PART II ITEM 8 Financial Statements and Supplementary Data Derivative instruments used in the Company’s investment risk management. Investment Cash Flow Hedges Derivative financial instruments are also used by the Company as a part of its investment strategy to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities (such as paying claims, investment returns and withdrawals). Derivatives are typically used in this strategy to reduce interest rate and foreign currency risks. Accounting policy. Using cash flow hedge accounting, fair values are reported in other long-term investments or other liabilities and accumulated other comprehensive income and amortized into net investment income or reported in other realized investment gains and losses as interest or principal payments are received. Cash flows. Under the terms of these various contracts, the Company periodically exchanges cash flows between variable and fixed interest rates and/or between two currencies for both principal and interest. Foreign currency swaps are primarily Euros, Australian dollars, Canadian dollars, Japanese yen, and British pounds, and have terms for periods of up to 9 years. Net interest cash flows are reported in operating activities. Purpose. The Company uses interest rate, foreign currency, and combination (interest rate and foreign currency) swap contracts to hedge the interest and foreign currency cash flows of its fixed maturity bonds to match associated insurance liabilities. Volume of activity. The following table provides the notional values of these derivative instruments for the indicated periods: The following table provides the effect of these derivative instruments on the financial statements for the indicated periods: (1) Other comprehensive income for foreign currency swaps excludes amounts required to adjust future policy benefits for the run-off settlement annuity business. For the years ended December 31, 2012 and 2011, the amount of gains (losses) reclassified from accumulated other comprehensive income into income was not material. The amount of gains (losses) recognized due to ineffectiveness was not material and there were no amounts excluded from the assessment of hedge effectiveness. Fair Value Effect on the Financial Statements  (In millions) As of December 31, Instrument 2012 2011 Interest rate swaps $ 58 $ 134 Foreign currency swaps 133 134 Combination interest rate and foreign currency swaps 64 64 TOTAL $ 255 $ 332 Accounts Payable, Accrued Gain (Loss) Recognized in Other Long-Term Expenses Other Investments and Other Liabilities Comprehensive Income  (1) For the years ended As of December 31, As of December 31, December 31, Instrument 2012 2011 2012 2011 2012 2011 Interest rate swaps $ 4 $ 7 $ - $ - $ (3) $ (3) Foreign currency swaps 1 3 18 19 (3) (1) Combination interest rate and foreign currency swaps - - 13 11 (2) 1 TOTAL $ 5 $ 10 $ 31 $ 30 $ (8) $ (3) 108 CIGNA CORPORATION -  2012 Form  10-K Notional Amount  (In millions)