Fair Value

3 Months Ended

Mar. 31, 2012

Fair Value [Abstract]

Fair Value

5. Fair Value

Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

Assets and Liabilities Measured at Fair Value

Recurring Fair Value Measurements

The assets and liabilities measured at estimated fair value on a recurring basis, including those items for which the Company has elected the FVO, were determined as described below. These estimated fair values and their corresponding placement in the fair value hierarchy are summarized as follows:

	March 31, 2012
	Fair Value Measurements at Reporting Date Using
	Quoted Prices  in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
			(In millions)
Assets:
Fixed maturity securities:
U.S. corporate securities	$	—	$	97,968	$	7,305	$	105,273
Foreign corporate securities		—		60,708		4,646		65,354
Foreign government securities		—		53,125		2,213		55,338
U.S. Treasury and agency securities		20,804		20,588		24		41,416
RMBS		—		39,033		2,246		41,279
CMBS		—		17,970		762		18,732
State and political subdivision securities		—		13,834		82		13,916
ABS		—		10,945		2,198		13,143
Total fixed maturity securities		20,804		314,171		19,476		354,451
Equity securities:
Common stock		902		1,072		268		2,242
Non-redeemable preferred stock		—		355		446		801
Total equity securities		902		1,427		714		3,043
Trading and other securities:
Actively Traded Securities		—		531		13		544
FVO general account securities		—		244		30		274
FVO contractholder-directed unit-linked investments		8,536		8,346		1,237		18,119
FVO securities held by CSEs		—		89		—		89
Total trading and other securities		8,536		9,210		1,280		19,026
Short-term investments (1)		5,602		5,243		462		11,307
Mortgage loans:
Commercial mortgage loans held by CSEs		—		3,024		—		3,024
Mortgage loans held-for-sale (2)		—		7,496		1,708		9,204
Total mortgage loans		—		10,520		1,708		12,228
Other invested assets:
MSRs		—		—		727		727
Other investments		322		120		—		442
Derivative assets: (3)
Interest rate contracts		23		8,197		165		8,385
Foreign currency contracts		1		1,059		59		1,119
Credit contracts		—		132		41		173
Equity market contracts		31		2,165		574		2,770
Total derivative assets		55		11,553		839		12,447
Total other invested assets		377		11,673		1,566		13,616
Net embedded derivatives within asset host contracts (4)		—		1		329		330
Separate account assets (5)		31,103		189,490		1,382		221,975
Total assets	$	67,324	$	541,735	$	26,917	$	635,976
Liabilities:
Derivative liabilities: (3)
Interest rate contracts	$	46	$	2,195	$	23	$	2,264
Foreign currency contracts		—		1,356		5		1,361
Credit contracts		—		48		3		51
Equity market contracts		11		339		181		531
Total derivative liabilities		57		3,938		212		4,207
Net embedded derivatives within liability host contracts (4)		—		16		2,742		2,758
Long-term debt of CSEs		—		2,834		82		2,916
Liability related to securitized reverse residential mortgage loans (6)		—		6,747		1,505		8,252
Trading liabilities (6)		167		2		—		169
Total liabilities	$	224	$	13,537	$	4,541	$	18,302

	December 31, 2011
	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
			(In millions)
Assets:
Fixed maturity securities:
U.S. corporate securities	$	—	$	99,001	$	6,784	$	105,785
Foreign corporate securities		—		59,648		4,370		64,018
Foreign government securities		76		50,138		2,322		52,536
U.S. Treasury and agency securities		19,911		20,070		31		40,012
RMBS		—		41,035		1,602		42,637
CMBS		—		18,316		753		19,069
State and political subdivision securities		—		13,182		53		13,235
ABS		—		11,129		1,850		12,979
Total fixed maturity securities		19,987		312,519		17,765		350,271
Equity securities:
Common stock		819		1,105		281		2,205
Non-redeemable preferred stock		—		380		438		818
Total equity securities		819		1,485		719		3,023
Trading and other securities:
Actively Traded Securities		—		473		—		473
FVO general account securities		—		244		23		267
FVO contractholder-directed unit-linked investments		7,572		8,453		1,386		17,411
FVO securities held by CSEs		—		117		—		117
Total trading and other securities		7,572		9,287		1,409		18,268
Short-term investments (1)		8,150		8,120		590		16,860
Mortgage loans:
Commercial mortgage loans held by CSEs		—		3,138		—		3,138
Mortgage loans held-for-sale (2)		—		9,302		1,414		10,716
Total mortgage loans		—		12,440		1,414		13,854
Other invested assets:
MSRs		—		—		666		666
Other investments		312		124		—		436
Derivative assets: (3)
Interest rate contracts		32		10,426		338		10,796
Foreign currency contracts		1		1,316		61		1,378
Credit contracts		—		301		29		330
Equity market contracts		29		2,703		964		3,696
Total derivative assets		62		14,746		1,392		16,200
Total other invested assets		374		14,870		2,058		17,302
Net embedded derivatives within asset host contracts (4)		—		1		362		363
Separate account assets (5)		28,191		173,507		1,325		203,023
Total assets	$	65,093	$	532,229	$	25,642	$	622,964
Liabilities:
Derivative liabilities: (3)
Interest rate contracts	$	91		2,351		38	$	2,480
Foreign currency contracts		—		1,103		17		1,120
Credit contracts		—		85		28		113
Equity market contracts		12		211		75		298
Total derivative liabilities		103		3,750		158		4,011
Net embedded derivatives within liability host contracts (4)		—		19		4,565		4,584
Long-term debt of CSEs		—		2,952		116		3,068
Liability related to securitized reverse residential mortgage loans (6)		—		6,451		1,175		7,626
Trading liabilities (6)		124		3		—		127
Total liabilities	$	227	$	13,175	$	6,014	$	19,416

(1) Short-term investments as presented in the tables above differ from the amounts presented in the consolidated balance sheets because certain short-term investments are not measured at estimated fair value on a recurring basis.

(2) Mortgage loans held-for-sale are comprised of securitized reverse residential mortgage loans and other mortgage loans held-for-sale. The amounts in the preceding tables differ from the amount presented in the consolidated balance sheets as these tables do not include mortgage loans that are stated at lower of amortized cost or estimated fair value.

(3) Derivative liabilities are presented within other liabilities in the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation in the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.

(4) Net embedded derivatives within asset host contracts are presented primarily within premiums, reinsurance and other receivables in the consolidated balance sheets. Net embedded derivatives within liability host contracts are presented primarily within PABs in the consolidated balance sheets. At March 31, 2012, fixed maturity securities and equity securities also included embedded derivatives of $0 and ($74) million, respectively. At December 31, 2011, fixed maturity securities and equity securities included embedded derivatives of $2 million and ($72) million, respectively.

(5) Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets.

(6) The liability related to securitized reverse residential mortgage loans and trading liabilities are presented within other liabilities in the consolidated balance sheets.

Valuation Process

On behalf of the Company’s chief investment officer and chief financial officer, a pricing and valuation committee, that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, derivatives, and mortgage loans. This committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time, provides oversight of the selection of independent third party pricing providers and the controls and procedures to evaluate pricing from such pricing providers. Periodically the chief accounting officer reports to the audit committee on compliance with fair value accounting standards.

