13. INVESTMENTS

Overview

In millions of dollars	March 31, 2014		December 31, 2013
Securities available-for-sale (AFS)	$	290,937	$	286,511
Debt securities held-to-maturity (HTM)(1)	10,600		10,599
Non-marketable equity securities carried at fair value(2)	4,459		4,705
Non-marketable equity securities carried at cost(3)	6,904		7,165
Total investments	$	312,900	$	308,980

(1) Recorded at amortized cost less impairment for securities that have credit-related impairment.

(2) Unrealized gains and losses for non-marketable equity securities carried at fair value are recognized in earnings.

(3) Non-marketable equity securities carried at cost primarily consist of shares issued by the Federal Reserve Bank, Federal Home Loan Banks, foreign central banks and various clearing houses of which Citigroup is a member.

The following table presents interest and dividends on investments for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
In millions of dollars	2014		2013
Taxable interest	$	1,467	$	1,510
Interest exempt from U.S. federal income tax	164		172
Dividends	126		120
Total interest and dividends	$	1,757	$	1,802

The following table presents realized gains and losses on the sale of investments for the three months ended March 31, 2014 and 2013. The gross realized investment losses exclude losses from other-than-temporary impairment (OTTI):

	Three Months Ended March 31,
In millions of dollars	2014			2013
Gross realized investment gains	$	292		$	494
Gross realized investment losses	(164		)	(44		)
Net realized gains on sale of investments	$	128		$	450

The Company has sold various debt securities that were classified as HTM. These sales were in response to a significant deterioration in the creditworthiness of the issuers or securities. In addition, certain securities were reclassified to AFS investments in response to significant credit deterioration and, because the Company intends to sell the securities, Citi recorded OTTI on the securities. The following table sets forth, for the periods indicated, gain (loss) on HTM securities sold, securities reclassified to AFS and OTTI recorded on AFS securities reclassified.

	Three Months Ended March 31,
In millions of dollars	2014			2013
Carrying value of HTM securities sold	$	—		$	167
Net realized gain (loss) on sale of HTM securities	—			(10		)
Carrying value of securities reclassified to AFS	52			602
OTTI losses on securities reclassified to AFS	(8		)	(94		)

Securities Available-for-Sale

The amortized cost and fair value of AFS securities at March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014								December 31, 2013
In millions of dollars	Amortized cost		Gross unrealized gains(1)		Gross unrealized losses(1)		Fair value		Amortized cost		Gross unrealized gains(1)		Gross unrealized losses(1)		Fair value
Debt securities AFS
Mortgage-backed securities(2)
U.S. government-sponsored agency guaranteed	$	42,028	$	486	$	712	$	41,802	$	42,494	$	391	$	888	$	41,997
Prime	16		—		—		16		33		2		3		32
Alt-A	43		—		—		43		84		10		—		94
Subprime	12		—		—		12		12		—		—		12
Non-U.S. residential	9,659		96		5		9,750		9,976		95		4		10,067
Commercial	472		6		5		473		455		6		8		453
Total mortgage-backed securities	$	52,230	$	588	$	722	$	52,096	$	53,054	$	504	$	903	$	52,655
U.S. Treasury and federal agency securities
U.S. Treasury	$	82,824	$	368	$	178	$	83,014	$	68,891	$	476	$	147	$	69,220
Agency obligations	14,409		102		31		14,480		18,320		123		67		18,376
Total U.S. Treasury and federal agency securities	$	97,233	$	470	$	209	$	97,494	$	87,211	$	599	$	214	$	87,596
State and municipal(3)	$	20,700	$	224	$	1,809	$	19,115	$	20,761	$	184	$	2,005	$	18,940
Foreign government	90,365		463		391		90,437		96,608		403		540		96,471
Corporate	10,960		218		96		11,082		11,039		210		119		11,130
Asset-backed securities(2)	15,158		53		104		15,107		15,352		42		120		15,274
Other debt securities	710		—		—		710		710		1		—		711
Total debt securities AFS	$	287,356	$	2,016	$	3,331	$	286,041	$	284,735	$	1,943	$	3,901	$	282,777
Marketable equity securities AFS	$	4,942	$	103	$	149	$	4,896	$	3,832	$	85	$	183	$	3,734
Total securities AFS	$	292,298	$	2,119	$	3,480	$	290,937	$	288,567	$	2,028	$	4,084	$	286,511

