FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2015

5. FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

March 31, 2015							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting^*	Collateral			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	65	$	2,709	$	-	$	-	$	-	$	2,774
Obligations of states, municipalities and political subdivisions		-		25,579		2,256		-		-		27,835
Non-U.S. governments		716		19,139		34		-		-		19,889
Corporate debt		-		142,315		1,827		-		-		144,142
RMBS		-		20,387		17,345		-		-		37,732
CMBS		-		10,749		2,694		-		-		13,443
CDO/ABS		-		8,554		6,453		-		-		15,007
Total bonds available for sale		781		229,432		30,609		-		-		260,822
Other bond securities:
U.S. government and government sponsored entities		-		5,483		-		-		-		5,483
Obligations of states, municipalities and political subdivisions		-		76		-		-		-		76
Non-U.S. governments		-		2		-		-		-		2
Corporate debt		-		551		16		-		-		567
RMBS		-		888		1,288		-		-		2,176
CMBS		-		676		269		-		-		945
CDO/ABS		-		1,914		7,850		-		-		9,764
Total other bond securities		-		9,590		9,423		-		-		19,013
Equity securities available for sale:
Common stock		3,056		3		1		-		-		3,060
Preferred stock		25		-		-		-		-		25
Mutual funds		680		1		-		-		-		681
Total equity securities available for sale		3,761		4		1		-		-		3,766
Other equity securities		1,076		2		22		-		-		1,100
Mortgage and other loans receivable		-		-		6		-		-		6
Other invested assets		2		4,096		5,098		-		-		9,196
Derivative assets:
Interest rate contracts		1		4,806		14		-		-		4,821
Foreign exchange contracts		-		971		-		-		-		971
Equity contracts		109		7		68		-		-		184
Commodity contracts		-		-		-		-		-		-
Credit contracts		-		-		4		-		-		4
Other contracts		-		-		29		-		-		29
Counterparty netting and cash collateral		-		-		-		(2,476)		(1,912)		(4,388)
Total derivative assets		110		5,784		115		(2,476)		(1,912)		1,621
Short-term investments		566		642		-		-		-		1,208
Separate account assets		76,673		5,466		-		-		-		82,139
Total	$	82,969	$	255,016	$	45,274	$	(2,476)	$	(1,912)	$	378,871
Liabilities:
Policyholder contract deposits	$	-	$	47	$	1,835	$	-	$	-	$	1,882
Other policyholder funds		-		8		-		-		-		8

Derivative liabilities:
Interest rate contracts		-		4,073		83		-		-		4,156
Foreign exchange contracts		-		1,445		8		-		-		1,453
Equity contracts		-		87		2		-		-		89
Commodity contracts		-		6		-		-		-		6
Credit contracts		-		-		795		-		-		795
Other contracts		-		-		88		-		-		88
Counterparty netting and cash collateral		-		-		-		(2,476)		(1,460)		(3,936)
Total derivative liabilities		-		5,611		976		(2,476)		(1,460)		2,651
Long-term debt		-		4,658		186		-		-		4,844
Other liabilities		-		178		-		-		-		178
Total	$	-	$	10,502	$	2,997	$	(2,476)	$	(1,460)	$	9,563

