FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2015

4. 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:

June 30, 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	$	1	$	2,513	$	-	$	-	$	-	$	2,514
Obligations of states, municipalities and political subdivisions		-		25,482		2,180		-		-		27,662
Non-U.S. governments		648		18,468		33		-		-		19,149
Corporate debt		-		138,745		2,118		-		-		140,863
RMBS		-		19,151		17,097		-		-		36,248
CMBS		-		10,845		2,677		-		-		13,522
CDO/ABS		-		9,037		6,071		-		-		15,108
Total bonds available for sale		649		224,241		30,176		-		-		255,066
Other bond securities:
U.S. government and government sponsored entities		176		3,639		-		-		-		3,815
Obligations of states, municipalities and political subdivisions		-		75		-		-		-		75
Non-U.S. governments		-		2		-		-		-		2
Corporate debt		-		436		16		-		-		452
RMBS		-		873		1,337		-		-		2,210
CMBS		-		644		223		-		-		867
CDO/ABS		-		1,751		7,426		-		-		9,177
Total other bond securities		176		7,420		9,002		-		-		16,598
Equity securities available for sale:
Common stock		3,843		8		-		-		-		3,851
Preferred stock		25		-		-		-		-		25
Mutual funds		877		2		-		-		-		879
Total equity securities available for sale		4,745		10		-		-		-		4,755
Other equity securities		1,301		-		22		-		-		1,323
Mortgage and other loans receivable		-		-		6		-		-		6
Other invested assets		2		4,312		5,075		-		-		9,389
Derivative assets:
Interest rate contracts		6		3,192		11		-		-		3,209
Foreign exchange contracts		-		675		-		-		-		675
Equity contracts		84		10		64		-		-		158
Commodity contracts		-		-		-		-		-		-
Credit contracts		-		-		4		-		-		4
Other contracts		-		-		30		-		-		30
Counterparty netting and cash collateral		-		-		-		(1,594)		(1,226)		(2,820)
Total derivative assets		90		3,877		109		(1,594)		(1,226)		1,256
Short-term investments		1,036		1,245		-		-		-		2,281
Separate account assets		76,833		5,302		-		-		-		82,135
Total	$	84,832	$	246,407	$	44,390	$	(1,594)	$	(1,226)	$	372,809

Liabilities:
Policyholder contract deposits	$	-	$	36	$	1,232	$	-	$	-	$	1,268
Other policyholder funds		-		8		-		-		-		8
Derivative liabilities:
Interest rate contracts		-		2,389		73		-		-		2,462
Foreign exchange contracts		-		1,232		7		-		-		1,239
Equity contracts		-		105		1		-		-		106
Commodity contracts		-		6		-		-		-		6
Credit contracts		-		-		555		-		-		555
Other contracts		-		2		46		-		-		48
Counterparty netting and cash collateral		-		-		-		(1,594)		(1,276)		(2,870)
Total derivative liabilities		-		3,734		682		(1,594)		(1,276)		1,546
Long-term debt		-		4,076		193		-		-		4,269
Other liabilities		120		164		-		-		-		284
Total	$	120	$	8,018	$	2,107	$	(1,594)	$	(1,276)	$	7,375

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- and six-month periods ended June 30, 2015, we transferred $190 million and $262 million, 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- and six-month periods ended June 30, 2015, we transferred $65 million and $180 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- and six-month periods ended June 30, 2015.

During the three- and six-month periods ended June 30, 2014, we transferred $236 million and $298 million, 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 six-month period ended June 30, 2014, we transferred $103 million of securities issued by the U.S. government and government sponsored entities from Level 1 to Level 2. There were no material transfers of securities issued by the U.S. government or government-sponsored entities from Level 1 to Level 2 during the three-month period ended June 30, 2014. We had no material transfers from Level 2 to Level 1 during the three- and six-month periods ended June 30, 2014.