The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with accounting standards for fair value determination through controls designed to ensure that the financial assets and financial liabilities are appropriately valued and represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple pricing sources and ongoing due diligence to confirm that independent pricing services use market-based parameters for valuation. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by reviewing such pricing with the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 0.5% of the total estimated fair value of fixed maturity securities and represent only 7% of the total estimated fair value of Level 3 fixed maturity securities.

The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotes are obtained, or an internally developed valuation is prepared for use in financial reporting. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and non-performance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio, accordingly, overrides have not been material. This is, in part, because internal estimates of liquidity and non-performance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used. As a result, the prices provided by the independent pricing services are typically used.

Guaranteed minimum benefits accounted for as embedded derivatives are calculated within the Company’s actuarial department. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios. The embedded derivative asset or liability is calculated as the average present value of future cash flows less the present value of future premiums associated with the embedded derivative, over multiple scenarios. The premium associated with the embedded derivative is assumed to be the fees in the contract, multiplied by a ratio which is locked in upon issuance of the insurance contract, such that the value of the embedded derivative at issuance is zero.

Capital market assumptions, such as risk free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.

Valuation Methods and Assumptions

The methods and assumptions used to estimate the fair value of the most significant financial instruments are summarized as follows:

Securities, Short-term Investments, Other Investments, Long-term Debt of CSEs and Trading Liabilities

When available, the estimated fair value of the Company’s fixed maturity securities, equity securities, trading and other securities and short-term investments are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The market standard valuation methodologies utilized include: discounted cash flow (“DCF”) methodologies, matrix pricing or other similar techniques. The inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity and management’s assumptions regarding estimated duration, liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s judgments about financial instruments.

The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Such observable inputs include benchmarking prices for similar assets in active markets, quoted prices in markets that are not active and observable yields and spreads in the market.

When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.

The estimated fair value of FVO securities held by CSEs, other investments, long-term debt of CSEs and trading liabilities is determined on a basis consistent with the methodologies described herein for securities. The Company consolidates certain securitization entities that hold securities that have been accounted for under the FVO and classified within trading and other securities.

The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings.

Mortgage Loans, Mortgage Servicing Rights (“MSRs”) and Liability Related to Securitized Reverse Residential Mortgage Loans

The Company has elected the FVO for commercial mortgage loans held by CSEs, residential mortgage loans held-for-sale, securitized reverse residential mortgage loans, MSRs and the liability related to securitized reverse residential mortgage loans. Although MSRs are not financial instruments, the Company has included them in the preceding table as a result of its election to carry them at estimated fair value. See “— Valuation Techniques and Inputs” below for a discussion of the methods and assumptions used to estimate the fair value of these financial instruments.

Derivatives

The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives and interest rate forwards to sell certain to be announced securities, or through the use of pricing models for OTC derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models.

The significant inputs to the pricing models for most OTC derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain OTC derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant inputs that are unobservable generally include references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its derivative positions using the standard swap curve which includes a spread to the risk free rate. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.

Most inputs for OTC derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

Embedded Derivatives Within Asset and Liability Host Contracts

Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees and equity or bond indexed crediting rates within certain funding agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

The Company issues and assumes certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs are embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within PABs in the consolidated balance sheets.

The fair value of these guarantees is estimated using the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk free rates.

The valuation of these guarantee liabilities includes adjustments for nonperformance risk and for a risk margin related to non-capital market inputs.

The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc.

Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.

The Company ceded the risk associated with certain of the GMIBs and GMABs previously described. These reinsurance agreements contain embedded derivatives which are included within premiums, reinsurance and other receivables in the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses) or policyholder benefits and claims depending on the statement of operations classification of the direct risk. The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.

The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as previously described in “— Securities, Short-term Investments and Other Investments.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities in the consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including an adjustment for nonperformance risk. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within PABs with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

Separate Account Assets

Separate account assets are carried at estimated fair value and reported as a summarized total on the consolidated balance sheets. The estimated fair value of separate account assets is based on the estimated fair value of the underlying assets. Assets within the Company’s separate accounts include: mutual funds, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. See “— Valuation Techniques and Inputs” below for a discussion of the methods and assumptions used to estimate the fair value of these financial instruments.

Valuation Techniques and Inputs

A description of the significant valuation techniques and inputs to the determination of estimated fair value for the more significant asset and liability classes measured at fair value on a recurring basis and categorized within Level 2 and Level 3 of the fair value hierarchy is as follows:

The Company determines the estimated fair value of its investments using primarily the market approach and the income approach. The use of quoted prices for identical assets and matrix pricing or other similar techniques are examples of market approaches, while the use of DCF methodologies is an example of the income approach. The Company attempts to maximize the use of observable inputs and minimize the use of unobservable inputs in selecting whether the market or income approach is used.

Level 2 Measurements:

Securities, Short-term Investments and Other Investments

This level includes fixed maturity securities and equity securities priced principally by independent pricing services using observable inputs. Trading and other securities, short-term investments and other investments within this level are of a similar nature and class to the Level 2 securities described below. Contractholder-directed unit-linked investments reported within trading and other securities include mutual fund interests without readily determinable fair values given prices are not published publicly. Valuation of these mutual funds is based upon quoted prices or reported net asset values (“NAVs”) provided by the fund managers, which were based on observable inputs.

U.S. corporate and foreign corporate securities.  These securities are principally valued using the market and income approaches. Valuations are based primarily on quoted prices in markets that are not active, or using matrix pricing or other similar techniques that use standard market observable inputs such as benchmark yields, spreads off benchmark yields, new issuances, issuer rating, duration, and trades of identical or comparable securities. Investment grade privately placed securities are valued using DCF methodologies using standard market observable inputs, and inputs derived from, or corroborated by, market observable data including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues that incorporate the credit quality and industry sector of the issuer. This level also includes certain below investment grade privately placed fixed maturity securities priced by independent pricing services that use observable inputs.

Structured securities comprised of RMBS, CMBS and ABS.  These securities are principally valued using the market approach and income approach. Valuation is based primarily on matrix pricing, DCF methodologies or other similar techniques using standard market inputs including spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, rating, weighted average coupon, weighted average maturity, average delinquency rates, geographic region, debt-service coverage ratios and issuance-specific information including, but not limited to: collateral type, payment terms of the underlying assets, payment priority within the tranche, structure of the security, deal performance and vintage of loans.

U.S. Treasury and agency securities.  These securities are principally valued using the market approach. Valuation is based primarily on quoted prices in markets that are not active, or using matrix pricing or other similar techniques using standard market observable inputs such as benchmark U.S. Treasury yield curve, the spread off the U.S. Treasury curve for the identical security and comparable securities that are actively traded.

Foreign government and state and political subdivision securities.  These securities are principally valued using the market approach. Valuation is based primarily on matrix pricing or other similar techniques using standard market observable inputs including benchmark U.S. Treasury or other yields, issuer ratings, broker-dealer quotes, issuer spreads and reported trades of similar securities, including those within the same sub-sector or with a similar maturity or credit rating.

Common and non-redeemable preferred stock.  These securities are principally valued using the market approach where market quotes are available but are not considered actively traded. Valuation is based principally on observable inputs including quoted prices in markets that are not considered active.