December 31, 2014							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting^*	Collateral			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	322	$	2,670	$	-	$	-	$	-	$	2,992
Obligations of states, municipalities and political subdivisions		-		25,500		2,159		-		-		27,659
Non-U.S. governments		742		20,323		30		-		-		21,095
Corporate debt		-		142,550		1,883		-		-		144,433
RMBS		-		20,715		16,805		-		-		37,520
CMBS		-		10,189		2,696		-		-		12,885
CDO/ABS		-		7,165		6,110		-		-		13,275
Total bonds available for sale		1,064		229,112		29,683		-		-		259,859
Other bond securities:
U.S. government and government sponsored entities		130		5,368		-		-		-		5,498
Obligations of states, municipalities and political subdivisions		-		122		-		-		-		122
Non-U.S. governments		-		2		-		-		-		2
Corporate debt		-		719		-		-		-		719
RMBS		-		989		1,105		-		-		2,094
CMBS		-		708		369		-		-		1,077
CDO/ABS		-		2,751		7,449		-		-		10,200
Total other bond securities		130		10,659		8,923		-		-		19,712
Equity securities available for sale:
Common stock		3,626		2		1		-		-		3,629
Preferred stock		25		-		-		-		-		25
Mutual funds		738		3		-		-		-		741
Total equity securities available for sale		4,389		5		1		-		-		4,395
Other equity securities		1,024		25		-		-		-		1,049
Mortgage and other loans receivable		-		-		6		-		-		6
Other invested assets		2		3,742		5,650		-		-		9,394
Derivative assets:
Interest rate contracts		2		3,729		12		-		-		3,743
Foreign exchange contracts		-		839		1		-		-		840
Equity contracts		98		58		51		-		-		207
Commodity contracts		-		-		-		-		-		-
Credit contracts		-		-		4		-		-		4
Other contracts		-		-		31		-		-		31
Counterparty netting and cash collateral		-		-		-		(2,102)		(1,119)		(3,221)
Total derivative assets		100		4,626		99		(2,102)		(1,119)		1,604

Short-term investments		584		1,100		-		-		-		1,684
Separate account assets		73,939		6,097		-		-		-		80,036
Total	$	81,232	$	255,366	$	44,362	$	(2,102)	$	(1,119)	$	377,739
Liabilities:
Policyholder contract deposits	$	-	$	52	$	1,509	$	-	$	-	$	1,561
Other policyholder funds		-		8		-		-		-		8
Derivative liabilities:
Interest rate contracts		-		3,047		86		-		-		3,133
Foreign exchange contracts		-		1,482		9		-		-		1,491
Equity contracts		-		98		4		-		-		102
Commodity contracts		-		6		-		-		-		6
Credit contracts		-		-		982		-		-		982
Other contracts		-		-		90		-		-		90
Counterparty netting and cash collateral		-		-		-		(2,102)		(1,429)		(3,531)
Total derivative liabilities		-		4,633		1,171		(2,102)		(1,429)		2,273
Long-term debt		-		5,253		213		-		-		5,466
Other liabilities		34		316		-		-		-		350
Total	$	34	$	10,262	$	2,893	$	(2,102)	$	(1,429)	$	9,658

* Represents netting of derivative exposures covered by a qualifying master netting agreement.

Transfers of Level 1 and Level 2 Assets and Liabilities

Our policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market.

During the three-month periods ended March 31, 2015 and 2014, we transferred $72 million and $62 milion, respectively, of securities issued by Non-U.S. government entities from Level 1 to Level 2, as they are no longer considered actively traded. For similar reasons, during the three-month periods ended March 31, 2015 and 2014, we transferred $115 million and $103 million, respectively, of securities issued by the U.S. government and government sponsored entities from Level 1 to Level 2.

We had no material transfers from Level 2 to Level 1 during the three-month periods ended March 31, 2015 and 2014, respectively.

Changes in Level 3 Recurring Fair Value Measurements

The following tables present changes during the three-month periods ended March 31, 2015 and 2014 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets at March 31, 2015 and 2014:

