Available-For-Sale Securities

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Available-For-Sale Securities

Available-For-Sale Securities

We have investments in certain debt and equity securities, primarily at Cat Insurance, that have been classified as available-for-sale and recorded at fair value based upon quoted market prices. These investments are primarily included in Other assets in the Consolidated Statement of Financial Position. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included, net of applicable deferred income taxes, in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position).  Realized gains and losses on sales of investments are generally determined using the FIFO (first-in, first-out) method for debt instruments and the specific identification method for equity securities.  Realized gains and losses are included in Other income (expense) in the Consolidated Statement of Results of Operations.

	June 30, 2012							December 31, 2011
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value
Government debt
U.S. treasury bonds	$	10	$	—		$	10	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	121		2			123		90		2			92
Corporate bonds
Corporate bonds	588		35			623		542		30			572
Asset-backed securities	96		(1		)	95		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	266		12			278		297		13			310
Residential	29		(3		)	26		33		(3		)	30
Commercial	131		6			137		142		3			145
Equity securities
Large capitalization value	139		29			168		127		21			148
Smaller company growth	22		11			33		22		7			29
Total	$	1,402	$	91		$	1,493	$	1,375	$	72		$	1,447

During the three and six months ended June 30, 2012, charges for other-than-temporary declines in the market value of securities were $1 million. These charges were accounted for as realized losses and were included in Other income (expense) in the Consolidated Statement of Results of Operations.  The cost basis of the impacted securities was adjusted to reflect these charges.  During the three and six months ended June 30, 2011, there were no charges for other-than-temporary declines in the market value of securities.

Investments in an unrealized loss position that are not other-than-temporarily impaired:
	June 30, 2012
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	3	$	—	$	19	$	4	$	22	$	4
Mortgage-backed debt securities
Residential	2		—		15		3		17		3
Commercial	2		—		8		1		10		1
Equity securities
Large capitalization value	28		3		14		2		42		5
Total	$	35	$	3	$	56	$	10	$	91	$	13

	December 31, 2011
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	54	$	1	$	1	$	—	$	55	$	1
Asset-backed securities	1		—		20		5		21		5
Mortgage-backed debt securities
U.S. governmental agency	51		1		—		—		51		1
Residential	3		—		18		3		21		3
Commercial	15		—		8		1		23		1
Equity securities
Large capitalization value	36		5		6		1		42		6
Smaller company growth	4		1		—		—		4		1
Total	$	164	$	8	$	53	$	10	$	217	$	18

¹  Indicates length of time that individual securities have been in a continuous unrealized loss position.

Corporate Bonds.  The unrealized losses on our investments in corporate bonds and asset-backed securities relate primarily to changes in interest rates and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Mortgage-Backed Debt Securities.  The unrealized losses on our investments in mortgage-backed securities and mortgage-related asset-backed securities relate primarily to the continuation of elevated housing delinquencies and default rates, risk aversion and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell these investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  Overall U.S. equity valuations declined during the second quarter of 2012 due to a worsening European debt crisis and a global economic slowdown. In each case where unrealized losses exist, the respective company's management is taking action in order to increase shareholder value.   We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

The fair value of the available-for-sale debt securities at June 30, 2012, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.

(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	125	$	127
Due after one year through five years	496		510
Due after five years through ten years	149		171
Due after ten years	45		43
U.S. agency mortgage-backed securities	266		278
Residential mortgage-backed securities	29		26
Commercial mortgage-backed securities	131		137
Total debt securities – available-for-sale	$	1,241	$	1,292

Sales of Securities
	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
Proceeds from the sale of available-for-sale securities	$	65	$	56	$	177	$	122
Gross gains from the sale of available-for-sale securities	$	1	$	1	$	3	$	2
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	—	$	1