Edgar Filing: GENERAL ELECTRIC CAPITAL CORP

gecc10q09302012.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 September 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 November 2, 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.

(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	50
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4.	Controls and Procedures	72

Part II – Other Information

Item 1.	Legal Proceedings	73
Item 6.	Exhibits	74
Signatures		75

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 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 September 30,				Nine months ended September 30,
(In millions)		2012		2011		2012		2011

Revenues
Revenues from services (a)	$	11,360	$	12,051	$	34,268	$	37,561
Other-than-temporary impairment on investment securities:
Total other-than-temporary impairment on investment securities		(25)		(86)		(90)		(270)
Less: Portion of other-than-temporary impairment recognized in
accumulated other comprehensive income		–		18		1		84
Net other-than-temporary impairment on investment securities
recognized in earnings		(25)		(68)		(89)		(186)
Revenues from services (Note 9)		11,335		11,983		34,179		37,375
Sales of goods		34		32		90		116
Total revenues		11,369		12,015		34,269		37,491

Costs and expenses
Interest		2,805		3,556		8,989		10,738
Operating and administrative		3,072		3,260		9,063		10,186
Cost of goods sold		27		30		75		108
Investment contracts, insurance losses and insurance annuity benefits		798		755		2,271		2,314
Provision for losses on financing receivables		1,122		961		2,728		2,893
Depreciation and amortization		1,768		1,837		5,137		5,405
Total costs and expenses		9,592		10,399		28,263		31,644

Earnings (loss) from continuing operations before income taxes		1,777		1,616		6,006		5,847
Benefit (provision) for income taxes		(78)		(59)		(367)		(834)

Earnings from continuing operations		1,699		1,557		5,639		5,013
Earnings (loss) from discontinued operations, net of taxes (Note 2)		(111)		(64)		(881)		166
Net earnings (loss)		1,588		1,493		4,758		5,179
Less net earnings (loss) attributable to noncontrolling interests		20		38		46		89
Net earnings (loss) attributable to GECC	$	1,568	$	1,455	$	4,712	$	5,090


Amounts attributable to GECC
Earnings from continuing operations	$	1,679	$	1,519	$	5,593	$	4,924
Earnings (loss) from discontinued operations, net of taxes		(111)		(64)		(881)		166
Net earnings (loss) attributable to GECC	$	1,568	$	1,455	$	4,712	$	5,090

(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 September 30,				Nine months ended September 30,
(In millions)		2012		2011		2012		2011

Net earnings	$	1,588	$	1,493	$	4,758	$	5,179
Less net earnings (loss) attributable to noncontrolling interests		20		38		46		89
Net earnings attributable to GECC	$	1,568	$	1,455	$	4,712	$	5,090

Other comprehensive income (loss), net of tax
Investment securities	$	125	$	249	$	635	$	451
Currency translation adjustments		526		(810)		252		1,730
Cash flow hedges		29		(48)		141		(310)
Benefit plans		(11)		28		(16)		27
Other comprehensive income (loss), net of tax		669		(581)		1,012		1,898
Less other comprehensive income (loss) attributable to
noncontrolling interests		(2)		22		(1)		13
Other comprehensive income (loss) attributable to GECC	$	671	$	(603)	$	1,013	$	1,885

Comprehensive income, net of tax		2,257		912		5,770		7,077
Less comprehensive income attributable to noncontrolling interests		18		60		45		102
Comprehensive income attributable to GECC	$	2,239	$	852	$	5,725	$	6,975

General Electric Capital Corporation and consolidated affiliates

Statement of Changes in Shareowners’ Equity

(Unaudited)

	Nine months ended September 30,
(In millions)		2012		2011

Beginning balance	$	77,110	$	68,984
Dividends and other transactions with shareowners		(1,486)		–
Other comprehensive income (loss), net of tax		1,013		1,885
Increases from net earnings attributable to the Company		4,712		5,090
Ending balance		81,349		75,959
Noncontrolling interests		711		1,205
Total equity	$	82,060	$	77,164

