geccform10q06302011.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
     
 
FORM 10-Q
  

(Mark One)
        
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2011
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________to ___________
_____________________________
 
Commission file number 001-06461
_____________________________
 
GENERAL ELECTRIC CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
  
13-1500700
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
     
901 Main Avenue, Norwalk, Connecticut
  
06851-1168
(Address of principal executive offices)
  
(Zip Code)

(Registrant’s telephone number, including area code) (203) 840-6300

                                                                                              
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þNo ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ¨ 
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
At July 29, 2011, 3,985,404 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $14 per share were outstanding.
 
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.
 

 
(1)
 

General Electric Capital Corporation
 
Part I – Financial Information
  
Page
       
Item 1.
Financial Statements
    
 
Condensed Statement of Current and Retained Earnings
  
3
 
Condensed Statement of Financial Position
  
4
 
Condensed Statement of Cash Flows
  
5
 
Summary of Operating Segments
  
6
 
Notes to Condensed, Consolidated Financial Statements (Unaudited)
  
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
48
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  
69
Item 4.
Controls and Procedures
  
69
       
Part II – Other Information
    
       
Item 6.
Exhibits
  
70
Signatures
  
71
     

 
Forward-Looking Statements
 
This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; potential market disruptions or other impacts arising in the United States or Europe from sovereign debt issues, including developments in connection with the U.S. indebtedness cap; the impact of conditions in the financial and credit markets on the availability and cost of our funding and on our ability to reduce our asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (Grey Zone); potential financial implications from the Japanese natural disaster; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the level of demand and financial performance of the major industries we serve, including, without limitation, air transportation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; strategic actions, including acquisitions, joint ventures and dispositions and our success in completing announced transactions and integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
 

 
(2)
 

Part I. Financial Information
 
 
Item 1. Financial Statements.
 
General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Current and Retained Earnings
 
(Unaudited)
 
               
 
Three months ended June 30,
  
Six months ended June 30,
(In millions)
  
2011
    
2010
    
2011
    
2010
                       
Revenues
                      
Revenues from services (a)
$
 11,638
  
$
 11,667
  
$
 23,868
  
$
 23,252
Other-than-temporary impairment on investment securities:
                      
   Total other-than-temporary impairment on investment securities
  
 (112)
    
 (95)
    
 (177)
    
 (247)
      Less: Portion of other-than-temporary impairment recognized in
                      
         accumulated other comprehensive income
  
 58
    
 42
    
 62
    
 121
   Net other-than-temporary impairment on investment securities
                      
      recognized in earnings
  
 (54)
    
 (53)
    
 (115)
    
 (126)
Revenues from services (Note 9)
  
 11,584
    
 11,614
    
 23,753
    
 23,126
Sales of goods
  
 42
    
 168
    
 84
    
 449
   Total revenues
  
 11,626
    
 11,782
    
 23,837
    
 23,575
                       
Costs and expenses
                      
Interest
  
 3,583
    
 3,638
    
 7,164
    
 7,327
Operating and administrative
  
 3,319
    
 3,471
    
 6,671
    
 6,980
Cost of goods sold
  
 38
    
 154
    
 78
    
 419
Investment contracts, insurance losses and insurance annuity benefits
  
 30
    
 38
    
 54
    
 73
Provision for losses on financing receivables
  
 811
    
 2,007
    
 1,968
    
 4,187
Depreciation and amortization
  
 1,792
    
 1,848
    
 3,567
    
 3,762
   Total costs and expenses
  
 9,573
    
 11,156
    
 19,502
    
 22,748
                       
Earnings from continuing operations before income taxes
  
 2,053
    
 626
    
 4,335
    
 827
Benefit (provision) for income taxes
  
 (378)
    
 95
    
 (824)
    
 459
                       
Earnings from continuing operations
  
 1,675
    
 721
    
 3,511
    
 1,286
Earnings (loss) from discontinued operations, net of taxes (Note 2)
  
 218
    
 (100)
    
 275
    
 (450)
Net earnings
  
 1,893
    
 621
    
 3,786
    
 836
Less net earnings (loss) attributable to noncontrolling interests
  
 20
    
 (22)
    
 51
    
 (27)
Net earnings attributable to GECC
  
 1,873
    
 643
    
 3,735
    
 863
Dividends
  
 –  
    
 1
    
 –  
    
 –  
Retained earnings at beginning of period
  
 49,829
    
 45,863
    
 47,967
    
 45,644
Retained earnings at end of period
$
 51,702
  
$
 46,507
  
$
 51,702
  
$
 46,507
                       
Amounts attributable to GECC
                      
Earnings from continuing operations
$
 1,655
  
$
 743
  
$
 3,460
  
$
 1,313
Earnings (loss) from discontinued operations, net of taxes
  
 218
    
 (100)
    
 275
    
 (450)
Net earnings attributable to GECC
$
 1,873
  
$
 643
  
$
 3,735
  
$
 863
                       
                       
(a)  
Excluding net other-than-temporary impairment on investment securities.
 
See accompanying notes.
 
 
(3)
 

General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Financial Position
 
 
June 30,
  
December 31,
(In millions)
2011
  
2010
   
(Unaudited)
      
Assets
          
Cash and equivalents
$
 77,258
  
$
 59,538
Investment securities (Note 3)
  
 18,372
    
 17,952
Inventories
  
 52
    
 66
Financing receivables – net (Notes 4 and 12)
  
 300,749
    
 312,234
Other receivables
  
 13,657
    
 13,674
Property, plant and equipment, less accumulated amortization of $24,961
          
   and $25,390
  
 55,307
    
 53,747
Goodwill (Note 5)
  
 28,173
    
 27,508
Other intangible assets – net (Note 5)
  
 1,843
    
 1,874
Other assets
  
 74,410
    
 79,045
Assets of businesses held for sale (Note 2)
  
 895
    
 3,127
Assets of discontinued operations (Note 2)
  
 6,407
    
 12,375
Total assets(a)
$
 577,123
  
$
 581,140
           
Liabilities and equity
          
Short-term borrowings (Note 6)
$
 118,599
  
$
 113,646
Accounts payable
  
 7,739
    
 6,839
Non-recourse borrowings of consolidated securitization entities (Note 6)
  
 29,075
    
 30,018
Bank deposits (Note 6)
  
 41,548
    
 37,298
Long-term borrowings (Note 6)
  
 268,830
    
 284,346
Investment contracts, insurance liabilities and insurance annuity benefits
  
 5,054
    
 5,779
Other liabilities
  
 22,283
    
 20,287
Deferred income taxes
  
 1,717
    
 6,109
Liabilities of businesses held for sale (Note 2)
  
 527
    
 592
Liabilities of discontinued operations (Note 2)
  
 1,706
    
 2,181
Total liabilities(a)
  
 497,078
    
 507,095
           
Capital stock
  
 56
    
 56
Accumulated other comprehensive income – net(b)
          
   Investment securities
  
 (376)
    
 (337)
   Currency translation adjustments
  
 986
    
 (1,541)
   Cash flow hedges
  
 (1,606)
    
 (1,347)
   Benefit plans
  
 (381)
    
 (380)
Additional paid-in capital
  
 28,463
    
 28,463
Retained earnings
  
 51,702
    
 47,967
Total GECC shareowner's equity
  
 78,844
    
 72,881
Noncontrolling interests(c)
  
 1,201
    
 1,164
Total equity
  
 80,045
    
 74,045
Total liabilities and equity
$
 577,123
  
$
 581,140
           
           
(a)  
Our consolidated assets at June 30, 2011 include total assets of $43,797 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $36,387 million and investment securities of $4,927 million. Our consolidated liabilities at June 30, 2011 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GECC. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $28,556 million. See Note 13.
 