Changes in Level 3 Recurring Fair Value Measurements

The following tables present changes during the three- and six-month periods ended June 30, 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 June 30, 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 June 30, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,256	$	-	$	(124)	$	93	$	-	$	(45)	$	2,180	$	-
Non-U.S. governments		34		-		(1)		-		-		-		33		-
Corporate debt		1,827		14		(50)		(85)		412		-		2,118		-
RMBS		17,345		281		(99)		(430)		-		-		17,097		-
CMBS		2,694		22		(40)		17		-		(16)		2,677		-
CDO/ABS		6,453		97		(196)		(283)		-		-		6,071		-
Total bonds available for sale		30,609		414		(510)		(688)		412		(61)		30,176		-
Other bond securities:
Corporate debt		16		-		-		-		-		-		16		-
RMBS		1,288		45		-		16		15		(27)		1,337		31
CMBS		269		8		-		(54)		-		-		223		1
CDO/ABS		7,850		265		-		(688)		-		(1)		7,426		93
Total other bond securities		9,423		318		-		(726)		15		(28)		9,002		125
Equity securities available for sale:
Common stock		1		2		-		(3)		-		-		-		-
Total equity securities available for sale		1		2		-		(3)		-		-		-		-
Other equity securities		22		-		-		-		-		-		22		-
Mortgage and other loans receivable		6		-		-		-		-		-		6		-
Other invested assets		5,098		81		(38)		(92)		91		(65)		5,075		-
Total	$	45,159	$	815	$	(548)	$	(1,509)	$	518	$	(154)	$	44,281	$	125
Liabilities:
Policyholder contract deposits	$	(1,835)	$	736	$	-	$	(133)	$	-	$	-	$	(1,232)	$	110
Derivative liabilities, net:
Interest rate contracts		(69)		4		-		3		-		-		(62)		3
Foreign exchange contracts		(8)		2		-		(1)		-		-		(7)		1
Equity contracts		66		(2)		-		(1)		-		-		63		(3)
Commodity contracts		-		-		-		-		-		-		-		-
Credit contracts		(791)		13		-		227		-		-		(551)		22
Other contracts		(59)		59		(2)		(14)		-		-		(16)		33
Total derivative liabilities, net^(a)		(861)		76		(2)		214		-		-		(573)		56
Long-term debt^(b)		(186)		(13)		-		6		-		-		(193)		(6)
Total	$	(2,882)	$	799	$	(2)	$	87	$	-	$	-	$	(1,998)	$	160


				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^(a)		in Income		Income (Loss)		Settlements, Net		In		Out		of Period		at End of Period
Six Months Ended June 30, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,159	$	1	$	(79)	$	158	$	-	$	(59)	$	2,180	$	-
Non-U.S. governments		30		-		(1)		4		-		-		33		-
Corporate debt		1,883		14		(33)		(146)		456		(56)		2,118		-
RMBS		16,805		539		(171)		(76)		-		-		17,097		-
CMBS		2,696		46		(30)		47		-		(82)		2,677		-
CDO/ABS		6,110		130		(167)		119		-		(121)		6,071		-
Total bonds available for sale		29,683		730		(481)		106		456		(318)		30,176		-
Other bond securities:
Corporate debt		-		-		-		-		16		-		16		(1)
RMBS		1,105		26		-		220		44		(58)		1,337		1
CMBS		369		8		-		(154)		-		-		223		8
CDO/ABS		7,449		397		-		(926)		581		(75)		7,426		51
Total other bond securities		8,923		431		-		(860)		641		(133)		9,002		59
Equity securities available for sale:
Common stock		1		2		-		(3)		-		-		-		-
Total equity securities available for sale		1		2		-		(3)		-		-		-		-
Other equity securities		-		-		-		-		22		-		22		-
Mortgage and other loans receivable		6		-		-		-		-		-		6		-
Other invested assets		5,650		527		(549)		(586)		98		(65)		5,075		-
Total	$	44,263	$	1,690	$	(1,030)	$	(1,343)	$	1,217	$	(516)	$	44,281	$	59
Liabilities:
Policyholder contract deposits	$	(1,509)	$	461	$	-	$	(184)	$	-	$	-	$	(1,232)	$	40
Derivative liabilities, net:
Interest rate contracts		(74)		-		-		12		-		-		(62)		(1)
Foreign exchange contracts		(8)		3		-		(2)		-		-		(7)		3
Equity contracts		47		6		-		10		-		-		63		2
Commodity contracts		-		-		-		-		-		-		-		-
Credit contracts		(978)		160		-		267		-		-		(551)		50
Other contracts		(59)		73		-		(30)		-		-		(16)		48
Total derivative liabilities, net^(a)		(1,072)		242		-		257		-		-		(573)		102
Long-term debt^(b)		(213)		2		-		18		-		-		(193)		13
Total	$	(2,794)	$	705	$	-	$	91	$	-	$	-	$	(1,998)	$	155