(4)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Financial Position

	September 30,		December 31,
(In millions, except share information)	2012		2011
	(Unaudited)
Assets
Cash and equivalents	$	77,666	$	76,702
Investment securities (Note 3)		48,695		47,359
Inventories		73		51
Financing receivables – net (Notes 4 and 12)		271,623		288,847
Other receivables		13,772		13,390
Property, plant and equipment, less accumulated amortization of $23,886
and $23,615		52,288		51,419
Goodwill (Note 5)		27,338		27,230
Other intangible assets – net (Note 5)		1,361		1,546
Other assets		64,887		75,612
Assets of businesses held for sale (Note 2)		2,700		711
Assets of discontinued operations (Note 2)		1,199		1,669
Total assets(a)	$	561,602	$	584,536

Liabilities and equity
Short-term borrowings (Note 6)	$	113,587	$	136,333
Accounts payable		7,007		7,239
Non-recourse borrowings of consolidated securitization entities (Note 6)		31,171		29,258
Bank deposits (Note 6)		45,196		43,115
Long-term borrowings (Note 6)		230,402		234,391
Investment contracts, insurance liabilities and insurance annuity benefits		28,806		30,198
Other liabilities		15,445		17,334
Deferred income taxes		5,945		7,052
Liabilities of businesses held for sale (Note 2)		206		345
Liabilities of discontinued operations (Note 2)		1,777		1,471
Total liabilities(a)		479,542		506,736

Preferred stock, $0.01 par value (750,000 shares authorized at both September 30, 2012
and December 31, 2011 and 40,000 shares and 0 shares issued and outstanding		–		–
at September 30, 2012 and December 31, 2011, respectively)
Common stock, $14 par value (4,166,000 shares authorized at
both September 30, 2012 and December 31, 2011 and 1,000 shares
issued and outstanding at both September 30, 2012 and December 31, 2011)		–		–
Accumulated other comprehensive income – net(b)
Investment securities		602		(33)
Currency translation adjustments		(145)		(399)
Cash flow hedges		(961)		(1,101)
Benefit plans		(579)		(563)
Additional paid-in capital		31,589		27,628
Retained earnings		50,843		51,578
Total GECC shareowners' equity		81,349		77,110
Noncontrolling interests(c)(Note 8)		711		690
Total equity		82,060		77,800
Total liabilities and equity	$	561,602	$	584,536

(a)

Our consolidated assets at September 30, 2012 include total assets of $47,623 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 $40,422 million and investment securities of $4,797 million. Our consolidated liabilities at September 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 $30,270 million. See Note 13.

(b)	The sum of accumulated other comprehensive income − net was $(1,083) million and $(2,096) million at September 30, 2012 and December 31, 2011, respectively.

(c)	Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(140) million and $(141) million at September 30, 2012 and December 31, 2011, respectively.

See accompanying notes.

(5)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Cash Flows

(Unaudited)

	Nine months ended September 30,
(In millions)	2012		2011

Cash flows – operating activities
Net earnings	$	4,758	$	5,179
Less net earnings (loss) attributable to noncontrolling interests		46		89
Net earnings attributable to GECC		4,712		5,090
(Earnings) loss from discontinued operations		881		(166)
Adjustments to reconcile net earnings attributable to GECC
to cash provided from operating activities
Depreciation and amortization of property, plant and equipment		5,137		5,405
Increase (decrease) in accounts payable		(287)		1,103
Provision for losses on financing receivables		2,728		2,893
All other operating activities		1,841		2,328
Cash from (used for) operating activities – continuing operations		15,012		16,653
Cash from (used for) operating activities – discontinued operations		20		821
Cash from (used for) operating activities		15,032		17,474

