans of $250 and equity method investments of $569, at carrying value
|  |  |  | 2018
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies |  | $ | 21,712 |  |  |  | $ | 27,030 |  |  |  |  | $ | 8 |  |  |  |  | $ | 0 |  |  |  |  | $ | 27,038 |  |
Municipalities |  | 359 |  |  |  | 0 |  |  |  |  | 469 |  |  |  |  | 0 |  |  |  |  | 469 |  |
Mortgage and asset-backed securities |  | 14 |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 15 |  |  |  |  | 15 |  |
Public utilities |  | 2,727 |  |  |  | 0 |  |  |  |  | 2,973 |  |  |  |  | 0 |  |  |  |  | 2,973 |  |
Sovereign and supranational |  | 1,551 |  |  |  | 0 |  |  |  |  | 1,840 |  |  |  |  | 0 |  |  |  |  | 1,840 |  |
Banks/financial institutions |  | 1,445 |  |  |  | 0 |  |  |  |  | 1,583 |  |  |  |  | 0 |  |  |  |  | 1,583 |  |
Other corporate |  | 2,510 |  |  |  | 0 |  |  |  |  | 2,804 |  |  |  |  | 0 |  |  |  |  | 2,804 |  |
Commercial mortgage and other loans |  | 6,919 |  |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 6,893 |  |  |  |  | 6,893 |  |
Other investments (1) |  | 26 |  |  |  | 0 |  |  |  |  | 26 |  |  |  |  | 0 |  |  |  |  | 26 |  |
Total assets |  | $ | 37,263 |  |  |  | $ | 27,030 |  |  |  |  | $ | 9,703 |  |  |  |  | $ | 6,908 |  |  |  |  | $ | 43,641 |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other policyholders’ funds |  | $ | 7,146 |  |  |  | $ | 0 |  |  |  |  | $ | 0 |  |  |  |  | $ | 7,067 |  |  |  |  | $ | 7,067 |  |
Notes payable (excluding leases) |  | 5,765 |  |  |  | 0 |  |  |  |  | 5,606 |  |  |  |  | 270 |  |  |  |  | 5,876 |  |
Total liabilities |  | $ | 12,911 |  |  |  | $ | 0 |  |  |  |  | $ | 5,606 |  |  |  |  | $ | 7,337 |  |  |  |  | $ | 12,943 |  |
(1) Excludes policy loans of $232 and equity method investments of $377, at carrying value Fair Value of Financial Instruments Fixed maturity and equity securities The Company determines the fair values of fixed maturity securities and public 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 the Company obtains from outside brokers. A third party pricing vendor has developed valuation models to determine fair values of privately issued securities to reflect the impact of the persistent economic environment and the changing regulatory framework. These models are discounted cash flow (DCF) valuation models, but also use information from related markets, specifically the 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 security by discounting those loss adjusted cash flows. In cases where a credit curve cannot be developed from the specific security features, the valuation methodology takes into consideration other market observable inputs, including: 1) the most appropriate comparable security(ies) 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 4) bond indices that are comparative in rating, industry, maturity and region. The pricing data and market quotes the Company obtains from outside sources, including third party pricing services, are reviewed internally for reasonableness. If a fair value appears unreasonable, the Company will re-examine the inputs and assess the reasonableness of the pricing data with the vendor. Additionally, the Company may compare the inputs to relevant market indices and other performance measurements. Based on management's analysis, 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. The Company has performed verification of the inputs and calculations in any valuation models to confirm that the valuations represent reasonable estimates of fair value. The fixed maturity securities classified as Level 3 consist of securities with limited or no observable valuation inputs. For Level 3 securities, the Company estimates 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. The Company considers these inputs to be unobservable. The Company also considers 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, the Company has determined that certain pricing assumptions and data used by its 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. For the periods presented, the Company has not adjusted the quotes or prices it obtains from the pricing services and brokers it uses. The following tables present the pricing sources for the fair values of the Company's fixed maturity and equity securities as of December 31.
