gecc10q06302012.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, 2012
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 26, 2012, 1,000 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.
 

The attached financial statements are marked as “drafts” and are being made available to you at this time in order to facilitate our drafting process as well as KPMG’s review process. As the word “draft” indicates, these documents are neither final nor complete. Rather, these draft documents are preliminary, incomplete and possibly incorrect in some places, reflecting the fact that they are works in progress. Accordingly, no inference or conclusion should be drawn from these draft documents with respect to the quality or effectiveness of GECS’ internal control over financial reporting or disclosure controls and procedures


The attached financial statements are marked as “drafts” and are being made available to you at this time in order to facilitate our drafting process as well as KPMG’s review process. As the word “draft” indicates, these documents are neither final nor complete. Rather, these draft documents are preliminary, incomplete and possibly incorrect in some places, reflecting the fact that they are works in progress. Accordingly, no inference or conclusion should be drawn from these draft documents with respect to the quality or effectiveness of GECS’ internal control over financial reporting or disclosure controls and procedures


 
(1)
 

General Electric Capital Corporation
 
Part I – Financial Information
  
Page
       
Item 1.
Financial Statements
    
 
Condensed Statement of Earnings
  
3
 
Condensed Statement of Comprehensive Income
  
4
 
Condensed Statement of Changes in Shareowners’ Equity
  
4
 
Condensed Statement of Financial Position
  
5
 
Condensed Statement of Cash Flows
  
6
 
Summary of Operating Segments
  
7
 
Notes to Condensed Financial Statements (Unaudited)
  
8
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 1.
Legal Proceedings
  
69
Item 6.
Exhibits
  
71
Signatures
  
72
     
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 developments in the European sovereign debt situation; 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 (GE Money Japan); pending and future mortgage securitization claims and litigation in connection with WMC, which may affect our estimates of liability, including possible loss estimates; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; our ability to pay dividends to GE at the planned level; 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; the impact of potential information technology or data security breaches; 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 Earnings
(Unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
(In millions)
 
2012 
 
 
2011 
 
 
2012 
 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
Revenues from services (a)
$
11,464 
 
$
12,452 
 
$
22,908 
 
$
25,510 
Other-than-temporary impairment on investment securities:
 
 
 
 
 
 
 
 
 
 
 
   Total other-than-temporary impairment on investment securities
 
(33)
 
 
(113)
 
 
(65)
 
 
(184)
      Less: Portion of other-than-temporary impairment recognized in
 
 
 
 
 
 
 
 
 
 
 
         accumulated other comprehensive income
 
1 
 
 
59 
 
 
1 
 
 
66 
   Net other-than-temporary impairment on investment securities
 
 
 
 
 
 
 
 
 
 
 
      recognized in earnings
 
(32)
 
 
(54)
 
 
(64)
 
 
(118)
Revenues from services (Note 9)
 
11,432 
 
 
12,398 
 
 
22,844 
 
 
25,392 
Sales of goods
 
26 
 
 
42 
 
 
56 
 
 
84 
   Total revenues
 
11,458 
 
 
12,440 
 
 
22,900 
 
 
25,476 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
 
 
 
Interest
 
2,988 
 
 
3,598 
 
 
6,184 
 
 
7,182 
Operating and administrative
 
3,090 
 
 
3,449 
 
 
5,991 
 
 
6,926 
Cost of goods sold
 
23 
 
 
38 
 
 
48 
 
 
78 
Investment contracts, insurance losses and insurance annuity benefits
 
702 
 
 
790 
 
 
1,473 
 
 
1,559 
Provision for losses on financing receivables
 
743 
 
 
792 
 
 
1,606 
 
 
1,932 
Depreciation and amortization
 
1,674 
 
 
1,792 
 
 
3,369 
 
 
3,568 
   Total costs and expenses
 
9,220 
 
 
10,459 
 
 
18,671 
 
 
21,245 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from continuing operations before income taxes
 
2,238 
 
 
1,981 
 
 
4,229 
 
 
4,231 
Benefit (provision) for income taxes
 
(102)
 
 
(346)
 
 
(289)
 
 
(775)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
2,136 
 
 
1,635 
 
 
3,940 
 
 
3,456 
Earnings from discontinued operations, net of taxes (Note 2)
 
(553)
 
 
195 
 
 
(770)
 
 
230 
Net earnings (loss)
 
1,583 
 
 
1,830 
 
 
3,170 
 
 
3,686 
Less net earnings (loss) attributable to noncontrolling interests
 
14 
 
 
20 
 
 
26 
 
 
51 
Net earnings (loss) attributable to GECC
$
1,569 
 
$
1,810 
 
$
3,144 
 
$
3,635 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to GECC
 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations
$
2,122 
 
$
1,615 
 
$
3,914 
 
$
3,405 
Earnings (loss) from discontinued operations, net of taxes
 
(553)
 
 
195 
 
 
(770)
 
 
230 
Net earnings (loss) attributable to GECC
$
1,569 
 
$
1,810 
 
$
3,144 
 
$
3,635 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)  
Excluding net other-than-temporary impairment on investment securities.
 