Cash flows – investing activities
Additions to property, plant and equipment		(8,096)		(7,149)
Dispositions of property, plant and equipment		4,848		4,637
Increase in loans to customers		(217,198)		(234,522)
Principal collections from customers – loans		227,408		249,413
Investment in equipment for financing leases		(6,585)		(6,920)
Principal collections from customers – financing leases		9,150		9,797
Net change in credit card receivables		(3,254)		746
Proceeds from sale of discontinued operations		227		8,951
Proceeds from principal business dispositions		244		2,117
Payments for principal businesses purchased		–		(50)
All other investing activities		9,383		4,229
Cash from (used for) investing activities – continuing operations		16,127		31,249
Cash from (used for) investing activities – discontinued operations		(30)		(789)
Cash from (used for) investing activities		16,097		30,460

Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		(1,209)		(1,893)
Net increase (decrease) in bank deposits		1,195		3,746
Newly issued debt (maturities longer than 90 days)
Short-term (91 to 365 days)		59		10
Long-term (longer than one year)		43,156		33,798
Non-recourse, leveraged lease		–		–
Repayments and other debt reductions (maturities longer than 90 days)
Short-term (91 to 365 days)		(66,837)		(58,005)
Long-term (longer than one year)		(3,162)		(1,603)
Non-recourse, leveraged lease		(389)		(640)
Proceeds from issuance of preferred stock		3,960		–
Dividends paid to shareowner		(5,446)		–
All other financing activities		(2,729)		(1,336)
Cash from (used for) financing activities – continuing operations		(31,402)		(25,923)
Cash from (used for) financing activities – discontinued operations		–		(42)
Cash from (used for) financing activities		(31,402)		(25,965)

Effect of currency exchange rate changes on cash and equivalents		1,227		1,042

Increase (decrease) in cash and equivalents		954		23,011
Cash and equivalents at beginning of year		76,823		60,398
Cash and equivalents at September 30		77,777		83,409
Less cash and equivalents of discontinued operations at September 30		111		131
Cash and equivalents of continuing operations at September 30	$	77,666	$	83,278

See accompanying notes.

(6)

General Electric Capital Corporation and consolidated affiliates

Summary of Operating Segments

	Three months ended September 30,				Nine months ended September 30,
	(Unaudited)				(Unaudited)
(In millions)	2012		2011		2012		2011

Revenues
CLL	$	4,124	$	4,512	$	12,707	$	13,786
Consumer		3,911		4,028		11,600		13,023
Real Estate		948		935		2,660		2,834
Energy Financial Services		401		221		1,086		931
GECAS		1,249		1,265		3,897		3,917
Total segment revenues		10,633		10,961		31,950		34,491
Corporate items and eliminations		736		1,054		2,319		3,000
Total revenues in GECC	$	11,369	$	12,015	$	34,269	$	37,491

Segment profit
CLL	$	568	$	688	$	1,879	$	1,943
Consumer		749		803		2,485		3,086
Real Estate		217		(82)		494		(775)
Energy Financial Services		132		79		325		330
GECAS		251		208		877		835
Total segment profit		1,917		1,696		6,060		5,419
Corporate items and eliminations		(238)		(177)		(467)		(495)
Earnings from continuing operations
attributable to GECC		1,679		1,519		5,593		4,924
Earnings (loss) from discontinued operations,
net of taxes, attributable to GECC		(111)		(64)		(881)		166
Total net earnings attributable to GECC	$	1,568	$	1,455	$	4,712	$	5,090

See accompanying notes.

(7)

Notes to Condensed Financial Statements (Unaudited)

1. BASIS OF PRESENTATION AND 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 financial services’ 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 GECS common stock and all GECS preferred stock held by GE were converted into an aggregate of 1,000 shares of GECC common stock, and (iii) all treasury shares of GECS and all outstanding 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 U.S. generally accepted accounting principles (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 third quarter of 2012, we completed the sale of our CLL business in South Korea for proceeds of $168 million. We also committed to sell a plant located in the United Kingdom, the sale of which was completed on October 18, 2012.

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. We completed the sale of Business Property on October 1, 2012 for proceeds of $2,406 million. We will deconsolidate substantially all Real Estate securitization entities in the fourth quarter of 2012 as servicing rights related to these entities were transferred to the buyer at closing.

