Available-For-Sale Securities

9 Months Ended

Sep. 30, 2011

Available-For-Sale Securities

Available-For-Sale Securities

8. 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 fair values 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.

	September 30, 2011			December 31, 2010
		Unrealized			Unrealized
		Pretax Net			Pretax Net
(Millions of dollars)	Cost Basis	Gains (Losses)	Fair Value	Cost Basis	Gains (Losses)	Fair Value
Government debt
U.S. treasury bonds	$10	$—	$10	$12	$—	$12
Other U.S. and non-U.S. government bonds	72	2	74	76	1	77
Corporate bonds
Corporate bonds	526	30	556	481	30	511
Asset-backed securities	117	(1)	116	136	—	136
Mortgage-backed debt securities
U.S. governmental agency mortgage-backed securities	274	16	290	258	15	273
Residential mortgage-backed securities	36	(4)	32	43	(3)	40
Commercial mortgage-backed securities	156	1	157	164	4	168
Equity securities
Large capitalization value	116	6	122	100	22	122
Smaller company growth	21	6	27	23	8	31
Total	$1,328	$56	$1,384	$1,293	$77	$1,370

During the three and nine months ended September 30, 2011, charges for other-than-temporary declines in the market value of securities were $4 million.  During the three and nine months ended September 30, 2010, charges for other-than-temporary declines in the market value of securities were $1 million and $2 million, respectively.    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.

Investments in an unrealized loss position that are not other-than-temporarily impaired:

	September 30, 2011
	Less than 12 months 1		12 months or more 1		Total
(Millions of dollars)	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Corporate bonds
Corporate bonds	$65	$1	$—	$—	$65	$1
Asset-backed securities	—	—	17	5	17	5
Mortgage-backed debt securities
Residential mortgage-backed securities	—	—	18	4	18	4
Commercial mortgage-backed securities	14	2	7	2	21	4
Equity securities
Large capitalization value	49	9	5	1	54	10
Small company growth	5	1	—	—	5	1
Total	$133	$13	$47	$12	$180	$25

	December 31, 2010
	Less than 12 months 1		12 months or more 1		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Corporate bonds
Asset-backed securities	$19	$—	$19	$4	$38	$4
Mortgage-backed debt securities
Residential mortgage-backed securities	2	—	25	4	27	4
Commercial mortgage-backed securities	3	—	14	1	17	1
Equity securities
Large capitalization value	14	1	12	2	26	3
Total	$38	$1	$70	$11	$108	$12

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 September 30, 2011.

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 September 30, 2011.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  U.S. equity valuations were notably lower for the three months ended September 30, 2011 due to concerns over Europe’s debt crisis and a potential global slowdown.  In each case where unrealized losses exist, we believe the respective company’s management is taking corrective action in order to increase shareholder value.   We do not consider these investments to be other-than-temporarily impaired as of September 30, 2011.

The fair value of the available-for-sale debt securities at September 30, 2011, 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)	Fair Value
Due in one year or less	$78
Due after one year through five years	$465
Due after five years through ten years	$211
Due after ten years	$481

Sales of Securities
	Three Months Ended September 30,		Nine Months Ended September 30,
(Millions of dollars)	2011	2010	2011	2010
Proceeds from the sale of available-for-sale securities	$58	$51	$180	$141
Gross gains from the sale of available-for-sale securities	$1	$—	$3	$1
Gross losses from the sale of available-for-sale securities	$—	$—	$1	$—