See accompanying notes.
 
 
(3)
 

General Electric Capital Corporation and consolidated affiliates
Condensed Statement of Comprehensive Income
(Unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
(In millions)
 
2012 
 
 
2011 
 
 
2012 
 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
1,583 
 
$
1,830 
 
$
3,170 
 
$
3,686 
   Less: Net earnings (loss) attributable to noncontrolling interests
 
14 
 
 
20 
 
 
26 
 
 
51 
Net earnings attributable to GECC
$
1,569 
 
$
1,810 
 
$
3,144 
 
$
3,635 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
      Investment securities
$
180 
 
$
390 
 
$
510 
 
$
202 
      Currency translation adjustments
 
(390)
 
 
983 
 
 
(274)
 
 
2,540 
      Cash flow hedges
 
40 
 
 
(190)
 
 
112 
 
 
(262)
      Benefit plans
 
19 
 
 
– 
 
 
(5)
 
 
(1)
Other comprehensive income (loss), net of tax
 
(151)
 
 
1,183 
 
 
343 
 
 
2,479 
   Less: Other comprehensive income (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
      noncontrolling interests
 
11 
 
 
(11)
 
 
1 
 
 
(9)
Other comprehensive income (loss) attributable to GECC
$
(162)
 
$
1,194 
 
$
342 
 
$
2,488 
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income, net of tax
 
1,432 
 
 
3,013 
 
 
3,513 
 
 
6,165 
   Less: Comprehensive income attributable to noncontrolling interests
 
25 
 
 
9 
 
 
27 
 
 
42 
Comprehensive income attributable to GECC
$
1,407 
 
$
3,004 
 
$
3,486 
 
$
6,123 
 
 
 
 
 
 
 
 
 
 
 
 

General Electric Capital Corporation and consolidated affiliates
Statement of Changes in Shareowners’ Equity
(Unaudited)

 
  
 
Six months ended June 30,
(In millions)
 
 
 
 
 
 
 
2012 
 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
  
 
 
  
 
$
77,110 
 
$
68,984 
Dividends and other transactions with shareowners
 
  
 
 
  
 
 
(769)
 
 
1 
Other comprehensive income (loss), net of tax
 
  
 
 
  
 
 
342 
 
 
2,488 
Increases from net earnings attributable to the company
 
  
 
 
  
 
 
3,144 
 
 
3,635 
Ending balance
 
  
 
 
  
 
 
79,827 
 
 
75,108 
Noncontrolling interests
 
  
 
 
  
 
 
759 
 
 
1,201 
Total equity
 
  
 
 
  
 
$
80,586 
 
$
 76,309 

 
(4)
 

General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Financial Position
 
 
 
 
 
 
 
 
June 30,
 
December 31,
(In millions, except share information)
 
 
 
 
 
 
2012 
 
2011 
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
 
 
 
 
 
 
$
66,252 
 
$
76,702 
Investment securities (Note 3)
 
 
 
 
 
 
 
47,906 
 
 
47,359 
Inventories
 
 
 
 
 
 
 
60 
 
 
51 
Financing receivables – net (Notes 4 and 12)
 
 
 
 
 
 
 
273,984 
 
 
288,847 
Other receivables
 
 
 
 
 
 
 
13,701 
 
 
13,390 
Property, plant and equipment, less accumulated amortization of $23,671
 
 
 
 
 
 
 
 
 
 
 
   and $23,615
 
 
 
 
 
 
 
51,969 
 
 
51,419 
Goodwill (Note 5)
 
 
 
 
 
 
 
27,072 
 
 
27,230 
Other intangible assets – net (Note 5)
 
 
 
 
 
 
 
1,443 
 
 
1,546 
Other assets
 
 
 
 
 
 
 
71,897 
 
 
75,612 
Assets of businesses held for sale (Note 2)
 
 
 
 
 
 
 
3,039 
 
 
711 
Assets of discontinued operations (Note 2)
 
 
 
 
 
 
 
1,481 
 
 
1,669 
Total assets(a)
 
 
 
 
 
 
$
558,804 
 
$
584,536 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings (Note 6)
 
 
 
 
 
 
$
119,796 
 
$
136,333 
Accounts payable
 
 
 
 
 
 
 
7,700 
 
 
7,239 
Non-recourse borrowings of consolidated securitization entities (Note 6)
 
 
 
 
 
 
 
30,696 
 
 
29,258 
Bank deposits (Note 6)
 
 
 
 
 
 
 
41,942 
 
 
43,115 
Long-term borrowings (Note 6)
 
 
 
 
 
 
 
