Entergy 2011 Annual Report Download - page 110

Deferred taxes on unrealized gains/(losses) are recorded in other
comprehensive income for the decommissioning trusts which do not
meet the criteria for regulatory accounting treatment as described
above. Unrealized gains/(losses) above are reported before deferred
taxes of $149 million and $130 million as of December 31, 2011
and 2010, respectively. The amortized cost of debt securities was
$1,530 million as of December 31, 2011 and $1,475 million as of
December 31, 2010. As of December 31, 2011, the debt securities
have an average coupon rate of approximately 4.15%, an average
duration of approximately 5.40 years, and an average maturity of
approximately 8.53 years. The equity securities are generally held
in funds that are designed to approximate or somewhat exceed
the return of the Standard & Poor’s 500 Index. A relatively small
percentage of the securities are held in funds intended to replicate
the return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale
equity and debt securities, summarized by investment type and
length of time that the securities have been in a continuous loss
position, are as follows as of December 31, 2011 (in millions):
Equity Securities Debt Securities
Gross Gross
Fair Unrealized Fair Unrealized
Value Losses Value Losses
Less than 12 months $ 130 $ 9 $ 123 $ 3
More than 12 months 43 5 60 2
Total $173 $14 $183 $5
The fair value and gross unrealized losses of available-for-sale
equity and debt securities, summarized by investment type and
length of time that the securities have been in a continuous loss
position, are as follows as of December 31, 2010 (in millions):
Equity Securities Debt Securities
Gross Gross
Fair Unrealized Fair Unrealized
Value Losses Value Losses
Less than 12 months $ 15 $1 $ 474 $ 11
More than 12 months 105 8 4 1
Total $120 $9 $478 $12
The unrealized losses in excess of twelve months on equity securities
above relate to Entergy’s Utility operating companies and System
Energy.
The fair value of debt securities, summarized by contractual
maturities, as of December 31, 2011 and 2010 are as follows
(in millions):
2011 2010
Less than 1 year $ 69 $ 37
1 year - 5 years 566 557
5 years - 10 years 583 512
10 years - 15 years 187 163
15 years - 20 years 42 47
20 years+ 212 204
Total $1,659 $1,520
During the years ended December 31, 2011, 2010, and 2009,
proceeds from the dispositions of securities amounted to $1,360
million, $2,606 million, and $2,571 million, respectively. During
the years ended December 31, 2011, 2010, and 2009, gross gains
of $29 million, $69 million, and $80 million, respectively, and gross
losses of $11 million, $9 million, and $30 million, respectively, were
reclassified out of other comprehensive income into earnings.
Other Than Temporary Impairments and
Unrealized Gains and Losses
Entergy evaluates unrealized losses at the end of each period
to determine whether an other-than-temporary impairment has
occurred. The assessment of whether an investment in a debt
security has suffered an other-than-temporary impairment is based
on whether Entergy has the intent to sell or more likely than not will
be required to sell the debt security before recovery of its amortized
costs. Further, if Entergy does not expect to recover the entire
amortized cost basis of the debt security, an other-than-temporary
impairment is considered to have occurred and it is measured by
the present value of cash flows expected to be collected less the
amortized cost basis (credit loss). For debt securities held as of
January 1, 2009 for which an other-than-temporary impairment
had previously been recognized but for which assessment under
the new guidance indicates this impairment is temporary, Entergy
recorded an adjustment to its opening balance of retained earnings
of $11.3 million ($6.4 million net-of-tax). Entergy did not have any
material other-than-temporary impairments relating to credit losses
on debt securities for the years ended December 31, 2011 and 2010.
The assessment of whether an investment in an equity security has
suffered an other-than-temporary impairment continues to be based
on a number of factors including, first, whether Entergy has the
ability and intent to hold the investment to recover its value, the
duration and severity of any losses, and, then, whether it is expected
that the investment will recover its value within a reasonable period
of time. Entergy’s trusts are managed by third parties who operate in
accordance with agreements that define investment guidelines and
place restrictions on the purchases and sales of investments. Entergy
recorded charges to other income of $0.1 million in 2011, $1 million
in 2010, and $86 million in 2009, resulting from the recognition of the
other-than-temporary impairment of certain equity securities held in
its decommissioning trust funds.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
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