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.

	September 30,		December 31,
(In millions)	2012		2011

Assets
Cash and equivalents	$	99	$	149
Financing receivables – net		2,406		412
Property, plant and equipment – net		38		81
All other		157		69
Assets of businesses held for sale	$	2,700	$	711

Liabilities
Short-term borrowings	$	186	$	252
All other		20		93
Liabilities of businesses held for sale	$	206	$	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 September 30,				Nine months ended September 30,
(In millions)	2012		2011		2012		2011

Operations
Total revenues (loss)	$	(112)	$	17	$	(462)	$	348

Earnings (loss) from discontinued operations before income taxes	$	(141)	$	(74)	$	(579)	$	(112)
Benefit (provision) for income taxes		28		22		155		55
Earnings (loss) from discontinued operations, net of taxes	$	(113)	$	(52)	$	(424)	$	(57)

Disposal
Gain (loss) on disposal before income taxes	$	(4)	$	(45)	$	(506)	$	(86)
Benefit (provision) for income taxes		6		33		49		309
Gain (loss) on disposal, net of taxes	$	2	$	(12)	$	(457)	$	223

Earnings (loss) from discontinued operations, net of taxes	$	(111)	$	(64)	$	(881)	$	166

	September 30,		December 31,
(In millions)	2012		2011

Assets
Cash and equivalents	$	111	$	121
Financing receivables - net		6		521
Other		1,082		1,027
Assets of discontinued operations	$	1,199	$	1,669

Liabilities
Deferred income taxes	$	360	$	207
Other		1,417		1,264
Liabilities of discontinued operations	$	1,777	$	1,471

Assets at September 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. From February 2011 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 nine months ended September 30, 2012, we recorded increases to our reserve of $344 million to reflect an excess of claims activity over our previous estimates and revisions to our assumptions about the level of future claim activity. We continue to closely monitor and evaluate claims activity. At September 30, 2012, our reserve for reimbursement of claims in excess of the statutory interest rate was $578 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 September 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 overall 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 earnings (loss) from discontinued operations, net of taxes, were $(9) million and $2 million in the three months ended September 30, 2012 and 2011, respectively, and $(363) million and $2 million in the nine months ended September 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 $4,075 million at September 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. As such, they do not include unspecified repurchase claims, such as claims based upon loan sampling, which WMC believes does not meet the substantive and procedural requirements for tender under the governing agreements. 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 have qualified as “validly tendered,” meaning the loans sold did not satisfy contractual obligations. The volume of claims in the second and third quarters of 2012 reflects increased activity by securitization trustees and certain investors in residential mortgage-backed securities issued in 2006, and, WMC believes, may reflect applicable statutes of limitations considerations.

(11)

Reserves related to WMC were $608 million at September 30, 2012, reflecting an increase to reserves in the third quarter of 2012 of $117 million due to higher pending claims. The amount of these reserves is based upon pending and estimated future loan repurchase requests, WMC’s historical experience on loans validly tendered for repurchase, and WMC’s historical loss rates on loans repurchased. Adverse changes to assumptions, such as a 10% increase in the estimated loss rate and 50% increases to the estimates of future loan repurchase requests and estimated percentage of loans repurchased would result in an increase to the reserves of approximately $550 million. The reserve reflects 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.

WMC is a party to ten lawsuits involving repurchase claims on loans included in eight securitizations in which the adverse parties are securitization trustees, three of which were initiated by WMC. In three of these actions, the trustees assert, on the basis of loan sampling, breach of contract claims on mortgage loans with approximately $950 million in original unpaid principal balance, beyond those included in WMC’s previously discussed pending claims at September 30, 2012. These claims do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. WMC intends to defend itself vigorously. As noted above, WMC believes that these unspecified trustee-initiated claims do not satisfy the substantive and procedural requirements for tender under the governing agreements. As a result, WMC has not included amounts based on loan sampling in its pending claims and holds no related reserve as of September 30, 2012.