225,539 
 
 
234,391 
Investment contracts, insurance liabilities and insurance annuity benefits
 
 
 
 
 
 
 
28,328 
 
 
30,198 
Other liabilities
 
 
 
 
 
 
 
14,759 
 
 
17,334 
Deferred income taxes
 
 
 
 
 
 
 
7,392 
 
 
7,052 
Liabilities of businesses held for sale (Note 2)
 
 
 
 
 
 
 
283 
 
 
345 
Liabilities of discontinued operations (Note 2)
 
 
 
 
 
 
 
1,783 
 
 
1,471 
Total liabilities(a)
 
 
 
 
 
 
 
478,218 
 
 
506,736 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, $0.01 par value (750,000 authorized at June 30, 2012 and
 
 
 
 
 
 
 
 
 
 
 
    22,500 issued and outstanding at June 30, 2012)
 
 
 
 
 
 
 
– 
 
 
– 
Common stock, $14 par value (4,166,000 shares authorized at
 
 
 
 
 
 
 
 
 
 
 
   both June 30, 2012 and December 31, 2011 and 1,000 shares
 
 
 
 
 
 
 
 
 
 
 
      issued and outstanding at both June 30, 2012 and
 
 
 
 
 
 
 
 
 
 
 
        December 31, 2011)
 
 
 
 
 
 
 
– 
 
 
– 
Accumulated other comprehensive income – net(b)
 
 
 
 
 
 
 
 
 
 
 
   Investment securities
 
 
 
 
 
 
 
476 
 
 
(33)
   Currency translation adjustments
 
 
 
 
 
 
 
(673)
 
 
(399)
   Cash flow hedges
 
 
 
 
 
 
 
(989)
 
 
(1,101)
   Benefit plans
 
 
 
 
 
 
 
(568)
 
 
(563)
Additional paid-in capital
 
 
 
 
 
 
 
29,859 
 
 
27,628 
Retained earnings
 
 
 
 
 
 
 
51,722 
 
 
51,578 
Total GECC shareowners' equity
 
 
 
 
 
 
 
79,827 
 
 
77,110 
Noncontrolling interests(c)(Note 8)
 
 
 
 
 
 
 
759 
 
 
690 
Total equity
 
 
 
 
 
 
 
80,586 
 
 
77,800 
Total liabilities and equity
 
 
 
 
 
 
$
558,804 
 
$
584,536 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Our consolidated assets at June 30, 2012 include total assets of $47,499 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 $38,554 million and investment securities of $4,874 million. Our consolidated liabilities at June 30, 2012 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 $29,796 million. See Note 13.
 
(b)
The sum of accumulated other comprehensive income − net was $(1,754) million and $(2,096) million at June 30, 2012 and December 31, 2011, respectively.
 
(c)
Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(142) million and $(141) million at June 30, 2012 and December 31, 2011, respectively.
 
See accompanying notes.

 
(5)
 
 
General Electric Capital Corporation and consolidated affiliates
Condensed Statement of Cash Flows
(Unaudited)
 
 
 
 
Six months ended June 30,
(In millions)
 
 
 
 
2012 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – operating activities
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
 
 
 
 
 
$
3,170 
 
$
3,686 
Less net earnings (loss) attributable to noncontrolling interests
 
 
 
 
 
 
 
26 
 
 
51 
Net earnings attributable to GECC
 
 
 
 
 
 
 
3,144 
 
 
3,635 
(Earnings) loss from discontinued operations
 
 
 
 
 
 
 
770 
 
 
(230)
Adjustments to reconcile net earnings attributable to GECC
 
 
 
 
 
 
 
 
 
 
 
   to cash provided from operating activities
 
 
 
 
 
 
 
 
 
 
 
      Depreciation and amortization of property, plant and equipment
 
 
 
 
 
 
 
3,369 
 
 
3,568 
      Increase (decrease) in accounts payable
 
 
 
 
 
 
 
201 
 
 
885 
      Provision for losses on financing receivables
 
 
 
 
 
 
 
1,606 
 
 
1,932 
      All other operating activities
 
 
 
 
 
 
 
1,734 
 
 
(83)
Cash from (used for) operating activities – continuing operations
 
 
 
 
 
 
 
10,824 
 
 
9,707 
Cash from (used for) operating activities – discontinued operations
 
 
 
 
 
 
 
(45)
 
 
674 
Cash from (used for) operating activities
 
 
 
 
 
 
 
10,779 
 
 
10,381 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – investing activities
 
 
 
 
 
 
 
 
 
 
 
Additions to property, plant and equipment
 
 
 
 
 
 
 
(5,514)
 
 
(5,118)
Dispositions of property, plant and equipment
 
 
 
 
 
 
 
2,726 
 
 
3,505 
Increase in loans to customers
 
 
 
 
 
 
 
(148,817)
 
 
(153,746)
Principal collections from customers – loans
 
 
 
 
 
 
 