(b)  
The sum of accumulated other comprehensive income − net was $(1,377) million and $(3,605) million at June 30, 2011 and December 31, 2010, respectively.
 
(c)  
Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(128) million and $(137) million at June 30, 2011 and December 31, 2010, respectively.
 
See accompanying notes.

 
(4)
 

General Electric Capital Corporation and consolidated affiliates
Condensed Statement of Cash Flows
(Unaudited)
 

 
Six months ended June 30,
(In millions)
  
2011
    
2010
           
Cash flows – operating activities
          
Net earnings
$
3,786
  
$
836
Less net earnings (loss) attributable to noncontrolling interests
  
51
    
(27)
Net earnings attributable to GECC
  
3,735
    
863
(Earnings) loss from discontinued operations
  
(275)
    
450
Adjustments to reconcile net earnings attributable to GECC
          
   to cash provided from operating activities
          
      Depreciation and amortization of property, plant and equipment
  
3,567
    
3,762
      Increase (decrease) in accounts payable
  
955
    
2,325
      Provision for losses on financing receivables
  
1,968
    
4,187
      All other operating activities
  
(743)
    
(498)
Cash from (used for) operating activities – continuing operations
  
9,207
    
11,089
Cash from (used for) operating activities – discontinued operations
  
683
    
339
Cash from (used for) operating activities
  
9,890
    
11,428
           
Cash flows – investing activities
          
Additions to property, plant and equipment
  
(5,118)
    
(2,177)
Dispositions of property, plant and equipment
  
3,488
    
2,279
Increase in loans to customers
  
(153,755)
    
(150,337)
Principal collections from customers – loans
  
166,514
    
160,233
Investment in equipment for financing leases
  
(4,386)
    
(4,522)
Principal collections from customers – financing leases
  
6,813
    
8,372
Net change in credit card receivables
  
1,575
    
1,578
Proceeds from sale of discontinued operations
  
4,371
    
–
Proceeds from principal business dispositions
  
2,077
    
825
Payments for principal businesses purchased
  
(93)
    
–
All other investing activities
  
4,118
    
11,976
Cash from (used for) investing activities – continuing operations
  
25,604
    
28,227
Cash from (used for) investing activities – discontinued operations
  
(623)
    
(102)
Cash from (used for) investing activities
  
24,981
    
28,125
           
Cash flows – financing activities
          
Net increase (decrease) in borrowings (maturities of 90 days or less)
  
(2,932)
    
(2,247)
Net increase (decrease) in bank deposits
  
2,464
    
619
Newly issued debt (maturities longer than 90 days)
          
   Short-term (91 to 365 days)
  
10
    
10,628
   Long-term (longer than one year)
  
26,860
    
17,138
   Non-recourse, leveraged lease
  
–
    
–
Repayments and other debt reductions (maturities longer than 90 days)
          
   Short-term (91 to 365 days)
  
(44,379)
    
(63,476)
   Long-term (longer than one year)
  
(273)
    
(1,163)
   Non-recourse, leveraged lease
  
(520)
    
(454)
Dividends paid to shareowner
  
–
    
–
All other financing activities
  
(728)
    
(1,270)
Cash from (used for) financing activities – continuing operations
  
(19,498)
    
(40,225)
Cash from (used for) financing activities – discontinued operations
  
(42)
    
(305)
Cash from (used for) financing activities
  
(19,540)
    
(40,530)
           
Effect of currency exchange rate changes on cash and equivalents
  
2,407
    
(1,598)
           
Increase (decrease) in cash and equivalents
  
17,738
    
(2,575)
Cash and equivalents at beginning of year
  
59,679
    
63,880
Cash and equivalents at June 30
  
77,417
    
61,305
Less cash and equivalents of discontinued operations at June 30
  
159
    
1,903
Cash and equivalents of continuing operations at June 30
$
77,258
  
$
59,402
           
           
See accompanying notes.

 
(5)
 
 
Summary of Operating Segments
 
 
Three months ended June 30,
  
Six months ended June 30,
 
(Unaudited)
  
(Unaudited)
(In millions)
2011
  
2010
  
2011
  
2010
Revenues
                      
CLL
$
 4,666
  
$
 4,506
  
$
 9,274
  
$
 9,100
Consumer
  
 4,176
    
 4,317
    
 9,003
    
 8,743
Real Estate
  
 992
    
 991
    
 1,899
    
 1,935
Energy Financial Services
  
 365
    
 595
    
 710
    
 1,386
GECAS
  
 1,327
    
 1,259
    
 2,652
    
 2,498
   Total segment revenues
  
 11,526
    
 11,668
    
 23,538
    
 23,662
GECC corporate items and eliminations
  
 100
    
 114
    
 299
    
 (87)
Total revenues in GECC
$
 11,626
  
$
 11,782
  
$
 23,837
  
$
 23,575
                       
Segment profit
                      
CLL
$
 701
  
$
 312
  
$
 1,255
  
$
 544
Consumer
  
 1,020
    
 649
    
 2,239
    
 1,204
Real Estate
  
 (335)
    
 (524)
    
 (693)
    
 (927)
Energy Financial Services
  
 139
    
 126
    
 251
    
 279
GECAS
  
 321
    
 288
    
 627
    
 605
    Total segment profit
  
 1,846
    
 851
    
 3,679
    
 1,705
GECC corporate items and eliminations
  
 (191)
    
 (108)
    
 (219)
    
 (392)
Earnings from continuing operations
                      
    attributable to GECC
  
 1,655
    
 743
    
 3,460
    
 1,313
Earnings (loss) from discontinued operations,
                      
    net of taxes, attributable to GECC
  
 218
    
 (100)
    
 275
    
 (450)
Total net earnings attributable to GECC
$
 1,873
  
$
 643
  
$
 3,735
  
$
 863
                       
                       
See accompanying notes.
 
 
(6)
 

Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
All of the outstanding common stock of General Electric Capital Corporation (GECC) is owned by General Electric Capital Services, Inc. (GECS), all of whose common stock is owned by General Electric Company (GE Company or GE). Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We also consolidate the economic interests we hold in certain businesses within companies in which we hold a voting equity interest and are majority owned by our ultimate parent, but which we have agreed to actively manage and control. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 consolidated financial statements), which discusses our consolidation and financial statement presentation. GECC includes Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services (GECAS).