(1) Gross unrealized gains and losses, as presented, do not include the impact of minority investments and the related allocations and pick-up of unrealized gains and losses of AFS securities. These amounts totaled $6 million and $36 million of unrealized gains as of March 31, 2014 and December 31, 2013, respectively.

(2) The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 20 to the Consolidated Financial Statements.

(3) The unrealized losses on state and municipal debt securities are primarily attributable to the effects of fair value hedge accounting. Specifically, Citi hedges the LIBOR-benchmark interest rate component of certain fixed-rate tax-exempt state and municipal debt securities utilizing LIBOR-based interest rate swaps. During the hedge period, losses incurred on the LIBOR-hedging swaps recorded in earnings were substantially offset by gains on the state and municipal debt securities attributable to changes in the LIBOR swap rate being hedged. However, because the LIBOR swap rate decreased significantly during the hedge period while the overall fair value of the municipal debt securities was relatively unchanged, the effect of reclassifying fair value gains on these securities from Accumulated other comprehensive income (AOCI) to earnings, attributable solely to changes in the LIBOR swap rate, resulted in net unrealized losses remaining in AOCI that relate to the unhedged components of these securities.

As discussed in more detail below, the Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. Any credit-related impairment related to debt securities that the Company does not plan to sell and is not likely to be required to sell is recognized in the Consolidated Statement of Income, with the non-credit-related impairment recognized in AOCI. For other debt securities with OTTI, the entire impairment is recognized in the Consolidated Statement of Income.

The table below shows the fair value of AFS securities that have been in an unrealized loss position for less than 12 months or for 12 months or longer as of March 31, 2014 and December 31, 2013:

	Less than 12 months				12 months or longer				Total
In millions of dollars	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
March 31, 2014
Securities AFS
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	15,717	$	379	$	6,433	$	333	$	22,150	$	712
Prime	2		—		3		—		5		—
Alt-A	11		—		—		—		11		—
Non-U.S. residential	1,467		4		13		1		1,480		5
Commercial	161		2		47		3		208		5
Total mortgage-backed securities	$	17,358	$	385	$	6,496	$	337	$	23,854	$	722
U.S. Treasury and federal agency securities
U.S. Treasury	$	34,874	$	175	$	100	$	3	$	34,974	$	178
Agency obligations	5,020		30		17		1		5,037		31
Total U.S. Treasury and federal agency securities	$	39,894	$	205	$	117	$	4	$	40,011	$	209
State and municipal	$	602	$	29	$	11,703	$	1,780	$	12,305	$	1,809
Foreign government	32,249		343		4,032		48		36,281		391
Corporate	3,504		83		579		13		4,083		96
Asset-backed securities	5,915		42		1,974		62		7,889		104
Other debt securities	49		—		—		—		49		—
Marketable equity securities AFS	1,342		77		806		72		2,148		149
Total securities AFS	$	100,913	$	1,164	$	25,707	$	2,316	$	126,620	$	3,480
December 31, 2013
Securities AFS
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	19,377	$	533	$	5,643	$	355	$	25,020	$	888
Prime	85		3		3		—		88		3
Non-U.S. residential	2,103		4		5		—		2,108		4
Commercial	206		6		28		2		234		8
Total mortgage-backed securities	$	21,771	$	546	$	5,679	$	357	$	27,450	$	903
U.S. Treasury and federal agency securities
U.S. Treasury	$	34,780	$	133	$	268	$	14	$	35,048	$	147
Agency obligations	6,692		66		101		1		6,793		67
Total U.S. Treasury and federal agency securities	$	41,472	$	199	$	369	$	15	$	41,841	$	214
State and municipal	$	595	$	29	$	11,447	$	1,976	$	12,042	$	2,005
Foreign government	35,783		477		5,778		63		41,561		540
Corporate	4,565		108		387		11		4,952		119
Asset-backed securities	11,207		57		1,931		63		13,138		120
Marketable equity securities AFS	1,271		92		806		91		2,077		183
Total securities AFS	$	116,664	$	1,508	$	26,397	$	2,576	$	143,061	$	4,084