154,149 
 
 
166,493 
Investment in equipment for financing leases
 
 
 
 
 
 
 
(4,349)
 
 
(4,386)
Principal collections from customers – financing leases
 
 
 
 
 
 
 
5,993 
 
 
6,813 
Net change in credit card receivables
 
 
 
 
 
 
 
(1,178)
 
 
1,575 
Proceeds from sale of discontinued operations
 
 
 
 
 
 
 
– 
 
 
4,371 
Proceeds from principal business dispositions
 
 
 
 
 
 
 
88 
 
 
2,077 
Payments for principal businesses purchased
 
 
 
 
 
 
 
– 
 
 
(93)
All other investing activities
 
 
 
 
 
 
 
3,779 
 
 
3,659 
Cash from (used for) investing activities – continuing operations
 
 
 
 
 
 
 
6,877 
 
 
25,150 
Cash from (used for) investing activities – discontinued operations
 
 
 
 
 
 
 
37 
 
 
(614)
Cash from (used for) investing activities
 
 
 
 
 
 
 
6,914 
 
 
24,536 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – financing activities
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
 
 
 
 
 
 
(621)
 
 
(2,857)
Net increase (decrease) in bank deposits
 
 
 
 
 
 
 
(890)
 
 
2,464 
Newly issued debt (maturities longer than 90 days)
 
 
 
 
 
 
 
 
 
 
 
   Short-term (91 to 365 days)
 
 
 
 
 
 
 
40 
 
 
10 
   Long-term (longer than one year)
 
 
 
 
 
 
 
29,618 
 
 
26,954 
   Non-recourse, leveraged lease
 
 
 
 
 
 
 
– 
 
 
– 
Repayments and other debt reductions (maturities longer than 90 days)
 
 
 
 
 
 
 
 
 
 
 
   Short-term (91 to 365 days)
 
 
 
 
 
 
 
(50,546)
 
 
(44,380)
   Long-term (longer than one year)
 
 
 
 
 
 
 
(1,988)
 
 
(273)
   Non-recourse, leveraged lease
 
 
 
 
 
 
 
(310)
 
 
(520)
Proceeds from issuance of preferred stock
 
 
 
 
 
 
 
2,227 
 
 
– 
Dividends paid to shareowner
 
 
 
 
 
 
 
(3,000)
 
 
– 
All other financing activities
 
 
 
 
 
 
 
(2,354)
 
 
(936)
Cash from (used for) financing activities – continuing operations
 
 
 
 
 
 
 
(27,824)
 
 
(19,538)
Cash from (used for) financing activities – discontinued operations
 
 
 
 
 
 
 
– 
 
 
(42)
Cash from (used for) financing activities
 
 
 
 
 
 
 
(27,824)
 
 
(19,580)
 
 
 
 
 
 
 
 
 
 
 
 
Effect of currency exchange rate changes on cash and equivalents
 
 
 
 
 
 
 
(327)
 
 
2,407 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in cash and equivalents
 
 
 
 
 
 
 
(10,458)
 
 
17,744 
Cash and equivalents at beginning of year
 
 
 
 
 
 
 
76,823 
 
 
60,398 
Cash and equivalents at June 30
 
 
 
 
 
 
 
66,365 
 
 
78,142 
Less cash and equivalents of discontinued operations at June 30
 
 
 
 
 
 
 
113 
 
 
159 
Cash and equivalents of continuing operations at June 30
 
 
 
 
 
 
$
66,252 
 
$
77,983 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
 
 
(6)
 

General Electric Capital Corporation and consolidated affiliates
Summary of Operating Segments

 
Three months ended June 30,
 
Six months ended June 30,
 
(Unaudited)
 
(Unaudited)
(In millions)
2012 
 
2011 
 
2012 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
CLL
$
4,141 
 
$
4,666 
 
$
8,583 
 
$
9,274 
Consumer
 
3,812 
 
 
4,172 
 
 
7,689 
 
 
8,995 
Real Estate
 
876 
 
 
992 
 
 
1,712 
 
 
1,899 
Energy Financial Services
 
446 
 
 
365 
 
 
685 
 
 
710 
GECAS
 
1,317 
 
 
1,327 
 
 
2,648 
 
 
2,652 
    Total segment revenues
 
10,592 
 
 
11,522 
 
 
21,317 
 
 
23,530 
Corporate items and eliminations
 
866 
 
 
918 
 
 
1,583 
 
 
1,946 
Total revenues in GECC
$
11,458 
 
$
12,440 
 
$
22,900 
 
$
25,476 
 
 
 
 
 
 
 
 
 
 
 
 
Segment profit
 
 
 
 
 
 
 
 
 
 
 
CLL
$
626 
 
$
701 
 
$
1,311 
 
$
1,255 
Consumer
 
907 
 
 
1,042 
 
 
1,736 
 
 
2,283 
Real Estate
 
221 
 
 
(335)
 
