gecc10q06302010.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, 2010
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 ¨No ¨
 
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 30, 2010, 3,985,404 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $14 per share were outstanding.
 
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.
 

 
(1)

 


 
General Electric Capital Corporation
 
Part I – Financial Information
 
Page
       
Item 1.
Financial Statements
   
 
Condensed Statement of Current and Retained Earnings
 
3
 
Condensed Statement of Financial Position
 
4
 
Condensed Statement of Cash Flows
 
5
 
Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
37
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
59
Item 4.
Controls and Procedures
 
59
       
Part II – Other Information
   
       
Item 1.
Legal Proceedings
 
59
Item 6.
Exhibits
 
61
Signatures
 
62
     

 
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; 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; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the level of demand and financial performance of the major industries we serve, including, without limitation, air transportation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
 

 
(2)

 

Part I. Financial Information
 
Item 1. Financial Statements.
 
General Electric Capital Corporation and consolidated affiliates
Condensed Statement of Current and Retained Earnings
(Unaudited)
 
   
 
Three months ended
 
Six months ended
 
June 30
 
June 30
(In millions)
 
2010 
   
2009 
   
2010 
   
2009 
                       
Revenues
                     
Revenues from services (Note 9)
$
 12,129 
 
$
 12,531 
 
$
 24,179 
 
$
 26,033 
Sales of goods
 
 168 
   
 205 
   
 449 
   
 478 
   Total revenues
 
 12,297 
   
 12,736 
   
 24,628 
   
 26,511 
                       
Costs and expenses
                     
Interest
 
 3,863 
   
 4,475 
   
 7,792 
   
 9,588 
Operating and administrative
 
 3,636 
   
 3,495 
   
 7,313 
   
 7,397 
Cost of goods sold
 
 154 
   
 164 
   
 419 
   
 388 
Investment contracts, insurance losses and insurance annuity benefits
 
 38 
   
 45 
   
 73 
   
 118 
Provision for losses on financing receivables
 
 2,009 
   
 2,817 
   
 4,272 
   
 5,153 
Depreciation and amortization
 
 1,856 
   
 1,946 
   
 3,780 
   
 4,126 
   Total costs and expenses
 
 11,556 
   
 12,942 
   
 23,649 
   
 26,770 
                       
Earnings (loss) from continuing operations before income taxes
 
 741 
   
 (206)
   
 979 
   
 (259)
Benefit for income taxes
 
 76 
   
 654 
   
 448 
   
 1,782 
                       
Earnings from continuing operations
 
 817 
   
 448 
   
 1,427 
   
 1,523 
Loss from discontinued operations, net of taxes (Note 2)
 
 (187)
   
 (194)
   
 (574)
   
 (197)
Net earnings
 
 630 
   
 254 
   
 853 
   
 1,326 
Less net earnings (loss) attributable to noncontrolling interests
 
 (13)
   
 17 
   
 (10)
   
 63 
Net earnings attributable to GECC
 
 643 
   
 237 
   
 863 
   
 1,263 
Dividends
 
 1 
   
 (31)
   
 – 
   
 (47)
Retained earnings at beginning of period
 
 45,863 
   
 46,456 
   
 45,644 
   
 45,446 
Retained earnings at end of period
$
 46,507 
 
$
 46,662 
 
$
 46,507 
 
$
 46,662 
                       
Amounts attributable to GECC
                     
Earnings from continuing operations
$
 830 
 
$
 431 
 
$
 1,437 
 
$
 1,460 
Loss from discontinued operations, net of taxes
 
 (187)
   
 (194)
   
 (574)
   
 (197)
Net earnings attributable to GECC
$
 643 
 
$
 237 
 
$
 863 
 
$
 1,263 
                       
                       
During the three and six months ended June 30, 2010, we recorded pre-tax, other-than-temporary impairments of $95 million and $247 million, respectively, of which $53 million and $126 million, respectively, was recorded through earnings and $42 million and $121 million, respectively, was recorded in Accumulated Other Comprehensive Income.
 

 
See accompanying notes.
 

 
(3)

 

General Electric Capital Corporation and consolidated affiliates
Condensed Statement of Financial Position
 
 
June 30,
 
December 31,
(In millions)
2010 
 
2009 
   
(Unaudited)
     
Assets
         
Cash and equivalents
$
 61,188 
 
$
 63,696 
Investment securities (Note 3)
 
 15,800 
   
 27,509 
Inventories
 
 71 
   
 71 
Financing receivables – net (Note 4)
 
 333,262 
   
 336,926 
Other receivables
 
 12,560 
   
 17,876 
Property, plant and equipment, less accumulated amortization of $25,612
         
   and $26,307
 
 53,669 
   
 56,695 
Goodwill (Note 5)
 
 27,143 
   
 28,961 
Other intangible assets – net (Note 5)
 
 2,347 
   
 3,018 
Other assets
 
 81,317 
   
 86,355 
Assets of businesses held for sale
 
 599 
   
 125 
Assets of discontinued operations (Note 2)
 
 1,203 
   
 1,470 
Total assets(a)
$
 589,159 
 
$
 622,702 
           
Liabilities and equity
         
Short-term borrowings (Note 6)
$
 116,015 
 
$
 128,329 
Accounts payable
 
 8,043 
   
 11,162 
Non-recourse borrowings of consolidated securitization entities (Note 6)
 
 33,411 
   
 3,883 
Bank deposits (Note 6)
 
 37,471 
   
 38,923 
Long-term borrowings (Note 6)
 
 289,699 
   
 326,321 
Investment contracts, insurance liabilities and insurance annuity benefits
 
 7,430 
   
 8,687 
Other liabilities
 
 19,658 
   
 22,736 
Deferred income taxes
 
 5,279 
   
 5,831 
Liabilities of businesses held for sale
 
 261 
   
 55 
Liabilities of discontinued operations (Note 2)
 
 971 
   
 853 
Total liabilities(a)
 
 518,238 
   
 546,780 
           
Capital stock
 
 56 
   
 56 
Accumulated other comprehensive income – net(b)
         
   Investment securities
 
 (702)
   
 (676)
   Currency translation adjustments
 
 (2,750)
   
 1,228 
   Cash flow hedges
 
 (1,340)
   
 (1,816)
   Benefit plans
 
 (369)
   
 (434)
Additional paid-in capital
 
 28,421 
   
 28,431 
Retained earnings
 
 46,507 
   
 46,929 
Total GECC shareowner's equity
 
 69,823 
   
 73,718 
Noncontrolling interests(c)
 
 1,098 
   
 2,204 
Total equity
 
 70,921 
   
 75,922 
Total liabilities and equity
$
 589,159 
 
$
 622,702 
           
           
(a)  
Our consolidated assets at June 30, 2010 include total assets of $52,015 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 $42,786 million and investment securities of $6,168 million. Our consolidated liabilities at June 30, 2010 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 $32,696 million. See Note 12.
 
(b)  
The sum of accumulated other comprehensive income − net was $(5,161) million and $(1,698) million at June 30, 2010 and December 31, 2009, respectively.
 
