XML 63 R18.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Jun. 30, 2012

10. FAIR VALUE MEASUREMENTS

For a description of how we estimate fair value, see Note 1 in our 2011 consolidated financial statements.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities primarily supporting obligations to annuitants and policyholders in our run-off insurance operations, supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), investment securities held at our treasury operations and investments held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. Such securities are mainly investment grade.

(In millions)									Netting
	Level 1		(a)	Level 2		(a)	Level 3		adjustment		(b)	Net balance
June 30, 2012
Assets
Investment securities
Debt
U.S. corporate	$	0		$	21,298		$	3,372	$	0		$	24,670
State and municipal		0			3,688			81		0			3,769
Residential mortgage-backed		0			2,340			97		0			2,437
Commercial mortgage-backed		0			3,051			0		0			3,051
Asset-backed(c)		0			825			4,304		0			5,129
Corporate - non-U.S.		72			1,129			1,363		0			2,564
Government - non-U.S.		874			974			51		0			1,899
U.S. government and federal agency		0			3,241			261		0			3,502
Retained interests		0			0			31		0			31
Equity
Available-for-sale		566			14			14		0			594
Trading		260			0			0		0			260
Derivatives(d)		0			12,265			148		(6,653)			5,760
Other(e)		0			0			409		0			409
Total	$	1,772		$	48,825		$	10,131	$	(6,653)		$	54,075

Liabilities
Derivatives	$	0		$	4,217		$	14	$	(3,516)		$	715
Other		0			23			0		0			23
Total	$	0		$	4,240		$	14	$	(3,516)		$	738

December 31, 2011
Assets
Investment securities
Debt
U.S. corporate	$	0		$	20,535		$	3,235	$	0		$	23,770
State and municipal		0			3,157			77		0			3,234
Residential mortgage-backed		0			2,568			41		0			2,609
Commercial mortgage-backed		0			2,824			4		0			2,828
Asset-backed(c)		0			930			4,040		0			4,970
Corporate - non-U.S.		71			1,058			1,204		0			2,333
Government - non-U.S.		1,003			1,444			84		0			2,531
U.S. government and federal agency		0			3,805			253		0			4,058
Retained interests		0			0			35		0			35
Equity
Available-for-sale		715			18			17		0			750
Trading		241			0			0		0			241
Derivatives(d)		0			14,830			160		(5,319)			9,671
Other(e)		0			0			388		0			388
Total	$	2,030		$	51,169		$	9,538	$	(5,319)		$	57,418

Liabilities
Derivatives	$	0		$	4,503		$	20	$	(4,025)		$	498
Other		0			25			0		0			25
Total	$	0		$	4,528		$	20	$	(4,025)		$	523

There were no securities transferred between Level 1 and Level 2 during the six months ended June 30, 2012.
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists and when collateral is posted to us.
Includes investments in our CLL business in asset-backed securities collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.
The fair value of derivatives included an adjustment for non-performance risk. The cumulative adjustment was a loss of $22 million and $11 million at June 30, 2012 and December 31, 2011, respectively. See Note 11 for additional information on the composition of our derivative portfolio.
Included private equity investments and loans designated under the fair value option.

The following tables present the changes in Level 3 instruments measured on a recurring basis for the three and six months ended June 30, 2012 and 2011, respectively. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners' equity.

Changes in Level 3 Instruments for the Three Months Ended June 30, 2012

																						Net
(In millions)																						change in
						Net realized/																unrealized
			Net			unrealized																gains
			realized/			gains (losses)																(losses)
			unrealized			included in																relating to
			gains			accumulated																instruments
	Balance at		(losses)			other								Transfers			Transfers			Balance at		still held at
	April 1,		included in			comprehensive								into			out of			June 30,		June 30,
	2012		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2012		2012		(c)

Investment securities
Debt
U.S. corporate	$	3,251	$	33		$	(71)	$	119	$	(40)	$	(31)	$	116		$	(5)		$	3,372	$	0
State and municipal		79		0			1		1		0		0		0			0			81		0
Residential
mortgage-backed		107		0			0		0		0		(2)		1			(9)			97		0
Commercial
mortgage-backed		1		0			0		0		(1)		0		0			0			0		0
Asset-backed		4,404		7			(89)		57		(75)		0		0			0			4,304		0
Corporate – non-U.S.		1,249		(3)			(63)		306		0		(52)		9			(83)			1,363		0
Government
– non-U.S.		52		0			0		13		(1)		(13)		0			0			51		0
U.S. government and
federal agency		260		0			1		0		0		0		0			0			261		0
Retained interests		34		0			(4)		4		(2)		(1)		0			0			31		0
Equity
Available-for-sale		15		0			(1)		3		(4)		1		0			0			14		0
Derivatives(d)(e)		117		21			(2)		20		(3)		(13)		0			(4)			136		30
Other		390		2			(13)		34		(4)		0		0			0			409		(1)
Total	$	9,959	$	60		$	(241)	$	557	$	(130)	$	(111)	$	126		$	(101)		$	10,119	$	29

Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Earnings.
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
Represented the amount of unrealized gains or losses for the period included in earnings.
Represented derivative assets net of derivative liabilities and included cash accruals of $2 million not reflected in the fair value hierarchy table.
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.