 
277 
 
 
(693)
Energy Financial Services
 
122 
 
 
139 
 
 
193 
 
 
251 
GECAS
 
308 
 
 
321 
 
 
626 
 
 
627 
    Total segment profit
 
2,184 
 
 
1,868 
 
 
4,143 
 
 
3,723 
Corporate items and eliminations
 
(62)
 
 
(253)
 
 
(229)
 
 
(318)
Earnings from continuing operations
 
 
 
 
 
 
 
 
 
 
 
    attributable to GECC
 
2,122 
 
 
1,615 
 
 
3,914 
 
 
3,405 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
    net of taxes, attributable to GECC
 
(553)
 
 
195 
 
 
(770)
 
 
230 
Total net earnings attributable to GECC
$
1,569 
 
$
1,810 
 
$
3,144 
 
$
3,635 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.

 
(7)
 

Notes to Condensed Financial Statements (Unaudited)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
General Electric Company (GE Company or GE) owns all of the common stock of General Electric Capital Corporation (GECC). 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 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 fiscal year ended December 31, 2011 (2011 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).

On February 22, 2012, our former parent, General Electric Capital Services, Inc. (GECS), merged with and into GECC. The merger simplified GE’s corporate structure by consolidating financial services entities and assets within our organization and simplifying Securities and Exchange Commission and regulatory reporting. Upon completion of the merger, (i) all outstanding shares of GECC common stock were cancelled, (ii) all outstanding shares of common stock of GECS and all outstanding shares of preferred stock of GECS held by GE were converted into an aggregate of 1,000 shares of common stock of GECC and (iii) all treasury shares of GECS and all outstanding shares of preferred stock of GECS held by GECC were cancelled.  As a result of the merger, GECC became the surviving corporation, assumed all of GECS’ rights and obligations and became wholly-owned directly by GE.

Because both GECS and GECC were wholly-owned either directly or indirectly by GE, the merger was accounted for as a transfer of assets between entities under common control. Transfers of net assets or exchanges of shares between entities under common control are accounted for at historical value, and as if the transfer occurred at the beginning of the period. Prior period results are retrospectively adjusted to furnish comparative information. GECC’s continuing operations now include the run-off insurance operations previously held and managed in our former parent, GECS, and which are reported in corporate items and eliminations. The operating businesses that are reported as segments, including CLL, Consumer, Real Estate, Energy Financial Services and GECAS, are not affected by the merger. Unless otherwise indicated, references to GECC and the GE Capital segment in this Form 10-Q Report relate to the entity or segment as they exist subsequent  to the February 22, 2012 merger. In addition, during the first quarter of 2012, we announced the planned disposition of the Consumer mortgage lending business in Ireland (Consumer Ireland). This disposition is reported as a discontinued operation, which requires retrospective restatement of prior periods to classify the assets, liabilities and results of operations as discontinued operations.

GECC enters into various operating and financing arrangements with its parent, 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.

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.

Accounting Changes
 
On January 1, 2012, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2011-05, an amendment to Accounting Standards Codification (ASC) 220, Comprehensive Income. ASU 2011-05 introduces a new statement, the Consolidated Statement of Comprehensive Income, which begins with net earnings and adds or deducts other recognized changes in assets and liabilities that are not included in net earnings, but are reported directly to equity, under GAAP. For example, unrealized changes in currency translation adjustments are included in the measure of comprehensive income but are excluded from net earnings. The amendments became effective for the first quarter 2012 financial statements. The amendments affect only the display of those components of equity categorized as other comprehensive income and do not change existing recognition and measurement requirements that determine net earnings.

 
(8)
 

On January 1, 2012, we adopted FASB ASU 2011-04, an amendment to ASC 820, Fair Value Measurements. ASU 2011-04 clarifies or changes the application of existing fair value measurements, including: that the highest and best use valuation premise in a fair value measurement is relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity’s holding are not permitted in a fair value measurement. Adopting these amendments had no effect on the financial statements. For a description of how we estimate fair value and our process for reviewing fair value measurements classified as Level 3 in the fair value hierarchy, see Note 1 in our 2011 consolidated financial statements.

See Note 1 in our 2011 consolidated financial statements for a summary of our significant accounting policies.

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 2011 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.

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 2012, we committed to sell a portion of our Business Properties portfolio (Business Property) in Real Estate, including certain commercial loans, the origination and servicing platforms and the servicing rights on loans previously securitized by GECC. Upon closing, we will also expect to deconsolidate substantially all Real Estate securitization entities as servicing rights related to these entities will be transferred to the buyer.

In the second quarter of 2011, we committed to sell our Consumer business banking operations in Latvia.