				Net												Changes in
				Realized and												Unrealized Gains
				Unrealized				Purchases,								(Losses) Included
		Fair Value		Gains (Losses)		Other		Sales,		Gross		Gross		Fair Value		in Income on
		Beginning		Included		Comprehensive		Issues and		Transfers		Transfers		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Settlements, Net		in		out		of Period		at End of Period
Three Months Ended March 31, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,159	$	1	$	45	$	65	$	-	$	(14)	$	2,256	$	-
Non-U.S. governments		30		-		-		4		-		-		34		-
Corporate debt		1,883		-		17		(61)		44		(56)		1,827		-
RMBS		16,805		258		(72)		354		-		-		17,345		-
CMBS		2,696		24		10		30		-		(66)		2,694		-
CDO/ABS		6,110		33		29		402		-		(121)		6,453		-
Total bonds available for sale		29,683		316		29		794		44		(257)		30,609		-
Other bond securities:
Corporate debt		-		-		-		-		16		-		16		-
RMBS		1,105		(19)		-		204		29		(31)		1,288		(31)
CMBS		369		-		-		(100)		-		-		269		2
CDO/ABS		7,449		132		-		(238)		581		(74)		7,850		(40)
Total other bond securities		8,923		113		-		(134)		626		(105)		9,423		(69)
Equity securities available for sale:
Common stock		1		-		-		-		-		-		1		-
Total equity securities available for sale		1		-		-		-		-		-		1		-
Other equity securities		-		-		-		-		22		-		22		(3)
Mortgage and other loans receivable		6		-		-		-		-		-		6		-
Other invested assets		5,650		446		(511)		(494)		7		-		5,098		-
Total	$	44,263	$	875	$	(482)	$	166	$	699	$	(362)	$	45,159	$	(72)
Liabilities:
Policyholder contract deposits	$	(1,509)	$	(275)	$	-	$	(51)	$	-	$	-	$	(1,835)	$	(50)
Derivative liabilities, net:
Interest rate contracts		(74)		(4)		-		9		-		-		(69)		(4)
Foreign exchange contracts		(8)		1		-		(1)		-		-		(8)		1
Equity contracts		47		8		-		11		-		-		66		5
Commodity contracts		-		-		-		-		-		-		-		-
Credit contracts		(978)		147		-		40		-		-		(791)		28
Other contracts		(59)		14		2		(16)		-		-		(59)		14
Total derivative liabilities, net^(a)		(1,072)		166		2		43		-		-		(861)		44
Long-term debt^(b)		(213)		15		-		12		-		-		(186)		19
Total	$	(2,794)	$	(94)	$	2	$	4	$	-	$	-	$	(2,882)	$	13
				Net												Changes in
				Realized and												Unrealized Gains
				Unrealized				Purchases,								(Losses) Included
		Fair Value		Gains (Losses)		Other		Sales,		Gross		Gross		Fair Value		in Income on
		Beginning		Included		Comprehensive		Issues and		Transfers		Transfers		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Settlements, Net		in		out		of Period		at End of Period
Three Months Ended March 31, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions^(c)	$	1,080	$	-	$	117	$	846	$	-	$	(1)	$	2,042	$	-
Non-U.S. governments		16		-		(1)		2		-		-		17		-
Corporate debt		1,255		(3)		20		4		648		(109)		1,815		-
RMBS		14,941		244		133		557		-		(111)		15,764		-
CMBS		5,735		6		111		(50)		-		(61)		5,741		-
CDO/ABS		6,974		34		2		8		66		(474)		6,610		-
Total bonds available for sale		30,001		281		382		1,367		714		(756)		31,989		-

Other bond securities:
RMBS		937		28		-		104		-		-		1,069		16
CMBS		844		17		-		(91)		-		-		770		14
CDO/ABS		8,834		335		-		(451)		-		(220)		8,498		166
Total other bond securities		10,615		380		-		(438)		-		(220)		10,337		196
Equity securities available for sale:
Common stock		1		-		-		-		-		(1)		-		-
Total equity securities available for sale		1		-		-		-		-		(1)		-		-
Other invested assets		5,930		79		54		49		85		(207)		5,990		-
Total	$	46,547	$	740	$	436	$	978	$	799	$	(1,184)	$	48,316	$	196
Liabilities:
Policyholder contract deposits	$	(312)	$	(474)	$	(8)	$	29	$	-	$	-	$	(765)	$	(82)
Derivative liabilities, net:
Interest rate contracts		(100)		(6)		-		8		-		-		(98)		(1)
Equity contracts		49		(3)		-		(5)		47		-		88		(6)
Commodity contracts		1		-		-		-		-		-		1		-
Credit contracts		(1,280)		80		-		15		-		-		(1,185)		94
Other contracts		(109)		16		(1)		(15)		-		-		(109)		12
Total derivative liabilities, net^(a)		(1,439)		87		(1)		3		47		-		(1,303)		99
Long-term debt^(b)		(370)		(3)		-		19		(70)		21		(403)		7
Total	$	(2,121)	$	(390)	$	(9)	$	51	$	(23)	$	21	$	(2,471)	$	24

(a) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

(b) Includes guaranteed investment agreements (GIAs), notes, bonds, loans and mortgages payable.