As a wholly-owned subsidiary, GECC enters into various operating and financing arrangements with GE. Transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of capital contributions from GE to GECC; GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

Beginning January 1, 2011, GE allocates service costs related to its principal pension plans and GE no longer allocates the retiree costs of postretirement healthcare benefits to its segments. This revised allocation methodology better aligns segment operating costs to active employee costs that are managed by the segments. This change did not significantly affect our reported segment results.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to the condensed, consolidated financial statements relates to continuing operations.

Interim Period Presentation
 
The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2010 consolidated financial statements. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.

 
(7)
 

2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
 
Assets and Liabilities of Businesses Held for Sale
 
In the second quarter of 2011, we committed to sell our Consumer business banking operations in Latvia.

In 2010, we committed to sell our Consumer businesses in Argentina, Brazil, and Canada, a CLL business in South Korea, and our Interpark business in Real Estate. The Consumer Canada disposition was completed during the first quarter of 2011. The Consumer Brazil and our Interpark business in Real Estate dispositions were completed during the second quarter of 2011 for proceeds of $22 million and $704 million, respectively.

Summarized financial information for businesses held for sale is shown below.

 
June 30,
  
December 31,
(In millions)
2011
  
2010
   
           
      
Assets
  
           
      
Cash and equivalents
$
149
  
$
54
Financing receivables – net
  
576
    
1,917
Property, plant and equipment – net
  
100
    
103
Other intangible assets – net
  
31
    
187
Other assets
  
9
    
841
Other
  
30
    
25
Assets of businesses held for sale
$
895
  
$
3,127
         
           
Liabilities
          
Short-term borrowings
$
399
  
$
146
Accounts payable
  
56
    
46
Long-term borrowings
  
19
    
228
Other liabilities
  
53
    
172
Liabilities of businesses held for sale
$
527
  
$
592

Discontinued Operations
 
Discontinued operations primarily comprised BAC Credomatic GECF Inc. (BAC) (our Central American bank and card business), GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our U.S. recreational vehicle and marine equipment financing business (Consumer RV Marine), Consumer Mexico, Consumer Singapore and our Consumer home lending operations in Australia and New Zealand (Australian Home Lending). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.


 
(8)
 

Summarized financial information for discontinued operations is shown below.

 
Three months ended June 30,
  
Six months ended June 30,
(In millions)
2011
  
2010
  
2011
  
2010
                       
Operations
                      
Total revenues
$
 121
  
$
 513
  
$
324
  
$
1,050
                       
                       
Earnings (loss) from discontinued operations before income taxes
$
 (13)
  
$
104
  
$
11
  
$
123
Benefit (provision) for income taxes
  
 35
    
(19)
    
29
    
(7)
Earnings (loss) from discontinued operations, net of taxes
$
 22
  
$
85
  
$
40
  
$
116
                       
Disposal
                      
Gain (loss) on disposal before income taxes
$
 (52)
  
$
(185)
  
$
(41)
  
$
(566)
Benefit for income taxes
  
 248
    
–
    
276
    
–
Gain (loss) on disposal, net of taxes
$
 196
  
$
(185)
  
$
235
  
$
(566)
                       
Earnings (loss) from discontinued operations, net of taxes
$
 218
  
$
(100)
  
$
275
  
$
(450)
                       

 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Assets
          
Cash and equivalents
$
159
  
$
 142
Financing receivables - net
  
4,966
    
10,589
Other assets
  
17
    
168
Other
  
1,265
    
1,476
Assets of discontinued operations
$
6,407
  
$
12,375
           
 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Liabilities
          
Accounts payable
$
16
  
$
 110
Deferred income taxes
  
171
    
238
Other
  
1,519
    
1,833
Liabilities of discontinued operations
$
1,706
  
$
2,181
           

Assets at June 30, 2011 and December 31, 2010, primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2015 and in part in 2017, related to the sale of our GE Money Japan business.

BAC Credomatic GECF Inc. (BAC)
 
During the fourth quarter of 2010, we classified BAC as discontinued operations and completed the sale of BAC for $1,920 million. Immediately prior to the sale, and in accordance with terms of a previous agreement, we increased our ownership interest in BAC from 75% to 100% for a purchase price of $633 million. As a result of the sale of our interest in BAC, we recognized an after-tax gain of $780 million in 2010.

BAC revenues from discontinued operations were $248 million and $508 million in the three and six months ended June 30, 2010, respectively. In total, BAC earnings from discontinued operations, net of taxes, were $20 million and $37 million in the three and six months ended June 30, 2010, respectively.
 
 
 
(9)
 
 
GE Money Japan
 
During the third quarter of 2007, we committed to a plan to sell our Japanese personal loan business, Lake, upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. In connection with the sale, we reduced the proceeds from the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese Yen (approximately $3,000 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009. In the third quarter of 2010, we began making reimbursements under this arrangement.

Our overall claims experience developed unfavorably through 2010. We believe that the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. In September 2010, a large independent personal loan company in Japan filed for bankruptcy, which precipitated a significant amount of publicity surrounding excess interest refund claims in the Japanese marketplace, along with substantial legal advertising. We observed an increase in claims during September 2010 and higher average daily claims in the fourth quarter of 2010 and the first two months of 2011. While we have experienced a decline in claims following the February 2011 claims filing deadline related to the bankruptcy filing of the personal loan company, it continues to be unclear whether excess interest refund claims activity will be also affected by the March 11, 2011 earthquake and subsequent tsunami in Japan. As of June 30, 2011, our reserve for reimbursement of claims in excess of the statutory interest rate was $1,037 million.

The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. Our estimated liability for excess interest refund claims at June 30, 2011 assumes the pace of incoming claims will decelerate, average exposure per claim remains consistent with historical experience, and we continue to see further impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant effect on the total amount of our liability. Average daily claims have been higher than expected, which we believe is primarily attributable to the bankruptcy filing of the large independent personal loan company described above and claims activity has declined substantially following that period. We believe that continued evaluation of claims activity will be important in order to fully assess the potential impact of this bankruptcy or other events on our overall claim reserve estimate.  Holding all other assumptions constant, if claims declined at a rate of one percent higher or lower than assumed, our liability estimate would change by approximately $250 million.

Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business, the effects of the March 11, 2011 earthquake and subsequent tsunami in Japan and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, market activity regarding other personal loan companies and consumer activity, may continue to have an adverse effect on claims development.

GE Money Japan losses from discontinued operations, net of taxes, were $0 million and $188 million in the three months ended June 30, 2011 and 2010, respectively, and $0 million and $571 million in the six months ended June 30, 2011 and 2010, respectively.

WMC
 
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC’s contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. All claims received for early payment default have either been resolved or are no longer being pursued.
 
 
 
(10)
 

 
Pending claims for unmet representations and warranties were $783 million at December 31, 2009, $347 million at December 31, 2010 and $469 million at June 30, 2011. Reserves related to these contractual representations and warranties were $101 million at both June 30, 2011 and December 31, 2010. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. Based on our historical experience, we estimate that a small percentage of the total loans WMC originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations. WMC’s current reserve represents our best estimate of losses with respect to WMC’s repurchase obligations. Actual losses could exceed the reserve amount if actual claim rates, investigative or litigation activity, valid tenders or losses WMC incurs on repurchased loans are higher than we have historically observed with respect to WMC.