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

 
 
 
 
 
 
 
June 30,
 
December 31,
(In millions)
 
 
 
 
 
 
2012
  
2011
 
 
 
 
 
 
 
  
           
      
Assets
 
 
 
 
 
 
  
           
      
Cash and equivalents
 
 
 
 
 
 
$
135 
  
$
149 
Financing receivables – net
 
 
 
 
 
 
  
2,794 
    
412 
Property, plant and equipment – net
 
 
 
 
 
 
 
56 
 
 
81 
All other
 
 
 
 
 
 
  
54 
    
69 
Assets of businesses held for sale
 
 
 
 
 
 
$
3,039 
  
$
711 
 
 
 
 
 
 
 
  
           
    
           
Liabilities
 
 
 
 
 
 
  
 
    
 
Short-term borrowings
 
 
 
 
 
 
$
223 
 
$
252 
All other
 
 
 
 
 
 
 
60 
 
 
93 
Liabilities of businesses held for sale
 
 
 
 
 
 
$
283 
 
$
345 


 
(9)
 

Discontinued Operations
 
Discontinued operations primarily comprised 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, our Consumer home lending operations in Australia and New Zealand (Australian Home Lending) and Consumer Ireland. Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.

Summarized financial information for discontinued operations is shown below.

 
Three months ended June 30,
 
Six months ended June 30,
(In millions)
2012 
 
2011 
 
2012 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Operations
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
(349)
 
$
124 
 
$
(350)
 
$
331 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations before income taxes
$
(380)
 
$
(38)
 
$
(438)
 
$
(38)
Benefit (provision) for income taxes
 
121 
 
 
37 
 
 
127 
 
 
33 
Earnings (loss) from discontinued operations, net of taxes
$
(259)
 
$
(1)
 
$
(311)
 
$
(5)
 
 
 
 
 
 
 
 
 
 
 
 
Disposal
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on disposal before income taxes
$
(308)
 
$
(52)
 
$
(502)
 
$
(41)
Benefit (provision) for income taxes
 
14 
 
 
248 
 
 
43 
 
 
276 
Gain (loss) on disposal, net of taxes
$
(294)
 
$
196 
 
$
(459)
 
$
235 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations, net of taxes
$
(553)
 
$
195 
 
$
(770)
 
$
230 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
June 30,
 
December 31,
(In millions)
 
 
 
 
 
 
2012 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
 
 
 
 
 
 
$
113 
 
$
121 
Financing receivables - net
 
 
 
 
 
 
 
234 
 
 
521 
Other
 
 
 
 
 
 
 
1,134 
 
 
1,027 
Assets of discontinued operations
 
 
 
 
 
 
$
1,481 
 
$
1,669 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
 
 
 
 
 
$
231 
 
$
207 
Other
 
 
 
 
 
 
 
1,552 
 
 
1,264 
Liabilities of discontinued operations
 
 
 
 
 
 
$
1,783 
 
$
1,471 
 
 
 
 
 
 
 
 
 
 
 
 

Assets at June 30, 2012 and December 31, 2011 primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2017 and in part in 2019, related to the sale of our GE Money Japan business.

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.


 
(10)
 

Our overall claims experience developed unfavorably through 2010. We believe that the level of excess interest refund claims was 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 the latter part of 2010 and the first two months of 2011. Since February and through the end of 2011, we experienced substantial declines in the rate of incoming claims, though the overall rate of reduction was slower than we expected. The September 2010 bankruptcy filing referenced above had a significant effect on the pace of incoming claim declines and it is difficult to predict the pace and pattern at which claims will continue to decelerate. During the first half of 2012, we recorded increases to our reserve of $336 million to reflect an excess of claims activity over our previous estimates and, based on recent experience, revisions to our assumptions about the level of future claim activity. We continue to closely monitor and evaluate claims activity. At June 30, 2012, our reserve for reimbursement of claims in excess of the statutory interest rate was $695 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, 2012 assumes the pace of incoming claims will continue to decelerate, average exposure per claim remains consistent with recent experience, and we continue to see the impact of loss mitigation efforts. Estimating the pace and pattern of decline in incoming claims has a significant effect on the total amount of our liability. While the pace of incoming claims continues to decline, it is highly variable and difficult to predict. Holding all other assumptions constant, for example, adverse changes of 20% and 50% in assumed incoming daily claim rate reduction would result in an increase to our reserves of approximately $100 million and $350 million, respectively.

Uncertainties about the likelihood of consumers to present valid claims, the runoff status of the underlying book of business, the financial status of other personal lending companies in Japan, challenging economic conditions and the impact of laws and regulations make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Additionally, the Japanese government is currently considering the introduction of proposed legislation to develop a framework for collective legal action proceedings. Recent trends, including the effect of consumer activity, market activity regarding other personal loan companies, higher claims severity and potential Japanese legislative actions, may continue to have an adverse effect on claims development.