				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 June 30, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,042	$	-	$	74	$	7	$	-	$	(132)	$	1,991	$	-
Non-U.S. governments		17		-		-		4		4		-		25		-
Corporate debt		1,815		9		33		(71)		707		(297)		2,196		-
RMBS		15,764		251		127		67		119		-		16,328		-
CMBS		5,741		17		129		(7)		69		(32)		5,917		-
CDO/ABS		6,610		18		1		726		103		(27)		7,431		-
Total bonds available for sale		31,989		295		364		726		1,002		(488)		33,888		-
Other bond securities:
RMBS		1,069		23		-		(32)		2		-		1,062		2
CMBS		770		21		-		(40)		6		-		757		19
CDO/ABS		8,498		334		-		(436)		1		-		8,397		122
Total other bond securities		10,337		378		-		(508)		9		-		10,216		143
Equity securities available for sale:
Common stock		-		-		-		-		-		-		-		-
Preferred stock		-		-		-		-		-		-		-		-
Total equity securities available for sale		-		-		-		-		-		-		-		-
Mortgage and other loans receivable		-		-		-		6		-		-		6		-
Other invested assets		5,990		8		(5)		(15)		-		(154)		5,824		-
Total	$	48,316	$	681	$	359	$	209	$	1,011	$	(642)	$	49,934	$	143
Liabilities:
Policyholder contract deposits	$	(765)	$	(58)	$	(16)	$	(3)	$	-	$	-	$	(842)	$	(37)
Derivative liabilities, net:
Interest rate contracts		(98)		8		-		23		-		-		(67)		8
Foreign exchange contracts		-		3		-		(12)		-		-		(9)		3
Equity contracts		88		11		-		(8)		-		-		91		11
Commodity contracts		1		-		-		-		-		-		1		-
Credit contracts		(1,185)		75		-		25		-		-		(1,085)		69
Other contracts		(109)		18		48		(10)		-		-		(53)		16
Total derivatives liabilities, net^(a)		(1,303)		115		48		18		-		-		(1,122)		107
Long-term debt^(b)		(403)		(5)		-		14		-		-		(394)		(4)
Total	$	(2,471)	$	52	$	32	$	29	$	-	$	-	$	(2,358)	$	66


				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
Six Months Ended June 30, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions^(c)	$	1,080	$	-	$	191	$	853	$	-	$	(133)	$	1,991	$	-
Non-U.S. governments		16		-		(1)		6		4		-		25		-
Corporate debt		1,255		6		53		(67)		1,355		(406)		2,196		-
RMBS		14,941		495		260		624		119		(111)		16,328		-
CMBS		5,735		23		240		(57)		69		(93)		5,917		-
CDO/ABS		6,974		52		3		734		169		(501)		7,431		-
Total bonds available for sale		30,001		576		746		2,093		1,716		(1,244)		33,888		-
Other bond securities:
RMBS		937		51		-		72		2		-		1,062		17
CMBS		844		38		-		(131)		6		-		757		32
CDO/ABS		8,834		669		-		(887)		1		(220)		8,397		286
Total other bond securities		10,615		758		-		(946)		9		(220)		10,216		335
Equity securities available for sale:
Common stock		1		-		-		-		-		(1)		-		-
Preferred stock		-		-		-		-		-		-		-		-
Total equity securities available for sale		1		-		-		-		-		(1)		-		-
Mortgage and other loans receivable		-		-		-		6		-		-		6		-
Other invested assets		5,930		87		49		34		85		(361)		5,824		-
Total	$	46,547	$	1,421	$	795	$	1,187	$	1,810	$	(1,826)	$	49,934	$	335
Liabilities:
Policyholder contract deposits	$	(312)	$	(532)	$	(24)	$	26	$	-	$	-	$	(842)	$	(120)
Derivative liabilities, net:
Interest rate contracts		(100)		2		-		32		-		(1)		(67)		4
Foreign exchange contracts		-		3		-		(12)		-		-		(9)		4
Equity contracts		49		8		-		(14)		48		-		91		5
Commodity contracts		1		-		-		-		-		-		1		-
Credit contracts		(1,280)		154		-		41		-		-		(1,085)		164
Other contracts		(109)		35		47		(26)		-		-		(53)		27
Total derivatives liabilities, net^(a)		(1,439)		202		47		21		48		(1)		(1,122)		204
Long-term debt^(b)		(370)		(8)		-		33		(70)		21		(394)		5
Total	$	(2,121)	$	(338)	$	23	$	80	$	(22)	$	20	$	(2,358)	$	89