Changes in Level 3 Instruments for the Three Months Ended June 30, 2011

																						Net
(In millions)																						change in
						Net realized/																unrealized
			Net			unrealized																gains
			realized/			gains (losses)																(losses)
			unrealized			included in																relating to
			gains			accumulated																instruments
	Balance at		(losses)			other								Transfers			Transfers			Balance at		still held at
	April 1,		included in			comprehensive								into			out of			June 30,		June 30,
	2011		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2011		2011		(c)

Investment securities
Debt
U.S. corporate	$	3,119	$	14		$	3	$	30	$	(41)	$	(29)	$	0		$	0		$	3,096	$	0
State and municipal		210		0			0		0		0		(1)		0			0			209		0
Residential
mortgage-backed		118		0			(2)		1		0		0		0			(72)			45		0
Commercial
mortgage-backed		11		0			1		(1)		0		0		0			(4)			7		0
Asset-backed		2,826		(3)			(19)		409		(43)		(1)		0			(37)			3,132		0
Corporate – non-U.S.		1,479		(1)			28		0		0		(31)		62			0			1,537		0
Government
– non-U.S.		162		(16)			8		13		0		0		107			0			274		0
U.S. government and
federal agency		201		0			23		0		0		0		0			0			224		0
Retained interests		52		1			(4)		0		(2)		(2)		0			0			45		0
Equity
Available-for-sale		21		0			1		0		0		0		0			0			22		0
Derivatives(d)(e)		75		37			0		1		0		(2)		0			0			111		12
Other		472		3			11		114		0		(5)		0			0			595		1
Total	$	8,746	$	35		$	50	$	567	$	(86)	$	(71)	$	169		$	(113)		$	9,297	$	13

Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Earnings.
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
Represented the amount of unrealized gains or losses for the period included in earnings.
Represented derivative assets net of derivative liabilities and included cash accruals of $1 million not reflected in the fair value hierarchy table.
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.

Changes in Level 3 Instruments for the Six Months Ended June 30, 2012

																						Net
(In millions)																						change in
						Net realized/																unrealized
			Net			unrealized																gains
			realized/			gains (losses)																(losses)
			unrealized			included in																relating to
			gains			accumulated																instruments
	Balance at		(losses)			other								Transfers			Transfers			Balance at		still held at
	January 1,		included in			comprehensive								into			out of			June 30,		June 30,
	2012		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2012		2012		(c)

Investment securities
Debt
U.S. corporate	$	3,235	$	59		$	(34)	$	132	$	(71)	$	(47)	$	116		$	(18)		$	3,372	$	0
State and municipal		77		0			3		1		0		0		0			0			81		0
Residential
mortgage-backed		41		(3)			3		0		0		(3)		69			(10)			97		0
Commercial
mortgage-backed		4		0			0		0		(1)		0		0			(3)			0		0
Asset-backed		4,040		3			(47)		398		(106)		0		16			0			4,304		0
Corporate – non-U.S.		1,204		(12)			(3)		316		0		(78)		23			(87)			1,363		0
Government
– non-U.S.		84		(34)			35		65		(72)		(27)		0			0			51		0
U.S. government and
federal agency		253		0			8		0		0		0		0			0			261		0
Retained interests		35		0			(8)		9		(3)		(2)		0			0			31		0
Equity
Available-for-sale		17		0			(2)		3		(4)		0		0			0			14		0
Derivatives(d)(e)		141		(4)			(1)		20		(3)		(13)		0			(4)			136		1
Other		388		4			(13)		34		(4)		0		0			0			409		1
Total	$	9,519	$	13		$	(59)	$	978	$	(264)	$	(170)	$	224		$	(122)		$	10,119	$	2

Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Earnings.
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
Represented the amount of unrealized gains or losses for the period included in earnings.
Represented derivative assets net of derivative liabilities and included cash accruals of $2 million not reflected in the fair value hierarchy table.
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.

Changes in Level 3 Instruments for the Six Months Ended June 30, 2011

																						Net
(In millions)																						change in
						Net realized/																unrealized
			Net			unrealized																gains
			realized/			gains (losses)																(losses)
			unrealized			included in																relating to
			gains			accumulated																instruments
	Balance at		(losses)			other								Transfers			Transfers			Balance at		still held at
	January 1,		included in			comprehensive								into			out of			June 30,		June 30,
	2011		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2011		2011		(c)