GE Money Japan losses from discontinued operations, net of taxes, were $327 million and an insignificant amount in the three months ended June 30, 2012 and 2011, respectively, and $354 million and $1 million in the six months ended June 30, 2012 and 2011, 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 representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans as to which there was an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.

Pending repurchase claims based upon representations and warranties made in connection with loan sales were $2,731 million at June 30, 2012, $705 million at December 31, 2011 and $347 million at December 31, 2010. Pending claims represent those active repurchase claims that identify the specific loans tendered for repurchase and, for each loan, the alleged breach of a representation or warranty. The amounts reported reflect the purchase price or unpaid principal balances of the loans at the time of purchase and do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. Historically, a small percentage of the total loans WMC originated and sold has been tendered for repurchase, and of those loans tendered, only a limited amount has qualified as “validly tendered,” meaning the loans sold did not satisfy contractual obligations. The increase in loan repurchase claims in the second quarter was driven by an increase in activity by securitization trustees and certain investors in residential mortgage-backed securities issued beginning in the second quarter of 2006, and, we believe, may reflect applicable statutes of limitations considerations.

 
(11)
 
 
WMC is a party to nine lawsuits involving repurchase claims on loans included in six private-label securitizations.  Seven of these actions were commenced in the second quarter of 2012, one was commenced in July 2012 and one began in the third quarter of 2011.  Five of the actions were initiated by WMC.  Adverse to WMC in these cases are affiliates of either Deutsche Bank National Trust Company (Deutsche Bank) or US Bank National Association, solely in their capacity as trustees for the securitization trusts at issue in the cases.  In two actions commenced by Deutsche Bank, it purports to assert approximately $850 million of claims beyond those included in WMC’s previously discussed pending claims at June 30, 2012, based on loan sampling. WMC intends to defend itself vigorously.

Reserves related to contractual representations and warranties were $491 million and $140 million at June 30, 2012 and March 31, 2012, respectively, and reflect an increase to reserves in the second quarter of 2012 of $351 million due to higher pending claims and an increase in estimated future loan repurchase requests.  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 WMC’s historical loss rates on loans repurchased.  Assuming a 10% increase in our estimated loss rate and 50% increases to our estimates of future loan repurchase requests and estimated percentage of loans repurchased would result in an increase to our reserves of approximately $500 million.  Our reserve reflects our judgment, based on currently available information, and a number of assumptions, including economic conditions, claim activity, pending and threatened litigation and indemnification demands, and other activity in the mortgage industry.

Uncertainties surrounding economic conditions, the ability and propensity of mortgage holders to present valid claims, governmental actions, pending and threatened litigation against WMC, including increased activity by securitization trustees, indemnification demands and other activity in the mortgage industry make it difficult to develop a meaningful estimate of aggregate possible claims exposure. Actual losses could exceed the reserve amount if actual claim rates, governmental actions, litigation and indemnification activity, or losses WMC incurs on repurchased loans differ from our assumptions.  

WMC revenues (loss) from discontinued operations were $(351) million and an insignificant amount in the three months ended June 30, 2012 and 2011, respectively, and $(358) million and an insignificant amount in the six months ended June 30, 2012 and 2011, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $227 million and $1 million in the three months ended June 30, 2012 and 2011, respectively, and $236 million and $3 million in the six months ended June 30, 2012 and 2011, respectively.

Other
 
In the first quarter of 2012, we announced the planned disposition of Consumer Ireland and classified the business as discontinued operations.  Consumer Ireland revenues from discontinued operations were $2 million and $4 million in the three months ended June 30, 2012 and 2011, respectively, and $6 million and $8 million in the six months ended June 30, 2012 and 2011, respectively. Consumer Ireland earnings (loss) from discontinued operations, net of taxes, were $2 million and $(23) million in the three months ended June 30, 2012 and 2011, respectively, and $(186) million (including a $131 million loss on disposal) and $(44) million in the six months ended June 30, 2012 and 2011, respectively.

In the second quarter of 2011, we entered into an agreement to sell our Australian Home Lending operations and classified it as discontinued operations. As a result, we recognized an after-tax loss of $148 million in 2011. We completed the sale in the third quarter of 2011 for proceeds of approximately $4,577 million. Australian Home Lending revenues from discontinued operations were an insignificant amount and $101 million in the three months ended June 30, 2012 and 2011, respectively, and $1 million and $215 million in the six months ended June 30, 2012 and 2011, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were an insignificant amount and $(117) million in the three months ended June 30, 2012 and 2011, respectively, and $2 million and $ (80) million in the six months ended June 30, 2012 and 2011, 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 $1 million and $2 million in the three months ended June 30, 2012 and 2011, respectively, and $1 million and $31 million in the six months ended June 30, 2012 and 2011, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $1 million and $319 million in the three months ended June 30, 2012 and 2011, respectively, and $1 million and $326 million in the six months ended June 30, 2012 and 2011, respectively.