WMC revenues (loss) from discontinued operations were $0 million and $(3) million in the three months ended June 30, 2011 and 2010, respectively, and $0 million and $(3) million in the six months ended June 30, 2011 and 2010, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $(2) million and $1 million in the three months ended June 30, 2011 and 2010, respectively, and $(3) million in both the six months ended June 30, 2011 and 2010.

Other
 
In the second quarter of 2011, we entered into an agreement to sell our Australian Home Lending operations for approximately $4,700 million. As a result, we recognized an after-tax loss of $150 million in the second quarter of 2011. Australian Home Lending revenues from discontinued operations were $101 million and $131 million in the three months ended June 30, 2011 and 2010, respectively, and $215 million and $268 million in the six months ended June 30, 2011 and 2010, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were $(118) million and $24 million in the three months ended June 30, 2011 and 2010, respectively, and $(80) million and $37 million in the six months ended June 30, 2011 and 2010, respectively.

In the first quarter of 2011, we entered into an agreement to sell our Consumer Singapore business for $692 million. The sale was completed in the second quarter of 2011 and resulted in the recognition of a gain on disposal, net of taxes, of $319 million. Consumer Singapore revenues from discontinued operations were $2 million and $26 million in the three months ended June 30, 2011 and 2010, respectively, and $31 million and $52 million in the six months ended June 30, 2011 and 2010, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $319 million and $8 million in the three months ended June 30, 2011 and 2010, respectively, and $326 million and $16 million in the six months ended June 30, 2011 and 2010, respectively.

In the fourth quarter of 2010, we entered into agreements to sell our Consumer RV Marine portfolio and Consumer Mexico business. The Consumer RV Marine and Consumer Mexico dispositions were completed during the first quarter and the second quarter of 2011, respectively, for proceeds of $2,365 million and $1,943 million, respectively. Consumer RV Marine revenues from discontinued operations were $6 million and $54 million in the three months ended June 30, 2011 and 2010, respectively, and $11 million and $108 million in the six months ended June 30, 2011 and 2010, respectively. Consumer RV Marine earnings (loss) from discontinued operations, net of taxes, were $2 million and $17 million in the three months ended June 30, 2011 and 2010, respectively, and $2 million and $(1) million in the six months ended June 30, 2011 and 2010, respectively. Consumer Mexico revenues from discontinued operations were $12 million and $56 million in the three months ended June 30, 2011 and 2010, respectively, and $67 million and $117 million in the six months ended June 30, 2011 and 2010, respectively. Consumer Mexico earnings from discontinued operations, net of taxes, were $17 million in both the three months ended June 30, 2011 and 2010, and $33 million and $35 million in the six months ended June 30, 2011 and 2010, respectively.

 
(11)
 

3. INVESTMENT SECURITIES
 
Substantially all of our investment securities are classified as available-for-sale. These comprise mainly investment grade debt securities supporting obligations to holders of guaranteed investment contracts (GICs) in Trinity, and investment securities at our treasury operations. We do not have any securities classified as held to maturity.

 
At
 
June 30, 2011
  
December 31, 2010
     
Gross
  
Gross
          
Gross
  
Gross
    
 
Amortized
  
unrealized
  
unrealized
  
Estimated
  
Amortized
  
unrealized
  
unrealized
  
Estimated
(In millions)
cost
  
gains
  
losses
  
fair value
  
cost
  
gains
  
losses
  
fair value
                                               
Debt
                                              
   U.S. corporate
$
 2,897
  
$
 95
  
$
 (10)
  
$
 2,982
  
$
 3,490
  
$
169
  
$
 (14)
  
$
 3,645
   State and municipal
  
 915
    
 10
    
 (228)
    
 697
    
 918
    
4
    
 (232)
    
 690
   Residential mortgage-backed(a)
  
 1,887
    
 23
    
 (302)
    
 1,608
    
 2,099
    
14
    
 (355)
    
 1,758
   Commercial mortgage-backed
  
 1,523
    
 38
    
 (173)
    
 1,388
    
 1,619
    
 - 
    
 (183)
    
 1,436
   Asset-backed
  
 3,708
    
 25
    
 (143)
    
 3,590
    
 3,242
    
 7
    
 (190)
    
 3,059
   Corporate – non-U.S.
  
 1,441
    
 44
    
 (84)
    
 1,401
    
 1,478
    
 39
    
 (111)
    
 1,406
   Government – non-U.S.
  
 2,197
    
 7
    
 (84)
    
 2,120
    
 1,804
    
 8
    
 (58)
    
 1,754
   U.S. government and
                                              
       federal agency
  
 2,597
    
 9
    
 –  
    
 2,606
    
 2,663
    
 3
    
 (5)
    
 2,661
Retained interests
  
 32
    
 16
    
 (3)
    
 45
    
 55
    
 10
    
 (26)
    
 39
Equity
                                              
   Available-for-sale
  
 1,287
    
 204
    
 (31)
    
 1,460
    
 902
    
 194
    
 (9)
    
 1,087
   Trading
  
 475
    
 –  
    
 –  
    
 475
    
 417
    
 - 
    
 - 
    
 417
Total
$
 18,959
  
$
 471
  
$
 (1,058)
  
$
 18,372
  
$
 18,687
  
$
448
  
$
 (1,183)
  
$
 17,952
                                               
                                               
(a)  
Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at June 30, 2011, $788 million relates to securities issued by government sponsored entities and $820 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.
 
 
The fair value of investment securities increased to $18,372 million at June 30, 2011, from $17,952 million at December 31, 2010, primarily driven by improved market conditions and purchases.
 
 
 
(12)
 
 
The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.
 
 
In loss position for
  
 
Less than 12 months
  
12 months or more
  
     
Gross
 (a)
    
Gross
  
 
Estimated
unrealized
Estimated
unrealized
  
(In millions)
fair value
losses
fair value
losses
(a)
                         
June 30, 2011
                        
Debt
                        
   U.S. corporate
$
 151
  
$
 (6)
  
$
 169
  
$
 (4)
  
   State and municipal
  
 93
    
 (15)
    
 447
    
 (213)
  
   Residential mortgage-backed
  
 282
    
 (7)
    
 853
    
 (295)
  
   Commercial mortgage-backed
  
 767
    
 (123)
    
 621
    
 (50)
  
   Asset-backed
  
 58
    
 (4)
    
 875
    
 (139)
  
   Corporate – non-U.S.
  
 116
    
 (4)
    
 731
    
 (80)
  
   Government – non-U.S.
  
 1,105
    
 (3)
    
 128
    
 (81)
  
   U.S. government and federal agency
  
 –  
    
 –  
    
 –  
    
 –  
  
Retained interests
  
 –  
    
 –  
    
 6
    
 (3)
  
Equity
  
 69
    
 (31)
    
 –  
    
 –  
  
Total
$
 2,641
  
$
 (193)
  
$
 3,830
  
$
 (865)
  
                         
December 31, 2010
                        
Debt
                        
   U.S. corporate
$
 357
  
$
 (5)
  
$
 337
  
$
 (9)
  
   State and municipal
  
 137
    
 (16)
    
 443
    
 (216)
  
   Residential mortgage-backed
  
 166
    
 (3)
    
 920
    
 (352)
  
   Commercial mortgage-backed
  
 779
    
 (103)
    
 652
    
 (80)
  
   Asset-backed
  
 111
    
 (5)
    
 902
    
 (185)
  
   Corporate – non-U.S.
  