It is difficult to develop a meaningful estimate of aggregate possible claims exposure because of uncertainties surrounding economic conditions, the ability and propensity of mortgage holders to present valid claims, governmental actions, mortgage industry activity, as well as pending and threatened litigation and indemnification demands against WMC. WMC has received unspecified indemnification demands from depositors/underwriters of residential mortgage backed securities (RMBS) in connection with lawsuits brought by RMBS investors to which WMC is not a party. WMC believes that it has strong defenses to these demands. Actual losses arising from claims against WMC could exceed the reserve amount if actual claim rates, governmental actions, litigation and indemnification activity, or losses WMC incurs on repurchased loans differ from its assumptions.

WMC revenues (loss) from discontinued operations were $(117) million and $(21) million in the three months ended September 30, 2012 and 2011, respectively, and $(475) million and $(21) million in the nine months ended September 30, 2012 and 2011, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $78 million and $15 million in the three months ended September 30, 2012 and 2011, respectively, and $314 million and $18 million in the nine months ended September 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. We completed the sale in the third quarter of 2012 for proceeds of $227 million. Consumer Ireland revenues from discontinued operations were $1 million and $4 million in the three months ended September 30, 2012 and 2011, respectively, and $7 million and $12 million in the nine months ended September 30, 2012 and 2011, respectively. Consumer Ireland losses from discontinued operations, net of taxes, were $8 million and $65 million in the three months ended September 30, 2012 and 2011, respectively, and $194 million (including a $121 million loss on disposal) and $109 million in the nine months ended September 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 $3 million and $33 million in the three months ended September 30, 2012 and 2011, respectively, and $4 million and $248 million in the nine months ended September 30, 2012 and 2011, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were $2 million and $15 million in the three months ended September 30, 2012 and 2011, respectively, and $4 million and $(65) million in the nine months ended September 30, 2012 and 2011, respectively.

(12)

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 (loss) from discontinued operations were $(1) million in both the three months ended September 30, 2012 and 2011 and an insignificant amount and $30 million in the nine months ended September 30, 2012 and 2011, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $1 million and $7 million in the three months ended September 30, 2012 and 2011, respectively, and $2 million and $333 million in the nine months ended September 30, 2012 and 2011, 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 an insignificant amount in both the three months ended September 30, 2012 and 2011 and an insignificant amount and $11 million in the nine months ended September 30, 2012 and 2011, respectively. Consumer RV Marine earnings from discontinued operations, net of taxes, were an insignificant amount for both the three months ended September 30, 2012 and 2011 and an insignificant amount and $2 million in the nine months ended September 30, 2012 and 2011, respectively. Consumer Mexico revenues from discontinued operations were $1 million in both the three months ended September 30, 2012 and 2011 and $1 million and $68 million in the nine months ended September 30, 2012 and 2011, respectively. Consumer Mexico earnings (loss) from discontinued operations, net of taxes, were $(4) million and $1 million in the three months ended September 30, 2012 and 2011, respectively, and $(8) million and $34 million in the nine months ended September 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.

	September 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	$	20,264	$	4,242	$	(327)	$	24,179	$	20,748	$	3,432	$	(410)	$	23,770
State and municipal		4,032		579		(120)		4,491		3,027		350		(143)		3,234
Residential mortgage-backed(a)		2,360		205		(141)		2,424		2,711		184		(286)		2,609
Commercial mortgage-backed		2,975		230		(126)		3,079		2,913		162		(247)		2,828
Asset-backed		5,588		68		(111)		5,545		5,102		32		(164)		4,970
Corporate – non-U.S.		2,550		163		(134)		2,579		2,414		126		(207)		2,333
Government – non-U.S.		1,812		149		(4)		1,957		2,488		129		(86)		2,531
U.S. government and
federal agency		3,480		96		–		3,576		3,974		84		–		4,058
Retained interests		27		2		–		29		25		10		–		35
Equity
Available-for-sale		480		110		(17)		573		713		75		(38)		750
Trading		263		–		–		263		241		–		–		241
Total	$	43,831	$	5,844	$	(980)	$	48,695	$	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 September 30, 2012, $1,529 million relates to securities issued by government sponsored entities and $895 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 $48,695 million at September 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)