Commercial Mortgage Loans Held by CSEs

These commercial mortgage loans are principally valued using the market approach. The principal market for these commercial loan portfolios is the securitization market. The Company uses the quoted securitization market price of the obligations of the CSEs to determine the estimated fair value of these commercial loan portfolios. These market prices are determined principally by independent pricing services using observable inputs.

Mortgage Loans Held-For-Sale

Residential mortgage loans held-for-sale are principally valued using the market approach. For securitized reverse residential mortgage loans, valuation is based primarily on readily available observable pricing for securities backed by similar fixed-rate loans. For other residential mortgage loans held-for-sale, valuation is based primarily on readily available observable pricing for securities backed by similar loans. The unobservable adjustments to such prices are insignificant.

Derivative Assets and Derivative Liabilities

This level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded derivatives and interest rate forwards to sell certain to-be-announced securities included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. These derivatives are principally valued using the income approach.

Interest rate contracts.

Non-option-based — Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve and LIBOR basis curves.

Option-based — Valuations are based on option pricing models, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves and interest rate volatility.

Foreign currency contracts.

Non-option-based — Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves, currency spot rates and cross currency basis curves.

Option-based — Valuations are based on option pricing models, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves, currency spot rates, cross currency basis curves and currency volatility.

Credit contracts.

Non-option-based — Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, credit curves and recovery rates.

Equity market contracts.

Non-option-based — Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, spot equity index levels and dividend yield curves.

Option-based — Valuations are based on option pricing models, which utilize significant inputs that may include the swap yield curve, spot equity index levels, dividend yield curves and equity volatility.

Separate Account Assets

These assets are comprised of investments that are similar in nature to the securities, short-term investments, other investments and derivative assets referred to above. Also included are certain mutual funds and hedge funds without readily determinable fair values given prices are not published publicly. Valuation of the mutual funds and hedge funds is based upon quoted prices or reported NAVs provided by the fund managers.

Long-term Debt of CSEs

The estimated fair value of the long-term debt of CSEs is based on quoted prices when traded as assets in active markets or, if not available, based on market standard valuation methodologies, consistent with the Company’s methods and assumptions used to estimate the fair value of comparable fixed maturity securities.

Liability Related to Securitized Reverse Residential Mortgage Loans

The estimated fair value of the liability related to securitized reverse residential mortgage loans, is based on quoted prices when traded as assets in active markets or, if not available, based on market standard valuation methodologies consistent with the Company’s methods and assumptions used to estimate the fair value of comparable financial instruments.

Level 3 Measurements:

In general, investments classified within Level 3 use many of the same valuation techniques and inputs as described in Level 2 Measurements. However, if key inputs are unobservable, or if the investments are less liquid and there is very limited trading activity, the investments are generally classified as Level 3. The use of independent non-binding broker quotations to value investments generally indicates there is a lack of liquidity or a lack of transparency in the process to develop the valuation estimates generally causing these investments to be classified in Level 3.

Securities and Short-term Investments

This level includes fixed maturity securities and equity securities priced principally using market standard valuation methodologies, including matrix pricing and DCF methodologies, using inputs that are not market observable or cannot be derived principally from, or corroborated by, observable market data; inputs including quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2; and to a much lesser extent, independent non-binding broker quotations. Trading and other securities and short-term investments within this level are of a similar nature and class to the Level 3 securities described below; accordingly, the valuation techniques and significant market standard observable inputs used in their valuation are also similar to those described below.

U.S. corporate and foreign corporate securities.  These securities, including financial services industry hybrid securities classified within fixed maturity securities, are principally valued using the market approach. Valuations are based primarily on matrix pricing or other similar techniques that utilize unobservable inputs or inputs that cannot be derived principally from, or corroborated by, observable market data, including illiquidity premium, delta spread adjustments or spreads over below investment grade curves to reflect industry trends or specific credit-related issues; and inputs including quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2. Certain valuations are based on independent non-binding broker quotations.

Structured securities comprised of RMBS, CMBS and ABS.  These securities are principally valued using the market approach and income approach. Valuation is based primarily on matrix pricing, DCF methodologies or other similar techniques that utilize inputs that are unobservable or cannot be derived principally from, or corroborated by, observable market data including spreads over below investment grade curves to reflect industry trends on specific credit-related issues. Below investment grade securities, alternative residential mortgage loan RMBS and RMBS supported by sub-prime mortgage loans included in this level are valued based on inputs including quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2. Certain of these valuations are based on independent non-binding broker quotations.

Foreign government and state and political subdivision securities.  These securities are principally valued using the market approach. Valuation is based primarily on independent non-binding broker quotations and inputs including quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2.

Common and non-redeemable preferred stock.  These securities, including privately held securities and financial services industry hybrid securities classified within equity securities, are principally valued using the market and income approaches. Valuations are based primarily on matrix pricing, DCF methodologies or other similar techniques using inputs such as comparable credit rating and issuance structure. Certain of these securities are valued based on inputs including quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2 and independent non-binding broker quotations.

Mortgage Loans Held-for-Sale

For both securitized reverse residential mortgage loans held-for-sale and other residential mortgage loans held-for-sale, for which pricing for securities backed by similar adjustable-rate loans is not observable, the estimated fair value is determined using unobservable independent broker quotations or valuation models using significant unobservable inputs.

MSRs

MSRs, which are valued using an income approach, are carried at estimated fair value and have multiple significant unobservable inputs including assumptions regarding estimates of discount rates, loan prepayments and servicing costs. Sales of MSRs tend to occur in private transactions where the precise terms and conditions of the sales are typically not readily available and observable market valuations are limited. As such, the Company relies primarily on a discounted cash flow model to estimate the fair value of the MSRs. The model requires inputs such as type of loan (fixed vs. variable and agency vs. other), age of loan, loan interest rates and current market interest rates that are generally observable. The model also requires the use of unobservable inputs including assumptions regarding estimates of discount rates, loan prepayments and servicing costs.

Derivative Assets and Derivative Liabilities

These derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. These valuation methodologies generally use the same inputs as described in the corresponding sections above for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.

Interest rate contracts.

Non-option-based — Significant unobservable inputs may include pull through rates on interest rate lock commitments and the extrapolation beyond observable limits of the swap yield curve and LIBOR basis curves.

Option-based — Significant unobservable inputs may include the extrapolation beyond observable limits of the swap yield curve, LIBOR basis curves and interest rate volatility.

Foreign currency contracts.

Non-option-based — Significant unobservable inputs may include the extrapolation beyond observable limits of the swap yield curve, LIBOR basis curves and cross currency basis curves. Certain of these derivatives are valued based on independent non-binding broker quotations.

Option-based — Significant unobservable inputs may include currency correlation and the extrapolation beyond observable limits of the swap yield curve, LIBOR basis curves, cross currency basis curves and currency volatility.

Credit contracts.

Non-option-based — Significant unobservable inputs may include credit spreads, repurchase rates and the extrapolation beyond observable limits of the swap yield curve and credit curves. Certain of these derivatives are valued based on independent non-binding broker quotations.

Equity market contracts.

Non-option-based — Significant unobservable inputs may include the extrapolation beyond observable limits of dividend yield curves.

