Available-For-Sale Securities

3 Months Ended

Mar. 31, 2013

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.

	March 31, 2013						December 31, 2012
(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	120		2		122		144		2			146
Corporate bonds
Corporate bonds	638		36		674		626		38			664
Asset-backed securities	94		—		94		96		—			96
Mortgage-backed debt securities
U.S. governmental agency	336		7		343		291		8			299
Residential	24		—		24		26		(1		)	25
Commercial	101		9		110		117		10			127
Equity securities
Large capitalization value	151		58		209		147		38			185
Smaller company growth	21		17		38		22		12			34
Total	$	1,495	$	129	$	1,624	$	1,479	$	107		$	1,586

During the three months ended March 31, 2013 and 2012, 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:
	March 31, 2013
	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	$	—	$	—	$	21	$	2	$	21	$	2
Mortgage-backed debt securities
U.S. governmental agency	122		2		12		—		134		2
Residential	—		—		10		1		10		1
Equity securities
Large capitalization value	10		1		7		1		17		2
Total	$	132	$	3	$	50	$	4	$	182	$	7

	December 31, 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	$	—	$	—	$	20	$	3	$	20	$	3
Mortgage-backed debt securities
U.S. governmental agency	84		1		15		—		99		1
Residential	—		—		14		1		14		1
Equity securities
Large capitalization value	25		2		10		1		35		3
Total	$	109	$	3	$	59	$	5	$	168	$	8

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 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 March 31, 2013.

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 March 31, 2013.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  The unrealized losses on our investments in equity securities relate primarily to uneven sector participation in the market recovery. U.S. equity valuations were generally higher for the first quarter of 2013 on growing consumer confidence and a steady recovery in housing.  We do not consider these investments to be other-than-temporarily impaired as of March 31, 2013.

The cost basis and fair value of the available-for-sale debt securities at March 31, 2013, 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.

	March 31, 2013
(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	181	$	183
Due after one year through five years	588		618
Due after five years through ten years	58		65
Due after ten years	35		34
U.S. governmental agency mortgage-backed securities	336		343
Residential mortgage-backed securities	24		24
Commercial mortgage-backed securities	101		110
Total debt securities – available-for-sale	$	1,323	$	1,377

Sales of Securities
	Three Months Ended March 31,
(Millions of dollars)	2013		2012
Proceeds from the sale of available-for-sale securities	$	98	$	112
Gross gains from the sale of available-for-sale securities	$	1	$	2
Gross losses from the sale of available-for-sale securities	$	—	$	—