(c)  
Included accumulated other comprehensive income attributable to noncontrolling interests of $(161) million and $(191) million at June 30, 2010 and December 31, 2009, respectively.
 

 
See accompanying notes.
 

 
(4)

 

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

 
Six months ended June 30
(In millions)
 
2010 
   
2009 
           
Cash flows – operating activities
         
Net earnings
$
 853 
 
$
 1,326 
Less net earnings attributable to noncontrolling interests
 
 (10)
   
63 
Net earnings attributable to GECC
 
 863 
   
 1,263 
Loss from discontinued operations
 
 574 
   
 197 
Adjustments to reconcile net earnings attributable to GECC
         
   to cash provided from operating activities
         
      Depreciation and amortization of property, plant and equipment
 
 3,780 
   
 4,126 
      Increase (decrease) in accounts payable
 
 2,444 
   
 (858)
      Provision for losses on financing receivables
 
 4,272 
   
 5,153 
      All other operating activities
 
 (435)
   
 (11,427)
Cash from (used for) operating activities – continuing operations
 
 11,498 
   
 (1,546)
Cash from (used for) operating activities – discontinued operations
 
 (67)
   
 (26)
Cash from (used for) operating activities
 
 11,431 
   
 (1,572)
           
Cash flows – investing activities
         
Additions to property, plant and equipment
 
 (2,205)
   
 (3,296)
Dispositions of property, plant and equipment
 
 2,287 
   
 2,668 
Increase in loans to customers
 
 (152,988)
   
 (114,271)
Principal collections from customers – loans
 
 164,765 
   
 132,395 
Investment in equipment for financing leases
 
 (4,593)
   
 (4,606)
Principal collections from customers – financing leases
 
 8,555 
   
 9,886 
Net change in credit card receivables
 
 1,573 
   
 2,046 
Proceeds from principal business dispositions
 
 825 
   
 8,846 
Payments for principal businesses purchased
 
 – 
   
 (5,637)
All other investing activities
 
 9,905 
   
 2,459 
Cash from (used for) investing activities – continuing operations
 
 28,124 
   
 30,490 
Cash from (used for) investing activities – discontinued operations
 
 1 
   
 30 
Cash from (used for) investing activities
 
 28,125 
   
 30,520 
           
Cash flows – financing activities
         
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
 (2,382)
   
 (26,638)
Net increase (decrease) in bank deposits
 
 748 
   
 (6,450)
Newly issued debt (maturities longer than 90 days)
         
   Short-term (91 to 365 days)
 
 10,628 
   
 2,804 
   Long-term (longer than one year)
 
 16,663 
   
 45,882 
   Non-recourse, leveraged lease
 
 – 
   
 – 
Repayments and other debt reductions (maturities longer than 90 days)
         
   Short-term (91 to 365 days)
 
 (63,476)
   
 (35,656)
   Long-term (longer than one year)
 
 (989)
   
 (2,731)
   Non-recourse, leveraged lease
 
 (454)
   
 (470)
Dividends paid to shareowner
 
 – 
   
 – 
Capital contribution and share issuance
 
 – 
   
 8,750 
All other financing activities
 
 (1,270)
   
 (1,619)
Cash from (used for) financing activities – continuing operations
 
 (40,532)
   
 (16,128)
Cash from (used for) financing activities – discontinued operations
 
 – 
   
 – 
Cash from (used for) financing activities
 
 (40,532)
   
 (16,128)
           
Effect of currency exchange rate changes on cash and equivalents
 
 (1,598)
   
 (53)
           
Increase (decrease) in cash and equivalents
 
 (2,574)
   
 12,767 
Cash and equivalents at beginning of year
 
 63,880 
   
 36,605 
Cash and equivalents at June 30
 
 61,306 
   
 49,372 
Less cash and equivalents of discontinued operations at June 30
 
 118 
   
 184 
Cash and equivalents of continuing operations at June 30
$
 61,188 
 
$
 49,188 
           
           
See accompanying notes.
 

 
(5)

 

Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
All of the outstanding common stock of General Electric Capital Corporation (GECC) is owned by General Electric Capital Services, Inc. (GECS), all of whose common stock is owned by General Electric Company (GE Company or GE). Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We also consolidate the economic interests we hold in certain businesses within companies in which we hold a voting equity interest and are majority owned by our ultimate parent, but which we have agreed to actively manage and control. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K or 2009 consolidated financial statements), which discusses our consolidation and financial statement presentation. GECC includes Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services (GECAS).

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

Effective January 1, 2010, GE expanded the GE Capital Finance segment to include all of the continuing operations of GECC and renamed it GE Capital. In addition, the Transportation Financial Services business, previously reported in GECAS, is now included in CLL and our Consumer business in Italy, previously reported in Consumer, is now included in CLL. Details of total revenues and segment profit by operating segment can be found on page 41 of this report.

In connection with this reorganization, net financing and corporate assets of $3,746 million previously managed by the GE Capital Finance segment (but owned by GECS) were transferred to GECC on January 1, 2010. In addition, in order to align substantially all of GE’s insurance operations under GECS, GECC transferred net assets related to our run-off insurance operations of $690 million to GECS. These non-cash transfers were recorded at their carrying values and the net difference was recorded as a reduction in an intercompany payable between GECS and GECC. The financial statements of prior periods have been restated as if these transfers had occurred at the beginning of the earliest period presented. Combined prior period financial statements resulting from this restatement are referred to as consolidated in these financial statements. See Exhibit 99(b) in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.

Beginning in the first quarter of 2010, we have included a separate line on the statement of cash flows for the effect of currency exchange rate changes on cash and equivalents. We had previously included the effect of currency exchange rate changes on cash and equivalents in “All other investing activities”, as the effect was insignificant.

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

Accounting Changes
 
On January 1, 2010, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2009-16 and ASU 2009-17, amendments to Accounting Standards Codification (ASC) 860, Transfers and Servicing, and ASC 810, Consolidation, respectively (ASU 2009-16 & 17). ASU 2009-16 eliminates the Qualified Special Purpose Entity (QSPE) concept, and ASU 2009-17 requires that all such entities be evaluated for consolidation as Variable Interest Entities (VIEs). Adoption of these amendments resulted in the consolidation of all of our sponsored QSPEs. In addition, we consolidated assets of VIEs related to direct investments in entities that hold loans and fixed income securities, and a small number of companies to which we have extended loans in the ordinary course of business and subsequently were subject to a troubled debt restructuring (TDR).
 
 
 
(6)

 
 
 
We consolidated the assets and liabilities of these entities at amounts at which they would have been reported in our financial statements had we always consolidated them. We also deconsolidated certain entities where we did not meet the definition of the primary beneficiary under the revised guidance; however the effect was insignificant at January 1, 2010. The incremental effect on total assets and liabilities, net of our investment in these entities, was an increase of $30,917 million and $32,359 million, respectively, at January 1, 2010. The net reduction of total equity (including noncontrolling interests) was $1,442 million at January 1, 2010, principally related to the reversal of previously recognized securitization gains as a cumulative effect adjustment to retained earnings. See Note 12 for additional information.
 