(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 June 30, 2015
Bonds available for sale	$	311	$	10	$	93	$	414
Other bond securities		23		(3)		298		318
Equity securities available for sale		-		2		-		2
Other invested assets		18		(12)		75		81
Policyholder contract deposits		-		736		-		736
Derivative liabilities, net		(19)		(1)		96		76
Long-term debt		-		-		(13)		(13)
Three Months Ended June 30, 2014
Bonds available for sale	$	298	$	(15)	$	12	$	295
Other bond securities		49		1		328		378
Equity securities available for sale		-		-		-		-
Other invested assets		12		(9)		5		8
Policyholder contract deposits		-		(58)		-		(58)
Derivative liabilities, net		16		8		91		115
Long-term debt		-		-		(5)		(5)
Six Months Ended June 30, 2015
Bonds available for sale	$	622	$	1	$	107	$	730
Other bond securities		41		3		387		431
Equity securities available for sale		-		2		-		2
Other invested assets		86		377		64		527
Policyholder contract deposits		-		461		-		461
Derivative liabilities, net		-		5		237		242
Long-term debt		-		-		2		2
Six Months Ended June 30, 2014
Bonds available for sale	$	602	$	(51)	$	25	$	576
Other bond securities		100		2		656		758
Equity securities available for sale		-		-		-		-
Other invested assets		89		(13)		11		87
Policyholder contract deposits		-		(532)		-		(532)
Derivative liabilities, net		31		5		166		202
Long-term debt		-		-		(8)		(8)

The following tables present the gross components of purchases, sales, issues and settlements, net, shown above, for the three- and six-month periods ended June 30, 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 June 30, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	116	$	-	$	(23)	$	93
Non-U.S. governments		2		-		(2)		-
Corporate debt		182		(10)		(257)		(85)

RMBS		446		(143)		(733)		(430)
CMBS		70		-		(53)		17
CDO/ABS		282		(178)		(387)		(283)
Total bonds available for sale		1,098		(331)		(1,455)		(688)
Other bond securities:
RMBS		64		(4)		(44)		16
CMBS		-		(43)		(11)		(54)
CDO/ABS		12		(331)		(369)		(688)
Total other bond securities		76		(378)		(424)		(726)
Equity securities available for sale		-		(2)		(1)		(3)
Other invested assets		64		(1)		(155)		(92)
Total assets	$	1,238	$	(712)	$	(2,035)	$	(1,509)
Liabilities:
Policyholder contract deposits	$	-	$	(112)	$	(21)	$	(133)
Derivative liabilities, net		2		-		212		214
Long-term debt^(b)		-		-		6		6
Total liabilities	$	2	$	(112)	$	197	$	87
Three Months Ended June 30, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	48	$	(27)	$	(14)	$	7
Non-U.S. governments		5		-		(1)		4
Corporate debt		63		(1)		(133)		(71)
RMBS		665		(11)		(587)		67
CMBS		27		-		(34)		(7)
CDO/ABS		892		(2)		(164)		726
Total bonds available for sale		1,700		(41)		(933)		726
Other bond securities:
RMBS		21		(14)		(39)		(32)
CMBS		-		-		(40)		(40)
CDO/ABS		23		(8)		(451)		(436)
Total other bond securities		44		(22)		(530)		(508)
Equity securities available for sale		-		-		-		-
Mortgage and other loans receivable		6		-		-		6
Other invested assets		137		(1)		(151)		(15)
Total assets	$	1,887	$	(64)	$	(1,614)	$	209
Liabilities:
Policyholder contract deposits	$	-	$	(46)	$	43	$	(3)
Derivative liabilities, net		-		-		18		18
Long-term debt^(b)		-		-		14		14
Total liabilities	$	-	$	(46)	$	75	$	29
								Purchases,
								Sales, Issues and
(in millions)		Purchases		Sales		Settlements		Settlements, Net^(a)
Six Months Ended June 30, 2015
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	223	$	(22)	$	(43)	$	158
Non-U.S. governments		8		-		(4)		4
Corporate debt		188		(60)		(274)		(146)