|  | 2019
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 34,878 |  |  |  |  | $ | 1,522 |  |  |  |  | $ | 0 |  |  |  |  | $ | 36,400 |  |
Total government and agencies |  |  | 34,878 |  |  |  |  | 1,522 |  |  |  |  | 0 |  |  |  |  | 36,400 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,847 |  |  |  |  | 0 |  |  |  |  | 1,847 |  |
Total municipalities |  |  | 0 |  |  |  |  | 1,847 |  |  |  |  | 0 |  |  |  |  | 1,847 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 232 |  |  |  |  | 0 |  |  |  |  | 232 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 178 |  |  |  |  | 178 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 232 |  |  |  |  | 178 |  |  |  |  | 410 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 6,556 |  |  |  |  | 0 |  |  |  |  | 6,556 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 224 |  |  |  |  | 224 |  |
Total public utilities |  |  | 0 |  |  |  |  | 6,556 |  |  |  |  | 224 |  |  |  |  | 6,780 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,042 |  |  |  |  | 0 |  |  |  |  | 1,042 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,042 |  |  |  |  | 0 |  |  |  |  | 1,042 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 10,264 |  |  |  |  | 0 |  |  |  |  | 10,264 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 23 |  |  |  |  | 23 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 10,264 |  |  |  |  | 23 |  |  |  |  | 10,287 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 34,234 |  |  |  |  | 0 |  |  |  |  | 34,234 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 262 |  |  |  |  | 262 |  |
Total other corporate |  |  | 0 |  |  |  |  | 34,234 |  |  |  |  | 262 |  |  |  |  | 34,496 |  |
Total securities available for sale |  |  | $ | 34,878 |  |  |  |  | $ | 55,697 |  |  |  |  | $ | 687 |  |  |  |  | $ | 91,262 |  |
Equity securities, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 642 |  |  |  |  | $ | 80 |  |  |  |  | $ | 0 |  |  |  |  | $ | 722 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 80 |  |  |  |  | 80 |  |
Total equity securities |  |  | $ | 642 |  |  |  |  | $ | 80 |  |  |  |  | $ | 80 |  |  |  |  | $ | 802 |  |
|  | 2019
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 27,937 |  |  |  |  | $ | 354 |  |  |  |  | $ | 0 |  |  |  |  | $ | 28,291 |  |
Total government and agencies |  |  | 27,937 |  |  |  |  | 354 |  |  |  |  | 0 |  |  |  |  | 28,291 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,083 |  |  |  |  | 0 |  |  |  |  | 1,083 |  |
Total municipalities |  |  | 0 |  |  |  |  | 1,083 |  |  |  |  | 0 |  |  |  |  | 1,083 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 7 |  |  |  |  | 0 |  |  |  |  | 7 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 10 |  |  |  |  | 10 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 7 |  |  |  |  | 10 |  |  |  |  | 17 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 2,954 |  |  |  |  | 0 |  |  |  |  | 2,954 |  |
Total public utilities |  |  | 0 |  |  |  |  | 2,954 |  |  |  |  | 0 |  |  |  |  | 2,954 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,320 |  |  |  |  | 0 |  |  |  |  | 1,320 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,320 |  |  |  |  | 0 |  |  |  |  | 1,320 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,018 |  |  |  |  | 0 |  |  |  |  | 1,018 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 1,018 |  |  |  |  | 0 |  |  |  |  | 1,018 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 2,911 |  |  |  |  | 0 |  |  |  |  | 2,911 |  |
Total other corporate |  |  | 0 |  |  |  |  | 2,911 |  |  |  |  | 0 |  |  |  |  | 2,911 |  |
Total securities held to maturity |  |  | $ | 27,937 |  |  |  |  | $ | 9,647 |  |  |  |  | $ | 10 |  |  |  |  | $ | 37,594 |  |
|  | 2018
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 32,993 |  |  |  |  | $ | 1,349 |  |  |  |  | $ | 0 |  |  |  |  | $ | 34,342 |  |
Total government and agencies |  |  | 32,993 |  |  |  |  | 1,349 |  |  |  |  | 0 |  |  |  |  | 34,342 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,863 |  |  |  |  | 0 |  |  |  |  | 1,863 |  |
