Available-For-Sale Securities

3 Months Ended

Mar. 31, 2012

Available-For-Sale Securities

Available-For-Sale Securities

8.Available-For-Sale Securities

We have investments in certain debt and equity securities, primarily at Cat Insurance, that have been classified as available-for-sale and recorded at fair value based upon quoted market prices. These investments are primarily included in Other assets in the Consolidated Statement of Financial Position. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included, net of applicable deferred income taxes, in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position).  Realized gains and losses on sales of investments are generally determined using the FIFO (first-in, first-out) method for debt instruments and the specific identification method for equity securities.  Realized gains and losses are included in Other income (expense) in the Consolidated Statement of Results of Operations.

	March 31, 2012							December 31, 2011
(Millions of dollars)	CostBasis		Unrealized Pretax Net Gains(Losses)			FairValue		CostBasis		Unrealized Pretax Net Gains(Losses)			FairValue
Government debt
U.S. treasury bonds	$	12	$	—		$	12	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	121		2			123		90		2			92
Corporate bonds
Corporate bonds	569		35			604		542		30			572
Asset-backed securities	99		(1		)	98		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	266		13			279		297		13			310
Residential	32		(3		)	29		33		(3		)	30
Commercial	137		6			143		142		3			145
Equity securities
Large capitalization value	133		35			168		127		21			148
Smaller company growth	29		13			42		22		7			29
Total	$	1,398	$	100		$	1,498	$	1,375	$	72		$	1,447

During the three months ended March 31, 2012 and 2011, there were no charges for other-than-temporary declines in the market value of securities.

Investments in an unrealized loss position that are not other-than-temporarily impaired:

	March 31, 2012
	Less than 12 months (1)				12 months or more(1)				Total
(Millions of dollars)	FairValue		UnrealizedLosses		FairValue		UnrealizedLosses		FairValue		UnrealizedLosses
Corporate bonds
Asset-backed securities	$	3	$	—	$	19	$	4	$	22	$	4
Mortgage-backed debt securities
Residential	2		—		16		3		18		3
Commercial	4		—		8		1		12		1
Equity securities
Large capitalization value	20		2		7		1		27		3
Total	$	29	$	2	$	50	$	9	$	79	$	11

	December 31, 2011
	Less than 12 months(1)				12 months or more(1)				Total
(Millions of dollars)	FairValue		UnrealizedLosses		FairValue		UnrealizedLosses		FairValue		UnrealizedLosses
Corporate bonds
Corporate bonds	$	54	$	1	$	1	$	—	$	55	$	1
Asset-backed securities	1		—		20		5		21		5
Mortgage-backed debt securities
U.S. governmental agency	51		1		—		—		51		1
Residential	3		—		18		3		21		3
Commercial	15		—		8		1		23		1
Equity securities
Large capitalization value	36		5		6		1		42		6
Smaller company growth	4		1		—		—		4		1
Total	$	164	$	8	$	53	$	10	$	217	$	18

(1)Indicates length of time that individual securities have been in a continuous unrealized loss position.

Corporate Bonds.  The unrealized losses on our investments in corporate bonds and asset-backed securities relate primarily to changes in interest rates and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of March 31, 2012.

Mortgage-Backed Debt Securities.  The unrealized losses on our investments in mortgage-backed securities and mortgage-related asset-backed securities relate primarily to the continuation of elevated housing delinquencies and default rates, risk aversion and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell these investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of March 31, 2012.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  U.S. equity valuations increased during the first quarter of 2012 on better-than-estimated earnings and positive economic data.  In each case where unrealized losses exist, the respective company’s management is taking corrective action in order to increase shareholder value.  We do not consider these investments to be other-than-temporarily impaired as of March 31, 2012.

The fair value of the available-for-sale debt securities at March 31, 2012, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.

(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	99	$	101
Due after one year through five years	511		526
Due after five years through ten years	145		166
Due after ten years	46		44
U.S. agency mortgage-backed securities	266		279
Residential mortgage-backed securities	32		29
Commercial mortgage-backed securities	137		143
Total debt securities — available-for-sale	$	1,236	$	1,288

Sales of Securities

	Three Months Ended March 31,
(Millions of dollars)	2012		2011
Proceeds from the sale of available-for-sale securities	$	112	$	66
Gross gains from the sale of available-for-sale securities	$	2	$	1
Gross losses from the sale of available-for-sale securities	$	—	$	1