Option-based — Significant unobservable inputs may include the extrapolation beyond observable limits of dividend yield curves, equity volatility and unobservable correlations between model inputs. Certain of these derivatives are valued based on independent non-binding broker quotations.

Direct and Assumed Guaranteed Minimum Benefits

These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curve, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curve and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.

Reinsurance Ceded on Certain Guaranteed Minimum Benefits

These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those previously described under “Direct and Assumed Guaranteed Minimum Benefits” and also include counterparty credit spreads.

Separate Account Assets

These assets are comprised of investments that are similar in nature to the securities and derivative assets referred to above. Separate account assets within this level also include other limited partnership interests. Other limited partnership interests are valued giving consideration to the value of the underlying holdings of the partnerships and by applying a premium or discount, if appropriate, for factors such as liquidity, bid/ask spreads, the performance record of the fund manager or other relevant variables which may impact the exit value of the particular partnership interest.

Liability Related to Securitized Reverse Residential Mortgage Loans

The estimated fair value of the liability related to securitized reverse residential mortgage loans is based on quoted prices when traded as assets in less active markets or, if not available, based on market standard valuation methodologies using unobservable inputs, consistent with the Company’s methods and assumptions used to estimate the fair value of comparable financial instruments.

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Valuation Techniques	Significant Unobservable Inputs	Range			Weighted Average
Fixed maturity securities:
U.S. corporate and foreign corporate securities	•   Matrix pricing	•   Delta spread adjustments (1)	(100)	-	420		52
		•   Illiquidity premium (1)	30	-	30
		•   Spreads from below investment grade curves (1)	—	-	889		395
		•   Offered quotes (2)	—	-	136
	•   Market pricing	•   Quoted prices (2)	54	-	133		94
	•   Consensus pricing	•   Offered quotes (2)	58	-	148
Foreign government securities	•   Market pricing	•   Quoted prices (2)	43	-	155		102
	•   Consensus pricing	•   Offered quotes (2)	10	-	267
RMBS	•   Matrix pricing and DCF	•   Spreads from below investment grade curves (1)	30	-	5,493		888
	•   Market pricing	•   Quoted prices (2)	92	-	108		103
	•   Consensus pricing	•   Offered quotes (2)	59	-	106
CMBS	•   Matrix pricing and DCF	•   Spreads from below investment grade curves (1)	—	-	8,127		3,566
	•   Consensus pricing	•   Offered quotes (2)	13	-	107
ABS	•   Matrix pricing and DCF	•   Spreads from below investment grade curves (1)	404	-	8,094		1,961
	•   Market pricing	•   Quoted prices (2)	97	-	101		100
	•   Consensus pricing	•   Offered quotes (2)	16	-	108
Derivatives:
Interest rate contracts	•   Present value techniques	•   Swap yield (1)	241	-	388
Foreign currency contracts	•   Present value techniques	•   Swap yield (1)	187	-	240
	•   Consensus pricing	•   Offered quotes (3)
Credit contracts	•   Present value techniques	•   Credit spreads (1)	—	-	100
	•   Consensus pricing	•   Offered quotes (3)
Equity market contracts	•   Present value techniques or option pricing models	•   Volatility	17%	-	36%
	•   Consensus pricing	•   Offered quotes (4)
Embedded derivatives:
Direct and assumed guaranteed minimum benefits	•   Option pricing techniques	•   Mortality rates:
		Ages 0 - 40	0%	-	0.13%
		Ages 41 - 60	0.05%	-	0.88%
		Ages 61 - 115	0.26%	-	100%
		•   Lapse rates:
		Durations 1 - 10	1%	-	36%
		Durations 11 - 20	5%	-	30%
		Durations 21 - 116	5%	-	65%
		•   Utilization rates (5)	20%	-	50%
		•   Withdrawal rates	0.07%	-	20%
		•   Long-term equity volatilities	14.70%	-	40%
		•   Nonperformance risk spread	0.24%	-	2.32%

(1) For this unobservable input, range and weighted average are presented in basis points.

(2) For this unobservable input, range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par.

(3) At March 31, 2012, excluding equity market contracts, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.

(4) The Company holds certain purchased options that are valued using term structure models dependent upon an unobservable market correlation input. This input is highly specific to the particular markets referenced by the option and is subjectively estimated by derivatives broker/dealers. The Company has elected to use independent non-binding broker quotations to value these positions, which are validated against the Company’s internal models using proprietary correlation assumptions. The correlation inputs used to validate the estimated fair values of these options provided by broker quotations range from 40% to 85%.

(5) This range is attributable to certain GMIB and lifetime withdrawal benefits.

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement for other types of financial instruments classified within Level 3. These financial instruments are subject to the controls described in the above “— Valuation Process” section. Generally, equity securities, trading and other securities, short-term investments and securities included within separate account assets classified within Level 3 use the same valuation techniques and significant unobservable inputs as previously described for fixed maturity securities. This includes matrix pricing and DCF methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. Mortgage loans held-for-sale classified within Level 3 are valued using independent non-binding broker quotations and internal models such as DCF methodologies using current interest rates. MSRs, which are classified within Level 3, are valued using DCF methodologies using inputs such as discount rates, loan prepayments and servicing costs. The long-term debt of CSEs classified within Level 3 is valued using independent non-binding broker quotations and internal models including matrix pricing and DCF methodologies using current interest rates. The liability related to securitized reverse residential mortgage loans, which is classified within Level 3 is valued using quoted prices. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other types of financial instruments is similar in nature to that described below.

A description of the sensitivity of the estimated fair value to changes in the significant unobservable inputs for certain of the major asset and liability classes described above is as follows:

U.S. corporate and foreign corporate securities.  Significant spread widening in isolation will adversely impact the overall valuation, while significant spread tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation would result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations. Significant increases (decreases) in offered quotes in isolation would result in substantially higher (lower) valuations.

Foreign government securities.  Significant spread widening in isolation will adversely impact the overall valuation, while significant spread tightening will lead to substantial valuation increases. Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations. Significant increases (decreases) in offered quotes in isolation would result in substantially higher (lower) valuations.

Structured securities comprised of RMBS, CMBS and ABS.  Significant spread widening in isolation will adversely impact the overall valuation, while significant spread tightening will lead to substantial valuation increases. Significant increases (decreases) in offered quotes in isolation would result in substantially higher (lower) valuations. In general, changes in the assumptions used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

Interest rate contracts.  Significant increases (decreases) in the unobservable portion of the swap yield curve in isolation will result in substantial valuation changes.

Foreign currency contracts.  Significant increases (decreases) in the unobservable portion of the swap yield curve in isolation will result in substantial valuation changes. Significant increases (decreases) in offered quotes in isolation will result in substantially higher (lower) valuations. 

Credit contracts.  Credit contracts with significant unobservable inputs are primarily comprised of credit default swaps written by the Company. Significant credit spread widening in isolation will result in substantially higher adverse valuations, while significant spread tightening will result in substantially lower adverse valuations. Significant increases (decreases) in offered quotes in isolation will result in substantially higher (lower) valuations.

Equity market contracts.  Significant decreases in the equity volatility in isolation will adversely impact overall valuation, while significant increases in equity volatility will result in substantial valuation increases. Significant increases (decreases) in offered quotes in isolation will result in substantially higher (lower) valuations. 