The amended guidance on ASC 860 changed existing derecognition criteria in a manner that significantly narrows the types of transactions that will qualify as sales. The revised criteria apply to transfers of financial assets occurring after December 31, 2009.

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 2009 Form 10-K. 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 June 2010, we committed to sell our Consumer businesses in Indonesia and Argentina. Assets of $571 million and liabilities of $212 million were classified as held for sale at June 30, 2010.

Discontinued Operations
 
Discontinued operations 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.) and our U.S. mortgage business (WMC). 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)
2010 
 
2009 
 
2010 
 
2009 
                       
Total revenues
$
 (2)
 
$
 (2)
 
$
 (3)
 
$
 (8)
                       
Loss from discontinued operations, net of taxes
                     
    Loss from operations
$
 (2)
 
$
 (63)
 
$
 (8)
 
$
 (70)
    Loss on disposal
 
 (185)
   
 (131)
   
 (566)
   
 (127)
Total loss from discontinued operations, net of taxes
$
 (187)
 
$
 (194)
 
$
 (574)
 
$
 (197)
                       
 
 
 
 
(7)

 

 
Assets of discontinued operations were $1,203 million and $1,470 million at June 30, 2010 and December 31, 2009, respectively, and primarily comprised a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business. Liabilities of discontinued operations were $971 million and $853 million at June 30, 2010 and December 31, 2009, respectively. During the first six months of 2010, we recorded incremental reserves of $566 million related to interest refund claims on the 2008 sale of GE Money Japan. During the first quarter of 2010, we also reduced tax reserves by $325 million related to resolution of an uncertain tax position in Japan, but were required to record an offsetting valuation allowance on our deferred tax asset in Japan.

GE Money Japan
 
During the third quarter of 2007, we committed to a plan to sell 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. As a result, we recognized an after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361 million. In connection with the sale, we reduced the proceeds on the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale may be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the agreement, with all claims in excess of 258 billion Japanese Yen (approximately $2,900 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.

We update our estimate of our share of expected losses quarterly. We recorded a reserve of $132 million in the second quarter of 2009 for our estimated share of incremental losses under the loss-sharing provisions of the agreement based on our experience at that time. In the last several months, our overall claims experience has developed unfavorably. While the number of new claims continues to decline from 2009, the pace of the decline has been slower than expected and claims severity has increased. We believe the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. During the first quarter of 2010, we accrued $380 million of incremental reserves for these claims. In the second quarter of 2010, we accrued an additional $186 million of reserves for these claims. As of June 30, 2010, our liability for reimbursement of claims in excess of the statutory interest rate was $697 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. We continue to monitor incoming claims activity relative to our expected claims levels. Our current expectations are that the pace of incoming claims continues to decelerate, average exposure per claim remains consistent with recent levels and we see the impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant impact on the total amount of our liability. For example, our current model assumes incoming claims continue to decline at a rate of 11% per month. June daily claims declined at a rate higher than assumed in our model. Holding all other assumptions constant, if claims were to decline at rates of 9%, 6% or 3% and we assume no impact from our loss mitigation efforts, our estimate of our liability would increase by approximately $100 million, $400 million and $1,200 million, respectively.

Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, may continue to have an adverse effect on claims development.  We will continue to review our estimated exposure quarterly, and make adjustments if required.

GE Money Japan revenues from discontinued operations were an insignificant amount in both the second quarter of 2010 and 2009 and both the first six months of 2010 and 2009, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $188 million and $136 million in the second quarters of 2010 and 2009, respectively, and $571 million and $132 million in the first six months of 2010 and 2009, respectively.
 
 
 
 
(8)

 

 
WMC
 
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC revenues from discontinued operations were $(2) million in both the second quarters of 2010 and 2009, and $(3) million and $(9) million in the first six months of 2010 and 2009, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $1 million and $(5) million in the second quarters of 2010 and 2009, respectively, and $(3) million and $(11) million in the first six months of 2010 and 2009, 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 holders of guaranteed investment contracts (GICs) in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our global banks. None of our securities are classified as held to maturity.
 

 
At
 
June 30, 2010
 
December 31, 2009
     
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
$
 3,831 
 
$
 70 
 
$
 (152)
 
$
 3,749 
 
$
5,215 
 
$
83 
 
$
 (236)
 
$
 5,062 
   State and municipal
 
 879 
   
 7 
   
 (185)
   
 701 
   
887 
   
   
 (216)
   
 674 
   Residential mortgage-backed(a)
 
 2,481 
   
 20 
   
 (468)
   
 2,033 
   
2,999 
   
21 
   
 (722)
   
 2,298 
   Commercial mortgage-backed
 
 1,569 
   
 13 
   
 (166)
   
 1,416 
   
1,599 
   
 5 
   
 (302)
   
 1,302 
   Asset-backed
 
 2,323 
   
 61 
   
 (232)
   
 2,152 
   
2,468 
   
 29 
   
 (298)
   
 2,199 
   Corporate – non-U.S.
 
 1,575 
   
 56 
   
 (81)
   
 1,550 
   
994 
   
 18 
   
 (26)
   
 986 
   Government – non-U.S.
 
 2,099 
   
 11 
   
 (42)
   
 2,068 
   
2,461 
   
 15 
   
 (25)
   
 2,451 
   U.S. government and
                                             
       federal agency
 
 638 
   
 4 
   
 –
   
 642 
   
1,865 
   
 - 
   
 - 
   
 1,865 
Retained interests(b)
 
 58 
   
 9 
   
 (26)
   
 41 
   
8,479 
   
 392 
   
 (40)
   
 8,831 
Equity
                                             
   Available-for-sale
 
 949 
   
 115 
   
 (36)
   
 1,028 
   
897 
   
 227 
   
 (3)
   
 1,121 
   Trading
 
 420 
   
 –
   
 –
   
 420 
   
720 
   
 - 
   
 - 
   
 720 
Total
$
 16,822 
 
$
 366 
 
$
 (1,388)
 
$
 15,800 
 
$
28,584 
 
$
793 
 
$
 (1,868)
 
$
 27,509 
                                               
                                               
(a)  
Substantially collateralized by U.S. mortgages. Of our total RMBS portfolio at June 30, 2010, $1,102 million relates to securities issued by government sponsored entities and $931 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.
 
(b)  
Included $1,918 million of retained interests at December 31, 2009 accounted for at fair value in accordance with ASC 815, Derivatives and Hedging. See Note 12.
 

The fair value of investment securities decreased to $15,800 million at June 30, 2010, from $27,509 million at December 31, 2009, primarily driven by a decrease in retained interests as a result of our adoption of ASU 2009 -16 & 17 and maturities, partially offset by improved market conditions.
 