 
(12)
 

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 an insignificant amount and $6 million in the three months ended June 30, 2012 and 2011, respectively, and an insignificant amount  and $11 million in the six months ended June 30, 2012 and 2011, respectively. Consumer RV Marine earnings from discontinued operations, net of taxes, were $1 million and $2 million in the three months ended June 30, 2012 and 2011, respectively, and an insignificant amount and $2 million in the six months ended June 30, 2012 and 2011, respectively. Consumer Mexico revenues (losses) from discontinued operations were $(1) million and $12 million in the three months ended June 30, 2012 and 2011, respectively, and an insignificant amount and $67 million in the six months ended June 30, 2012 and 2011, respectively. Consumer Mexico earnings (loss) from discontinued operations, net of taxes, were $(2) million and $17 million in the three months ended June 30, 2012 and 2011, respectively, and $(4) million and $33 million in the six months ended June 30, 2012 and 2011, respectively.

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 annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations and Trinity, investment securities 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. We do not have any securities classified as held to maturity.

 
June 30, 2012
 
December 31, 2011
 
 
 
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
$
20,994 
 
$
4,003 
 
$
(327)
 
$
24,670 
 
$
20,748 
 
$
3,432 
 
$
(410)
 
$
23,770 
   State and municipal
 
3,436 
 
 
463 
 
 
(130)
 
 
3,769 
 
 
3,027 
 
 
350 
 
 
(143)
 
 
3,234 
   Residential mortgage-backed(a)
 
2,440 
 
 
195 
 
 
(198)
 
 
2,437 
 
 
2,711 
 
 
184 
 
 
(286)
 
 
2,609 
   Commercial mortgage-backed
 
3,060 
 
 
171 
 
 
(180)
 
 
3,051 
 
 
2,913 
 
 
162 
 
 
(247)
 
 
2,828 
   Asset-backed
 
5,269 
 
 
8 
 
 
(148)
 
 
5,129 
 
 
5,102 
 
 
32 
 
 
(164)
 
 
4,970 
   Corporate – non-U.S.
 
2,592 
 
 
140 
 
 
(168)
 
 
2,564 
 
 
2,414 
 
 
126 
 
 
(207)
 
 
2,333 
   Government – non-U.S.
 
1,792 
 
 
137 
 
 
(30)
 
 
1,899 
 
 
2,488 
 
 
129 
 
 
(86)
 
 
2,531 
   U.S. government and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        federal agency
 
3,412 
 
 
90 
 
 
– 
 
 
3,502 
 
 
3,974 
 
 
84 
 
 
– 
 
 
4,058 
Retained interests
 
28 
 
 
3 
 
 
– 
 
 
31 
 
 
25 
 
 
10 
 
 
– 
 
 
35 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Available-for-sale
 
502 
 
 
98 
 
 
(6)
 
 
594 
 
 
713 
 
 
75 
 
 
(38)
 
 
750 
   Trading
 
260 
 
 
– 
 
 
– 
 
 
260 
 
 
241 
 
 
– 
 
 
– 
 
 
241 
Total
$
43,785 
 
$
5,308 
 
$
(1,187)
 
$
47,906 
 
$
44,356 
 
$
4,584 
 
$
(1,581)
 
$
47,359 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)  
Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at June 30, 2012, $1,626 million relates to securities issued by government-sponsored entities and $811 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 financial institutions.
 
 
The fair value of investment securities increased to $47,906 million at June 30, 2012, from $47,359 million at December 31, 2011, primarily due to the impact of lower interest rates and additional purchases in our CLL business of investments collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.

 
(13)
 

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
 
 
 
Gross
 
 
Estimated
 
unrealized
 
Estimated
 
unrealized
 
(In millions)
fair value
 
losses
(a)
fair value
 
losses
(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
 
 
 
 
 
 
 
 
 
 
 
   U.S. corporate
$
365 
 
$
(16)
 
$
1,121 
 
$
(311)
 
   State and municipal
 
71 
 
 
(1)
 
 
233 
 
 
(129)
 
   Residential mortgage-backed
 
26 
 
 
– 
 
 
752 
 
 
(198)
 
   Commercial mortgage-backed
 
268 
 
 
(7)
 
 
1,057 
 
 
(173)
 
   Asset-backed
 
4,136 
 
 
(27)
 
 
792 
 
 
(121)
 
   Corporate – non-U.S.
 
488 
 
 
(31)
 
 
571 
 
 
(137)
 
   Government – non-U.S.
 
196 
 
 
(1)
 
 
171 
 
 
(29)
 
   U.S. government and federal agency
 
– 
 
 
– 
 
 
– 
 
 
– 
 
Retained interests
 
2 
 
 
– 
 
 
– 
 
 
– 
 
Equity
 
64 
 
 
(5)
 
 
7 
 
 
(1)
 
Total
$
5,616 
 
$
(88)
 
$
4,704 
 
$
(1,099)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 201