The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates as of March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
In millions of dollars	Amortized cost		Fair value		Amortized cost		Fair value
Mortgage-backed securities(1)
Due within 1 year	$	84	$	84	$	87	$	87
After 1 but within 5 years	302		308		346		354
After 5 but within 10 years	2,875		2,927		2,898		2,932
After 10 years(2)	48,969		48,777		49,723		49,282
Total	$	52,230	$	52,096	$	53,054	$	52,655
U.S. Treasury and federal agency securities
Due within 1 year	$	17,703	$	17,773	$	15,789	$	15,853
After 1 but within 5 years	75,394		75,521		66,232		66,457
After 5 but within 10 years	855		855		2,129		2,185
After 10 years(2)	3,281		3,345		3,061		3,101
Total	$	97,233	$	97,494	$	87,211	$	87,596
State and municipal
Due within 1 year	$	137	$	139	$	576	$	581
After 1 but within 5 years	3,912		3,924		3,731		3,735
After 5 but within 10 years	441		484		439		482
After 10 years(2)	16,210		14,568		16,015		14,142
Total	$	20,700	$	19,115	$	20,761	$	18,940
Foreign government
Due within 1 year	$	34,276	$	34,299	$	37,005	$	36,959
After 1 but within 5 years	46,176		46,141		51,344		51,304
After 5 but within 10 years	8,585		8,596		7,314		7,216
After 10 years(2)	1,328		1,401		945		992
Total	$	90,365	$	90,437	$	96,608	$	96,471
All other(3)
Due within 1 year	$	2,849	$	2,807	$	2,786	$	2,733
After 1 but within 5 years	11,083		11,176		10,934		11,020
After 5 but within 10 years	5,534		5,582		5,632		5,641
After 10 years(2)	7,362		7,334		7,749		7,721
Total	$	26,828	$	26,899	$	27,101	$	27,115
Total debt securities AFS	$	287,356	$	286,041	$	284,735	$	282,777

(1) Includes mortgage-backed securities of U.S. government-sponsored agencies.

(2) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights.

(3) Includes corporate, asset-backed and other debt securities.

Debt Securities Held-to-Maturity

The carrying value and fair value of debt securities HTM at March 31, 2014 and December 31, 2013 were as follows:

In millions of dollars	Amortized cost(1)		Net unrealized losses recognized in AOCI		Carrying value(2)		Gross unrealized gains		Gross unrealized losses		Fair value
March 31, 2014
Debt securities held-to-maturity
Mortgage-backed securities(3)
Prime	$	70	$	15	$	55	$	6	$	2	$	59
Alt-A	1,298		270		1,028		487		257		1,258
Subprime	2		—		2		1		—		3
Non-U.S. residential	1,329		198		1,131		63		18		1,176
Commercial	10		—		10		1		—		11
Total mortgage-backed securities	$	2,709	$	483	$	2,226	$	558	$	277	$	2,507
State and municipal	$	1,496	$	59	$	1,437	$	67	$	57	$	1,447
Foreign government	5,623		—		5,623		77		—		5,700
Corporate	818		72		746		122		—		868
Asset-backed securities(3)	591		23		568		16		10		574
Total debt securities held-to-maturity	$	11,237	$	637	$	10,600	$	840	$	344	$	11,096
December 31, 2013
Debt securities held-to-maturity
Mortgage-backed securities(3)
Prime	$	72	$	16	$	56	$	5	$	2	$	59
Alt-A	1,379		287		1,092		449		263		1,278
Subprime	2		—		2		1		—		3
Non-U.S. residential	1,372		206		1,166		60		20		1,206
Commercial	10		—		10		1		—		11
Total mortgage-backed securities	$	2,835	$	509	$	2,326	$	516	$	285	$	2,557
State and municipal	$	1,394	$	62	$	1,332	$	50	$	70	$	1,312
Foreign government	5,628		—		5,628		70		10		5,688
Corporate	818		78		740		111		—		851
Asset-backed securities(3)	599		26		573		22		10		585
Total debt securities held-to-maturity	$	11,274	$	675	$	10,599	$	769	$	375	$	10,993