Total municipalities |  |  | 0 |  |  |  |  | 1,863 |  |  |  |  | 0 |  |  |  |  | 1,863 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 162 |  |  |  |  | 0 |  |  |  |  | 162 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 177 |  |  |  |  | 177 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 162 |  |  |  |  | 177 |  |  |  |  | 339 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 7,062 |  |  |  |  | 0 |  |  |  |  | 7,062 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 109 |  |  |  |  | 109 |  |
Total public utilities |  |  | 0 |  |  |  |  | 7,062 |  |  |  |  | 109 |  |  |  |  | 7,171 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,260 |  |  |  |  | 0 |  |  |  |  | 1,260 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,260 |  |  |  |  | 0 |  |  |  |  | 1,260 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 8,895 |  |  |  |  | 0 |  |  |  |  | 8,895 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 23 |  |  |  |  | 23 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 8,895 |  |  |  |  | 23 |  |  |  |  | 8,918 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 28,789 |  |  |  |  | 0 |  |  |  |  | 28,789 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 213 |  |  |  |  | 213 |  |
Total other corporate |  |  | 0 |  |  |  |  | 28,789 |  |  |  |  | 213 |  |  |  |  | 29,002 |  |
Total securities available for sale |  |  | $ | 32,993 |  |  |  |  | $ | 49,380 |  |  |  |  | $ | 522 |  |  |  |  | $ | 82,895 |  |
Equity securities, carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 874 |  |  |  |  | $ | 67 |  |  |  |  | $ | 0 |  |  |  |  | $ | 941 |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 46 |  |  |  |  | 46 |  |
Total equity securities |  |  | $ | 874 |  |  |  |  | $ | 67 |  |  |  |  | $ | 46 |  |  |  |  | $ | 987 |  |
|  | 2018
(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 maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | $ | 27,030 |  |  |  |  | $ | 8 |  |  |  |  | $ | 0 |  |  |  |  | $ | 27,038 |  |
Total government and agencies |  |  | 27,030 |  |  |  |  | 8 |  |  |  |  | 0 |  |  |  |  | 27,038 |  |
Municipalities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 469 |  |  |  |  | 0 |  |  |  |  | 469 |  |
Total municipalities |  |  | 0 |  |  |  |  | 469 |  |  |  |  | 0 |  |  |  |  | 469 |  |
Mortgage- and asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Broker/other |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 15 |  |  |  |  | 15 |  |
Total mortgage- and asset-backed securities |  |  | 0 |  |  |  |  | 0 |  |  |  |  | 15 |  |  |  |  | 15 |  |
Public utilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 2,973 |  |  |  |  | 0 |  |  |  |  | 2,973 |  |
Total public utilities |  |  | 0 |  |  |  |  | 2,973 |  |  |  |  | 0 |  |  |  |  | 2,973 |  |
Sovereign and supranational: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,840 |  |  |  |  | 0 |  |  |  |  | 1,840 |  |
Total sovereign and supranational |  |  | 0 |  |  |  |  | 1,840 |  |  |  |  | 0 |  |  |  |  | 1,840 |  |
Banks/financial institutions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 1,583 |  |  |  |  | 0 |  |  |  |  | 1,583 |  |
Total banks/financial institutions |  |  | 0 |  |  |  |  | 1,583 |  |  |  |  | 0 |  |  |  |  | 1,583 |  |
Other corporate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Third party pricing vendor |  |  | 0 |  |  |  |  | 2,804 |  |  |  |  | 0 |  |  |  |  | 2,804 |  |
Total other corporate |  |  | 0 |  |  |  |  | 2,804 |  |  |  |  | 0 |  |  |  |  | 2,804 |  |
Total securities held to maturity |  |  | $ | 27,030 |  |  |  |  | $ | 9,677 |  |  |  |  | $ | 15 |  |  |  |  | $ | 36,722 |  |