RMBS		1,407		(165)		(1,318)		(76)
CMBS		142		(27)		(68)		47
CDO/ABS		861		(201)		(541)		119
Total bonds available for sale		2,829		(475)		(2,248)		106
Other bond securities:
RMBS		309		(10)		(79)		220
CMBS		-		(79)		(75)		(154)
CDO/ABS		226		(371)		(781)		(926)
Total other bond securities		535		(460)		(935)		(860)
Equity securities available for sale		-		(2)		(1)		(3)
Other invested assets		304		(587)		(303)		(586)
Total assets	$	3,668	$	(1,524)	$	(3,487)	$	(1,343)
Liabilities:
Policyholder contract deposits	$	-	$	(185)	$	1	$	(184)
Derivative liabilities, net		17		-		240		257
Long-term debt^(b)		-		-		18		18
Total liabilities	$	17	$	(185)	$	259	$	91
Six Months Ended June 30, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions^(c)	$	936	$	(32)	$	(51)	$	853
Non-U.S. governments		7		-		(1)		6
Corporate debt		119		(8)		(178)		(67)
RMBS		1,752		(26)		(1,102)		624
CMBS		92		(57)		(92)		(57)
CDO/ABS		1,222		(2)		(486)		734
Total bonds available for sale		4,128		(125)		(1,910)		2,093
Other bond securities:
RMBS		162		(19)		(71)		72
CMBS		-		(6)		(125)		(131)
CDO/ABS		44		(15)		(916)		(887)
Total other bond securities		206		(40)		(1,112)		(946)
Equity securities available for sale		-		-		-		-
Mortgage and other loans receivable		6		-		-		6
Other invested assets		433		(1)		(398)		34
Total assets	$	4,773	$	(166)	$	(3,420)	$	1,187
Liabilities:
Policyholder contract deposits	$	-	$	(58)	$	84	$	26
Derivative liabilities, net		1		-		20		21
Long-term debt^(b)		-		-		33		33
Total liabilities	$	1	$	(58)	$	137	$	80

(a) There were no issuances during the three- and six-month periods ended June 30, 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 June 30, 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. The Net realized and unrealized gains (losses) included in income or Other comprehensive income (loss) as shown in the table above contains no material net gains (losses) related to assets and liabilities transferred into or out of Level 3 during the three-month period ended June 30, 2015. The Net realized and unrealized gains (losses) included in income or Other comprehensive income (loss) as shown in the table above exclude $18 million of net gains related to assets and liabilities transferred into Level 3, and include $3 million of net gains related to assets and liabilities transferred out of Level 3 during the six-month period ended June 30, 2015.

The Net realized and unrealized gains (losses) included in income or Other comprehensive income (loss) as shown in the table above excludes $14 million and $37 million of net gains related to assets and liabilities transferred into Level 3 during the three- and six-month periods ended June 30, 2014, respectively, and includes $25 million and $2 million of net losses related to assets and liabilities transferred out of Level 3 during the three- and six-month periods ended June 30, 2014, respectively.

Transfers of Level 3 Assets

During the three- and six-month periods ended June 30, 2015 and 2014, transfers into Level 3 assets primarily included certain investments in RMBS, CDO/ABS and private placement corporate debt. The transfers of investments in RMBS and 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- and six-month periods ended June 30, 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- and six-month periods ended June 30, 2015 and 2014.

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
	June 30,		Valuation		Range
(in millions)	2015		Technique	Unobservable Input	(Weighted Average)
Assets:

Obligations of states,	$	1,224	Discounted cash flow	Yield^(b)	4.32% - 5.14% (4.73%)
municipalities and
political subdivisions

Corporate debt		1,519	Discounted cash flow	Yield^(b)	4.27% - 7.64% (5.96%)


RMBS		17,727	Discounted cash flow	Constant prepayment rate^(a)(c)	0.88% - 9.02% (4.95%)
				Loss severity^(a)(c)	46.61% - 79.61% (63.11%)
				Constant default rate^(a)(c)	3.54% - 8.93% (6.23%)
				Yield^(c)	2.93% - 6.27% (4.60%)