September 30, 2012
Debt
U.S. corporate	$	266	$	(11)		$	942	$	(316)
State and municipal		81		(1)			316		(119)
Residential mortgage-backed		18		–			709		(141)
Commercial mortgage-backed		56		(1)			1,006		(125)
Asset-backed		9		(2)			746		(109)
Corporate – non-U.S.		138		(10)			622		(124)
Government – non-U.S.		142		(1)			94		(3)
U.S. government and federal agency		–		–			–		–
Retained interests		2		–			–		–
Equity		57		(16)			7		(1)
Total	$	769	$	(42)		$	4,442	$	(938)

December 31, 2011
Debt
U.S. corporate	$	1,435	$	(241)		$	836	$	(169)
State and municipal		87		(1)			307		(142)
Residential mortgage-backed		219		(9)			825		(277)
Commercial mortgage-backed		244		(23)			1,320		(224)
Asset-backed		100		(7)			850		(157)
Corporate – non-U.S.		330		(28)			607		(179)
Government – non-U.S.		906		(5)			203		(81)
U.S. government and federal agency		502		–			–		–
Retained interests		–		–			–		–
Equity		440		(38)			–		–
Total	$	4,263	$	(352)		$	4,948	$	(1,229)

(a)	Includes gross unrealized losses at September 30, 2012 of $(137) million related to securities that had other-than-temporary impairments previously recognized.

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 that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell these securities 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 nine months ended September 30, 2012 have not changed from those described in Note 3 in our 2011 consolidated financial statements.

During the third quarter of 2012, we recorded pre-tax, other-than-temporary impairments of $25 million, all of which were recorded through earnings. At July 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $410 million. During the third quarter, we recognized no first-time impairments and incremental charges on previously impaired securities of $13 million. These amounts included $39 million related to securities that were subsequently sold.

During the third quarter of 2011, we recorded pre-tax, other-than-temporary impairments of $86 million, of which $68 million was recorded through earnings ($6 million relates to equity securities) and $18 million was recorded in accumulated other comprehensive income (AOCI). At July 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $413 million. During the third quarter of 2011, we recognized first-time impairments of $37 million and incremental charges on previously impaired securities of $23 million. These amounts included $1 million related to securities that were subsequently sold.

(14)

During the nine months ended September 30, 2012, we recorded pre-tax, other-than-temporary impairments of $90 million, of which $89 million was recorded through earnings ($24 million relates to equity securities) and $1 million was recorded in AOCI. At January 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $558 million. During the nine months ended September 30, 2012, we recognized first-time impairments of $10 million and incremental charges on previously impaired securities of $25 million. These amounts included $209 million related to securities that were subsequently sold.

During the nine months ended September 30, 2011, we recorded pre-tax, other-than-temporary impairments of $270 million, of which $186 million was recorded through earnings ($16 million relates to equity securities) and $84 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $332 million. During the nine months ended September 30, 2011, we recognized first-time impairments of $57 million and incremental charges on previously impaired securities of $104 million. These amounts included $22 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)


(In millions)	Amortized		Estimated
	cost		fair value
Due in
2012	$	2,220	$	2,245
2013-2016		7,399		7,391
2017-2021		4,752		5,270
2022 and later		17,761		21,870

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 September 30,				Nine months ended September 30,
(In millions)	2012		2011		2012		2011

Gains	$	26	$	28	$	85	$	189
Losses, including impairments		(55)		(70)		(159)		(197)
Net	$	(29)	$	(42)	$	(74)	$	(8)

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 issuers totaled $2,696 million and $3,466 million in the third quarters of 2012 and 2011, respectively, and $9,200 million and $13,438 million in the nine months ended September 30, 2012 and 2011, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized pre-tax gains (losses) on trading securities of $1 million and $(29) million in the third quarters of 2012 and 2011, respectively, and $37 million and $26 million in the nine months ended September 30, 2012 and 2011, respectively.