The following is a discussion of the determination of fair value of the Company's remaining financial instruments. Derivatives The Company uses 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. The Company uses pricing models to determine the estimated fair value of derivatives. 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 significant inputs to pricing derivatives are generally observable in the market or can be derived by observable market data. When these inputs are observable, the derivatives are classified as Level 2. The fair values of the foreign currency forwards and options are based on observable market inputs, therefore they are classified as Level 2. To determine the fair value of its interest rate derivatives, the Company uses inputs that are generally observable in the market or can be derived from observable market data. Interest rate swaps are cleared trades. In a cleared swap contract the clearinghouse provides benefits to the counterparties similar to contracts listed for investment traded on an exchange since it maintains a daily margin to mitigate counterparties credit risk. These derivatives are priced using observable inputs, accordingly, they are classified as Level 2. For its interest rate swaptions, the Company estimates their fair values using observable market data, including interest rate curves and volatilities. Their fair values are also classified as Level 2. For derivatives associated with VIEs where the Company is the primary beneficiary, the Company is 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. The Company receives 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, the Company 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 the Company's consolidated VIEs are classified as Level 3 of the fair value hierarchy. Commercial mortgage and other loans Commercial mortgage and other loans include transitional real estate loans, commercial mortgage loans and middle market loans. The Company's loan receivables do not have readily determinable market prices and generally lack market liquidity. Fair values for loan receivables are determined based on the present value of expected future cash flows discounted at the applicable U.S. Treasury or London Interbank Offered Rate (LIBOR) yield plus an appropriate spread that considers other risk factors, such as credit and liquidity risk. These spreads are provided by the applicable asset managers based on their knowledge of the current loan pricing environment and market conditions. The spreads are a significant component of the pricing inputs and are generally considered unobservable. Therefore, these investments have been assigned a Level 3 within the fair value hierarchy. Other investments Other investments includes short-term investments that are measured at fair value where amortized cost approximates fair value. Other policyholders' funds The largest component of the other policyholders' funds liability is the Company's annuity line of business in Aflac Japan. The Company's annuities have fixed benefits and premiums. For this product, the Company estimates the fair value to be equal to the cash surrender value. This is analogous to the value paid to policyholders on the valuation date if they were to surrender their policy. The Company periodically checks the cash value against discounted cash flow projections for reasonableness. The Company considers its inputs for this valuation to be unobservable and have accordingly classified this valuation as Level 3. Notes payable The fair values of the Company's publicly issued notes payable are determined by utilizing available sources of observable inputs from third party pricing vendors and are classified as Level 2. The fair values of the Company's yen-denominated loans approximate their carrying values and are classified as Level 3. Transfers between Hierarchy Levels and Level 3 Rollforward There were no transfers between Level 1 and 2 for assets and liabilities that are measured and carried at fair value on a recurring basis for the years ended December 31, 2019 and 2018, respectively. The following tables present the changes in fair value of the Company's investments and derivatives carried at fair value classified as Level 3 as of December 31.
