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 Statement 3. 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 Statement 3). 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 Statement 1.



	December 31, 2012							December 31, 2011							December 31, 2010
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		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	$	12	$	—		$	12
Other U.S. and non-U.S. government bonds	144		2			146		90		2			92		76		1			77

Corporate bonds
Corporate bonds	626		38			664		542		30			572		481		30			511
Asset-backed securities	96		—			96		112		(1		)	111		136		—			136

Mortgage-backed debt securities
U.S. governmental agency	291		8			299		297		13			310		258		15			273
Residential	26		(1		)	25		33		(3		)	30		43		(3		)	40
Commercial	117		10			127		142		3			145		164		4			168

Equity securities
Large capitalization value	147		38			185		127		21			148		100		22			122
Smaller company growth	22		12			34		22		7			29		23		8			31
Total	$	1,479	$	107		$	1,586	$	1,375	$	72		$	1,447	$	1,293	$	77		$	1,370

During 2012, 2011 and 2010, charges for other-than-temporary declines in the market values of securities were $2 million, $5 million and $3 million, respectively. These charges were accounted for as a realized loss and were included in Other income (expense) in Statement 1. 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:

	December 31, 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	84		1		15		—		99		1
Residential	—		—		14		1		14		1

Equity securities
Large capitalization value	25		2		10		1		35		3
Total	$	109	$	3	$	59	$	5	$	168	$	8


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



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

	December 31, 2011
	Less than 12 months¹				12 months or more ¹				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.



Investments in an unrealized loss position that are not other-than-temporarily impaired:
	December 31, 2010
	Less than 12 months ¹				12 months or more ¹				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	19	$	—	$	19	$	4	$	38	$	4

Mortgage-backed debt securities
Residential	2		—		25		4		27		4
Commercial	3		—		14		1		17		1

Equity securities
Large capitalization value	14		1		12		2		26		3
Total	$	38	$	1	$	70	$	11	$	108	$	12


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 December 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 December 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. Overall U.S. equity valuations were marginally lower for the fourth quarter of 2012 as concerns over economic growth and the fiscal budget outweighed strong earnings and stimulus measures. We do not consider these investments to be other-than-temporarily impaired as of December 31, 2012.

The cost basis and fair value of the available-for-sale debt securities at December 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.




	December 31, 2012
(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	161	$	162
Due after one year through five years	595		623
Due after five years through ten years	78		90
Due after ten years	42		41
U.S. governmental agency mortgage-backed securities	291		299
Residential mortgage-backed securities	26		25
Commercial mortgage-backed securities	117		127
Total debt securities – available-for-sale	$	1,310	$	1,367




Sales of Securities:
	Years Ended December 31,
(Millions of dollars)	2012		2011		2010
Proceeds from the sale of available-for-sale securities	$	306	$	247	$	228
Gross gains from the sale of available-for-sale securities	$	6	$	4	$	10
Gross losses from the sale of available-for-sale securities	$	—	$	1	$	1