 
 
 
(9)

 

 
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
fair value
losses
                       
June 30, 2010
                     
Debt
                     
   U.S. corporate
$
 661 
 
$
 (7)
 
$
 877 
 
$
 (145)
   State and municipal
 
 278 
   
 (14)
   
 396 
   
 (171)
   Residential mortgage-backed
 
 691 
   
 (3)
   
 1,234 
   
 (465)
   Commercial mortgage-backed
 
 351 
   
 (2)
   
 1,065 
   
 (164)
   Asset-backed
 
 176 
   
 (20)
   
 938 
   
 (212)
   Corporate – non-U.S.
 
 416 
   
 (27)
   
 620 
   
 (54)
   Government – non-U.S.
 
 678 
   
 (2)
   
 134 
   
 (40)
   U.S. government and federal agency
 
 –
   
 –
   
 –
   
 –
Retained interests
 
 –
   
 –
   
 14 
   
 (26)
Equity
 
 154 
   
 (35)
   
 3 
   
 (1)
Total
$
 3,405 
 
$
 (110)
 
$
 5,281 
 
$
 (1,278)
                       
December 31, 2009
                     
Debt
                     
   U.S. corporate
$
 611 
 
$
 (20)
 
$
 1,365 
 
$
 (216)
   State and municipal
 
 237 
   
 (120)
   
 421 
   
 (96)
   Residential mortgage-backed
 
 74 
   
 (4)
   
 1,561 
   
 (718)
   Commercial mortgage-backed
 
 –
   
 –
   
 1,015 
   
 (302)
   Asset-backed
 
 68 
   
 (7)
   
 1,312 
   
 (291)
   Corporate – non-U.S.
 
 310 
   
 (14)
   
 346 
   
 (12)
   Government – non-U.S.
 
 370 
   
 (3)
   
 195 
   
 (22)
   U.S. government and federal agency
 
 –
   
 –
   
 –
   
 –
Retained interests
 
 208 
   
 (16)
   
 27 
   
 (24)
Equity
 
 23 
   
 (1)
   
 8 
   
 (2)
Total
$
 1,901 
 
$
 (185)
 
$
 6,250 
 
$
 (1,683)
                       

We adopted amendments to ASC 320 and recorded a cumulative effect adjustment to increase retained earnings as of April 1, 2009 of $58 million.

We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the first six months of 2010 have not changed from those described in our 2009 consolidated financial statements. See Note 3 to the consolidated financial statements in our 2009 Form 10-K, for additional information regarding these methodologies and inputs.

During the second quarter of 2010, we recorded pre-tax, other-than-temporary impairments of $95 million, of which $53 million was recorded through earnings and $42 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $200 million. During the second quarter, we recognized first time impairments of $35 million and incremental charges on previously impaired securities of $16 million. These amounts included $2 million related to securities that were subsequently sold.
 
 
 
 
(10)

 

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

During the three months ended June 30, 2009, we recognized pre-tax, other-than-temporary impairments of $132 million, of which $57 million was recorded through earnings and $75 million was recorded in AOCI. At April 1, 2009 cumulative impairments recognized in earnings associated with debt securities still held were $101 million. During the second quarter, we recognized first time impairments of $21 million and incremental charges on previously impaired securities of $21 million. There were no securities that had previously been impaired.

During the six months ended June 30, 2009, we recognized impairments of $295 million. Of the $295 million, $33 million was reclassified to retained earnings at April 1, 2009, as a result of the amendments to ASC 320, Investments – Debt and Equity Securities. Subsequent to April 1, 2009, first time and incremental credit impairments were $21 million and $21 million, respectively. There were no securities sold that had previously been impaired.

Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
 

 
Amortized
 
Estimated
(In millions)
cost
 
fair value
           
Due in
         
    2010
$
 2,851 
 
$
 2,869 
    2011-2014
 
 3,490 
   
 3,494 
    2015-2019
 
 1,619 
   
 1,434 
    2020 and later
 
 1,062 
   
 913 

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

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

 
Three months ended June 30
 
Six months ended June 30
(In millions)
2010 
 
2009 
 
2010 
 
2009 
                       
Gains
$
 32 
 
$
 19 
 
$
 113 
 
$
 27 
Losses, including impairments
 
 (55)
   
 (83)
   
 (129)
   
 (251)
   Net
$
 (23)
 
$
 (64)
 
$
 (16)
 
$
 (224)
                       

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

Proceeds from investment securities sales and early redemptions by the issuer totaled $3,451 million and $1,313 million in the second quarters of 2010 and 2009, respectively, and $7,203 million and $3,278 million in the first six months of 2010 and 2009, respectively, principally from the sales of short-term securities in our bank subsidiaries.

We recognized net pre-tax gains on trading securities of $4 million and $204 million in the second quarters of 2010 and 2009, respectively, and $19 million and $244 million in the first six months of 2010 and 2009, respectively.

 
(11)

 

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
 
Financing receivables - net, consisted of the following.

 
At
 
June 30,
 
January 1,
 
December 31,
(In millions)
2010 
 
2010(a)
 
2009 
                 
Loans, net of deferred income
$
 294,016 
 
$
 331,710 
 
$
 290,586 
Investment in financing leases, net of deferred income
 
 48,339 
   
 55,209 
   
 54,445 
   
 342,355 
   
 386,919 
   
 345,031 
Less allowance for losses
 
 (9,093)
   
 (9,805)
   
 (8,105)
Financing receivables – net(b)
$
 333,262 
 
$
 377,114 
 
$
 336,926 
                 
                 
(a)
Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
 
(b)
Financing receivables at June 30, 2010 and December 31, 2009 included $1,621 million and $2,704 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per ASC 310, Receivables.
 

Effective January 1, 2009, loans acquired in a business acquisition are recorded at fair value, which incorporates our estimate at the acquisition date of the credit losses over the remaining life of the portfolio. As a result, the allowance for loan losses is not carried over at acquisition. This may result in lower reserve coverage ratios prospectively. Details of financing receivables – net follow.
 

 
At
 
June 30,
 
January 1,
 
December 31,
(In millions)
2010 
 
2010(a)
 
2009 
                 
CLL(b)
               
Americas
$
 93,042 
 
$
 99,666 
 
$
 87,496 
Europe
 
 36,067 
   
 43,403 
   
 41,455 
Asia
 
 11,914 
   
 13,159 
   
 13,202 
Other
 
 2,727 
   
 2,836 
   
 2,836 
   
 143,750 
   
 159,064 
   
 144,989 
Consumer(b)
               
Non-U.S. residential mortgages
 
 48,013 
   
 58,345 
   
 58,345 
Non-U.S. installment and revolving credit
 
 21,783 
   
 24,976 
   
 24,976 
U.S. installment and revolving credit
 
 42,946 
   
 47,171 
   
 23,190 
Non-U.S. auto
 
 10,012 
   
 13,344 
   
 13,344 
Other
 
 9,764 
   
 11,688 
   
 11,688 
   
 132,518 
   
 155,524 
   
 131,543 
                 
Real Estate
 
 44,006 
   
 48,673 
   
 44,841 
                 
Energy Financial Services
 
 7,472 
   
 7,790 
   
 7,790 
                 
GECAS(b)
 
 12,337 
   
 13,254 
   
 13,254 
                 
Other(c)
 
 2,272 
   
 2,614 
   
 2,614 
   
 342,355 
   
 386,919 
   
 345,031 
Less allowance for losses
 
 (9,093)
   
 (9,805)
   
 (8,105)
Total
$
 333,262 
 
$
 377,114 
 
$
 336,926 
                 
                 
(a)
Reflects the effects of our adoption of ASU 2009-16 &17 on January 1, 2010.
 
