Investment Securities

6 Months Ended

Jun. 30, 2012

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, investment securities at ourtreasury operations 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.

	June 30, 2012								December 31, 2011
			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	$	20,994	$	4,003	$	(327)	$	24,670	$	20,748	$	3,432	$	(410)	$	23,770
State and municipal		3,436		463		(130)		3,769		3,027		350		(143)		3,234
Residential mortgage-backed(a)		2,440		195		(198)		2,437		2,711		184		(286)		2,609
Commercial mortgage-backed		3,060		171		(180)		3,051		2,913		162		(247)		2,828
Asset-backed		5,269		8		(148)		5,129		5,102		32		(164)		4,970
Corporate – non-U.S.		2,592		140		(168)		2,564		2,414		126		(207)		2,333
Government – non-U.S.		1,792		137		(30)		1,899		2,488		129		(86)		2,531
U.S. government and
federal agency		3,412		90		0		3,502		3,974		84		0		4,058
Retained interests		28		3		0		31		25		10		0		35
Equity
Available-for-sale		502		98		(6)		594		713		75		(38)		750
Trading		260		0		0		260		241		0		0		241
Total	$	43,785	$	5,308	$	(1,187)	$	47,906	$	44,356	$	4,584	$	(1,581)	$	47,359

• Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at June 30, 2012, $1,626 million relates to securities issued by government-sponsored entities and $811 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 increased to $47,906 million at June 30, 2012, from $47,359 millionat December 31, 2011, primarily due to the impact of lower interest rates and additional purchases in our CLL business of investments collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.

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)
June 30, 2012
Debt
U.S. corporate	$	365	$	(16)		$	1,121	$	(311)
State and municipal		71		(1)			233		(129)
Residential mortgage-backed		26		0			752		(198)
Commercial mortgage-backed		268		(7)			1,057		(173)
Asset-backed		4,136		(27)			792		(121)
Corporate – non-U.S.		488		(31)			571		(137)
Government – non-U.S.		196		(1)			171		(29)
U.S. government and federal agency		0		0			0		0
Retained interests		2		0			0		0
Equity		64		(5)			7		(1)
Total	$	5,616	$	(88)		$	4,704	$	(1,099)
December 31, 2011
Debt
U.S. corporate	$	1,435	$	(241)		$	836	$	(169)
State and municipal		87		(1)			307		(142)
Residential mortgage-backed		219		(9)			825		(277)
Commercial mortgage-backed		244		(23)			1,320		(224)
Asset-backed		100		(7)			850		(157)
Corporate – non-U.S.		330		(28)			607		(179)
Government – non-U.S.		906		(5)			203		(81)
U.S. government and federal agency		502		0			0		0
Retained interests		0		0			0		0
Equity		440		(38)			0		0
Total	$	4,263	$	(352)		$	4,948	$	(1,229)

• Includes gross unrealized losses at June 30, 2012 of $(200) 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 six months ended June 30, 2012 have not changed from those described in our 2011 consolidated financial statements. See Note 3 in our 2011 consolidated financial statements for additional information regarding these methodologies and inputs.

During the second quarter of 2012, we recorded pre-tax,other-than-temporary impairments of $33million, of which $32 million was recorded through earnings ($16 million relates to equity securities) and $1 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $434 million. During the second quarter, we recognized first-time impairments of $3 million and incremental charges on previously impaired securities of $6 million. These amounts included $33 million related to securities that were subsequently sold.

During the second quarter of 2011, we recorded pre-tax,other-than-temporary impairments of $113 million, of which $54 million was recorded through earnings ($5 million relates to equity securities) and $59 million was recorded in AOCI. At April 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $388 million. During the second quarter of 2011, we recognized first-time impairments of $19 million and incremental charges on previously impaired securities of $24 million. These amounts included $18 million related to securities that were subsequently sold.

During the six months ended June 30, 2012, we recorded pre-tax,other-than-temporary impairments of $65 million, of which $64 million was recorded through earnings ($23 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 six months ended June 30, 2012, we recognized first-time impairments of $10 million and incremental charges on previously impaired securities of $11 million. These amounts included $169million related to securities that were subsequently sold.

During the six months ended June 30, 2011, we recorded pre-tax,other-than-temporary impairments of $184 million, of which $118 million was recorded through earnings ($10 million relates to equity securities) and $66 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $332 million. During the six months ended June 30, 2011, we recognized first-time impairments of $20 million and incremental charges on previously impaired securities of $81 million. These amounts included $21 million related to securities that were subsequently sold.

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

(In millions)	Amortized		Estimated
	cost		fair value
Due in
2012	$	2,082	$	2,112
2013-2016		7,450		7,447
2017-2021		9,080		10,591
2022 and later		13,607		16,247

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 June 30,				Six months ended June 30,
(In millions)	2012		2011		2012		2011
Gains	$	21	$	45	$	59	$	161
Losses, including impairments		(34)		(56)		(104)		(127)
Net	$	(13)	$	(11)	$	(45)	$	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 $2,742 million and $4,833million in the second quartersof2012 and 2011, respectively, and $6,504 million and $9,972 million in the six months ended June 30, 2012 and 2011, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized pre-tax gains on trading securities of $13 million and $52 million in the second quarters of 2012 and 2011, respectively, and $36 million and $55 million in the six months ended June 30, 2012 and 2011, respectively.