Available-For-Sale Securities

9 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Available-For-Sale Securities

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.

	September 30, 2012							December 31, 2011
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value
Government debt
U.S. treasury bonds	$	10	$	—		$	10	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	116		2			118		90		2			92
Corporate bonds
Corporate bonds	630		42			672		542		30			572
Asset-backed securities	94		—			94		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	288		10			298		297		13			310
Residential	28		(1		)	27		33		(3		)	30
Commercial	123		8			131		142		3			145
Equity securities
Large capitalization value	140		37			177		127		21			148
Smaller company growth	22		12			34		22		7			29
Total	$	1,451	$	110		$	1,561	$	1,375	$	72		$	1,447

During the three months ended September 30, 2012, there were no charges for other-than-temporary declines in the market value of securities. During the nine months ended September 30, 2012, charges for other-than-temporary declines in the market value of securities were $1 million. During the three and nine months ended September 30, 2011, charges for other-than-temporary declines in the market value of securities were $4 million. These charges were accounted for as realized losses and were included in Other income (expense) in the Consolidated Statement of Results of Operations.  The cost basis of the impacted securities was adjusted to reflect these charges.

Investments in an unrealized loss position that are not other-than-temporarily impaired:
	September 30, 2012
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	—	$	—	$	20	$	3	$	20	$	3
Mortgage-backed debt securities
U.S. governmental agency	74		1		4		—		78		1
Residential	—		—		15		1		15		1
Equity securities
Large capitalization value	22		2		13		2		35		4
Total	$	96	$	3	$	52	$	6	$	148	$	9

	December 31, 2011
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
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 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 September 30, 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 September 30, 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.  Overall U.S. equity valuations were higher during the third quarter of 2012 despite lingering concerns over Europe's debt crisis and on mixed economic data.  We do not consider these investments to be other-than-temporarily impaired as of September 30, 2012.

The fair value of the available-for-sale debt securities at September 30, 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.

	September 30, 2012
(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	141	$	143
Due after one year through five years	530		551
Due after five years through ten years	135		157
Due after ten years	44		43
U.S. governmental agency mortgage-backed securities	288		298
Residential mortgage-backed securities	28		27
Commercial mortgage-backed securities	123		131
Total debt securities – available-for-sale	$	1,289	$	1,350

Sales of Securities
	Three Months Ended September 30,				Nine Months Ended September 30,
(Millions of dollars)	2012		2011		2012		2011
Proceeds from the sale of available-for-sale securities	$	66	$	58	$	243	$	180
Gross gains from the sale of available-for-sale securities	$	1	$	1	$	4	$	3
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	—	$	1