 123
    
 (2)
    
 673
    
 (109)
  
   Government – non-U.S.
  
 642
    
 (6)
    
 105
    
 (52)
  
   U.S. government and federal agency
  
 1,613
    
 (5)
    
 –  
    
 –  
  
Retained interests
  
 –  
    
 –  
    
 34
    
 (26)
  
Equity
  
 46
    
 (9)
    
 –  
    
 –  
  
Total
$
 3,974
  
$
 (154)
  
$
 4,066
  
$
 (1,029)
  
                         
                         
(a)  
At June 30, 2011, other-than-temporary impairments previously recognized through other comprehensive income (OCI) on securities still held amounted to ($439) million, of which ($350) million related to RMBS. Gross unrealized losses related to those securities at June 30, 2011 amounted to $(603) million, of which $(545) million related to RMBS.
 
 
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the three and six months ended June 30, 2011 have not changed from those described in our 2010 consolidated financial statements. See Note 3 in our 2010 consolidated financial statements for additional information regarding these methodologies and inputs.

During the second quarter of 2011, we recorded other-than-temporary impairments of $112 million, of which $54 million was recorded through earnings ($5 million relates to equity securities) and $58 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $368 million. During the second quarter, we recognized first time impairments of $19 million and incremental charges on previously impaired securities of $23 million.  These amounts included $18 million related to securities that were subsequently sold.

During the second quarter of 2010, we recorded other-than-temporary impairments of $95 million, of which $53 million was recorded through earnings and $42 million was recorded in AOCI. At April 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $200 million. During the second quarter of 2010, we recognized first time impairments of $35 million and incremental charges on previously impaired securities of $16 million. These amounts included $2 million related to securities that were subsequently sold.
 
 
 
(13)
 
 
During the six months ended June 30, 2011, we recorded other-than-temporary impairments of $177 million, of which $115 million was recorded through earnings ($10 million relates to equity securities) and $62 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $316 million. During the six months ended June 30, 2011, we recognized first time impairments of $19 million and incremental charges on previously impaired securities of $79 million. These amounts included $21 million related to securities that were subsequently sold.

During the six months ended June 30, 2010, we recorded other-than-temporary impairments of $247 million, of which $126 million was recorded through earnings ($1 million relates to equity securities) and $121 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $140 million. During the six months ended June 30, 2010, we recognized first time impairments of $90 million and incremental charges on previously impaired securities of $33 million. These amounts included $15 million related to securities that were subsequently sold.

Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
 
 
Amortized
  
Estimated
(In millions)
cost
  
fair value
           
Due in
          
    2011
$
 2,791
  
$
 2,797
    2012-2015
  
 4,548
    
 4,609
    2016-2020
  
 1,791
    
 1,682
    2021 and later
  
 909
    
 710

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.

 
 Three months ended June 30,
  
Six months ended June 30,
(In millions)
2011
  
2010
  
2011
  
2010
                       
Gains
$
 43
  
$
 28
  
$
 155
  
$
 106
Losses, including impairments
  
 (56)
    
 (55)
    
 (124)
    
 (129)
   Net
$
 (13)
  
$
 (27)
  
$
 31
  
$
 (23)
                       

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by the issuer totaled $4,722 million and $3,334 million in the three months ended June 30, 2011 and 2010, respectively, and $9,762 million and $6,930 million in the six months ended June 30, 2011 and 2010, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized net pre-tax gains on trading securities of $52 million and $4 million in the three months ended June 30, 2011 and 2010, respectively, and $55 million and $19 million in the six months ended June 30, 2011 and 2010, respectively.

 
(14)
 

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
 

 
At
 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Loans, net of deferred income(a)
$
266,704
  
$
275,877
Investment in financing leases, net of deferred income
  
41,099
    
44,390
   
307,803
    
320,267
Less allowance for losses
  
(7,054)
    
(8,033)
Financing receivables – net(b)
$
300,749
  
$
312,234
           
           
(a)  
Deferred income was $2,274 million and $2,351 million at June 30, 2011 and December 31, 2010, respectively.
 
(b)  
Financing receivables at June 30, 2011 and December 31, 2010 included $1,389 million and $1,503 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per Accounting Standards Codification (ASC) 310, Receivables.
 
The following tables provide additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios.
 

 
(15)
 

Financing Receivables – net
 
The following table displays our financing receivables balances.
 

 
At
 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Commercial
          
CLL
          
Americas
$
79,614
  
$
86,596
Europe
  
37,897
    
37,498
Asia
  
11,759
    
11,943
Other
  
2,489
    
2,626
Total CLL
  
131,759
    
138,663
           
Energy Financial Services
  
6,143
    
7,011
           
GECAS
  
11,952
    
12,615
           
Other
  
1,517
    
1,788
Total Commercial financing receivables
  
151,371
    
160,077
           
Real Estate
          
Debt
  
27,750
    
30,249
Business Properties
  
9,057
    
9,962
Total Real Estate financing receivables
  
36,807
    
40,211
           
Consumer
          
Non-U.S. residential mortgages
  
40,731
    
40,011
Non-U.S. installment and revolving credit
  
21,047
    
20,132
U.S. installment and revolving credit
  
42,178
    
43,974
Non-U.S. auto
  
7,141
    
7,558
Other
  
8,528
    
8,304
Total Consumer financing receivables
  
119,625
    
119,979
           
Total financing receivables
  
307,803
    
320,267
           
Less allowance for losses
  
(7,054)
    
(8,033)
Total financing receivables – net
$
300,749
  
$
312,234

 
(16)
 


Allowance for Losses on Financing Receivables
 
The following tables provide a roll-forward of our allowance for losses on financing receivables.
 

