Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

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
March 31, 2012
Assets
Investment securities
Debt
U.S. corporate	$	0		$	20,464		$	3,251	$	0		$	23,715
State and municipal		0			3,365			79		0			3,444
Residential mortgage-backed		0			2,403			107		0			2,510
Commercial mortgage-backed		0			2,980			1		0			2,981
Asset-backed(c)		0			915			4,404		0			5,319
Corporate - non-U.S.		74			1,197			1,249		0			2,520
Government - non-U.S.		1,111			1,110			52		0			2,273
U.S. government and federal agency		0			3,889			260		0			4,149
Retained interests		0			0			34		0			34
Equity
Available-for-sale		587			17			15		0			619
Trading		250			0			0		0			250
Derivatives(d)		0			11,227			129		(5,909)			5,447
Other(e)		0			0			390		0			390
Total	$	2,022		$	47,567		$	9,971	$	(5,909)		$	53,651
Liabilities
Derivatives	$	0		$	3,381		$	16	$	(3,153)		$	244
Other		0			24			0		0			24
Total	$	0		$	3,405		$	16	$	(3,153)		$	268
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 three months ended March 31, 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 $18 million and $11 million at March 31, 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 threemonths ended March 31, 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 shareowner's equity.

Changes in Level 3 Instruments for the Three Months Ended March 31, 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			March 31,		March 31,
	2012		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2012		2012		(c)
Investment securities
Debt
U.S. corporate	$	3,235	$	26		$	37	$	13	$	(31)	$	(16)	$	0		$	(13)		$	3,251	$	0
State and municipal		77		0			2		0		0		0		0			0			79		0
Residential
mortgage-backed		41		(3)			3		0		0		(1)		68			(1)			107		0
Commercial
mortgage-backed		4		0			0		0		0		0		0			(3)			1		0
Asset-backed		4,040		(4)			42		341		(31)		0		16			0			4,404		0
Corporate – non-U.S.		1,204		(9)			60		10		0		(26)		14			(4)			1,249		0
Government
– non-U.S.		84		(34)			35		52		(71)		(14)		0			0			52		0
U.S. government and
federal agency		253		0			7		0		0		0		0			0			260		0
Retained interests		35		0			(4)		5		(1)		(1)		0			0			34		0
Equity
Available-for-sale		17		0			(1)		0		0		(1)		0			0			15		0
Trading		0		0			0		0		0		0		0			0			0		0
Derivatives(d)(e)		141		(25)			1		0		0		0		0			0			117		(26)
Other		388		2			0		0		0		0		0			0			390		2
Total	$	9,519	$	(47)		$	182	$	421	$	(134)	$	(59)	$	98		$	(21)		$	9,959	$	(24)

• Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained 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 $4 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 March 31, 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			March 31,		March 31,
	2011		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2011		2011		(c)
Investment securities
Debt
U.S. corporate	$	3,198	$	87		$	(23)	$	45	$	(114)	$	(74)	$	0		$	0		$	3,119	$	0
State and municipal		225		0			(5)		4		0		(3)		0			(11)			210		0
Residential
mortgage-backed		66		0			3		1		(4)		(1)		71			(18)			118		0
Commercial
mortgage-backed		49		0			0		7		0		0		3			(48)			11		0
Asset-backed		2,540		3			74		371		(109)		(10)		1			(44)			2,826		0
Corporate – non-U.S.		1,486		(27)			54		12		(28)		(29)		11			0			1,479		0
Government
– non-U.S.		156		0			6		0		0		0		0			0			162		0
U.S. government and
federal agency		210		0			(9)		0		0		0		0			0			201		0
Retained interests		39		(19)			34		0		(1)		(1)		0			0			52		0
Equity
Available-for-sale		24		0			(1)		0		0		0		1			(3)			21		0
Trading		0		0			0		0		0		0		0			0			0		0
Derivatives(d)(e)		227		18			4		4		0		(184)		0			6			75		23
Other		450		0			17		5		0		0		0			0			472		0
Total	$	8,670	$	62		$	154	$	449	$	(256)	$	(302)	$	87		$	(118)		$	8,746	$	23

• Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained 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 $3 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 March 31, 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 three months ended				the year ended
	March 31, 2012				December 31, 2011
(In millions)	Level 2		Level 3		Level 2		Level 3
Financing receivables and loans held for sale	$	196	$	2,015	$	158	$	5,159
Cost and equity method investments(a)		0		73		0		402
Long-lived assets, including real estate		127		1,271		1,343		3,254
Total	$	323	$	3,359	$	1,501	$	8,815

• Includes the fair value of private equity and real estate funds included in Level 3 of $17 million and $123 million at March 31, 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 March 31, 2012 and 2011.

	Three months ended March 31,
(In millions)	2012		2011
Financing receivables and loans held for sale	$	(126)	$	(363)
Cost and equity method investments(a)		(21)		(48)
Long-lived assets, including real estate(b)		(152)		(567)
Total	$	(299)	$	(978)

• Includes fair value adjustments associated with private equity and real estate funds of $(3) million and $(5) million in the three months ended March 31, 2012 and 2011, respectively.
• Includes impairments related to real estate equity properties and investments recorded in operating and administrative expenses of $50 million and $436 million in the three months ended March 31, 2012 and 2011, respectively.

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

	Fair value at					Range
	March 31,		Valuation	Unobservable		(weighted
(Dollars in millions)	2012		technique	inputs		average)
Recurring fair value measurements
Investment securities
Debt
U.S. corporate	$	1,539	Income approach	Discount rate	(a)	2.0%-20.9% (10.3%)
Asset-backed		4,358	Income approach	Discount rate	(a)	1.9%-18.0% (4.4%)
Corporate Non-U.S.		713	Income approach	Discount rate	(a)	2.3%-27.2% (9.9%)
Other financial assets		381	Income approach	Weighted average		8.8%-11.5% (8.8%)
				cost of capital
Non-recurring fair value measurements
Financing receivables and loans held for sale	$	1,221	Income approach	Capitalization rate	(b)	6.7%-12.8% (8.2%)
Cost and equity method investments		28	Income approach	Capitalization rate	(b)	8.6% (8.6%)
Long-lived assets, including real estate		200	Income approach	Capitalization rate	(b)	4.8%-10.6% (6.2%)

• 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 $2,792 million and non-recurring measurements of $1,439 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 $172 million and non-recurring fair value measurements of $471 million were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.