(b)  
During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.
 
(c)  
Consisted of loans and financing leases related to certain consolidated, liquidating securitization entities.
 


 
(12)

 

Individually impaired loans are defined by U.S. generally accepted accounting principles (GAAP) as larger balance or restructured loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement. The vast majority of our consumer and a portion of our CLL nonearning receivables are excluded from this definition, as they represent smaller balance homogeneous loans that we evaluate collectively by portfolio for impairment. An analysis of impaired loans and specific reserves follows.
 

 
At
 
June 30,
 
January 1,
 
December 31,
(In millions)
2010 
 
2010(a)
 
2009 
                 
Loans requiring allowance for losses
$
 11,515 
 
$
9,541 
 
$
 9,145 
Loans expected to be fully recoverable
 
 3,924 
   
3,914 
   
 3,741 
   Total impaired loans
$
 15,439 
 
$
13,455 
 
$
 12,886 
                 
Allowance for losses (specific reserves)
$
 3,033 
 
$
 2,376 
 
$
 2,331 
Average investment during the period
 
 14,182 
   
(c)
   
 8,493 
Interest income earned while impaired(b)
 
 206 
   
(c)
   
 227 
                 
                 
(a)
Reflects the effects of our adoption of ASU 2009-16 &17 on January 1, 2010.
 
(b)  
Recognized principally on cash basis.
 
(c)  
Not applicable.
 

Impaired loans increased by $1,984 million from January 1, 2010, to June 30, 2010, primarily relating to increases at Real Estate. Impaired loans consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business. We regularly review our Real Estate loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loan-to-value ratios. We classify Real Estate loans as impaired when the most recent valuation reflects a projected loan-to-value ratio at maturity in excess of 100%, even if the loan is currently paying in accordance with contractual terms. The increase in impaired loans and related specific reserves at Real Estate reflects our current estimate of collateral values of the underlying properties, and our estimate of loans which are not past due, but for which it is probable that we will be unable to collect the full principal balance at maturity due to a decline in the underlying value of the collateral. Of our $8,281 million impaired loans at Real Estate at June 30, 2010, $5,892 million are currently paying in accordance with the contractual terms of the loan. Impaired loans at CLL primarily represent senior secured lending positions.

Our loss mitigation strategy intends to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a TDR. Such loans are classified as impaired, and specific reserves are determined based upon the present value of expected future cash flows discounted at the loan’s original effective interest rate, or collateral value as a practical expedient in accordance with the requirements of ASC 310-10-35. As of June 30, 2010, TDRs included in impaired loans were $5,942 million, primarily relating to Real Estate ($2,127 million), Consumer ($1,918 million) and CLL ($1,835 million). TDRs consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business ($364 million).


 
(13)

 

Allowance for Losses on Financing Receivables
 

 
Balance
 
Adoption of
 
Balance
 
Provision
             
Balance
 
December 31,
 
ASU 2009 -
 
January 1,
 
charged to
     
Gross
     
June 30,
(In millions)
2009 
 
16 & 17
(a)
2010 
 
operations
 
Other(b)
 
write-offs
 
Recoveries
 
2010 
                                               
CLL(c)
                                             
Americas
$
 1,179 
 
$
 66 
 
$
 1,245 
 
$
 630 
 
$
 (10)
 
$
 (558)
 
$
 55 
 
$
 1,362 
Europe
 
 575 
   
 –
   
 575 
   
 137 
   
 (70)
   
 (288)
   
 28 
   
 382 
Asia
 
 244 
   
 (10)
   
 234 
   
 108 
   
 (23)
   
 (94)
   
 9 
   
 234 
Other
 
 11 
   
 –
   
 11 
   
 (1)
   
 (2)
   
 –
   
 –
   
 8 
                                               
Consumer(c)
                                             
Non-U.S. residential
                                             
   mortgages
 
 949 
   
 –
   
 949 
   
 184 
   
 (105)
   
 (187)
   
 51 
   
 892 
Non-U.S. installment
                                             
   and revolving credit
 
 1,181 
   
 –
   
 1,181 
   
 652 
   
 (114)
   
 (987)
   
 288 
   
 1,020 
U.S. installment and
                                             
   revolving credit
 
 1,698 
   
 1,602 
   
 3,300 
   
 1,604 
   
 (1)
   
 (2,400)
   
 251 
   
 2,754 
Non-U.S. auto
 
 308 
   
 –
   
 308 
   
 71 
   
 (43)
   
 (204)
   
 102 
   
 234 
Other
 
 300 
   
 –
   
 300 
   
 165 
   
 (34)
   
 (217)
   
 43 
   
 257 
                                               
Real Estate
 
 1,494 
   
 42 
   
 1,536 
   
 645 
   
 (11)
   
 (374)
   
 1 
   
 1,797 
                                               
Energy Financial
                                             
   Services
 
 28 
   
 –
   
 28 
   
 24 
   
 1 
   
 –
   
 –
   
 53 
                                               
GECAS(c)
 
 104 
   
 –
   
 104 
   
 35 
   
 –
   
 (89)
   
 –
   
 50 
                                               
Other
 
 34 
   
 –
   
 34 
   
 18 
   
 –
   
 (3)
   
 1 
   
 50 
Total
$
 8,105 
 
$
 1,700 
 
$
 9,805 
 
$
 4,272 
 
$
 (412)
 
$
 (5,401)
 
$
 829 
 
$
 9,093 
                                               
                                               
(a)
Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
 
(b)  
Other primarily included the effects of currency exchange.
 
(c)
During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.
 