(15)

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

	September 30,		December 31,
(In millions)	2012		2011

Loans, net of deferred income(a)	$	242,729	$	256,895
Investment in financing leases, net of deferred income		34,274		38,142
		277,003		295,037
Less allowance for losses		(5,380)		(6,190)
Financing receivables – net(b)	$	271,623	$	288,847

(a)	Deferred income was $2,221 million and $2,329 million at September 30, 2012 and December 31, 2011, respectively.

(b)	Financing receivables at September 30, 2012 and December 31, 2011 included $845 million and $1,062 million, respectively, of loans that were acquired in a transfer but have been subject to credit deterioration since origination per 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.

Financing Receivables – net

	September 30,		December 31,
(In millions)	2012		2011

Commercial
CLL
Americas	$	74,488	$	80,505
Europe		34,916		36,899
Asia		11,597		11,635
Other		659		436
Total CLL		121,660		129,475

Energy Financial Services		4,989		5,912

GECAS		11,628		11,901

Other		537		1,282
Total Commercial financing receivables		138,814		148,570

Real Estate
Debt		21,225		24,501
Business Properties		5,069		8,248
Total Real Estate financing receivables		26,294		32,749

Consumer
Non-U.S. residential mortgages		33,855		35,550
Non-U.S. installment and revolving credit		18,504		18,544
U.S. installment and revolving credit		46,939		46,689
Non-U.S. auto		4,601		5,691
Other		7,996		7,244
Total Consumer financing receivables		111,895		113,718

Total financing receivables		277,003		295,037

Less allowance for losses		(5,380)		(6,190)
Total financing receivables – net	$	271,623	$	288,847

(16)

Allowance for Losses on Financing Receivables

	Balance at		Provision											Balance at
	January 1,		charged to					Gross						September 30,
(In millions)	2012		operations		Other		(a)	write-offs		(b)	Recoveries		(b)	2012

Commercial
CLL
Americas	$	889	$	67	$	(43)		$	(423)		$	77		$	567
Europe		400		271		(3)			(142)			48			574
Asia		157		13		(1)			(117)			20			72
Other		4		9		(1)			(10)			–			2
Total CLL		1,450		360		(48)			(692)			145			1,215


Energy Financial Services		26		8		–			(24)			3			13

GECAS		17		7		(1)			(11)			–			12

Other		37		3		(19)			(13)			1			9
Total Commercial		1,530		378		(68)			(740)			149			1,249

Real Estate
Debt		949		60		1			(384)			5			631
Business Properties		140		41		(8)			(71)			3			105
Total Real Estate		1,089		101		(7)			(455)			8			736

Consumer
Non-U.S. residential
mortgages		546		66		5			(213)			63			467
Non-U.S. installment
and revolving credit		717		270		22			(798)			443			654
U.S. installment and
revolving credit		2,008		1,807		(18)			(2,140)			373			2,030
Non-U.S. auto		101		18		(7)			(110)			71			73
Other		199		88		15			(193)			62			171
Total Consumer		3,571		2,249		17			(3,454)			1,012			3,395
Total	$	6,190	$	2,728	$	(58)		$	(4,649)		$	1,169		$	5,380

(a)	Other primarily included transfers to held for sale and the effects of currency exchange.

(b)

Net write-offs (gross 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		Provision											Balance at
	January 1,		charged to					Gross						September 30,
(In millions)	2011		operations		Other		(a)	write-offs		(b)	Recoveries		(b)	2011

Commercial
CLL
Americas	$	1,288	$	250	$	(79)		$	(544)		$	80		$	995
Europe		429		126		17			(218)			49			403
Asia		222		81		16			(194)			25			150
Other		6		3		(4)			–			–			5
Total CLL		1,945		460		(50)			(956)			154			1,553