Direct and assumed guaranteed minimum benefits.  For any increase (decrease) in mortality and lapse rates, the fair value of the guarantees will decrease (increase). For any increase (decrease) in utilization and volatility, the fair value of the guarantees will increase (decrease). Specifically for guaranteed minimum withdrawal benefits, for any increase (decrease) in withdrawal rates, the fair value of the guarantees will increase (decrease). Specifically for guaranteed minimum accumulation benefits and guaranteed minimum income benefits, for any increase (decrease) in withdrawal rates, the fair value of the guarantees will decrease (increase).

Transfers between Levels:

Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into and/or out of any level are assumed to occur at the beginning of the period.

Transfers between Levels 1 and 2:

During the three months ended March 31, 2012, transfers between Levels 1 and 2 were $37 million for fixed maturity securities. During the three months ended March 31, 2011, there were no transfers between Levels 1 and 2 for fixed maturity securities.

Transfers into or out of Level 3:

Transfers into and or out of Level 3 are presented in the tables which follow. Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

Transfers into Level 3 for fixed maturity securities and separate account assets were due primarily to a lack of trading activity, decreased liquidity and credit ratings downgrades (e.g., from investment grade to below investment grade) which have resulted in decreased transparency of valuations and an increased use of independent non-binding broker quotations and unobservable inputs to determine estimated fair value.

Transfers out of Level 3 for fixed maturity securities and separate account assets resulted primarily from increased transparency of both new issuances that subsequent to issuance and establishment of trading activity, became priced by independent pricing services and existing issuances that, over time, the Company was able to obtain pricing from, or corroborate pricing received from, independent pricing services with observable inputs or increases in market activity and upgraded credit ratings. With respect to derivatives, transfers out of Level 3 resulted primarily from increased transparency related to the observable portion of the swap yield curve or the observable portion of the equity volatility surface.