 
 
 
(14)

 
 

 
Balance
 
Provision
             
Balance
 
January 1,
 
charged to
     
Gross
     
June 30,
(In millions)
2009 
 
operations
 
Other(a)
 
write-offs
 
Recoveries
 
2009 
                                   
CLL(b)
                                 
Americas
$
843 
 
$
736 
 
$
(33)
 
$
(457)
 
$
44 
 
$
1,133 
Europe
 
311 
   
323 
   
– 
   
(192)
   
36 
   
478 
Asia
 
163 
   
120 
   
(6)
   
(85)
   
   
199 
Other
 
   
   
   
(1)
   
– 
   
                                   
Consumer(b)
                                 
Non-U.S. residential
                                 
   mortgages
 
381 
   
560 
   
59 
   
(231)
   
59 
   
828 
Non-U.S. installment
                                 
   and revolving credit
 
1,049 
   
891 
   
65 
   
(1,092)
   
228 
   
1,141 
U.S. installment and
                                 
   revolving credit
 
1,700 
   
1,729 
   
(497)
   
(1,438)
   
81 
   
1,575 
Non-U.S. auto
 
203 
   
242 
   
26 
   
(297)
   
90 
   
264 
Other
 
226 
   
160 
   
(16)
   
(163)
   
27 
   
234 
                                   
Real Estate
 
301 
   
344 
   
10 
   
(85)
   
– 
   
570 
                                   
Energy Financial
                                 
   Services
 
58 
   
32 
   
   
– 
   
– 
   
92 
                                   
GECAS(b)
 
58 
   
   
(1)
   
– 
   
– 
   
58 
                                   
Other
 
28 
   
12 
   
   
(14)
   
– 
   
27 
Total
$
5,325 
 
$
5,153 
 
$
(388)
 
$
(4,055)
 
$
572 
 
$
6,607 
                                   
                                   
(a)  
Other primarily included the effects of securitization activity and currency exchange.
 
(b)  
During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.
 

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

 
At
 
June 30,
 
December 31,
(In millions)
2010 
 
2009 
           
Goodwill
$
 27,143 
 
$
 28,961 
           
Other intangible assets
         
    Intangible assets subject to amortization
$
 2,347 
 
$
 3,018 
           


 
(15)

 

Changes in goodwill balances follow.
 

         
Dispositions,
     
 
Balance
     
currency
 
Balance
 
 
January 1,
     
exchange
 
June 30,
 
(In millions)
2010 
(a)
Acquisitions
 
and other
 
2010 
 
                         
CLL(b)
$
 14,053 
 
$
 –
 
$
 (656)
 
$
 13,397 
 
Consumer(b)
 
 11,443 
   
 –
   
 (482)
   
 10,961 
 
Real Estate
 
 1,189 
   
 –
   
 (112)
   
 1,077 
 
Energy Financial Services
 
 2,119 
   
 –
   
 (557)
   
 1,562 
 
GECAS
 
 157 
   
 –
   
 (11)
   
 146 
 
Total
$
 28,961 
 
$
 –
 
$
 (1,818)
 
$
 27,143 
 
                         
                         
(a)  
Reflected the transfer of previously owned assets by GECS on January 1, 2010, resulting in a related increase in goodwill of $141 million.
 
(b)  
Reflected the transfer of the Consumer business in Italy during the first quarter of 2010 from Consumer to CLL, resulting in a related movement of beginning goodwill balance of $18 million.
 

Goodwill balances decreased $1,818 million during the first six months of 2010, primarily as a result of the stronger U.S. dollar ($1,145 million) and the deconsolidation of Regency Energy Partners L.P. (Regency) at Energy Financial Services ($557 million). Our reporting units and related goodwill balances are CLL ($13,397 million), Consumer ($10,961 million), Real Estate ($1,077 million), Energy Financial Services ($1,562 million) and GECAS ($146 million) at June 30, 2010.

On May 26, 2010, we sold our general partnership interest in Regency, a midstream natural gas service provider, and retained a 21% limited partnership interest. This resulted in the deconsolidation of Regency and the remeasurement of our limited partnership interest to fair value. We recorded a pre-tax gain of $119 million, which is reported in Revenues from services.

Intangible Assets Subject to Amortization
 

 
At
 
June 30, 2010
 
December 31, 2009
 
Gross
         
Gross
       
 
carrying
 
Accumulated
     
carrying
 
Accumulated
   
(In millions)
amount
 
amortization
 
Net
 
amount
 
amortization
 
Net
                                   
                                   
Customer-related
$
 1,527 
 
$
 (708)
 
$
 819 
 
$
 1,831 
 
$
 (690)
 
$
 1,141 
Patents, licenses and trademarks
 
 614 
   
 (508)
   
 106 
   
 630 
   
 (461)
   
 169 
Capitalized software
 
 1,956 
   
 (1,442)
   
 514 
   
 2,169 
   
 (1,558)
   
 611 
Lease valuations
 
 1,643 
   
 (831)
   
 812 
   
 1,754 
   
 (793)
   
 961 
All other
 
 352 
   
 (256)
   
 96 
   
 475 
   
 (339)
   
 136 
Total
$
 6,092 
 
$
 (3,745)
 
$
 2,347 
 
$
 6,859 
 
$
 (3,841)
 
$
 3,018 

Amortization related to intangible assets subject to amortization was $187 million and $236 million for the three months ended June 30, 2010 and 2009, respectively. Amortization related to intangible assets subject to amortization for the six months ended June 30, 2010 and 2009, was $339 million and $410 million, respectively.
 


 
(16)

 

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

 
At
(In millions)
June 30,
 
December 31,
 
2010 
 
2009 
Short-term borrowings
         
Commercial paper
         
   U.S.
$
31,155 
 
$
32,637 
   Non-U.S.
 
9,647 
   
9,525 
Current portion of long-term borrowings(a)(b)(c)
 
62,998 
   
69,881 
GE Interest Plus notes(d)
 
8,354 
   
7,541 
Other(c)
 
3,861 
   
8,745 
Total short-term borrowings
$
116,015 
 
$
128,329 
           
Long-term borrowings
         
Senior unsecured notes(a)(b)
$
269,871 
 
$
305,535 
Subordinated notes(e)
 
2,112 
   
2,388 
Subordinated debentures(f)
 
6,952 
   
7,647 
Other(c)(g)
 
10,764 
   
10,751 
Total long-term borrowings
$
289,699 
 
$
326,321 
           
Non-recourse borrowings of consolidated securitization entities(h)
$
33,411 
 
$
3,883 
           
Bank deposits(i)
$
37,471 
 
$
38,923 
           
Total borrowings and bank deposits
$
476,596 
 
$
497,456 
           
           
 
(a)
GECC had issued and outstanding $58,045 million and $59,336 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at June 30, 2010 and December 31, 2009, respectively. Of the above amounts $13,000 million and $5,841 million is included in current portion of long-term borrowings at June 30, 2010 and December 31, 2009, respectively.
 
(b)  
Included in total long-term borrowings was $2,624 million and $3,138 million of obligations to holders of guaranteed investment contracts at June 30, 2010 and December 31, 2009, respectively. GECC could be required to repay up to approximately $2,500 million if its long-term credit rating were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1.
 
(c)  
Included $10,400 million and $10,604 million of secured funding at June 30, 2010 and December 31, 2009, respectively, of which $3,795 million and $5,667 million is non-recourse to GECC at June 30, 2010 and December 31, 2009, respectively.
 
(d) 
Entirely variable denomination floating rate demand notes.
 
(e)  
Included $117 million of subordinated notes guaranteed by GE at both June 30, 2010 and December 31, 2009.
 
(f)  
Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.
 
(g)  
Included $1,533 million and $1,649 million of covered bonds at June 30, 2010 and December 31, 2009, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $707 million.
 
