Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2012

Financial Instruments Measured At Fair Value On A Recurring Basis

The following tables present, by valuation hierarchy, the financial instruments measured at fair value on a recurring basis:



December 31, 2012	Level 1			Level 2		Level 3		Total
(in millions of U.S. dollars)	Level 1			Level 2		Level 3		Total
Assets:
Fixed maturities available for sale
U.S. Treasury and agency	$	2,050		$	1,685	$	—	$	3,735
Foreign	222			13,431		60		13,713
Corporate securities	20			16,586		102		16,708
Mortgage-backed securities	—			10,460		13		10,473
States, municipalities, and political subdivisions	—			2,677		—		2,677
	2,292			44,839		175		47,306
Equity securities	253			488		3		744
Short-term investments	1,503			725		—		2,228
Other investments	268			196		2,252		2,716
Securities lending collateral	—			1,791		—		1,791
Investment derivative instruments	11			—		—		11
Other derivative instruments	(6		)	30		—		24
Separate account assets	872			71		—		943
Total assets measured at fair value	$	5,193		$	48,140	$	2,430	$	55,763
Liabilities:
GLB⁽¹⁾	$	—		$	—	$	1,119	$	1,119


⁽¹⁾	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.



December 31, 2011	Level 1			Level 2		Level 3		Total
(in millions of U.S. dollars)	Level 1			Level 2		Level 3		Total
Assets:
Fixed maturities available for sale
U.S. Treasury and agency	$	1,691		$	1,264	$	5	$	2,960
Foreign	212			12,156		33		12,401
Corporate securities	20			14,539		134		14,693
Mortgage-backed securities	—			10,173		28		10,201
States, municipalities, and political subdivisions	—			1,711		1		1,712
	1,923			39,843		201		41,967
Equity securities	215			419		13		647
Short-term investments	1,246			1,055		—		2,301
Other investments	208			229		1,877		2,314
Securities lending collateral	—			1,375		—		1,375
Investment derivative instruments	10			—		—		10
Other derivative instruments	(16		)	54		3		41
Separate account assets	607			53		—		660
Total assets measured at fair value	$	4,193		$	43,028	$	2,094	$	49,315
Liabilities:
GLB⁽¹⁾	$	—		$	—	$	1,319	$	1,319


⁽¹⁾	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.

Fair Value And Maximum Future Funding Commitments Related To Investments

The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments:



		December 31				December 31
		2012				2011
(in millions of U.S. dollars)	Expected Liquidation Period	Fair Value		Maximum Future Funding Commitments		Fair Value		Maximum Future Funding Commitments
Financial	5 to 9 Years	$	225	$	111	$	205	$	141
Real estate	3 to 9 Years	292		62		270		96
Distressed	6 to 9 Years	192		152		182		57
Mezzanine	6 to 9 Years	284		279		195		282
Traditional	3 to 8 Years	711		587		565		200
Vintage	1 to 3 Years	14		—		18		1
Investment funds	Not Applicable	395		—		378		—
		$	2,113	$	1,191	$	1,813	$	777

Schedule Of Significant Unobservable Inputs Used In Level 3 Liability Valuations

The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to fair value Level 3 assets which are based on single broker quotes or net asset value and contain no quantitative unobservable inputs developed by management.



(in millions of U.S. dollars)	Fair Value at December 31, 2012		Valuation Technique	Significant Unobservable Inputs	Ranges
GLB⁽¹⁾	$	1,119	Actuarial model	Lapse rate	1% - 30%
				Annuitization rate	0% - 50%


⁽¹⁾	Discussion of the most significant inputs used in the fair value measurement of GLB and the sensitivity of those assumptions is included within Note 4 a) Guaranteed living benefits.

Financial Instruments Measured At Fair Value Using Significant Unobservable Inputs

The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3):



	Assets																								Liabilities
	Available-for-Sale Debt Securities															Equity securities			Other investments			Other derivative instruments			GLB⁽¹⁾
Year Ended December 31, 2012	U.S. Treasury and agency			Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions
(in millions of U.S. dollars)	U.S. Treasury and agency			Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions
Balance-Beginning of year	$	5		$	33		$	134		$	28		$	1		$	13		$	1,877		$	3		$	1,319
Transfers into Level 3	—			49			37			22			1			2			53			—			—
Transfers out of Level 3	(4		)	(13		)	(46		)	(35		)	(1		)	(11		)	—			—			—
Change in Net Unrealized Gains (Losses) included in OCI	—			(1		)	6			—			—			—			55			—			—
Net Realized Gains/Losses	—			—			(1		)	—			—			—			(7		)	(4		)	(200		)
Purchases	—			46			24			9			—			4			520			3			—
Sales	—			(53		)	(19		)	(7		)	—			(5		)	(9		)	—			—
Settlements	(1		)	(1		)	(33		)	(4		)	(1		)	—			(237		)	(2		)	—
Balance-End of Year	$	—		$	60		$	102		$	13		$	—		$	3		$	2,252		$	—		$	1,119
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		$	—		$	—		$	—		$	—		$	—		$	(7	)	$	—		$	(200	)


⁽¹⁾	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.