(c) Purchases, Sales, Issues and Settlements, Net primarily reflect the effect of consolidating previously unconsolidated securitization vehicles.

Net realized and unrealized gains and losses related to Level 3 items shown above are reported in the Condensed Consolidated Statements of Income as follows:

		Net		Net Realized
		Investment		Capital		Other
(in millions)		Income	Gains (Losses)			Income		Total
Three Months Ended March 31, 2015
Bonds available for sale	$	311	$	(9)	$	14	$	316
Other bond securities		18		6		89		113
Other invested assets		68		389		(11)		446
Policyholder contract deposits		-		(275)		-		(275)
Derivative liabilities, net		19		6		141		166
Long-term debt		-		-		15		15
Three Months Ended March 31, 2014
Bonds available for sale	$	304	$	(36)	$	13	$	281
Other bond securities		51		1		328		380
Other invested assets		77		(4)		6		79
Policyholder contract deposits		-		(474)		-		(474)
Derivative liabilities, net		15		(3)		75		87
Long-term debt		-		-		(3)		(3)

The following tables present the gross components of purchases, sales, issues and settlements, net, shown above, for the three-month periods ended March 31, 2015 and 2014 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:

								Purchases,
								Sales, Issues and
(in millions)		Purchases		Sales		Settlements		Settlements, Net^(a)
Three Months Ended March 31, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	107	$	(22)	$	(20)	$	65
Non-U.S. governments		6		-		(2)		4
Corporate debt		6		(50)		(17)		(61)
RMBS		961		(22)		(585)		354
CMBS		72		(27)		(15)		30
CDO/ABS		579		(23)		(154)		402
Total bonds available for sale		1,731		(144)		(793)		794
Other bond securities:
RMBS		245		(6)		(35)		204
CMBS		-		(36)		(64)		(100)
CDO/ABS		214		(40)		(412)		(238)
Total other bond securities		459		(82)		(511)		(134)
Equity securities available for sale		-		-		-		-
Other invested assets		240		(586)		(148)		(494)
Total assets	$	2,430	$	(812)	$	(1,452)	$	166
Liabilities:
Policyholder contract deposits	$	-	$	(73)	$	22	$	(51)
Derivative liabilities, net		15		-		28		43
Long-term debt^(b)		-		-		12		12
Total liabilities	$	15	$	(73)	$	62	$	4
Three Months Ended March 31, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions^(c)	$	888	$	(5)	$	(37)	$	846
Non-U.S. governments		2		-		-		2
Corporate debt		56		(7)		(45)		4
RMBS		1,087		(15)		(515)		557
CMBS		65		(57)		(58)		(50)
CDO/ABS		330		-		(322)		8
Total bonds available for sale		2,428		(84)		(977)		1,367
Other bond securities:
Corporate debt		-		-		-		-
RMBS		141		(5)		(32)		104
CMBS		-		(6)		(85)		(91)
CDO/ABS		21		(7)		(465)		(451)
Total other bond securities		162		(18)		(582)		(438)
Equity securities available for sale		-		-		-		-
Other invested assets		296		-		(247)		49
Total assets	$	2,886	$	(102)	$	(1,806)	$	978
Liabilities:
Policyholder contract deposits	$	-	$	(12)	$	41	$	29
Derivative liabilities, net		1		-		2		3
Long-term debt^(b)		-		-		19		19
Total liabilities	$	1	$	(12)	$	62	$	51

(a) There were no issuances during the three-month periods ended March 31, 2015 and 2014, respectively.

(b) Includes GIAs, notes, bonds, loans and mortgages payable.