CDO/ABS		3,819	Discounted cash flow	Constant prepayment rate^(a)(c)	6.70% - 13.10% (9.40%)
				Loss severity^(a)(c)	39.90% - 55.20% (47.70%)
				Constant default rate^(a)(c)	2.50% - 13.50% (7.30%)
				Yield^(c)	4.40% - 8.20% (7.00%)

CMBS		2,638	Discounted cash flow	Yield^(b)	0.00% - 17.59% (5.97%)
Liabilities:

Policyholder contract
deposits

GMWB		434	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		461	Discounted cash flow	Lapse rate	0.75% - 66.00%^(d)
				Mortality rate	0.02% - 44.06%^(d)

Index Life		285	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		299	Binomial Expansion	Recovery rate^(b)	8.00% - 23.00% (13.00%)
			Technique (BET)	Diversity score^(b)	9 - 10 (10)
				Weighted average life^(b)	4.51 - 8.44 years (7.06 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%)

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%)
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 rate	0.75% - 66.00%^(d)
				Mortality rate	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 CDO/ABS

The significant unobservable inputs used in fair value measurements of RMBS and 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.

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.

		June 30, 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	$	2,008	$	446	$	2,275	$	450

Real Estate / Infrastructure	Investments in real estate properties and infrastructure positions, including power plants and other energy generating facilities		359		203		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		119		34		121		26

Distressed	Securities of companies that are in default, under bankruptcy protection, or troubled		157		43		164		43

Other	Includes multi-strategy, mezzanine and other strategies		259		213		216		234
Total private equity funds			2,902		939		3,160		980
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		1,288		-		1,109		-

Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		2,880		16		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		562		-		498		-

Distressed	Securities of companies that are in default, under bankruptcy protection or troubled		753		15		731		5

Emerging markets	Investments in the financial markets of developing countries		347		-		308		-

Other	Includes multi-strategy, relative value and other strategies		182		-		125		-
Total hedge funds			6,012		31		5,199		6
Total		$	8,914	$	970	$	8,359	$	986

Private equity fund investments included above are not redeemable, because 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 June 30, 2015, assuming average original expected lives of 10 years for the funds, 84 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 11 percent between seven and 10 years.

The hedge fund investments included above are generally redeemable monthly (14 percent), quarterly (49 percent), semi-annually (14 percent) and annually (23 percent), with redemption notices ranging from one day to 180 days. At June 30, 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:

	Gain (Loss) Three Months Ended June 30,				Gain (Loss) Six Months Ended June 30,
	Gain (Loss) Three Months Ended June 30,				Gain (Loss) Six Months Ended June 30,
(in millions)		2015		2014		2015		2014
Assets:
Bond and equity securities	$	460	$	611	$	601	$	1,277
Alternative Investments^(a)		118		18		263		172
Other, including Short-term investments		-		2		2		5
Liabilities:
Long-term debt^(b)		131		(135)		55		(209)
Other liabilities		-		(2)		(3)		(6)
Total gain	$	709	$	494	$	918	$	1,239

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

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

We recognized gains of $5 million and $11 million during the three- and six-month periods ended June 30, 2015, respectively, and losses of $11 million and $22 million during the three- and six-month periods ended June 30, 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:

	June 30, 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^*	$	4,269	$	3,173	$	1,096	$	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 June 30,				Six Months Ended June 30,
(in millions)	Level 1		Level 2		Level 3			Total		2015		2014		2015		2014
June 30, 2015
Other investments	$	-	$	-	$	1,000	$	1,000	$	27	$	20	$	52	$	55
Investments in life settlements		-		-		501		501		72		45		142		87
Other assets		-		-		12		12		4		-		8		1
Total	$	-	$	-	$	1,513	$	1,513	$	103	$	65	$	202	$	143
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
June 30, 2015
Assets:
Mortgage and other loans receivable	$	-	$	376	$	27,931	$	28,307	$	27,137
Other invested assets		-		523		2,983		3,506		4,338
Short-term investments		-		11,584		-		11,584		11,584
Cash		1,937		-		-		1,937		1,937
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		268		116,875		117,143		106,864
Other liabilities		-		899		-		899		899
Long-term debt		-		23,593		3,674		27,267		26,091
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.

+ References + Details