	Assets																							Liabilities
	Available-for-Sale Debt Securities														Equity securities			Other investments			Other derivative instruments			GLB⁽¹⁾
Year Ended December 31, 2011	U.S. Treasury and Agency		Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions
(in millions of U.S. dollars)	U.S. Treasury and Agency		Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions
Balance-Beginning of year	$	—	$	26		$	115		$	39		$	2		$	13		$	1,432		$	4		$	507
Transfers into Level 3	—		9			42			4			—			—			—			—			—
Transfers out of Level 3	—		(18		)	(4		)	(48		)	—			—			—			—			—
Change in Net Unrealized Gains (Losses) included in OCI	—		(1		)	(2		)	—			—			(1		)	93			—			—
Net Realized Gains/Losses	—		—			(3		)	—			—			4			(3		)	2			812
Purchases	5		23			32			59			—			5			602			—			—
Sales	—		(3		)	(27		)	(17		)	—			(8		)	(55		)	—			—
Settlements	—		(3		)	(19		)	(9		)	(1		)	—			(192		)	(3		)	—
Balance-End of Year	$	5	$	33		$	134		$	28		$	1		$	13		$	1,877		$	3		$	1,319
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—	$	—		$	—		$	—		$	—		$	—		$	(3	)	$	(1	)	$	812

⁽¹⁾

Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $1.5 billion at December 31, 2011 and $648 million at December 31, 2010, which includes a fair value derivative adjustment of $1.3 billion and $507 million, respectively.



	Assets																					Liabilities
	Available-for-Sale Debt Securities																					GLB⁽¹⁾
Year Ended December 31, 2010	Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions			Equity securities			Other investments			Other derivative instruments
(in millions of U.S. dollars)	Foreign			Corporate securities			MBS			States, municipalities, and political subdivisions			Equity securities			Other investments			Other derivative instruments
Balance-Beginning of year	$	59		$	168		$	21		$	3		$	12		$	1,149		$	14		$	443
Transfers into (Out of) Level 3	(14		)	(25		)	(1		)	—			1			—			—			—
Change in Net Unrealized Gains (Losses) included in OCI	1			9			—			—			—			53			—			—
Net Realized Gains/Losses	1			(3		)	—			—			1			(7		)	2			64
Purchases, Sales, Issuances, and Settlements, Net	(21		)	(34		)	19			(1		)	(1		)	237			(12		)	—
Balance-End of Year	$	26		$	115		$	39		$	2		$	13		$	1,432		$	4		$	507
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		$	—		$	—		$	—		$	—		$	(7	)	$	1		$	64

⁽¹⁾

Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $648 million at December 31, 2010 and $559 million at December 31, 2009, which includes a fair value derivative adjustment of $507 million and $443 million, respectively.

Carrying Values And Fair Values Of Financial Instruments Not Measured At Fair Value

The following table presents carrying values and fair values of financial instruments not measured at fair value:



	December 31				December 31
	2012				2011
(in millions of U.S. dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturities held to maturity
U.S. Treasury and agency	$	1,044	$	1,083	$	1,078	$	1,126
Foreign	910		964		935		930
Corporate securities	2,133		2,275		2,338		2,337
Mortgage-backed securities	2,028		2,116		2,949		3,036
States, municipalities, and political subdivisions	1,155		1,195		1,147		1,176
	7,270		7,633		8,447		8,605
Partially-owned insurance companies	454		454		352		352
Total assets	$	7,724	$	8,087	$	8,799	$	8,957
Liabilities:
Short-term debt	$	1,401	$	1,401	$	1,251	$	1,251
Long-term debt	3,360		3,916		3,360		3,823
Trust preferred securities	309		446		309		404
Total liabilities	$	5,070	$	5,763	$	4,920	$	5,478

Financial Instruments Not Carried At Fair Value

The following table presents, by valuation hierarchy, the financial instruments not measured at fair value:



	December 31, 2012
(in millions of U.S. dollars)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities held to maturity
U.S. Treasury and agency	$	619	$	464	$	—	$	1,083
Foreign	—		964		—		964
Corporate securities	—		2,257		18		2,275
Mortgage-backed securities	—		2,116		—		2,116
States, municipalities, and political subdivisions	—		1,195		—		1,195
	619		6,996		18		7,633
Partially-owned insurance companies	—		—		454		454
Total assets	$	619	$	6,996	$	472	$	8,087
Liabilities:
Short-term debt	$	—	$	1,401	$	—	$	1,401
Long-term debt	—		3,916		—		3,916
Trust preferred securities	—		446		—		446
Total liabilities	$	—	$	5,763	$	—	$	5,763