CASH AND INVESTMENTS

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CASH AND INVESTMENTS	12 Months Ended
	Dec. 31, 2012
Investments and Cash [Abstract]
CASH AND INVESTMENTS	CASH AND INVESTMENTS The following is a summary of marketable securities classified as available-for-sale at December 31, 2012 and 2011 (in millions):   Cost   Unrealized Gains   Unrealized Losses   Estimated Fair Value 2012               Current marketable securities:               U.S. government and agency debt securities $ 236   $ 2   $ —   $ 238 Mortgage and asset-backed debt securities 171   3   —   174 Corporate debt securities 158   5   —   163 U.S. state and local municipal debt securities 15   —   —   15 Other debt and equity securities 7   —   —   7 Total marketable securities $ 587   $ 10   $ —   $ 597                   Cost   Unrealized Gains   Unrealized Losses   Estimated Fair Value 2011               Current marketable securities:               U.S. government and agency debt securities $ 184   $ 3   $ —   $ 187 Mortgage and asset-backed debt securities 188   4   (1 )   191 Corporate debt securities 835   4   (2 )   837 U.S. state and local municipal debt securities 15   —   —   15 Other debt and equity securities 10   1   —   11 Total marketable securities $ 1,232   $ 12   $ (3 )   $ 1,241 The gross realized gains on sales of marketable securities totaled $15, $49 and $24 million in 2012, 2011, and 2010, respectively. The gross realized losses totaled $6, $20 and $18 million in 2012, 2011, and 2010, respectively. There were no impairment losses recognized on marketable securities during 2012 or 2011, while impairment losses totaled $21 million during 2010 (discussed further below). Investment Other-Than-Temporary Impairments We have concluded that no other-than-temporary impairment losses existed as of December 31, 2012. In making this determination, we considered the financial condition and prospects of the issuer, the magnitude of the losses compared with the investments’ cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs. During the second quarter of 2010, we recorded impairment losses on certain asset-backed auction rate securities. The impairment charge resulted from provisions that allow the issuers of the securities to subordinate our holdings to newly issued debt or to tender for the securities at less than their par value. These securities, which had a cost basis of $128 million, were written down to their fair value of $107 million as of June 30, 2010, as an other-than-temporary impairment. The $21 million total impairment charge during the second quarter was recorded as a loss in investment income on the statement of consolidated income. Maturity Information The amortized cost and estimated fair value of marketable securities at December 31, 2012, by contractual maturity, are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.     Cost   Estimated Fair Value Due in one year or less $ 37   $ 37 Due after one year through three years 251   252 Due after three years through five years 49   49 Due after five years 248   257   585   595 Equity securities 2   2   $ 587   $ 597 Non-Current Investments and Restricted Cash Restricted cash and cash equivalents relate to our self-insurance requirements. We entered into an escrow agreement with an insurance carrier to guarantee our self-insurance obligations. This agreement requires us to provide cash collateral to the insurance carrier, which is reported in “Investments and Restricted Cash” on our consolidated balance sheets. Additional cash collateral provided is reflected in other investing activities in the statements of consolidated cash flows. This restricted cash is invested in money market funds and similar cash equivalent type assets. As of December 31, 2012 and 2011, we had $288 and $286 million in restricted cash, respectively. We held a $19 and $17 million investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan at December 31, 2012 and 2011, respectively. This investment is classified as “Investments and Restricted Cash” in the consolidated balance sheets with the quarterly change in investment value recognized in investment income on the statements of consolidated income. Fair Value Measurements Marketable securities utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. Government debt securities, as these securities all have quoted prices in active markets. Marketable securities utilizing Level 2 inputs include non-auction rate asset-backed securities, corporate bonds and municipal bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves. We maintain holdings in certain investment partnerships that are measured at fair value utilizing Level 3 inputs (classified as “other investments” in the tables below, and as “Other Non-Current Assets” in the consolidated balance sheets). These partnership holdings do not have quoted prices, nor can they be valued using inputs based on observable market data. These investments are valued internally using a discounted cash flow model with two significant inputs: (1) the after-tax cash flow projections for each partnership, and (2) a risk-adjusted discount rate consistent with the duration of the expected cash flows for each partnership. The weighted-average discount rates used to value these investments were 7.75% and 7.91% as of December 31, 2012 and 2011, respectively. These inputs and the resulting fair values are updated on a quarterly basis. The following table presents information about our investments measured at fair value on a recurring basis as of December 31, 2012 and 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions).   Quoted Prices in Active Markets for Identical Assets (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total 2012               Marketable securities:               U.S. government and agency debt securities $ 237   $ 1   $ —   $ 238 Mortgage and asset-backed debt securities —   174   —   174 Corporate debt securities —   163   —   163 U.S. state and local municipal debt securities —   15   —   15 Other debt and equity securities —   7   —   7 Total marketable securities 237   360   —   597 Other investments 19   —   163   182 Total $ 256   $ 360   $ 163   $ 779                   Quoted Prices in Active Markets for Identical Assets (Level 1)   Significant Other Observable Inputs (Level 2)   Significant Unobservable Inputs (Level 3)   Total 2011               Marketable securities:               U.S. government and agency debt securities $ 187   $ —   $ —   $ 187 Mortgage and asset-backed debt securities —   191   —   191 Corporate debt securities —   837   —   837 U.S. state and local municipal debt securities —   15   —   15 Other debt and equity securities —   11   —   11 Total marketable securities 187   1,054   —   1,241 Other investments 17   —   217   234 Total $ 204   $ 1,054   $ 217   $ 1,475 The following table presents the changes in the above Level 3 instruments measured on a recurring basis for the years ended December 31, 2012 and 2011 (in millions).     Marketable Securities   Other Investments   Total Balance on January 1, 2011 $ 138   $ 267   $ 405 Transfers into (out of) Level 3 —   —   — Net realized and unrealized gains (losses):           Included in earnings (in investment income) —   (50 )   (50 ) Included in accumulated other comprehensive income (pre-tax) —   —   — Purchases —   —   — Settlements (138 )   —   (138 ) Balance on December 31, 2011 $ —   $ 217   $ 217 Transfers into (out of) Level 3 —   —   — Net realized and unrealized gains (losses):           Included in earnings (in investment income) —   (54 )   (54 ) Included in accumulated other comprehensive income (pre-tax) —   —   — Purchases —   —   — Settlements —   —   — Balance on December 31, 2012 $ —   $ 163   $ 163