Investment Securities

9 Months Ended

Sep. 30, 2013

Investment Securities [Abstract]

Investment Securities

3.INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale. These comprise mainly investment grade debt securities supporting obligations to annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations and Trinity, and investments held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. We do not have any securities classified as held-to-maturity.

	September 30, 2013								December 31, 2012
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Amortized		unrealized		unrealized		Estimated
(In millions)	cost		gains		losses		fair value		cost		gains		losses		fair value
Debt
U.S. corporate	$	20,050	$	2,516	$	(209)	$	22,357	$	20,233	$	4,201	$	(302)	$	24,132
State and municipal		4,187		246		(189)		4,244		4,084		575		(113)		4,546
Residential mortgage-backed(a)		1,944		146		(59)		2,031		2,198		183		(119)		2,262
Commercial mortgage-backed		2,919		194		(88)		3,025		2,930		259		(95)		3,094
Asset-backed		6,533		8		(62)		6,479		5,784		31		(77)		5,738
Corporate – non-U.S.		1,893		101		(96)		1,898		2,391		150		(126)		2,415
Government – non-U.S.		2,370		86		(7)		2,449		1,617		149		(3)		1,763
U.S. government and
federal agency		839		52		(40)		851		3,462		103		-		3,565
Retained interests		67		11		-		78		76		7		-		83
Equity
Available-for-sale		208		46		(3)		251		513		86		(3)		596
Trading		142		-		-		142		245		-		-		245
Total	$	41,152	$	3,406	$	(753)	$	43,805	$	43,533	$	5,744	$	(838)	$	48,439

• Substantially collateralized by U.S. mortgages. Of our totalRMBSportfolio at September 30, 2013, $1,286 million relates to securities issued by government-sponsored entities and $745 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of financial institutions.

The fair value of investment securities decreased to $43,805 million at September 30, 2013, from $48,439 million at December 31, 2012, primarily due to the sale of U.S. government and federal agency securities at our treasury operations and the impact of higher interest rates.

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.

	In loss position for
	Less than 12 months					12 months or more
			Gross					Gross
	Estimated		unrealized			Estimated		unrealized
(In millions)	fair value		losses		(a)	fair value		losses		(a)
September 30, 2013
Debt
U.S. corporate	$	2,120	$	(134)		$	416	$	(75)
State and municipal		996		(84)			313		(105)
Residential mortgage-backed		237		(9)			511		(50)
Commercial mortgage-backed		292		(26)			773		(62)
Asset-backed		5,950		(13)			404		(49)
Corporate – non-U.S.		140		(1)			495		(95)
Government – non-U.S.		1,474		(6)			40		(1)
U.S. government and federal agency		444		(40)			-		-
Retained interests		9		-			-		-
Equity		16		(3)			-		-
Total	$	11,678	$	(316)		$	2,952	$	(437)
December 31, 2012
Debt
U.S. corporate	$	434	$	(7)		$	813	$	(295)
State and municipal		146		(2)			326		(111)
Residential mortgage-backed		98		(1)			691		(118)
Commercial mortgage-backed		37		-			979		(95)
Asset-backed		18		(1)			658		(76)
Corporate – non-U.S.		167		(8)			602		(118)
Government – non-U.S.		201		(1)			37		(2)
U.S. government and federal agency		-		-			-		-
Retained interests		3		-			-		-
Equity		26		(3)			-		-
Total	$	1,130	$	(23)		$	4,106	$	(815)

• Includes gross unrealized losses at September 30, 2013 of $(131) million related to securities that had other-than-temporary impairments previously recognized.

We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell these securities before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the ninemonths ended September 30, 2013 have not changed from those described in Note 3 in our 2012 consolidated financial statements.

During the three months ended September 30, 2013, we recognized pre-tax, other-than-temporary impairments of $62 million, of which $56 million was recorded through earnings($13million relates to equity securities), and $6 million was recorded in accumulated other comprehensive income (loss) (AOCI). At July 1, 2013, cumulative impairments recognized in earnings associated with debt securities still held were $777 million. During the three months ended September 30, 2013, we recognizednofirst-time impairments and incremental charges on previously impaired securities of $42 million. Of these cumulative amounts recognized through September 30, 2013, $52 million related to securities that were subsequently sold before the end of the third quarter of 2013.

During the three months ended September 30, 2012, we recognized pre-tax, other-than-temporary impairments of $25 million, all of which was recorded through earnings. At July 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $410 million. During the three months ended September 30, 2012, we recognized nofirst-time impairments and incremental charges on previously impaired securities of $13 million. Of these cumulative amounts recognized through September 30, 2012, $39 million related to securities that were subsequently sold before the end of the third quarter of 2012.

During the nine months ended September 30, 2013, we recognized pre-tax, other-than-temporary impairments of $503 million, of which $467 million was recorded through earnings ($14 million relates to equity securities), of which $96 million related to the impairment of an investment in a Brazilian company that was fully offset by the benefit of a guarantee provided by GE, and $36 million was recorded in AOCI. At January 1, 2013, cumulative impairments recognized in earnings associated with debt securities still held were $420 million. During the nine months ended September 30, 2013, we recognized first-time impairments of $385 million and incremental charges on previously impaired securities of $61 million. Of these cumulative amounts recognized through September 30, 2013, $99 million related to securities that were subsequently sold before the end of the third quarter of 2013.

During the nine months ended September 30, 2012, we recognized pre-tax, other-than-temporary impairments of $90 million, of which $89 million was recorded through earnings ($24 million relates to equity securities) and $1 million was recorded in AOCI. At January 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $558 million. During the nine months ended September 30, 2012, we recognized first-time impairments of $10 million and incremental charges on previously impaired securities of $25 million. Of these cumulative amounts recognized through September 30, 2012, $209 million related to securities that were subsequently sold before the end of the third quarter of 2012.

Contractual Maturities of Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)

(In millions)	Amortized		Estimated
	cost		fair value
Due
Within one year	$	2,771	$	2,786
After one year through five years		3,480		3,688
After five years through ten years		5,032		5,264
After ten years		18,056		20,061

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.

	Three months ended September 30,				Nine months ended September 30,
(In millions)	2013		2012		2013		2012
Gains	$	34	$	26	$	219	$	85
Losses, including impairments		(60)		(55)		(477)		(159)
Net	$	(26)	$	(29)	$	(258)	$	(74)

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by issuerstotaled $2,890 million and $2,696 million in the three months ended September 30, 2013 and 2012, respectively, and$12,815 million and $9,200 million in the nine months ended September 30, 2013 and 2012, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized pre-tax gains (losses) on trading securities of $4 million and $1 million in the three months ended September 30, 2013 and 2012, respectively, and$45 million and $37 million in the nine months ended September 30, 2013 and 2012, respectively.