(1) For securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer plus any accretion income and less any impairments recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings.

(2) HTM securities are carried on the Consolidated Balance Sheet at amortized cost, plus or minus any unamortized unrealized gains and losses recognized in AOCI prior to reclassifying the securities from AFS to HTM. The changes in the values of these securities are not reported in the financial statements, except for other-than-temporary impairments. For HTM securities, the credit loss component of the impairment is recognized in earnings, while the remainder of the difference between amortized cost and fair value is recognized in AOCI.

(3) The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 20 to the Consolidated Financial Statements.

The Company has the positive intent and ability to hold these securities to maturity absent any unforeseen further significant changes in circumstances, including deterioration in credit or with regard to regulatory capital requirements.

The net unrealized losses classified in AOCI relate to debt securities previously reclassified from AFS investments to HTM investments. Additionally, for HTM securities that have suffered credit impairment, declines in fair value for reasons other than credit losses are recorded in AOCI, while credit-related impairment is recognized in earnings. The AOCI balance for HTM securities is amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same debt securities. This will have no impact on the Company’s net income because the amortization of the unrealized holding loss reported in equity will offset the effect on interest income of the accretion of the discount on these securities.

The table below shows the fair value of debt securities in HTM that have been in an unrecognized loss position as of March 31, 2014 and December 31, 2013:

	Less than 12 months				12 months or longer				Total
In millions of dollars	Fair value		Gross unrecognized losses		Fair value		Gross unrecognized losses		Fair value		Gross unrecognized losses
March 31, 2014
Debt securities held-to-maturity
Mortgage-backed securities	$	—	$	—	$	295	$	277	$	295	$	277
State and municipal	38		3		453		54		491		57
Foreign government	—		—		—		—		—		—
Asset-backed securities	—		—		294		10		294		10
Total debt securities held-to-maturity	$	38	$	3	$	1,042	$	341	$	1,080	$	344
December 31, 2013
Debt securities held-to-maturity
Mortgage-backed securities	$	—	$	—	$	358	$	285	$	358	$	285
State and municipal	235		20		302		50		537		70
Foreign government	920		10		—		—		920		10
Asset-backed securities	98		6		198		4		296		10
Total debt securities held-to-maturity	$	1,253	$	36	$	858	$	339	$	2,111	$	375

Excluded from the gross unrecognized losses presented in the above table are the $637 million and $675 million of gross unrealized losses recorded in AOCI as of March 31, 2014 and December 31, 2013, respectively, mainly related to the HTM securities that were previously reclassified from AFS investments. Virtually all of these unrecognized losses relate to securities that have been in a loss position for 12 months or longer at March 31, 2014 and December 31, 2013.