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3), including realized and unrealized gains (losses) of all assets and (liabilities) and realized and unrealized gains (losses) of all assets and (liabilities) still held at the end of the respective periods:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities:
	U.S. Corporate Securities			Foreign Corporate Securities			Foreign Government Securities			U.S. Treasury and Agency Securities			RMBS			CMBS			State and Political Subdivision Securities		ABS			Other Fixed Maturity Securities
	(In millions)
Three Months Ended March 31, 2012:
Balance, beginning of period	$	6,784		$	4,370		$	2,322		$	31		$	1,602		$	753		$	53	$	1,850		$	—
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		2			5			3			—			7			6			—		6			—
Net investment gains (losses)		(1	)		(41	)		(1	)		—			(1	)		(18	)		—		1			—
Net derivative gains (losses)		—			—			—			—			—			—			—		—			—
Other revenues		—			—			—			—			—			—			—		—			—
Policyholder benefits and claims		—			—			—			—			—			—			—		—			—
Other expenses		—			—			—			—			—			—			—		—			—
Other comprehensive income (loss)		2			107			34			(1	)		8			4			3		(18	)		—
Purchases (3)		730			435			256			—			794			66			26		542			—
Sales (3)		(313	)		(112	)		(141	)		(6	)		(128	)		(57	)		—		(135	)		—
Issuances (3)		—			—			—			—			—			—			—		—			—
Settlements (3)		—			—			—			—			—			—			—		—			—
Transfers into Level 3 (4)		118			44			36			—			—			8			—		—			—
Transfers out of Level 3 (4)		(17	)		(162	)		(296	)		—			(36	)		—			—		(48	)		—
Balance, end of period	$	7,305		$	4,646		$	2,213		$	24		$	2,246		$	762		$	82	$	2,198		$	—
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2012 included in earnings:
Net investment income	$	2		$	5		$	3		$	—		$	7		$	6		$	—	$	6		$	—
Net investment gains (losses)	$	(1	)	$	(30	)	$	(1	)	$	—		$	—		$	(15	)	$	—	$	—		$	—
Net derivative gains (losses)	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—		$	—
Other revenues	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—		$	—
Policyholder benefits and claims	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—		$	—
Other expenses	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity Securities:						Trading and Other Securities:
	Common Stock			Non- redeemable Preferred Stock			Actively Traded Securities		FVO General Account Securities		FVO Contractholder- directed Unit-linked Investments			Short- term Investments			Mortgage Loans  Held- for-sale			MSRs (5)
	(In millions)
Three Months Ended March 31, 2012:
Balance, beginning of period	$	281		$	438		$	—	$	23	$	1,386		$	590		$	1,414		$	666
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		1			—			—		7		17			2			—			—
Net investment gains (losses)		(1	)		(3	)		—		—		—			—			—			—
Net derivative gains (losses)		—			—			—		—		—			—			—			—
Other revenues		—			—			—		—		—			—			32			45
Policyholder benefits and claims		—			—			—		—		—			—			—			—
Other expenses		—			—			—		—		—			—			—			—
Other comprehensive income (loss)		6			28			—		—		—			2			—			—
Purchases (3)		20			—			13		—		870			213			—			—
Sales (3)		—			(17	)		—		—		(1,037	)		(100	)		—			—
Issuances (3)		—			—			—		—		—			—			277			59
Settlements (3)		—			—			—		—		—			—			(18	)		(43	)
Transfers into Level 3 (4)		15			—			—		—		4			—			12			—
Transfers out of Level 3 (4)		(54	)		—			—		—		(3	)		(245	)		(9	)		—
Balance, end of period	$	268		$	446		$	13	$	30	$	1,237		$	462		$	1,708		$	727
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2012 included in earnings:
Net investment income	$	—		$	—		$	—	$	7	$	26		$	2		$	—		$	—
Net investment gains (losses)	$	—		$	(3	)	$	—	$	—	$	—		$	—		$	—		$	—
Net derivative gains (losses)	$	—		$	—		$	—	$	—	$	—		$	—		$	—		$	—
Other revenues	$	—		$	—		$	—	$	—	$	—		$	—		$	32		$	47
Policyholder benefits and claims	$	—		$	—		$	—	$	—	$	—		$	—		$	—		$	—
Other expenses	$	—		$	—		$	—	$	—	$	—		$	—		$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Net Derivatives: (6)												Net Embedded Derivatives (7)			Separate Account Assets (8)			Long-term Debt of CSEs			Liability Related to Securitized Reverse Residential Mortgage  Loans
	Interest Rate Contracts			Foreign Currency Contracts			Credit Contracts			Equity Market Contracts
	(In millions)
Three Months Ended March 31, 2012:
Balance, beginning of period	$	300		$	44		$	1		$	889		$	(4,203	)	$	1,325		$	(116	)	$	(1,175	)
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		—			—			—			—			—			—			—			—
Net investment gains (losses)		—			—			—			—			—			55			(10	)		—
Net derivative gains (losses)		1			17			43			(508	)		1,873			—			—			—
Other revenues		(63	)		—			—			—			—			—			—			(2	)
Policyholder benefits and claims		—			—			—			16			(47	)		—			—			—
Other expenses		—			—			—			—			—			—			—			—
Other comprehensive income (loss)		(86	)		—			—			(4	)		103			—			—			—
Purchases (3)		—			—			—			—			—			139			—			—
Sales (3)		—			—			—			—			—			(143	)		—			—
Issuances (3)		—			—			(3	)		—			—			1			—			(340	)
Settlements (3)		(10	)		(7	)		(3	)		—			(139	)		(4	)		44			12
Transfers into Level 3 (4)		—			—			—			—			—			26			—			—
Transfers out of Level 3 (4)		—			—			—			—			—			(17	)		—			—
Balance, end of period	$	142		$	54		$	38		$	393		$	(2,413	)	$	1,382		$	(82	)	$	(1,505	)
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2012 included in earnings:
Net investment income	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Net investment gains (losses)	$	—		$	—		$	—		$	—		$	—		$	—		$	(10	)	$	—
Net derivative gains (losses)	$	2		$	7		$	41		$	(507)		$	1,864		$	—		$	—		$	—
Other revenues	$	3		$	—		$	—		$	—		$	—		$	—		$	—		$	(3	)
Policyholder benefits and claims	$	—		$	—		$	—		$	16		$	(46	)	$	—		$	—		$	—
Other expenses	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities:
	U.S. Corporate Securities			Foreign Corporate Securities			Foreign Government Securities			U.S. Treasury and Agency Securities			RMBS (9)			CMBS			State and Political Subdivision Securities			ABS (9)			Other Fixed Maturity Securities
	(In millions)
Three Months Ended March 31, 2011:
Balance, beginning of period	$	7,149		$	5,726		$	3,134		$	79		$	2,541		$	1,011		$	46		$	3,026		$	4
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		3			6			6			—			4			(6	)		—			10			—
Net investment gains (losses)		—			13			(14	)		—			(6	)		45			—			(8	)		—
Net derivative gains (losses)		—			—			—			—			—			—			—			—			—
Other revenues		—			—			—			—			—			—			—			—			—
Policyholder benefits and claims		—			—			—			—			—			—			—			—			—
Other expenses		—			—			—			—			—			—			—			—			—
Other comprehensive income (loss)		48			74			86			—			38			99			—			77			—
Purchases (3)		588			621			469			1			126			142			4			495			—
Sales (3)		(317	)		(646	)		(213	)		(3	)		(72	)		(497	)		—			(167	)		—
Issuances (3)		—			—			—			—			—			—			—			—			—
Settlements (3)		—			—			—			—			—			—			—			—			—
Transfers into Level 3 (4)		88			3			13			—			—			92			—			—			—
Transfers out of Level 3 (4)		(698	)		(263	)		(295	)		(1	)		(1,247	)		(95	)		(4	)		(40	)		—
Balance, end of period	$	6,861		$	5,534		$	3,186		$	76		$	1,384		$	791		$	46		$	3,393		$	4
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2011 included in earnings:
Net investment income	$	3		$	6		$	7		$	—		$	4		$	(7	)	$	—		$	10		$	—
Net investment gains (losses)	$	(2	)	$	—		$	(15	)	$	—		$	(6	)	$	45		$	—		$	(3	)	$	—
Net derivative gains (losses)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Other revenues	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Policyholder benefits and claims	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Other expenses	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity Securities:						Trading and Other Securities:
	Common Stock			Non- redeemable Preferred Stock			Actively Traded Securities		FVO General Account Securities			FVO Contractholder- directed Unit-linked Investments			Short-term Investments			Mortgage Loans Held- for-sale			MSRs (5)
	(In millions)
Three Months Ended March 31, 2011:
Balance, beginning of period	$	268		$	905		$	10	$	77		$	735		$	858		$	24		$	950
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		—			—			1		5			30			2			—			—
Net investment gains (losses)		3			—			—		—			—			(1	)		—			—
Net derivative gains (losses)		—			—			—		—			—			—			—			—
Other revenues		—			—			—		—			—			—			(2	)		58
Policyholder benefits and claims		—			—			—		—			—			—			—			—
Other expenses		—			—			—		—			—			—			—			—
Other comprehensive income (loss)		18			37			—		—			—			7			—			—
Purchases (3)		41			1			22		—			62			371			—			—
Sales (3)		(35	)		(8	)		—		(20	)		(248	)		(492	)		—			—
Issuances (3)		—			—			—		—			—			—			—			54
Settlements (3)		—			—			—		—			—			—			—			(33	)
Transfers into Level 3 (4)		71			11			7		—			129			5			5			—
Transfers out of Level 3 (4)		(7	)		—			—		—			(142	)		(8	)		(2	)		—
Balance, end of period	$	359		$	946		$	40	$	62		$	566		$	742		$	25		$	1,029
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2011 included in earnings:
Net investment income	$	—		$	—		$	1	$	8		$	(10	)	$	—		$	—		$	—
Net investment gains (losses)	$	1		$	—		$	—	$	—		$	—		$	—		$	—		$	—
Net derivative gains (losses)	$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—
Other revenues	$	—		$	—		$	—	$	—		$	—		$	—		$	(2	)	$	57
Policyholder benefits and claims	$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—
Other expenses	$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Net Derivatives: (6)
	Interest Rate Contracts			Foreign Currency Contracts			Credit Contracts			Equity Market Contracts			Net Embedded Derivatives (7)			Separate Account Assets (8)			Long-term Debt of CSEs
	(In millions)
Three Months Ended March 31, 2011:
Balance, beginning of period	$	(86	)	$	73		$	44		$	142		$	(2,438	)	$	1,983		$	(184	)
Total realized/unrealized gains (losses) included in:
Earnings: (1), (2)
Net investment income		—			—			—			(3	)		—			—			—
Net investment gains (losses)		—			—			—			—			—			50			46
Net derivative gains (losses)		8			(8	)		6			(92	)		975			—			—
Other revenues		9			—			—			—			—			—			—
Policyholder benefits and claims		—			—			—			—			(18	)		—			—
Other expenses		—			—			—			—			—			—			—
Other comprehensive income (loss)		(13	)		—			(3	)		(1	)		48			—			—
Purchases (3)		—			—			—			18			—			375			—
Sales (3)		—			—			—			—			—			(227	)		—
Issuances (3)		—			—			(4	)		—			—			—			—
Settlements (3)		—			—			—			(5	)		(105	)		(1	)		—
Transfers into Level 3 (4)		—			—			—			—			—			20			—
Transfers out of Level 3 (4)		(7	)		(26	)		—			(75	)		—			(196	)		—
Balance, end of period	$	(89	)	$	39		$	43		$	(16	)	$	(1,538	)	$	2,004		$	(138	)
Changes in unrealized gains (losses) relating to assets and liabilities still held at March 31, 2011 included in earnings:
Net investment income	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Net investment gains (losses)	$	—		$	—		$	—		$	—		$	—		$	—		$	46
Net derivative gains (losses)	$	7		$	(8	)	$	6		$	(92	)	$	968		$	—		$	—
Other revenues	$	14		$	—		$	—		$	—		$	—		$	—		$	—
Policyholder benefits and claims	$	—		$	—		$	—		$	—		$	(18	)	$	—		$	—
Other expenses	$	—		$	—		$	—		$	—		$	—		$	—		$	—

(1) Amortization of premium/discount is included within net investment income. Impairments charged to earnings on securities and certain mortgage loans are included in net investment gains (losses) while changes in the estimated fair value of certain mortgage loans and MSRs are included in other revenues. Lapses associated with net embedded derivatives are included in net derivative gains (losses).

