Investment Securities

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Investment Securities

NOTE 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 in our run-off insurance operations and supporting obligations to holders of guaranteed investment contracts (GICs) in 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.

	2014								2013
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Amortized		unrealized		unrealized		Estimated
December 31 (In millions)	cost		gains		losses		fair value		cost		gains		losses		fair value
Debt
U.S. corporate	$	19,889	$	3,967	$	(69)	$	23,787	$	19,600	$	2,323	$	(217)	$	21,706
State and municipal		5,181		624		(56)		5,749		4,245		235		(191)		4,289
Residential mortgage-backed(a)		1,578		153		(6)		1,725		1,819		139		(48)		1,910
Commercial mortgage-backed		2,903		170		(10)		3,063		2,929		188		(82)		3,035
Asset-backed		8,084		9		(175)		7,918		7,373		60		(46)		7,387
Corporate – non-U.S.		1,380		126		(30)		1,476		1,741		103		(86)		1,758
Government – non-U.S.		1,646		152		(2)		1,796		2,336		81		(7)		2,410
U.S. government and federal agency		1,957		56		-		2,013		752		45		(27)		770
Retained interests		20		4		-		24		64		8		-		72
Equity
Available-for-sale		197		58		(1)		254		203		51		(3)		251
Trading		22		-		-		22		74		-		-		74
Total	$	42,857	$	5,319	$	(349)	$	47,827	$	41,136	$	3,233	$	(707)	$	43,662

(a)Substantially collateralized by U.S. mortgages. At December 31, 2014, $1,191million related to securities issued by government-sponsored entities and $534million related 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 increased to $47,827 million at December 31, 2014, from $43,662 million at December 31, 2013, primarily due to purchases of U.S. government and federal agency securities at Synchrony Financial, and higher net unrealized gains in U.S. corporate and State and municipal securities driven by lower interest rates in the U.S.

ESTIMATED FAIR VALUE AND GROSS UNREALIZED LOSSES OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES
	In loss position for
	Less than 12 months					12 months or more
			Gross					Gross
	Estimated		unrealized			Estimated		unrealized
December 31 (In millions)	fair value		losses		(a)	fair value		losses		(a)
2014
Debt
U.S. corporate	$	554	$	(16)		$	836	$	(53)
State and municipal		81		(1)			348		(55)
Residential mortgage-backed		30		-			159		(6)
Commercial mortgage-backed		165		(1)			204		(9)
Asset-backed		7,493		(158)			77		(17)
Corporate – non-U.S.		42		(1)			237		(29)
Government – non-U.S.		677		(2)			14		-
U.S. government and federal agency		705		-			1		-
Equity		14		(1)			-		-
Total	$	9,761	$	(180)		$	1,876	$	(169)	(b)
2013
Debt
U.S. corporate	$	2,170	$	(122)		$	598	$	(95)
State and municipal		1,076		(82)			367		(109)
Residential mortgage-backed		232		(11)			430		(37)
Commercial mortgage-backed		396		(24)			780		(58)
Asset-backed		112		(2)			359		(44)
Corporate – non-U.S.		96		(3)			454		(83)
Government – non-U.S.		1,479		(6)			42		(1)
U.S. government and federal agency		229		(27)			254		-
Retained interests		2		-			-		-
Equity		31		(3)			-		-
Total	$	5,823	$	(280)		$	3,284	$	(427)

(a) Included gross unrealized losses related to securities that had other-than-temporary impairments previously recognized of $29 million at December 31, 2014.

(b)The majority relate to debt securities held to support obligations to holders of GICs and more than 70% are debt securities that were considered to be investment-grade by the major rating agencies at December 31, 2014.  

We regularly review investment securities for other-than-temporary impairment (OTTI) using both qualitative and quantitative criteria. For debt securities, our qualitative review considers our ability and intent to hold the security and the financial condition of and near-term prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. Our quantitative review considers whether there has been an adverse change in expected future cash flows. Unrealized losses are not indicative of the amount of credit loss that would be recognized and at December 31, 2014 are primarily due to increases in market yields subsequent to our purchase of the securities. 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 the vast majority of these securities before anticipated recovery of our amortized cost. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during 2014 have not changed. For equity securities, we consider the duration and the severity of the unrealized loss. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future.