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at March 31, 2015 and 2014 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

We record transfers of assets and liabilities into or out of Level 3 classification at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. As a result, the Net realized and unrealized gains (losses) included in income or other comprehensive income as shown in the table above excludes $18 million and $23 million of net gains related to assets and liabilities transferred into Level 3 during the three-month periods ended March 31, 2015 and 2014, respectively, and includes $3 million and $23 million of net gains related to assets and liabilities transferred out of Level 3 during the three-month periods ended March 31, 2015 and 2014, respectively.

Transfers of Level 3 Assets

During the three-month periods ended March 31, 2015 and 2014, transfers into Level 3 assets primarily included certain investments in CDO/ABS and private placement corporate debt. The transfers of investments in CDO/ABS into Level 3 assets were due to decreases in market transparency and liquidity for individual security types. Transfers of investments in private placement corporate debt into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity.

During the three-month periods ended March 31, 2015 and 2014, transfers out of Level 3 assets primarily related to certain investments in corporate debt, RMBS, CDO/ABS, and investments in hedge funds. Transfers of certain investments in corporate debt, RMBS, and CDO/ABS out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. The transfers of certain hedge fund investments out of Level 3 assets were primarily the result of easing of certain fund-imposed redemption restrictions.

Transfers of Level 3 Liabilities

There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three-month periods ended March 31, 2015 and 2014, respectively.

Quantitative Information About Level 3 Fair Value Measurements

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and includes only those instruments for which information about the inputs is reasonably available to us, such as data from third-party valuation service providers and from internal valuation models. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:

	Fair Value at
	March 31,		Valuation		Range
(in millions)	2015		Technique	Unobservable Input	(Weighted Average)
Assets:

Obligations of states,	$	1,263	Discounted cash flow	Yield^(b)	3.78% - 4.46% (4.12%)
municipalities and
political subdivisions

Corporate debt		1,085	Discounted cash flow	Yield^(b)	3.77% - 8.21% (5.99%)


RMBS		18,003	Discounted cash flow	Constant prepayment rate^(a)(c)	0.76% - 9.06% (4.91%)
				Loss severity^(a)(c)	46.57% - 80.00% (63.29%)
				Constant default rate^(a)(c)	3.56% - 9.28% (6.42%)
				Yield^(c)	2.79% - 6.29% (4.54%)

Certain CDO/ABS		5,259	Discounted cash flow	Constant prepayment rate^(a)(c)	6.30% - 12.00% (8.70%)
				Loss severity^(a)(c)	43.90% - 58.50% (51.40%)
				Constant default rate^(a)(c)	2.50% - 14.30% (7.70%)
				Yield^(c)	4.60% - 8.70% (6.90%)

CMBS		2,583	Discounted cash flow	Yield^(b)	0.00% - 17.56% (5.88%)

CDO/ABS - DIB			Binomial Expansion	Recovery rate^(b)	5.00% - 33.00% (21.00%)
		310	Technique (BET)	Diversity score^(b)	3 - 26 (12)
				Weighted average life^(b)	0.27 - 10.40 years (4.97 years)
Liabilities:

Policyholder contract
deposits

GMWB		1,121	Discounted cash flow	Equity implied volatility^(b)	6.00% - 39.00%^(d)
				Base lapse rate^(b)	1.00% - 40.00%^(d)
				Dynamic lapse rate^(b)	0.20% - 60.00%^(d)
				Mortality rate^(b)	0.10% - 35.00%^(d)
				Utilization rate^(b)	0.50% - 30.00%^(d)

Index Annuities		361	Discounted cash flow	Lapse rates	0.75% - 66.00%^(d)
				Mortality rates	0.02% - 44.06%^(d)


Index Life	291	Discounted cash flow	Equity implied volatility	10.00% to 25.00%^(d)
			Base lapse rate	2.00% to 19.00%^(d)
			Mortality rates	0.00% to 20.00%^(d)

Total derivative
liabilities, net	554	BET	Recovery rate^(b)	8.00% - 23.00% (11.00%)
			Diversity score^(b)	9 - 22 (14)
			Weighted average life^(b)	3.09 - 10.40 years (7.12 years)