The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates as of March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
In millions of dollars	Carrying value		Fair value		Carrying value		Fair value
Mortgage-backed securities
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	10		11		10		11
After 10 years(1)	2,216		2,496		2,316		2,546
Total	$	2,226	$	2,507	$	2,326	$	2,557
State and municipal
Due within 1 year	$	3	$	3	$	8	$	9
After 1 but within 5 years	14		15		17		17
After 5 but within 10 years	83		88		69		72
After 10 years(1)	1,337		1,341		1,238		1,214
Total	$	1,437	$	1,447	$	1,332	$	1,312
Foreign government
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	5,623		5,700		5,628		5,688
After 5 but within 10 years	—		—		—		—
After 10 years(1)	—		—		—		—
Total	$	5,623	$	5,700	$	5,628	$	5,688
All other(2)
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	747		868		740		851
After 5 but within 10 years	—		—		—		—
After 10 years(1)	567		574		573		585
Total	$	1,314	$	1,442	$	1,313	$	1,436
Total debt securities held-to-maturity	$	10,600	$	11,096	$	10,599	$	10,993

(1) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights.

(2) Includes corporate and asset-backed securities.

Evaluating Investments for Other-Than-Temporary Impairment

Overview

The Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary.

An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. Losses related to HTM securities generally are not recorded, as these investments are carried at amortized cost. However, for HTM securities with credit-related losses, the credit loss component of the difference to adjust the security to fair value is recognized in earnings, while the remainder is recognized in AOCI. For securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings.

Regardless of the classification of the securities as AFS or HTM, the Company has assessed each position with an unrealized loss for OTTI. Factors considered in determining whether a loss is temporary include:

· the length of time and the extent to which fair value has been below cost;

· the severity of the impairment;

· the cause of the impairment and the financial condition and near-term prospects of the issuer;

· activity in the market of the issuer that may indicate adverse credit conditions; and

· the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

The Company’s review for impairment generally entails:

· identification and evaluation of investments that have indications of possible impairment;

· analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;

· discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment and those that would not support other-than-temporary impairment; and

· documentation of the results of these analyses, as required under business policies.

Debt

Under the guidance for debt securities, OTTI is recognized in earnings for debt securities that the Company has an intent to sell or that the Company believes it is more-likely-than-not that it will be required to sell prior to recovery of the amortized cost basis. For those securities that the Company does not intend to sell or expect to be required to sell, credit-related impairment is recognized in earnings, with the non-credit-related impairment recorded in AOCI.

For debt securities that are not deemed to be credit impaired, management assesses whether it intends to sell or whether it is more-likely-than-not that it would be required to sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted that it has no intent to sell and that it believes it is not likely to be required to sell the investment before recovery of its amortized cost basis. Where such an assertion cannot be made, the security’s decline in fair value is deemed to be other than temporary and is recorded in earnings.

For debt securities, a critical component of the evaluation for OTTI is the identification of credit impaired securities, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. For securities purchased and classified as AFS with the expectation of receiving full principal and interest cash flows as of the date of purchase, this analysis considers the likelihood and the timing of receiving all contractual principal and interest.

Equity

For equity securities, management considers the various factors described above, including its intent and ability to hold the equity security for a period of time sufficient for recovery to cost or whether it is more-likely-than-not that the Company will be required to sell the security prior to recovery of its cost basis. Where management lacks that intent or ability, the security’s decline in fair value is deemed to be other-than-temporary and is recorded in earnings. AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and cost recognized in earnings.

Management assesses equity method investments with fair value less than carrying value for OTTI. Fair value is measured as price multiplied by quantity if the investee has publicly listed securities. If the investee is not publicly listed, other methods are used (see Note 22 to the Consolidated Financial Statements).

For impaired equity method investments that Citi plans to sell prior to recovery of value or would likely be required to sell, with no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in earnings as OTTI regardless of severity and duration. The measurement of the OTTI does not include partial projected recoveries subsequent to the balance sheet date.