(h)  
Included at June 30, 2010 was $2,100 million of commercial paper, $11,674 million of current portion of long-term borrowings and $19,637 million of long-term borrowings related to former QSPEs consolidated on January 1, 2010 upon our adoption of ASU 2009-16 & 17, previously consolidated liquidating securitization entities and other on-book securitization borrowings. Included at December 31, 2009, was $2,424 million of commercial paper, $378 million of current portion of long-term borrowings and $1,081 million of long-term borrowings issued by consolidated liquidating securitization entities. See Note 12.
 
(i)  
Included $19,816 million and $21,252 million of deposits in non-U.S. banks at June 30, 2010 and December 31, 2009, respectively, and $10,882 million and $10,476 million of certificates of deposits distributed by brokers with maturities greater than one year at June 30, 2010 and December 31, 2009, respectively.
 

 
(17)

 

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

 
At
 
June 30,
 
December 31,
(In millions)
2010 
 
2009 
           
Unrecognized tax benefits
$
3,420 
 
$
3,820 
   Portion that, if recognized, would reduce tax expense and effective tax rate(a)
 
1,580 
   
1,792 
Accrued interest on unrecognized tax benefits
 
768 
   
713 
Accrued penalties on unrecognized tax benefits
 
67 
   
73 
Reasonably possible reduction to the balance of unrecognized
         
   tax benefits in succeeding 12 months
 
0-1000
   
0-650
   Portion that, if recognized, would reduce tax expense and effective tax rate(a)
 
0-550
   
0-250
           
           
(a)  
Some portion of such reduction may be reported as discontinued operations.
 

The IRS is currently auditing the GE consolidated income tax returns for 2003-2007, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years remain unresolved. It is reasonably possible that the 2003-2005 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

GE and GECC file a consolidated U.S. federal income tax return. The GECC provision for current tax expense includes its effect on the consolidated return. The effect of GECC on the consolidated liability is generally settled in cash as GE tax payments are due. The effect of GECC on the amount of the GE consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the GE group absent the tax on formation.

During the first quarter of 2009, following the change in our external credit ratings, funding actions taken and review of our operations, liquidity and funding, we determined that undistributed prior-year earnings of non-U.S. subsidiaries of GECC, on which we had previously provided deferred U.S. taxes, would be indefinitely reinvested outside the U.S. This change increased the amount of prior-year earnings indefinitely reinvested outside the U.S. by approximately $2 billion, resulting in an income tax benefit of $700 million in the first quarter of 2009.

 
(18)

 

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

 
Three months ended June 30
 
Six months ended June 30
(In millions)
2010 
 
2009 
 
2010 
 
2009 
                       
Net earnings attributable to GECC
$
643 
 
$
237 
 
$
863 
 
$
1,263 
Investment securities – net
 
41 
   
556 
   
(26)
   
516 
Currency translation adjustments – net
 
(2,618)
   
4,731 
   
(3,978)
   
1,707 
Cash flow hedges – net
 
63 
   
593 
   
476 
   
1,316 
Benefit plans – net
 
23 
   
(17)
   
65 
   
(9)
Total
$
(1,848)
 
$
6,100 
 
$
(2,600)
 
$
4,793 
                       
                       
On January 1, 2010, we adopted ASU 2009-16 & 17. This resulted in a reduction of GECC shareowner’s equity primarily related to the reversal of a portion of previously recognized securitization gains. This adjustment is reflected as a cumulative effect adjustment of the opening balances of retained earnings ($1,307 million) and accumulated other comprehensive income ($258 million). See Notes 1 and 12 for additional information.
 

Changes to noncontrolling interests during the second quarter of 2010 resulted from net earnings $(13) million, dividends $(5) million, the effects of deconsolidating Regency $(979) million, AOCI $(29) million and other $(34) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the first six months of 2010 resulted from net earnings $(10) million, dividends $(8) million, the effects of deconsolidating Regency $(979) million, AOCI $(20) million and other $(89) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the second quarter of 2009 resulted from net earnings $29 million, dividends $(3) million, AOCI $1 million and other $(6) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the first six months of 2009 resulted from net earnings $79 million, dividends $(6) million, the effects of deconsolidating Penske Truck Leasing Co., L.P. (PTL) $(331) million, AOCI $(8) million and other $1 million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

During the first quarter of 2009, GE made a $9,500 million capital contribution to GECS, of which GECS subsequently contributed $8,250 million to us. In addition, we issued one share of common stock (par value $14) to GECS for $500 million.

 
(19)

 

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

 
Three months ended June 30
 
Six months ended June 30
(In millions)
2010 
 
2009 
 
2010 
 
2009 
                       
Interest on loans(a)
$
 5,588 
 
$
 5,064 
 
$
11,297 
 
$
10,145 
Equipment leased to others
 
 2,769 
   
 2,927 
   
5,530 
   
6,412 
Fees(a)
 
 1,224 
   
 1,098 
   
2,488 
   
2,258 
Investment income(a)(b)
 
 110 
   
 616 
   
269 
   
954 
Financing leases(a)
 
 703 
   
 830 
   
1,459 
   
1,738 
Net securitization gains(a)
 
 –
   
 394 
   
–  
   
720 
Real estate investments
 
 354 
   
 371 
   
631 
   
718 
Associated companies(c)
 
 460 
   
 309 
   
1,057 
   
474 
Other items(d)(e)
 
 921 
   
 922 
   
1,448 
   
2,614 
Total
$
 12,129 
 
$
 12,531 
 
$
 24,179 
 
$
 26,033 
                       
                       
(a)  
On January 1, 2010, we adopted ASU 2009-16 & 17 which required us to consolidate substantially all of our former QSPEs. As a result, 2010 Revenues from services include interest and fee income from these entities, which were not presented on a consolidated basis in 2009. Also beginning in 2010, we no longer record gains for substantially all of our securitizations as they are recorded as on-book financings. See Note 12.
 
(b)  
Included net other-than-temporary impairments on investment securities of $53 million and $80 million in the second quarters of 2010 and 2009, respectively, and $126 million and $243 million in the first six months of 2010 and 2009, respectively. See Note 3.
 
(c)  
Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at June 30, 2010 and December 31, 2009 of $207,605 million and $137,075 million, respectively. Assets were primarily financing receivables of $110,269 million and $82,873 million at June 30, 2010 and December 31, 2009, respectively. Total liabilities were $173,188 million and $118,708 million, consisted primarily of bank deposits of $96,430 million and $69,573 million at June 30, 2010 and December 31, 2009, respectively, and debt of $59,216 million and $48,677 million at June 30, 2010 and December 31, 2009, respectively. Revenues in the second quarters of 2010 and 2009 totaled $4,750 million and $5,125 million, respectively, and net earnings in the second quarters of 2010 and 2009 totaled $1,153 million and $554 million, respectively. Revenues in the first six months of 2010 and 2009 totaled $9,716 million and $9,340 million, respectively, and net earnings in the first six months of 2010 and 2009 totaled $2,032 million and $1,163 million, respectively.
 