		Fair Value at
		December 31,	Valuation		Range
(in millions)		2014	Technique	Unobservable Input	(Weighted Average )
Assets:

Obligations of states,	$	1,178	Discounted cash flow	Yield^(b)	3.9% - 4.62% (4.26%)
municipalities and
political subdivisions

Corporate debt		1,145	Discounted cash flow	Yield^(b)	3.46% - 8.75% (6.10%)


RMBS		17,353	Discounted cash flow	Constant prepayment rate^(a)(c)	0.59% - 9.35% (4.97%)
				Loss severity^(a)(c)	46.04% - 79.56% (62.80%)
				Constant default rate^(a)(c)	3.67% - 9.96% (6.82%)
				Yield^(c)	2.67% - 6.64% (4.65%)

Certain CDO/ABS		5,282	Discounted cash flow	Constant prepayment rate^(a)(c)	6.40% - 12.80% (9.20%)
				Loss severity^(a)(c)	42.90% - 60.30% (51.90%)
				Constant default rate^(a)(c)	2.50% - 14.70% (7.80%)
				Yield^(c)	4.70% - 9.70% (7.10%)

CMBS		2,687	Discounted cash flow	Yield^(b)	0.00% - 17.29% (6.06%)

CDO/ABS - DIB			Binomial Expansion	Recovery rate^(b)	7.00% - 36.00% (21.00%)
		279	Technique (BET)	Diversity score^(b)	5 - 27 (12)
				Weighted average life^(b)	0.25 - 10.49 years (3.93 years)
Liabilities:

Policyholder contract
deposits

GMWB		890	Discounted cash flow	Equity implied volatility^(b)	6.00% - 39.00%^(d)
				Base lapse rate^(b)	1.00% - 40.00%^(d)
				Dynamic lapse rate^(b)	0.20% - 60.00%^(d)
				Mortality rate^(b)	0.10% - 35.00%^(d)
				Utilization rate^(b)	0.50% - 30.00%^(d)

Index Annuities		294	Discounted cash flow	Lapse rates	0.75% - 66%^(d)
				Mortality rates	0.02% - 44.06%^(d)

Index Life	259	Discounted cash flow	Equity implied volatility	10.00% to 25.00%^(d)
			Base lapse rate	2.00% to 19.00%^(d)
			Mortality rate	0.00% to 20.00%^(d)

Total derivative
liabilities, net	791	BET	Recovery rate^(b)	5.00% - 23.00% (13.00%)
			Diversity score^(b)	8 - 25 (13)
			Weighted average life^(b)	2.67 - 10.49 years (4.65 years)

(a) The unobservable inputs and ranges for the constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us because there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points.

(b) Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.

(d) Represents actual maximum and minimum, not weighted average rates.

The ranges of reported inputs for Corporate debt, RMBS, CDO/ABS, and CMBS valued using a discounted cash flow technique consist of plus/minus one standard deviation in either direction from the value-weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these investments.

Sensitivity to Changes in Unobservable Inputs

We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following is a general description of sensitivities of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. The effect of a change in a particular assumption in the sensitivity analysis below is considered independently of changes in any other assumptions. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply.

Obligations of States, Municipalities and Political Subdivisions

The significant unobservable input used in fair value measurement of certain investments in obligations of states, municipalities and political subdivisions is yield. In general, increases in the yield would decrease the fair value of investments in obligations of states, municipalities and political subdivisions.

Corporate Debt

Corporate debt securities included in Level 3 are primarily private placement issuances that are not traded in active markets or that are subject to transfer restrictions. Fair value measurements consider illiquidity and non-transferability. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discount rates based on credit spreads, yields or price levels of publicly-traded debt of the issuer or other comparable securities, considering illiquidity and structure. The significant unobservable input used in the fair value measurement of corporate debt is the yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. In addition, the migration in credit quality of a given security generally has a corresponding effect on the fair value measurement of the security. For example, a downward migration of credit quality would increase spreads. Holding U.S. Treasury rates constant, an increase in corporate credit spreads would decrease the fair value of corporate debt.