For impaired equity method investments that management does not plan to sell prior to recovery of value and is not likely to be required to sell, the evaluation of whether an impairment is other-than-temporary is based on (i) whether and when an equity method investment will recover in value and (ii) whether the investor has the intent and ability to hold that investment for a period of time sufficient to recover the value. The determination of whether the impairment is considered other-than-temporary is based on all of the following indicators, regardless of the time and extent of impairment:

· cause of the impairment and the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer;

· intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value; and

· length of time and extent to which fair value has been less than the carrying value.

The sections below describe the Company’s process for identifying credit-related impairments in its security types with the most significant unrealized losses as of March 31, 2014.

Mortgage-backed securities

For U.S. mortgage-backed securities (and in particular for Alt-A and other mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates, recovery rates (on foreclosed properties) and loss severity rates (on non-agency mortgage-backed securities).

Management develops specific assumptions using as much market data as possible and includes internal estimates, as well as estimates published by rating agencies and other third-party sources. Default rates are projected by considering current underlying mortgage loan performance, generally assuming the default of (i) 10% of current loans, (ii) 25% of 30-59 day delinquent loans, (iii) 70% of 60-90 day delinquent loans and (iv) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions contemplate the actual collateral attributes, including geographic concentrations, rating actions and current market prices.

Cash flow projections are developed using different stress test scenarios. Management evaluates the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenarios actually occurring based on the underlying pool’s characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.

State and municipal securities

The process for identifying credit impairments in Citigroup’s AFS state and municipal bonds is primarily based on a credit analysis that incorporates third-party credit ratings. Citigroup monitors the bond issuers and any insurers providing default protection in the form of financial guarantee insurance. The average external credit rating, ignoring any insurance, is Aa3/AA-. In the event of an external rating downgrade or other indicator of credit impairment (i.e., based on instrument-specific estimates of cash flows or probability of issuer default), the subject bond is specifically reviewed for adverse changes in the amount or timing of expected contractual principal and interest.

For AFS state and municipal bonds with unrealized losses that Citigroup plans to sell, would likely be required to sell or will be subject to an issuer call deemed probable of exercise prior to the expected recovery of its amortized cost basis, the full impairment is recognized in earnings.

Recognition and Measurement of OTTI

The following table presents the total OTTI recognized in earnings for the three months ended March 31, 2014:

OTTI on Investments and Other Assets

Three Months Ended March 31, 2014

In millions of dollars

AFS(1)

HTM

Other
Assets

Total

Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell:

Total OTTI losses recognized during the period ended March 31, 2014

—

Less: portion of impairment loss recognized in AOCI (before taxes)

—

Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell

—

Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery

201

—

201

Total impairment losses recognized in earnings

201

—

201

(1) Includes OTTI on non-marketable equity securities.

The following table presents the total OTTI recognized in earnings for the three months ended March 31, 2013:

OTTI on Investments and Other Assets

	Three Months Ended March 31, 2013
In millions of dollars	AFS(1)		HTM		Other Assets (2)		Total
Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell:
Total OTTI losses recognized during the period ended March 31, 2013	$	2	$	22	$	—	$	24
Less: portion of impairment loss recognized in AOCI (before taxes)	—		11		—		11
Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell	$	2	$	11	$	—	$	13
Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery(2)	143		—		105		248
Total impairment losses recognized in earnings	$	145	$	11	$	105	$	261

(1) Includes OTTI on non-marketable equity securities.

(2) The first quarter of 2013 included the recognition of a $105 million impairment charge related to the carrying value of Citi’s then-remaining 35% interest in the Morgan Stanley Smith Barney joint venture (MSSB), which was offset by the equity pickup from MSSB in the quarter which was recorded in Other Revenue.