 
Balance at
  
Provision
              
Balance at
 
January 1,
  
charged to
      
Gross
      
June 30,
(In millions)
2011
  
operations
  
Other
(a)
write-offs
(b)
Recoveries
(b)
2011
                                   
Commercial
                                  
CLL
                                  
Americas
$
1,287
  
$
219
  
$
(72)
  
$
(366)
  
$
55
  
$
1,123
Europe
  
429
    
73
    
30
    
(133)
    
34
    
433
Asia
  
222
    
77
    
10
    
(147)
    
18
    
180
Other
  
7
    
–  
    
–  
    
–  
    
–  
    
7
Total CLL
  
1,945
    
369
    
(32)
    
(646)
    
107
    
1,743
                                   
                                   
Energy Financial Services
  
22
    
11
    
(1)
    
(4)
    
7
    
35
                                   
GECAS
  
20
    
(2)
    
–  
    
(3)
    
–  
    
15
                                   
Other
  
58
    
11
    
1
    
(17)
    
1
    
54
Total Commercial
  
2,045
    
389
    
(32)
    
(670)
    
115
    
1,847
                                   
Real Estate
                                  
Debt
  
1,292
    
122
    
9
    
(341)
    
10
    
1,092
Business Properties
  
196
    
54
    
1
    
(70)
    
3
    
184
Total Real Estate
  
1,488
    
176
    
10
    
(411)
    
13
    
1,276
                                   
Consumer
                                  
Non-U.S. residential
                                  
   mortgages
  
803
    
66
    
40
    
(150)
    
31
    
790
Non-U.S. installment
                                  
   and revolving credit
  
937
    
311
    
64
    
(664)
    
286
    
934
U.S. installment and
                                  
   revolving credit
  
2,333
    
941
    
1
    
(1,688)
    
259
    
1,846
Non-U.S. auto
  
168
    
26
    
12
    
(126)
    
63
    
143
Other
  
259
    
59
    
4
    
(152)
    
48
    
218
Total Consumer
  
4,500
    
1,403
    
121
    
(2,780)
    
687
    
3,931
Total
$
8,033
  
$
1,968
  
$
99
  
$
(3,861)
  
$
815
  
$
7,054
                                   
                                   
(a)  
Other primarily included transfers to held for sale and the effects of currency exchange.
 
(b)  
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
 
 
(17)
 
 
 
Balance at
  
Adoption of
  
Balance at
  
Provision
              
Balance at
 
December 31,
  
ASU 2009
  
January 1,
  
charged to
      
Gross
      
June 30,
(In millions)
2009
  
16 & 17(a)
  
2010
  
operations
  
Other(b)
  
write-offs(c)
  
Recoveries(c)
  
2010
                                               
Commercial
                                              
CLL
                                              
Americas
$
1,179
  
$
66
  
$
1,245
  
$
630
  
$
(10)
  
$
(558)
  
$
55
  
$
1,362
Europe
  
575
    
–
    
575
    
137
    
(70)
    
(288)
    
28
    
382
Asia
  
244
    
(10)
    
234
    
108
    
(23)
    
(94)
    
9
    
234
Other
  
11
    
–
    
11
    
(1)
    
(2)
    
–
    
–
    
8
Total CLL
  
2,009
    
56
    
2,065
    
874
    
(105)
    
(940)
    
92
    
1,986
                                               
                                               
Energy Financial Services
  
28
    
–
    
28
    
24
    
1
    
–
    
–
    
53
                                               
GECAS
  
104
    
–
    
104
    
35
    
–
    
(89)
    
–
    
50
                                               
Other
  
34
    
–
    
34
    
18
    
–
    
(3)
    
1
    
50
Total Commercial
  
2,175
    
56
    
2,231
    
951
    
(104)
    
(1,032)
    
93
    
2,139
                                               
Real Estate
                                              
Debt
  
1,358
    
(3)
    
1,355
    
548
    
(4)
    
(310)
    
1
    
1,590
Business Properties
  
136
    
45
    
181
    
97
    
(7)
    
(64)
    
–
    
207
Total Real Estate
  
1,494
    
42
    
1,536
    
645
    
(11)
    
(374)
    
1
    
1,797
                                               
Consumer
                                              
Non-U.S. residential
                                              
   mortgages
  
892
    
–
    
892
    
170
    
(103)
    
(180)
    
49
    
828
Non-U.S. installment
                                              
   and revolving credit
  
1,106
    
–
    
1,106
    
615
    
(113)
    
(935)
    
281
    
954
U.S. installment and
                                              
   revolving credit
  
1,551
    
1,602
    
3,153
    
1,570
    
(1)
    
(2,320)
    
233
    
2,635
Non-U.S. auto
  
292
    
–
    
292
    
73
    
(43)
    
(191)
    
92
    
223
Other
  
292
    
–
    
292
    
163
    
(35)
    
(217)
    
43
    
246
Total Consumer
  
4,133
    
1,602
    
5,735
    
2,591
    
(295)
    
(3,843)
    
698
    
4,886
Total
$
7,802
  
$
1,700
  
$
9,502
  
$
4,187
  
$
(410)
  
$
(5,249)
  
$
792
  
$
8,822
                                               
                                               
(a)  
Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
 
(b)
Other primarily included the effects of currency exchange.
 
(c)
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
 
See Note 12 for supplemental information about the credit quality of financing receivables and allowance for losses on financing receivables.

 
(18)
 

5. GOODWILL AND OTHER INTANGIBLE ASSETS
 
Goodwill and other intangible assets – net, consisted of the following.
 

 
At
 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Goodwill
$
 28,173
  
$
 27,508
           
Other intangible assets
          
    Intangible assets subject to amortization
$
 1,843
  
$
 1,874
           

Changes in goodwill balances follow.
 

         
Dispositions,
      
 
Balance at
      
currency
  
Balance at
  
 
January 1,
      
exchange
  
June 30,
  
(In millions)
2011
  
Acquisitions
  
and other
  
2011
  
                         
CLL
$
 13,893
  
$
 –  
  
$
 308
  
$
 14,201
  
Consumer
  
 10,817
    
 –  
    
 359
    
 11,176
  
Real Estate
  
 1,089
    
 –  
    
 (2)
    
 1,087
  
Energy Financial Services
  
 1,562
    
 –  
    
 –  
    
 1,562
  
GECAS
  
 147
    
 –  
    
 –  
    
 147
  
Total
$
 27,508
  
$
 –  
  
$
 665
  
$
 28,173
  
                         

Goodwill balances increased $665 million during the six months ended June 30, 2011, primarily as a result of the weaker U.S. dollar ($700 million). Our reporting units and related goodwill balances are CLL ($14,201 million), Consumer ($11,176 million), Real Estate ($1,087 million), Energy Financial Services ($1,562 million) and GECAS ($147 million) at June 30, 2011.

Intangible Assets Subject to Amortization
 

 
At
 
June 30, 2011
  
December 31, 2010
 
Gross
          
Gross
        
 
carrying
  
Accumulated
      
carrying
  
Accumulated
    
(In millions)
amount
  
amortization
  
Net
  
amount
  
amortization
  
Net
                                   
                                   
Customer-related
$
 1,213
  
$
 (661)
  
$
 552
  
$
 1,112
  
$
 (588)
  
$
 524
Patents, licenses and trademarks
  
 385
    
 (322)
    
 63
    
 599
    
 (532)
    
 67
Capitalized software
  
 2,249
    
 (1,726)
    
 523
    
 2,016
    
 (1,522)
    
 494
Lease valuations
  
 1,655
    
 (989)
    
 666
    
 1,646
    
 (917)
    
 729
All other
  
 297
    
 (258)
    
 39
    
 326
    
 (266)
    
 60
Total
$
 5,799
  
$
 (3,956)
  
$
 1,843
  
$
 5,699
  
$
 (3,825)
  
$
 1,874

Amortization related to intangible assets subject to amortization was $134 million and $179 million in the three months ended June 30, 2011 and 2010, respectively, and $271 million and $324 million in the six months ended June 30, 2011 and 2010, respectively.
 