RMBS and Certain CDO/ABS

The significant unobservable inputs used in fair value measurements of RMBS and certain CDO/ABS valued by third-party valuation service providers are constant prepayment rates (CPR), loss severity, constant default rates (CDR), and yield. A change in the assumptions used for the probability of default will generally be accompanied by a corresponding change in the assumption used for the loss severity and an inverse change in the assumption used for prepayment rates. In general, increases in CPR, loss severity, CDR, and yield, in isolation, would result in a decrease in the fair value measurement. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship between the directional change of each input is not usually linear.

CMBS

The significant unobservable input used in fair value measurements for CMBS is the yield. Prepayment assumptions for each mortgage pool are factored into the yield. CMBS generally feature a lower degree of prepayment risk than RMBS because commercial mortgages generally contain a penalty for prepayment. In general, increases in the yield would decrease the fair value of CMBS.

CDO/ABS – DIB

The significant unobservable inputs used for certain CDO/ABS securities valued using the BET are recovery rates, diversity score, and the weighted average life of the portfolio. An increase in recovery rates and diversity score will increase the fair value of the portfolio. An increase in the weighted average life will decrease the fair value.

Policyholder contract deposits

Embedded derivatives within Policyholder contract deposits relate to guaranteed minimum withdrawal benefits (GMWB) within variable annuity products and certain enhancements to interest crediting rates based on market indices within equity-indexed annuities and guaranteed investment contracts (GICs). GMWB represents our largest exposure of these embedded derivatives, although the carrying value of the liability fluctuates based on the performance of the equity markets and therefore, at a point in time, can be low relative to the exposure. The principal unobservable input used for GMWBs and embedded derivatives in equity-indexed annuities measured at fair value is equity implied volatility. For GMWBs, other significant unobservable inputs include base and dynamic lapse rates, mortality rates, and utilization rates. Lapse, mortality, and utilization rates may vary significantly depending upon age groups and duration. In general, increases in volatility and utilization rates will increase the fair value of the liability associated with GMWB, while increases in lapse rates and mortality rates will decrease the fair value of the liability.

Derivative liabilities – credit contracts

The significant unobservable inputs used for Derivative liabilities – credit contracts are recovery rates, diversity scores, and the weighted average life of the portfolio. AIG non-performance risk is also considered in the measurement of the liability.

An increase in recovery rates and diversity score will decrease the fair value of the liability. An increase in the weighted average life will increase the fair value measurement of the liability.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value Per Share

The following table includes information related to our investments in certain other invested assets, including private equity funds and hedge funds that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis, we use the net asset value per share as a practical expedient to measure fair value.

		March 31, 2015				December 31, 2014
			Fair Value Using Net Asset Value Per Share (or its equivalent)				Fair Value Using Net Asset Value Per Share (or its equivalent)

					Unfunded				Unfunded
(in millions)	Investment Category Includes				Commitments				Commitments
Investment Category
Private equity funds:
Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage	$	2,123	$	461	$	2,275	$	450

Real Estate / Infrastructure	Investments in real estate properties and infrastructure positions, including power plants and other energy generating facilities		370		205		384		227

Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company		133		30		121		26

Distressed	Securities of companies that are in default, under bankruptcy protection, or troubled		161		43		164		43

Other	Includes multi-strategy, mezzanine and other strategies		248		209		216		234
Total private equity funds			3,035		948		3,160		980
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		1,182		-		1,109		-

Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		2,750		1		2,428		1

Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		531		-		498		-

Distressed	Securities of companies that are in default, under bankruptcy protection or troubled		736		23		731		5

Emerging markets	Investments in the financial markets of developing countries		339		-		308		-

Other	Includes multi-strategy, relative value and other strategies		173		-		125		-
Total hedge funds			5,711		24		5,199		6
Total		$	8,746	$	972	$	8,359	$	986

Private equity fund investments included above are not redeemable, as distributions from the funds will be received when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one- or two-year increments. At March 31, 2015, assuming average original expected lives of 10 years for the funds, 85 percent of the total fair value using net asset value per share (or its equivalent) presented above would have expected remaining lives of three years or less, 5 percent between four and six years and 10 percent between seven and 10 years.