The following is a three-month roll-forward of the credit-related impairments recognized in earnings for AFS and HTM debt securities held as of March 31, 2014 that the Company does not intend to sell nor likely will be required to sell:

	Cumulative OTTI credit losses recognized in earnings
In millions of dollars	Dec. 31, 2013 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Reductions due to credit-impaired securities sold, transferred or matured			Mar. 31, 2014 balance
AFS debt securities
Mortgage-backed securities	$	295	$	—	$	—	$	—		$	295
Foreign government securities	171		—		—		—			171
Corporate	113		—		—		—			113
All other debt securities	144		—		—		—			144
Total OTTI credit losses recognized for AFS debt securities	$	723	$	—	$	—	$	—		$	723
HTM debt securities
Mortgage-backed securities(1)	$	678	$	—	$	—	$	(13	)	$	665
Corporate	56		—		—		—			56
All other debt securities	133		—		—		—			133
Total OTTI credit losses recognized for HTM debt securities	$	867	$	—	$	—	$	(13	)	$	854

(1) Primarily consists of Alt-A securities.

The following is a three-month roll-forward of the credit-related impairments recognized in earnings for AFS and HTM debt securities held as of March 31, 2013 that the Company does not intend to sell nor likely will be required to sell:

	Cumulative OTTI credit losses recognized in earnings
In millions of dollars	Dec. 31, 2012 balance		Credit impairments recognized in earnings on securities not previously impaired		Credit impairments recognized in earnings on securities that have been previously impaired		Reductions due to credit-impaired securities sold, transferred or matured			Mar. 31, 2013 balance
AFS debt securities
Mortgage-backed securities	$	295	$	—	$	—	$	—		$	295
Foreign government securities	169		—		—		—			169
Corporate	116		—		—		—			116
All other debt securities	137		2		—		—			139
Total OTTI credit losses recognized for AFS debt securities	$	717	$	2	$	—	$	—		$	719
HTM debt securities
Mortgage-backed securities(1)	$	869	$	10	$	1	$	(34	)	$	846
Corporate	56		—		—		—			56
All other debt securities	135		—		—		—			135
Total OTTI credit losses recognized for HTM debt securities	$	1,060	$	10	$	1	$	(34	)	$	1,037

(1) Primarily consists of Alt-A securities.

Investments in Alternative Investment Funds That Calculate Net Asset Value per Share

The Company holds investments in certain alternative investment funds that calculate net asset value (NAV) per share, including hedge funds, private equity funds, funds of funds and real estate funds. The Company’s investments include co-investments in funds that are managed by the Company and investments in funds that are managed by third parties. Investments in funds are generally classified as non-marketable equity securities carried at fair value. The fair values of these investments are estimated using the NAV per share of the Company’s ownership interest in the funds, where it is not probable that the Company will sell an investment at a price other than the NAV.

	Fair value				Unfunded commitments				Redemption frequency
In millions of dollars	March 31, 2014		December 31, 2013		March 31, 2014		December 31, 2013		(if currently eligible) monthly, quarterly, annually	Redemption notice period
Hedge funds	$	425	$	751	$	—	$	—	Generally quarterly	10-95 days
Private equity funds(1)(2)	733		794		163		170		—	—
Real estate funds (2)(3)	206		294		24		36		—	—
Total(4)(5)	$	1,364	$	1,839	$	187	$	206	—	—

(1) Private equity funds include funds that invest in infrastructure, leveraged buyout transactions, emerging markets and venture capital.

(2) With respect to the Company’s investments in private equity funds and real estate funds, distributions from each fund will be received as the underlying assets held by these funds are liquidated. It is estimated that the underlying assets of these funds will be liquidated over a period of several years as market conditions allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments, subject to the approval of the general partner or investment manager of these funds, which generally may not be unreasonably withheld.

(3) Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia.

(4) Included in the total fair value of investments above are $1.1 billion and $1.6 billion of fund assets that are valued using NAVs provided by third-party asset managers as of March 31, 2014 and December 31, 2013, respectively.

(5) Excluded from the total fair value of investments above are $64 million of fund assets that are considered probable to be sold at a price other than the NAV. Therefore, the fair values of these investments have been estimated using recent transaction information rather than the NAV per share as of March 31, 2014.