 
(19)
 

6. BORROWINGS AND BANK DEPOSITS
 
Borrowings are summarized in the following table.

 
At
(In millions)
June 30,
  
December 31,
 
2011
  
2010
Short-term borrowings
          
Commercial paper
          
   U.S.
$
25,618
  
$
27,398
   Non-U.S.
  
9,862
    
9,497
Current portion of long-term borrowings(a)(b)(c)(e)
  
72,947
    
65,610
GE Interest Plus notes(d)
  
8,544
    
9,058
Other(c)
  
1,628
    
2,083
Total short-term borrowings
$
118,599
  
$
113,646
           
Long-term borrowings
          
Senior unsecured notes(a)(b)
$
243,565
  
$
263,043
Subordinated notes(e)
  
4,362
    
2,276
Subordinated debentures(f)(g)
  
7,591
    
7,298
Other(c)(h)
  
13,312
    
11,729
Total long-term borrowings
$
268,830
  
$
284,346
           
Non-recourse borrowings of consolidated securitization entities(i)
$
29,075
  
$
30,018
           
Bank deposits(j)
$
41,548
  
$
37,298
           
Total borrowings and bank deposits
$
458,052
  
$
465,308
           
           
(a)  
GECC had issued and outstanding $45,045 million and $53,495 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at June 30, 2011 and December 31, 2010, respectively. Of the above amounts, $28,095 million and $18,455 million is included in current portion of long-term borrowings at June 30, 2011 and December 31, 2010, respectively.
 
(b)  
Included in total long-term borrowings were $2,073 million and $2,395 million of obligations to holders of guaranteed investment contracts at June 30, 2011 and December 31, 2010, respectively. If the long-term credit rating of GECC were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1, GECC could be required to provide up to $1,961 million as of June 30, 2011, to repay holders of GICs.
 
(c)  
Included $10,635 million and $11,117 million of funding secured by real estate, aircraft and other collateral at June 30, 2011 and December 31, 2010, respectively, of which $4,442 million and $4,653 million is non-recourse to GECC at June 30, 2011 and December 31, 2010, respectively.
 
(d)  
Entirely variable denomination floating rate demand notes.
 
(e)  
Included $117 million of subordinated notes guaranteed by GE included in current portion of long-term borrowings at June 30, 2011 and in long-term borrowings at December 31, 2010.
 
(f)  
Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.
 
(g)  
Includes $3,054 million of subordinated debentures, which constitute the sole assets of wholly-owned trusts who have issued trust preferred securities. Obligations associated with these trusts are unconditionally guaranteed by GECC.
 
(h)  
Included $2,126 million and $1,984 million of covered bonds at June 30, 2011 and December 31, 2010, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $825 million at June 30, 2011.
 
(i)  
Included at June 30, 2011 and December 31, 2010, were $11,590 million and $10,499 million of current portion of long-term borrowings, respectively, and $17,485 million and $19,519 million of long-term borrowings, respectively. See Note 13.
 
(j)  
Included $20,864 million and $18,781 million of deposits in non-U.S. banks at June 30, 2011 and December 31, 2010, respectively, and $13,869 million and $11,606 million of certificates of deposits with maturities greater than one year at June 30, 2011 and December 31, 2010, respectively.

 
(20)
 
 
7. INCOME TAXES
 
The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:

 
At
 
June 30,
  
December 31,
(In millions)
2011
  
2010
           
Unrecognized tax benefits
$
3,030
  
$
2,949
      Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
1,451
    
1,330
Accrued interest on unrecognized tax benefits
  
548
    
577
Accrued penalties on unrecognized tax benefits
  
79
    
73
Reasonably possible reduction to the balance of unrecognized
          
   tax benefits in succeeding 12 months
  
0-1,300
    
0-1,200
      Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
0-250
    
0-250
           
           
(a)  
Some portion of such reduction may be reported as discontinued operations.
 
 
The IRS is currently auditing the GE consolidated income tax returns for 2006-2007, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years were unresolved. It is reasonably possible that the 2006–2007 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECC effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE’s tax payments are due. The effect of GECC on the amount of the consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the group absent the tax on formation.

 
(21)
 

8. SHAREOWNER’S EQUITY
 
A summary of increases (decreases) in GECC shareowner’s equity that did not result directly from transactions with the shareowner, net of income taxes, follows.

 
 Three months ended June 30,
  
Six months ended June 30,
(In millions)
2011
  
2010
  
2011
  
2010
                       
Net earnings attributable to GECC
$
1,873
  
$
643
  
$
3,735
  
$
863
Investment securities – net
  
38
    
41
    
(39)
    
(26)
Currency translation adjustments – net
  
985
    
(2,618)
    
2,527
    
(3,978)
Cash flow hedges – net
  
(195)
    
63
    
(259)
    
476
Benefit plans – net
  
–  
    
23
    
(1)
    
65
Total
$
2,701
  
$
(1,848)
  
$
5,963
  
$
(2,600)
                       

Changes to noncontrolling interests are as follows.

 
 Three months ended June 30,
  
Six months ended June 30,
(In millions)
2011
  
2010
  
2011
  
2010
                       
Beginning balance
$
1,178
  
$
2,158
  
$
1,164
  
$
2,204
Net earnings
  
20
    
(22)
    
51
    
(27)
Dividends
  
–
    
(5)
    
(3)
    
(8)
Dispositions
  
–
    
(979)
    
–  
    
(979)
AOCI and other (a)
  
3
    
(54)
    
(11)
    
(92)
Ending balance
$
1,201
  
$
1,098
  
$
1,201
  
$
1,098
                       
                       
(a)  
The amount of change related to AOCI and other for the six months ended June 30, 2010 includes the impact of our adoption of ASC 810, Consolidations, of $(32) million. Changes to other individual components of AOCI attributable to noncontrolling interests were insignificant.

 
(22)
 

9. REVENUES FROM SERVICES
 
Revenues from services are summarized in the following table.

 
 Three months ended June 30,
  
Six months ended June 30,
(In millions)
2011
  
2010
  
2011
  
2010
                       
Interest on loans
$
5,005
  
$
5,192
  
$
10,134
  
$
10,488
Equipment leased to others
  
2,852
    
2,769
    
5,674
    
5,530
Fees
  
1,159
    
1,169
    
2,304
    
2,374
Associated companies(a)(b)
  
526
    
460
    
1,608
    
1,057
Financing leases
  
618
    
686
    
1,283
    
1,427
Real estate investments
  
430
    
354
    
832
    
631
Investment income
  
318
    
105
    
610
    
257
Other items
  
676
    
879
    
1,308
    
1,362
Total
$
11,584
  
$
 11,614
  
$
23,753
  
$
 23,126
                       
                       
(a)  
During the first quarter of 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a pre-tax gain of $690 million. Following the sale, we hold a 2.25% equity ownership interest which is classified as an available–for-sale security.
 