2019 |
| Fixed Maturity Securities |  | Equity Securities |  | Derivatives(1) |  |  |
(In millions) | Mortgage- and Asset- Backed Securities |  | Public Utilities |  | Banks/ Financial Institutions |  | Other Corporate |  |  |  | Foreign Currency Swaps |  | Credit Default Swaps |  | Total |
Balance, beginning of period | $ | 177 |  |  | $ | 109 |  |  | $ | 23 |  |  | $ | 213 |  |  | $ | 46 |  |  | $ | 80 |  |  | $ | 0 |  |  | $ | 648 |  |
Realized investment gains (losses) included in earnings | 0 |  |  | 0 |  |  | 0 |  |  | (1 | ) |  | 0 |  |  | (33 | ) |  | 0 |  |  | (34 | ) |
Unrealized gains (losses) included in other comprehensive income (loss) | 1 |  |  | 6 |  |  | 1 |  |  | 8 |  |  | 0 |  |  | (4 | ) |  | 0 |  |  | 12 |  |
Purchases, issuances, sales and settlements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchases | 0 |  |  | 48 |  |  | 0 |  |  | 165 |  |  | 34 |  |  | 0 |  |  | 0 |  |  | 247 |  |
Issuances | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |
Sales | 0 |  |  | (24 | ) |  | 0 |  |  | (17 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | (41 | ) |
Settlements | 0 |  |  | (6 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (6 | ) |
Transfers into Level 3 | 0 |  |  | 116 |  | (2) | 0 |  |  | 26 |  | (2) | 0 |  |  | 0 |  |  | 0 |  |  | 142 |  |
Transfers out of Level 3 | 0 |  |  | (25 | ) | (2) | (1 | ) |  | (132 | ) | (2), (3) | 0 |  |  | 0 |  |  | 0 |  |  | (158 | ) |
Balance, end of period | $ | 178 |  |  | $ | 224 |  |  | $ | 23 |  |  | $ | 262 |  |  | $ | 80 |  |  | $ | 43 |  |  | $ | 0 |  |  | $ | 810 |  |
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (33 | ) |  | $ | 0 |  |  | $ | (33 | ) |
(1) Derivative assets and liabilities are presented net (2) Transfer due to sector classification change (3) Transfer due to availability of observable market inputs
2018 |
| Fixed Maturity Securities |  | Equity Securities |  | Derivatives(1) |  |  |
(In millions) | Mortgage- and Asset- Backed Securities |  | Public Utilities |  | Banks/ Financial Institutions |  | Other Corporate |  |  |  | Foreign Currency Swaps |  | Credit Default Swaps |  | Total |
Balance, beginning of period | $ | 175 |  |  | $ | 68 |  |  | $ | 25 |  |  | $ | 146 |  |  | $ | 16 |  |  | $ | 22 |  |  | $ | 1 |  |  | $ | 453 |  |
Realized investment gains (losses) included in earnings | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (1 | ) |  | 54 |  |  | (1 | ) |  | 52 |  |
Unrealized gains (losses) included in other comprehensive income (loss) | 2 |  |  | 1 |  |  | (2 | ) |  | 1 |  |  | 0 |  |  | 4 |  |  | 0 |  |  | 6 |  |
Purchases, issuances, sales and settlements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchases | 0 |  |  | 40 |  |  | 0 |  |  | 56 |  |  | 31 |  |  | 0 |  |  | 0 |  |  | 127 |  |
Issuances | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |
Sales | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |
Settlements | 0 |  |  | 0 |  |  | 0 |  |  | (6 | ) |  | 0 |  |  | 0 |  |  | 0 |  |  | (6 | ) |
Transfers into Level 3 | 0 |  |  | 0 |  |  | 0 |  |  | 16 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 16 |  |
Transfers out of Level 3 | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |
Balance, end of period | $ | 177 |  |  | $ | 109 |  |  | $ | 23 |  |  | $ | 213 |  |  | $ | 46 |  |  | $ | 80 |  |  | $ | 0 |  |  | $ | 648 |  |
Changes in unrealized gains (losses) relating to Level 3 assets and liabilities still held at the end of the period included in earnings | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (1 | ) |  | $ | 54 |  |  | $ | (1 | ) |  | $ | 52 |  |
(1) Derivative assets and liabilities are presented net Level 3 Significant Unobservable Input Sensitivity The following tables summarize the significant unobservable inputs used in the valuation of the Company's Level 3 investments and derivatives carried at fair value as of December 31. Included in the tables are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
2019
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Assets: |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |
Mortgage- and asset-backed securities |  |  | $ | 178 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (a)
Public utilities |  |  | 224 |  |  |  | Discounted cash flow |  | Credit spreads |  | N/A | (a)
Banks/financial institutions |  |  | 23 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (a)
Other corporate |  |  | 262 |  |  |  | Discounted cash flow |  | Credit spreads |  | N/A | (a)
Equity securities |  |  | 80 |  |  |  | Net asset value |  | Offered quotes |  | N/A | (a)
Other assets: |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  |  | 106 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.89% - 2.09% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .12% - .43% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 10 - 100 bps |