The hedge fund investments included above are generally redeemable monthly (14 percent), quarterly (48 percent), semi-annually (15 percent) and annually (23 percent), with redemption notices ranging from one day to 180 days. At March 31, 2015, however, investments representing approximately 44 percent of the total fair value of the hedge fund investments cannot be redeemed, either in whole or in part, because the investments include various contractual restrictions. The majority of these contractual restrictions, which may have been put in place at the fund’s inception or thereafter, have pre-defined end dates and are generally expected to be lifted by the end of 2016. The fund investments for which redemption is restricted only in part generally relate to certain hedge funds that hold at least one investment that the fund manager deems to be illiquid.

Fair Value Option

The following table presents the gains and losses recorded related to the eligible instruments for which we elected the fair value option:

Three Months Ended March 31,	Gain (Loss)
(in millions)		2015		2014
Assets:
Mortgage and other loans receivable	$	-	$	-
Bond and equity securities		141		666
Alternative investments^(a)		145		154
Other, including Short-term investments		2		3
Liabilities:
Long-term debt^(b)		(76)		(74)
Other liabilities		(3)		(4)
Total gain	$	209	$	745

(a) Includes hedge funds, private equity funds and other investment partnerships.

(b) Includes GIAs, notes, bonds, loans and mortgages payable.

We recognized gains of $6 million and losses of $11 million during the three-month periods ended March 31, 2015 and 2014, respectively, attributable to the observable effect of changes in credit spreads on our own liabilities for which the fair value option was elected. We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.

The following table presents the difference between fair values and the aggregate contractual principal amounts of mortgage and other loans receivable and long-term debt for which the fair value option was elected:

	March 31, 2015						December 31, 2014
			Outstanding						Outstanding
(in millions)	Fair Value		Principal Amount		Difference		Fair Value		Principal Amount		Difference
Assets:
Mortgage and other loans receivable	$	6	$	4	$	2	$	6	$	4	$	2
Liabilities:
Long-term debt^*	$	4,844	$	3,541	$	1,303	$	5,466	$	4,101	$	1,365

* Includes GIAs, notes, bonds, loans and mortgages payable.

Fair Value Measurements on a Non-Recurring Basis

The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:

		Assets at Fair Value							Impairment Charges
		Non-Recurring Basis							Three Months Ended March 31,
(in millions)		Level 1		Level 2		Level 3		Total		2015		2014
March 31, 2015
Other investments	$	-	$	-	$	1,058	$	1,058	$	25	$	49
Investments in life settlements		-		-		308		308		70		42
Other assets		-		-		9		9		4		1
Total	$	-	$	-	$	1,375	$	1,375	$	99	$	92
December 31, 2014
Other investments	$	-	$	-	$	790	$	790
Investments in life settlements		-		-		537		537
Other assets		-		-		1		1
Total	$	-	$	-	$	1,328	$	1,328

Fair Value Information About Financial Instruments Not Measured at Fair Value

The following table presents the carrying value and estimated fair value of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	Estimated Fair Value									Carrying
(in millions)		Level 1		Level 2		Level 3		Total		Value
March 31, 2015
Assets:
Mortgage and other loans receivable	$	-	$	424	$	26,730	$	27,154	$	25,307
Other invested assets		-		549		2,912		3,461		4,324
Short-term investments		-		10,753		-		10,753		10,753
Cash		1,823		-		-		1,823		1,823
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		253		120,740		120,993		106,646
Other liabilities		-		1,300		-		1,300		1,300
Long-term debt		-		25,928		3,807		29,735		27,155
December 31, 2014
Assets:
Mortgage and other loans receivable	$	-	$	449	$	26,157	$	26,606	$	24,984
Other invested assets		-		593		2,882		3,475		4,352
Short-term investments		-		9,559		-		9,559		9,559
Cash		1,758		-		-		1,758		1,758
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		244		119,268		119,512		106,395
Other liabilities		-		1,120		-		1,120		1,120
Long-term debt		-		24,749		2,932		27,681		25,751

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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