(2) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

(3) The amount reported within purchases, sales, issuances and settlements is the purchase or issuance price and the sales or settlement proceeds based upon the actual date purchased or issued and sold or settled, respectively. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.

(4) Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and/or out of Level 3 in the same period are excluded from the rollforward.

(5) Other revenues represent the changes in estimated fair value due to changes in valuation model inputs or assumptions. For the three months ended March 31, 2012 and 2011, there was no other change in estimated fair value affecting MSRs. The additions for purchases, originations and issuances are presented within issuances and the reductions for loan payments, sales and settlements, affecting MSRs are presented within settlements.

(6) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

(7) Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(8) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income. For the purpose of this disclosure, these changes are presented within net investment gains (losses).

(9) See Note 3 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report for discussion of a reclassification from the ABS sector to the RMBS sector for securities backed by sub-prime residential mortgage loans.

Fair Value Option

Residential Mortgage Loans Held-For-Sale

The following table presents residential mortgage loans held-for-sale accounted for under the FVO at:

	March 31, 2012			December 31, 2011
	(In millions)
Unpaid principal balance	$	882		$	2,935
Excess of estimated fair value over unpaid principal balance		39			129
Carrying value at estimated fair value	$	921		$	3,064
Loans in non-accrual status	$	3		$	3
Loans more than 90 days past due	$	29		$	20
Loans in non-accrual status or more than 90 days past due, or both — difference between aggregate estimated fair value and unpaid principal balance	$	(2	)	$	(2	)

Residential mortgage loans held-for-sale accounted for under the FVO are initially measured at estimated fair value. Interest income on residential mortgage loans held-for-sale is recorded based on the stated rate of the loan and is recorded in net investment income. Gains and losses from initial measurement, subsequent changes in estimated fair value and gains or losses on sales are recognized in other revenues. Such changes in estimated fair value for these loans were due to the following:

	Three Months Ended March 31,
	2012			2011
	(In millions)
Instrument-specific credit risk based on changes in credit spreads for non-agency loans and adjustments in individual loan quality	$	(2	)	$	(1	)
Other changes in estimated fair value		170			63
Total gains (losses) recognized in other revenues	$	168		$	62

Securitized Reverse Residential Mortgage Loans

Securitized reverse residential mortgage loans accounted for under the FVO are initially measured at estimated fair value. Gains and losses from initial measurement and subsequent changes in estimated fair value are recognized in other revenues. The following table presents securitized reverse residential mortgage loans accounted for under the FVO at:

	March 31, 2012		December 31, 2011
	(In millions)
Unpaid principal balance	$	7,509	$	6,914
Excess of estimated fair value over unpaid principal balance		774		738
Carrying value at estimated fair value	$	8,283	$	7,652
Loans more than 90 days past due	$	69	$	59
Loans in non-accrual status or more than 90 days past due, or both — difference between aggregate estimated fair value and unpaid principal balance	$	1	$	—

The liability related to securitized reverse residential mortgage loans accounted for under the FVO is initially measured at estimated fair value. Gains and losses from initial measurement and subsequent changes in estimated fair value are recognized in other revenues. The following table presents the liability related to securitized reverse residential mortgage loans accounted for under the FVO at:

	March 31, 2012		December 31, 2011
	(In millions)
Contractual principal balance	$	7,509	$	6,914
Excess of estimated fair value over contractual principal balance		743		712
Carrying value at estimated fair value	$	8,252	$	7,626

Assets and Liabilities Held by CSEs

The Company has elected the FVO for the following assets and liabilities held by CSEs: commercial mortgage loans, securities and long-term debt. Information on the estimated fair value of the securities classified as trading and other securities is presented in Note 3. The following table presents these commercial mortgage loans accounted for under the FVO at:

	March 31, 2012		December 31, 2011
	(In millions)
Unpaid principal balance	$	2,899	$	3,019
Excess of estimated fair value over unpaid principal balance		125		119
Carrying value at estimated fair value	$	3,024	$	3,138

The following table presents the long-term debt accounted for under the FVO related to both the commercial mortgage loans and securities classified as trading and other securities at:

	March 31, 2012		December 31, 2011
	(In millions)
Contractual principal balance	$	2,791	$	2,954
Excess of estimated fair value over contractual principal balance		125		114
Carrying value at estimated fair value	$	2,916	$	3,068

Interest income on both commercial mortgage loans held by CSEs and securities classified as trading and other securities held by CSEs is recorded in net investment income. Interest expense on long-term debt of CSEs is recorded in other expenses. Gains and losses from initial measurement, subsequent changes in estimated fair value and gains or losses on sales of both the commercial mortgage loans and the long-term debt are recognized in net investment gains (losses). See Note 3.

Non-Recurring Fair Value Measurements

Certain assets are measured at estimated fair value on a non-recurring basis and are not included in the tables presented above. The amounts below relate to certain investments measured at estimated fair value during the period and still held at the reporting dates and which are categorized as Level 3 measurements.

	Three Months Ended March 31,
	2012							2011
	Carrying Value Prior to Measurement		Estimated Fair Value After Measurement		Net Investment Gains (Losses)			Carrying Value Prior to Measurement		Estimated Fair Value After Measurement		Net Investment Gains (Losses)
	(In millions)
Mortgage loans: (1)
Held-for-investment	$	166	$	167	$	1		$	176	$	184	$	8
Held-for-sale		320		304		(16	)		43		43		—
Mortgage loans, net	$	486	$	471	$	(15	)	$	219	$	227	$	8
Other limited partnership interests (2)	$	10	$	7	$	(3	)	$	—	$	—	$	—
Real estate joint ventures (3)	$	5	$	2	$	(3	)	$	—	$	—	$	—

(1) Mortgage loans — These impaired mortgage loans are written down to their estimated fair values which are reported as losses. Subsequent improvements in estimated fair value on previously impaired loans recorded through a reduction in the previously established valuation allowance are reported as gains. Estimated fair values for impaired mortgage loans are based on observable market prices or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, on the estimated fair value of the underlying collateral, or the present value of the expected future cash flows.

(2) Other limited partnership interests — These impaired investments were accounted for using the cost method. Impairments were recognized at estimated fair value determined from information provided in the financial statements of the underlying entities. These investments include private equity and debt funds that typically invest primarily in various strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital funds; and below investment grade debt and mezzanine debt funds. The estimated fair values of these investments have been determined using NAV data. Distributions will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next two to 10 years. Unfunded commitments for these investments were $3 million at March 31, 2012. There were no unfunded commitments for these investments at March 31, 2011.

(3) Real estate joint ventures — These impaired investments were accounted for using the cost method. Impairments were recognized at estimated fair value determined from information provided in the financial statements of the underlying entities. These investments include several real estate funds that typically invest primarily in commercial real estate. The estimated fair values of these investments have been determined using NAV data. Distributions will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next two to 10 years. Unfunded commitments for these investments were $3 million at March 31, 2012. There were no unfunded commitments for these investments at March 31, 2011.