|  |  | 63 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.89% - 2.09% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .12% - .43% | (c)
Total assets |  |  | $ | 936 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  |  | $ | 118 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.89% - 2.09% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .12% - .43% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 13 - 159 bps |
|  |  | 8 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 1.89% - 2.09% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .12% - .43% | (c)
Total liabilities |  |  | $ | 126 |  |  |  |  |  |  |  |  |
(a) N/A represents securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs. (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps
2018
(In millions) |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average) |
Assets: |  |  |  |  |  |  |  |  |  |  |
Securities available for sale, carried at fair value: |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |
Mortgage- and asset-backed securities |  |  | $ | 177 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (a)
Public utilities |  |  | 109 |  |  |  | Discounted cash flow |  | Credit spreads |  | N/A | (a)
Banks/financial institutions |  |  | 23 |  |  |  | Consensus pricing |  | Offered quotes |  | N/A | (a)
Other corporate |  |  | 213 |  |  |  | Discounted cash flow |  | Credit spreads |  | N/A | (a)
Equity securities |  |  | 46 |  |  |  | Net asset value |  | Offered quotes |  | N/A | (a)
Other assets: |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  |  | 125 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.75% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .18% - .71% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 19 - 120 bps |
|  |  | 57 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.75% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .18% - .71% | (c)
Total assets |  |  | $ | 750 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  |  | $ | 98 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.75% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .18% - .71% | (c)
|  |  |  |  |  |  |  | CDS spreads |  | 28 - 211 bps |
|  |  | 4 |  |  |  | Discounted cash flow |  | Interest rates (USD) |  | 2.75% - 2.84% | (b)
|  |  |  |  |  |  |  | Interest rates (JPY) |  | .18% - .71% | (c)
Total liabilities |  |  | $ | 102 |  |  |  |  |  |  |  |  |
(a) N/A represents securities where the Company receives unadjusted broker quotes and for which there is no transparency into the providers' valuation techniques or unobservable inputs. (b) Inputs derived from U.S. long-term rates to accommodate long maturity nature of the Company's swaps (c) Inputs derived from Japan long-term rates to accommodate long maturity nature of the Company's swaps The following is a discussion of the significant unobservable inputs or valuation techniques used in determining the fair value of securities and derivatives classified as Level 3. Net Asset Value The Company holds 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 the Company's valuation model price is overridden because it implies a value that is not consistent with current market conditions, the Company will solicit bids from a limited number of brokers. The Company also receives unadjusted prices from brokers for its 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 and CDS Spreads The significant drivers of the valuation of the foreign exchange swaps are interest rates and CDS spreads. Some of the Company's swaps have long maturities that increase the sensitivity of the swaps to interest rate fluctuations. For the Company's foreign exchange or cross currency swaps that are in a net asset position, an increase in yen interest rates (all other factors held constant) will decrease the present value of the yen final settlement receivable (receive leg), thus decreasing the value of the swap as long as the derivative remains in a net asset position. Foreign exchange swaps also have a lump-sum final settlement of foreign exchange principal amounts at the termination of the swap. Assuming all other factors are held constant, an increase in yen interest rates will decrease the receive leg and decrease the net value of the swap. Likewise, holding all other factors constant, an increase in U.S. dollar interest rates will increase the swap's net value due to the decrease in the present value of the dollar final settlement payable (pay leg). The extinguisher feature in most of the Company's VIE 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, the Company applies 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. For additional information on the Company's investments and financial instruments, see the accompanying Notes 1, 3 and 4.

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- 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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