Investment securities
Debt
U.S. corporate	$	3,198	$	101		$	(20)	$	75	$	(155)	$	(103)	$	0		$	0		$	3,096	$	0
State and municipal		225		0			(5)		4		0		(4)		0			(11)			209		0
Residential
mortgage-backed		66		0			1		2		(4)		(1)		71			(90)			45		0
Commercial
mortgage-backed		49		0			1		6		0		0		3			(52)			7		0
Asset-backed		2,540		0			55		780		(152)		(11)		1			(81)			3,132		0
Corporate – non-U.S.		1,486		(28)			82		12		(28)		(60)		73			0			1,537		0
Government
– non-U.S.		156		(16)			14		13		0		0		107			0			274		0
U.S. government and
federal agency		210		0			14		0		0		0		0			0			224		0
Retained interests		39		(18)			30		0		(3)		(3)		0			0			45		0
Equity
Available-for-sale		24		0			0		0		0		0		1			(3)			22		0
Derivatives(d)(e)		227		55			4		5		0		(186)		0			6			111		32
Other		450		3			28		119		0		(5)		0			0			595		1
Total	$	8,670	$	97		$	204	$	1,016	$	(342)	$	(373)	$	256		$	(231)		$	9,297	$	33

Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Earnings.
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
Represented the amount of unrealized gains or losses for the period included in earnings.
Represented derivative assets net of derivative liabilities and included cash accruals of $1 million not reflected in the fair value hierarchy table.
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.

Non-Recurring Fair Value Measurements

The following table represents non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at June 30, 2012 and December 31, 2011. These assets can include loans and long-lived assets that have been reduced to fair value when they are held for sale, impaired loans that have been reduced based on the fair value of the underlying collateral, cost and equity method investments and long-lived assets that are written down to fair value when they are impaired and the remeasurement of retained investments in formerly consolidated subsidiaries upon a change in control that results in deconsolidation of a subsidiary, if we sell a controlling interest and retain a noncontrolling stake in the entity. Assets that are written down to fair value when impaired and retained investments are not subsequently adjusted to fair value unless further impairment occurs.


	Remeasured during				Remeasured during
	the six months ended				the year ended
	June 30, 2012				December 31, 2011
(In millions)	Level 2		Level 3		Level 2		Level 3

Financing receivables and loans held for sale	$	171	$	2,731	$	158	$	5,159
Cost and equity method investments(a)		0		266		0		402
Long-lived assets, including real estate		326		2,014		1,343		3,254
Total	$	497	$	5,011	$	1,501	$	8,815

Includes the fair value of private equity and real estate funds included in Level 3 of $57 million and $123 million at June 30, 2012 and December 31, 2011, respectively.

The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at June 30, 2012 and 2011.


	Three months ended June 30,				Six months ended June 30,
(In millions)	2012		2011		2012		2011

Financing receivables and loans held for sale	$	(105)	$	(263)	$	(211)	$	(570)
Cost and equity method investments(a)		(38)		(127)		(58)		(174)
Long-lived assets, including real estate(b)		(107)		(342)		(247)		(861)
Total	$	(250)	$	(732)	$	(516)	$	(1,605)

Includes fair value adjustments associated with private equity and real estate funds of $(1) million and $ (8) million in the three months ended June 30, 2012 and 2011, respectively, and $(2) million and $ (13) million in the six months ended June 30, 2012 and 2011, respectively.
Includes impairments related to real estate equity properties and investments recorded in operating and administrative expenses of $6 million and $339 million in the three months ended June 30, 2012 and 2011, respectively, and $56 million and $776 million in the six months ended June 30, 2012 and 2011, respectively.

Level 3 Measurements

The following table presents information relating to the significant unobservable inputs of our Level 3 recurring and non-recurring measurements.


	Fair value at					Range
	June 30,		Valuation	Unobservable		(weighted
(Dollars in millions)	2012		technique	inputs		average)

Recurring fair value measurements

Investment securities

Debt

U.S. corporate	$	1,547	Income approach	Discount rate	(a)	2.0%-24.9% (10.6%)

Asset-backed		4,259	Income approach	Discount rate	(a)	1.6%-13.3% (4.2%)

Corporate Non-U.S.		912	Income approach	Discount rate	(a)	1.3%-30.2% (8.3%)

Other financial assets		367	Market comparables	Weighted average		7.6X-8.3X (8.3X)
				cost of capital
Non-recurring fair value measurements

Financing receivables and loans held for sale	$	1,828	Income approach	Capitalization rate	(b)	5.4%-11.5% (8.2%)

Cost and equity method investments		119	Income approach	Capitalization rate	(b)	7.0%-9.3% (8.3%)

Long-lived assets, including real estate		441	Income approach	Capitalization rate	(b)	4.8%-11.0% (7.4%)

Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value.
Represents the rate of return on net operating income which is considered acceptable for an investor and is used to determine a property's capitalized value. An increase in the capitalization rate would result in a decrease in the fair value.

Other Level 3 recurring fair value measurements of $2,875 million and non-recurring measurements of $2,110 million are valued using non-binding broker quotes or other third-party sources. For a description of our process to evaluate third-party pricing servicers, see Note 1 in our 2011 consolidated financial statements. Other recurring fair value measurements of $157 million and non-recurring fair value measurements of $513 million were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 5

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 17-22, 27, 28

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15C, 15D

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 28

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 16

-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15A

-Subparagraph a-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 21

-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 133

-Paragraph 44A, 44B

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 3, 10, 14, 15

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15B

-Subparagraph a, b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32, 33, 34

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details