Dow Chemical 2009 Annual Report Download - page 141

Table of Contents
Temporarily Impaired Securities at December 31, 2009
Less than 12 months 12 months or more Total
In millions Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
Debt securities:
U.S. Treasury obligations and direct
obligations of U.S. government
agencies $ 217 $ (4) - - $ 217 $ (4)
Corporate bonds 27 (1) $ 13 $ (1) 40 (2)
Total debt securities $ 244 $ (5) $ 13 $ (1) $ 257 $ (6)
Equity securities 40 (2) 7 (1) 47 (3)
Total temporarily impaired securities $ 284 $ (7) $ 20 $ (2) $ 304 $ (9)
Temporarily Impaired Securities at December 31, 2008
Less than 12 months 12 months or more Total
In millions Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
Debt securities:
U.S. Treasury obligations and direct
obligations of U.S. government
agencies $ 14 - - - $ 14 -
Corporate bonds 388 $ (35) $ 8 $ (1) 396 $ (36)
Other 4 - 2 - 6 -
Total debt securities $ 406 $ (35) $ 10 $ (1) $ 416 $ (36)
Equity securities 268 (152) 37 (25) 305 (177)
Total temporarily impaired securities $ 674 $ (187) $ 47 $ (26) $ 721 $ (213)
Portfolio managers regularly review the Company’s holdings to determine if any investments are other-than-temporarily impaired. The analysis includes
reviewing the amount of a temporary impairment, as well as the length of time it has been impaired. In addition, specific guidelines for each instrument type
are followed to determine if an other-than-temporary impairment has occurred.
For debt securities, the credit rating of the issuer, current credit rating trends, the trends of the issuer’s overall sector, the ability of the issuer to pay
expected cash flows and the length of time the security has been in a loss position are considered in determining whether unrealized losses represent an other-
than-temporary impairment. The Company did not have any credit-related losses during 2009.
For equity securities, the Company’s investments are primarily in Standard & Poor’s (“S&P”) 500 companies; however, the Company’s policies allow
investments in companies outside of the S&P 500. The largest holdings are Exchange Traded Funds that represent the S&P 500 index or Dow Jones index.
The decrease in temporarily impaired equity securities from December 31, 2008 to December 31, 2009 relates to the broad recovery in the equity markets in
2009, as well as impairments taken. The Company considers the evidence to support the recovery of the cost basis of a security including volatility of the
stock, the length of time the security has been in a loss position, value and growth expectations, and overall market and sector fundamentals, as well as
technical analysis, in determining whether unrealized losses represent an other-than-temporary impairment. In 2009, other-than-temporary impairment write-
downs were $93 million ($42 million in 2008).
The aggregate cost of the Company’s cost method investments totaled $129 million at December 31, 2009 ($104 million at December 31, 2008). Due to
the nature of these investments, the fair market value is not readily determinable. These investments are reviewed for impairment indicators. During 2009, the
Company’s impairment analysis identified indicators which resulted in a reduction in the cost basis of these investments of $10 million. During 2008, there
were no impairment indicators or circumstances that resulted in an adjustment to the cost basis of these investments.
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