(b)  
Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at June 30, 2011 and December 31, 2010 of $98,628 million and $180,015 million, respectively. Assets were primarily financing receivables of $53,492 million and $97,447 million at June 30, 2011 and December 31, 2010, respectively. Total liabilities were $72,874 million and $143,957 million, consisted primarily of bank deposits of $22,349 million and $75,661 million at June 30, 2011 and December 31, 2010, respectively, and debt of $43,106 million and $53,696 million at June 30, 2011 and December 31, 2010, respectively. Revenues in the second quarters of 2011 and 2010 totaled $3,951 million and $4,750 million, respectively, and net earnings in the second quarters of 2011 and 2010 totaled $628 million and $1,153 million, respectively. Revenues in the first six months of 2011 and 2010 totaled $7,668 million and $9,716 million, respectively, and net earnings in the first six months of 2011 and 2010 totaled $1,088 million and $2,032 million, respectively.
 
10. FAIR VALUE MEASUREMENTS
 
For a description on how we estimate fair value, see Note 1 in our 2010 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 of $4,927 million and $5,706 million at June 30, 2011 and December 31, 2010, respectively, primarily supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our treasury operations. Such securities are mainly investment grade.

 
(23)
 


(In millions)
                  
Netting
      
 
Level 1
(a)
Level 2
(a)
Level 3
(b)
adjustment
(c)
Net balance
June 30, 2011
                            
Assets
                            
Investment securities
                            
    Debt
                            
       U.S. corporate
$
 424
  
$
 1,028
  
$
 1,530
  
$
 –  
  
$
 2,982
       State and municipal
  
 –  
    
 531
    
 166
    
 –  
    
 697
       Residential mortgage-backed
  
 –  
    
 1,579
    
 29
    
 –  
    
 1,608
       Commercial mortgage-backed
  
 –  
    
 1,388
    
 –  
    
 –  
    
 1,388
       Asset-backed
  
 –  
    
 504
    
 3,086
    
 –  
    
 3,590
       Corporate - non-U.S.
  
 76
    
 293
    
 1,032
    
 –  
    
 1,401
       Government - non-U.S.
  
 804
    
 1,073
    
 243
    
 –  
    
 2,120
       U.S. government and federal agency
  
 –  
    
 2,606
    
 –  
    
 –  
    
 2,606
   Retained interests
  
 –  
    
 –  
    
 45
    
 –  
    
 45
   Equity
                            
        Available-for-sale
  
 946
    
 500
    
 14
    
 –  
    
 1,460
        Trading
  
 475
    
 –  
    
 –  
    
 –  
    
 475
Derivatives(d)
  
 –  
    
 9,875
    
 146
    
 (3,309)
    
 6,712
Other(e)
  
 –  
    
 –  
    
 595
    
 –  
    
 595
Total
$
 2,725
  
$
 19,377
  
$
 6,886
  
$
 (3,309)
  
$
 25,679
                             
Liabilities
                            
Derivatives
$
 –  
  
$
 5,544
  
$
 36
  
$
 (3,302)
  
$
 2,278
Other
  
 –  
    
 28
    
 –  
    
 –  
    
 28
Total
$
–  
  
$
5,572
  
$
36
  
$
(3,302)
  
$
2,306
                             
December 31, 2010
                            
Assets
                            
Investment securities
                            
    Debt
                            
       U.S. corporate
$
 588
  
$
 1,360
  
$
 1,697
  
$
 –  
  
$
 3,645
       State and municipal
  
 –  
    
 508
    
 182
    
 –  
    
 690
       Residential mortgage-backed
  
 47
    
 1,666
    
 45
    
 –  
    
 1,758
       Commercial mortgage-backed
  
 –  
    
 1,388
    
 48
    
 –  
    
 1,436
       Asset-backed
  
 –  
    
 563
    
 2,496
    
 –  
    
 3,059
       Corporate - non-U.S.
  
 89
    
 356
    
 961
    
 –  
    
 1,406
       Government - non-U.S.
  
 776
    
 850
    
 128
    
 –  
    
 1,754
       U.S. government and federal agency
  
 –  
    
 2,661
    
 –  
    
 –  
    
 2,661
    Retained interests
  
 –  
    
 –  
    
 39
    
 –  
    
 39
    Equity
                            
       Available-for-sale
  
 569
    
 500
    
 18
    
 –  
    
 1,087
       Trading
  
 417
    
 –  
    
 –  
    
 –  
    
 417
Derivatives(d)
  
 –  
    
 10,319
    
 330
    
 (3,644)
    
 7,005
Other(e)
  
 –  
    
 –  
    
 450
    
 –  
    
 450
Total
$
 2,486
  
$
 20,171
  
$
 6,394
  
$
 (3,644)
  
$
 25,407
                             
Liabilities
                            
Derivatives
$
 –  
  
$
 6,228
  
$
 102
  
$
 (3,635)
  
$
 2,695
Other
  
 –  
    
 31
    
 –  
    
 –  
    
 31
Total
$
 –  
  
$
 6,259
  
$
 102
  
$
 (3,635)
  
$
 2,726
                             
                             
(a)  
The fair value of securities transferred between Level 1 and Level 2 was $67 million during the six months ended June 30, 2011.
 
(b)  
Level 3 investment securities valued using non-binding broker quotes totaled $677 million and $711 million at June 30, 2011 and December 31, 2010, respectively, and were classified as available-for-sale securities.
 
(c)  
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.
 
(d)  
The fair value of derivatives included an adjustment for non-performance risk. At June 30, 2011 and December 31, 2010, the cumulative adjustment was a loss of $7 million and $9 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.
 
(e)  
Included private equity investments and loans designated under the fair value option.
 
 
(24)
 
 
The following tables present the changes in Level 3 instruments measured on a recurring basis for the three and six months ended June 30, 2011 and 2010. 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 June 30, 2011
 

                                       
Net
  
(In millions)
                                        
change in
  
         
Net realized/
                              
unrealized
  
       
Net
  
unrealized
                                        
gains
  
     
realized/
  
gains (losses)
                              
(losses)
  
     
unrealized
  
included in
                              
relating to
  
     
gains
  
accumulated
                              
instruments
  
     
(losses)
  
other
                
Transfers
  
Transfers
        
still held at
  
 
April 1,
  
included in
  
comprehensive
                
into
  
out of
  
June 30,
    
June 30,
  
 
2011
  
earnings
(a)
income
  
Purchases
  
Sales
  
Settlements
  
Level 3
(b)
Level 3
(b)
2011
    
2011
(c)
                                                               
Investment securities   
                                                              
   Debt
                                                              
      U.S. corporate
$
1,586
  
$
8
  
$
(23)
  
$
6
  
$
(41)
  
$
(6)
  
$
–
  
$
–
  
$
1,530
    
$
–
  
      State and municipal
  
168
    
–
    
(1)
    
–
    
–
    
(1)
    
–
    
–
    
166
      
–
  
      Residential
                                                              
          mortgage-backed
  
30
    
–
    
(1)
    
–
    
–
    
–
    
–
    
–
    
29
      
–
  
      Commercial
                                                              
          mortgage-backed
  
–
    
–
    
–
    
–
    
–
    
–
    
–
    
–
    
–
      
–
  
      Asset-backed
  
2,780
    
(3)
    
(20)
    
409
    
(43)