Our corporate debt portfolio comprises securities issued by public and private corporations in various industries, primarily in the U.S. Substantially all of our corporate debt securities are rated investment grade by the major rating agencies.

Our RMBS portfolio is collateralized primarily by pools of individual, direct mortgage loans, of which substantially all are in a senior position in the capital structure of the deals, not other structured products such as collateralized debt obligations. Of the total RMBS held at December 31, 2014, $1,191 million and $534 million related to agency and non-agency securities, respectively. Additionally, $287 million was related to residential subprime credit securities, primarily supporting our guaranteed investment contracts. Substantially all of the subprime exposure is related to securities backed by mortgage loans originated in 2006 and prior. A majority of subprime RMBS have been downgraded to below investment grade and are insured by Monoline insurers (Monolines). We continue to place partial reliance on Monolines with adequate capital and claims paying resources depending on the extent of the Monoline’s anticipated ability to cover expected credit losses.

Our commercial mortgage-backed securities (CMBS) portfolio is collateralized by both diversified pools of mortgages that were originated for securitization (conduit CMBS) and pools of large loans backed by high-quality properties (large loan CMBS), a majority of which were originated in 2007 and prior. The vast majority of the securities in our CMBS portfolio have investment-grade credit ratings.

Our asset-backed securities (ABS) portfolio is collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries, as well as a variety of diversified pools of assets such as student loans and credit cards. The vast majority of the securities in our ABS portfolio are in a senior position in the capital structure of the deals.

PRE-TAX, OTHER-THAN-TEMPORARY IMPAIRMENTS ON INVESTMENT SECURITIES
(In millions)	2014		2013		2012
Total pre-tax, OTTI recognized	$	189	$	778	$	192
Pre-tax, OTTI recognized in AOCI		(16)		(31)		(52)
Pre-tax, OTTI recognized in earnings(a)	$	173	$	747	$	140

(a)Included pre-tax, other-than-temporary impairments recorded in earnings related to equity securities of $3 million, $15million and $38million in2014, 2013 and 2012, respectively. The 2013 amount included $96million related to the impairment of an investment in a Brazilian company that was fully offset by the benefit of a guarantee provided by GE.

CHANGES IN CUMULATIVE CREDIT LOSS IMPAIRMENTS RECOGNIZED ON DEBT SECURITIES STILL HELD
(In millions)	2014		2013		2012
Cumulative credit loss impairments recognized, beginning of period	$	1,025	$	420	$	579
Credit loss impairments recognized on securities not previously impaired		4		389		27
Incremental credit loss impairments recognized on securities previously impaired		77		336		40
Less credit loss impairments previously recognized on securities sold
during the period or that we intend to sell		304		120		226
Cumulative credit loss impairments recognized, end of period	$	802	$	1,025	$	420

CONTRACTUAL MATURITIES OF INVESTMENT IN AVAILABLE-FOR-SALE DEBT SECURITIES
(EXCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)
	Amortized		Estimated
(In millions)	cost		fair value
Due
Within one year	$	2,475	$	2,489
After one year through five years		3,511		3,758
After five years through ten years		5,285		5,686
After ten years		18,782		22,888

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

GROSS REALIZED GAINS AND LOSSES ON AVAILABLE-FOR-SALE INVESTMENT SECURITIES
(In millions)	2014		2013		2012
Gains	$	169	$	239	$	177
Losses, including impairments		(186)		(762)		(211)
Net	$	(17)	$	(523)	$	(34)

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 issuers totaled $6,536 million, $15,262million and $12,792 million in 2014, 2013 and 2012, respectively, principally from sales of short-term government securities in our bank subsidiaries and redemptions of non-U.S. corporate and asset-backed securities in our CLL business.  The 2013 amount also included proceeds from the sale short-term securities in our Treasury operations.

We recognized pre-tax gains (losses) on trading securities of (4) million, $39million and $20 million in 2014, 2013 and 2012, respectively