Fair Value of Financial Instruments

The tables below exclude certain financial instruments. The excluded financial instruments are as follows: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and are excluded from the preceding three level hierarchy table. The estimated fair value of these financial instruments, which are primarily classified in Level 2, approximate carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. The table below also excludes financial instruments reported at estimated fair value on a recurring basis. See “— Recurring Fair Value Measurements.” All remaining balance sheet amounts excluded from the table below are not considered financial instruments subject to this disclosure.

The carrying values, estimated fair values and, for March 31, 2012, their corresponding placement in the fair value hierarchy, for such financial instruments, are summarized as follows:

	March 31, 2012
	Carrying Value		Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
	(In millions)
Assets:
Mortgage loans:
Held-for-investment	$	53,617	$	—	$	—	$	56,188	$	56,188
Held-for-sale		2,743		—		—		2,743		2,743
Mortgage loans, net	$	56,360	$	—	$	—	$	58,931	$	58,931
Policy loans	$	11,896	$	—	$	1,695	$	12,374	$	14,069
Real estate joint ventures	$	122	$	—	$	—	$	181	$	181
Other limited partnership interests	$	1,272	$	—	$	—	$	1,464	$	1,464
Other invested assets	$	924	$	65	$	—	$	859	$	924
Premiums, reinsurance and other receivables	$	4,484	$	—	$	447	$	4,455	$	4,902
Other assets	$	314	$	—	$	279	$	73	$	352
Liabilities:
PABs	$	150,903	$	—	$	—	$	160,074	$	160,074
Bank deposits	$	10,478	$	—	$	5,573	$	4,905	$	10,478
Long-term debt	$	20,437	$	—	$	18,422	$	4,139	$	22,561
Collateral financing arrangements	$	4,647	$	—	$	—	$	4,156	$	4,156
Junior subordinated debt securities	$	3,192	$	—	$	3,582	$	—	$	3,582
Other liabilities	$	5,965	$	—	$	3,195	$	2,773	$	5,968
Separate account liabilities	$	52,769	$	—	$	52,769	$	—	$	52,769
Commitments: (1)
Mortgage loan commitments	$	—	$	—	$	—	$	—	$	—
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments	$	—	$	—	$	44	$	—	$	44

	December 31, 2011
	Carrying Value		Estimated Fair Value
	(In millions)
Assets:
Mortgage loans:
Held-for-investment	$	53,777	$	56,422
Held-for-sale		4,462		4,462
Mortgage loans, net	$	58,239	$	60,884
Policy loans	$	11,892	$	14,213
Real estate joint ventures	$	130	$	183
Other limited partnership interests	$	1,318	$	1,656
Other invested assets	$	1,434	$	1,434
Premiums, reinsurance and other receivables	$	4,639	$	5,232
Other assets	$	310	$	308
Liabilities:
PABs	$	146,890	$	153,304
Bank deposits	$	10,507	$	10,507
Long-term debt	$	20,587	$	22,514
Collateral financing arrangements	$	4,647	$	4,136
Junior subordinated debt securities	$	3,192	$	3,491
Other liabilities	$	4,087	$	4,087
Separate account liabilities	$	49,610	$	49,610
Commitments: (1)
Mortgage loan commitments	$	—	$	3
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments	$	—	$	51

(1) Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. See Note 10 for additional information on these off-balance sheet obligations.

The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:

Mortgage Loans

The estimated fair values of these mortgage loans are determined as follows:

Mortgage loans held-for-investment. For commercial and agricultural mortgage loans, the estimated fair value was primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk. For residential mortgage loans, the estimated fair value was primarily determined from observable pricing for similar loans.

Mortgage loans held-for-sale. For these mortgage loans, estimated fair value is determined using independent non-binding broker quotations or values provided by independent valuation specialists, or, when the mortgage loan is in foreclosure or otherwise determined to be collateral dependent, the fair value of the underlying collateral is estimated using internal models similar to those used for mortgage loans held-for-investment.

Policy Loans

Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a DCF model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.

Real Estate Joint Ventures and Other Limited Partnership Interests

The amounts disclosed in the preceding tables consist of those investments accounted for using the cost method. The estimated fair values for cost method real estate joint ventures and other limited partnership interests are generally based on the Company’s share of the NAV as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.

Other Invested Assets

Other invested assets within the preceding tables are principally comprised of funds withheld, various interest-bearing assets held in foreign subsidiaries and certain amounts due under contractual indemnifications. For funds withheld and for the various interest-bearing assets held in foreign subsidiaries, the Company evaluates the specific facts and circumstances of each instrument to determine the appropriate estimated fair values. These estimated fair values were not materially different from the recognized carrying values.

Premiums, Reinsurance and Other Receivables

Premiums, reinsurance and other receivables in the preceding tables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivative positions and amounts receivable for securities sold but not yet settled.

Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on DCF methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.

The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.

Other Assets

Other assets in the preceding tables are primarily composed of a receivable for cash paid to an unaffiliated financial institution under the MetLife Reinsurance Company of Charleston (“MRC”) collateral financing arrangement as described in Note 12 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report. The estimated fair value of the receivable for the cash paid to the unaffiliated financial institution under the MRC collateral financing arrangement is determined by discounting the expected future cash flows using a discount rate that reflects the credit rating of the unaffiliated financial institution.

PABs

PABs in the preceding tables include investment contracts. Embedded derivatives on investment contracts and certain variable annuity guarantees accounted for as embedded derivatives are excluded from this caption in the preceding tables as they are separately presented in “— Recurring Fair Value Measurements.”

The investment contracts primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts. The valuation of these investment contracts is based on DCF methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.

Bank Deposits

Due to the frequency of interest rate resets on customer bank deposits held in money market accounts, the Company believes that there is minimal risk of a material change in interest rates such that the estimated fair value approximates carrying value. For time deposits, the Company has taken into consideration the sale price for the pending disposition of most of the depository business of MetLife Bank to determine the estimated fair value of bank deposits. See Note 2.

Long-term Debt, Collateral Financing Arrangements and Junior Subordinated Debt Securities

The estimated fair values of long-term debt and junior subordinated debt securities are principally valued using market standard valuation methodologies and DCF methodologies. Valuations classified as Level 2 are based primarily on quoted prices in markets that are not active or using matrix pricing or other similar techniques that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using DCF methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues. Valuations classified as Level 3 are based primarily on DCF methodologies that utilize unobservable discount rates applied to the expected future cash flows that can vary significantly based upon the specific terms of each individual arrangement. The determination of estimated fair values of collateral financing arrangements takes into account valuations obtained from the counterparties to the arrangements, as part of the collateral management process.

Capital leases, which are not required to be disclosed at estimated fair value, are excluded from the preceding tables.

Other Liabilities

Other liabilities consist primarily of interest and dividends payable, amounts due for securities purchased but not yet settled, funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements, and amounts payable under certain assumed reinsurance agreements are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.

Separate Account Liabilities

Separate account liabilities included in the preceding tables represent those balances due to policyholders under contracts that are classified as investment contracts.

Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.

Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “—Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

Mortgage Loan Commitments and Commitments to Fund Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments

The estimated fair values for mortgage loan commitments that will be held for investment and commitments to fund bank credit facilities, bridge loans and private corporate bonds that will be held for investment reflected in the above tables represents the difference between the discounted expected future cash flows using interest rates that incorporate current credit risk for similar instruments on the reporting date and the principal amounts of the commitments.