(d)  
Included a gain on the sale of a limited partnership interest in PTL and a related gain on the remeasurement of the retained investment to fair value totaling $296 million in the first quarter of 2009.
 
(e)  
Included a gain of $343 million on the remeasurement to fair value of our equity method investment in BAC Credomatic GECF Inc. (BAC), following our acquisition of a controlling interest in the second quarter of 2009.
 

10. FAIR VALUE MEASUREMENTS
 
For a description on how we estimate fair value, see Note 1 to the consolidated financial statements in our 2009 Form 10-K for information.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities of $6,168 million and $6,629 million at June 30, 2010 and December 31, 2009, respectively, primarily supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our global banks. Such securities are mainly investment-grade.

 
(20)

 


(In millions)
                 
Netting
     
 
Level 1
(a)
Level 2
(a)
Level 3
(b)
adjustment
(c)
Net balance
June 30, 2010
                           
Assets
                           
Investment securities
                           
    Debt
                           
       U.S. corporate
$
 726 
 
$
 1,385 
 
$
 1,638 
 
$
 –
 
$
 3,749 
       State and municipal
 
 –
   
 463 
   
 238 
   
 –
   
 701 
       Residential mortgage-backed
 
 –
   
 1,987 
   
 46 
   
 –
   
 2,033 
       Commercial mortgage-backed
 
 –
   
 1,368 
   
 48 
   
 –
   
 1,416 
       Asset-backed
 
 –
   
 690 
   
 1,462 
   
 –
   
 2,152 
       Corporate - non-U.S.
 
 136 
   
 544 
   
 870 
   
 –
   
 1,550 
       Government - non-U.S.
 
 933 
   
 992 
   
 143 
   
 –
   
 2,068 
       U.S. government and federal agency
 
 47 
   
 595 
   
 –
   
 –
   
 642 
   Retained interests(d)
 
 –
   
 –
   
 41 
   
 –
   
 41 
   Equity
                           
        Available-for-sale
 
 385 
   
 628 
   
 15 
   
 –
   
 1,028 
        Trading
 
 420 
   
 –
   
 –
   
 –
   
 420 
Derivatives(e)
 
 –
   
 11,504 
   
 677 
   
 (4,530)
   
 7,651 
Other(f)
 
 –
   
 –
   
 486 
   
 –
   
 486 
Total
$
 2,647 
 
$
 20,156 
 
$
 5,664 
 
$
 (4,530)
 
$
 23,937 
                             
Liabilities
                           
Derivatives
$
 –
 
$
 6,464 
 
$
 488 
 
$
 (4,538)
 
$
 2,414 
Other
 
 –
   
 29 
   
 –
   
 –
   
 29 
Total
$
– 
 
$
 6,493 
 
$
 488 
 
$
(4,538)
 
$
 2,443 
                             
December 31, 2009
                           
Assets
                           
Investment securities
                           
    Debt
                           
       U.S. corporate
$
 1,535 
 
$
 1,871 
 
$
 1,656 
 
$
 –
 
$
 5,062 
       State and municipal
 
 –
   
 501 
   
 173 
   
 –
   
 674 
       Residential mortgage-backed
 
 –
   
 2,254 
   
 44 
   
 –
   
 2,298 
       Commercial mortgage-backed
 
 –
   
 1,251 
   
 51 
   
 –
   
 1,302 
       Asset-backed
 
 –
   
 719 
   
 1,480 
   
 –
   
 2,199 
       Corporate - non-U.S.
 
 159 
   
 51 
   
 776 
   
 –
   
 986 
       Government - non-U.S.
 
 1,277 
   
 1,023 
   
 151 
   
 –
   
 2,451 
       U.S. government and federal agency
 
 85 
   
 1,780 
   
 –
   
 –
   
 1,865 
    Retained interests
 
 –
   
 –
   
 8,831 
   
 –
   
 8,831 
    Equity
                           
       Available-for-sale
 
 437 
   
 667 
   
 17 
   
 –
   
 1,121 
       Trading
 
 720 
   
 –
   
 –
   
 –
   
 720 
Derivatives(e)
 
 –
   
 10,411 
   
 451 
   
 (3,611)
   
 7,251 
Other(f)
 
 –
   
 –
   
 595 
   
 –
   
 595 
Total
$
 4,213 
 
$
 20,528 
 
$
 14,225 
 
$
 (3,611)
 
$
 35,355 
                             
Liabilities
                           
Derivatives
$
 –
 
$
 6,838 
 
$
 219 
 
$
 (3,623)
 
$
 3,434 
Other
 
 –
   
 32 
   
 –
   
 –
   
 32 
Total
$
 –
 
$
 6,870 
 
$
 219 
 
$
 (3,623)
 
$
 3,466 
                             
                             
                             
(a)  
Transfers between Level 1 to 2 were insignificant.
 
(b)  
Level 3 investment securities valued using non-binding broker quotes totaled $374 million and $620 million at June 30, 2010 and December 31, 2009, respectively, and were classified as available-for-sale securities.
 
(c)  
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.
 
(d)  
Substantially all of our retained interests were consolidated in connection with our adoption of ASU 2009-16 & 17 on January 1, 2010.
 
(e)  
The fair value of derivatives included an adjustment for non-performance risk. At June 30, 2010 and December 31, 2009, the cumulative adjustment was a gain of $8 million and $12 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.
 
(f)  
Included private equity investments and loans designated under the fair value option.
 
 
 
 
(21)

 

 
The following tables present the changes in Level 3 instruments measured on a recurring basis for the three months ended June 30, 2010 and 2009 and the six months ended June 30, 2010 and 2009. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowner’s equity.
 
Changes in Level 3 Instruments for the Three Months Ended June 30, 2010
 

(In millions)
       
Net realized/
               
Net change
 
         
unrealized
               
in unrealized
 
         
gains (losses)
               
gains (losses)
 
     
Net realized/
 
included in
               
relating to
 
     
unrealized
 
accumulated
 
Purchases,
 
Transfers
       
instruments
 
     
gains(losses)
 
other
 
issuances
 
in and/or
       
still held at
 
 
April 1,
 
included in
 
comprehensive
 
and
 
out of
 
June 30,
   
June 30,
 
 
2010 
 
earnings
(a)
income
 
settlements
 
Level 3
(b)
2010 
   
2010 
(c)
                                             
Investment securities   
                                           
    Debt
                                           
        U.S. corporate
$
1,440 
 
$
10 
 
$
11 
 
$
180 
 
$
(3)
 
$
1,638 
   
$
– 
 
        State and municipal
 
243 
   
– 
   
(5)
   
– 
   
– 
   
238 
     
– 
 
        Residential
                                           
            mortgage-backed
 
47 
   
– 
   
(7)
   
– 
   
   
46 
     
– 
 
        Commercial
                                           
            mortgage-backed
 
115 
   
– 
   
(6)
   
(61)
   
– 
   
48 
     
– 
 
        Asset-backed
 
1,447 
   
   
   
78 
   
(71)
   
1,462 
     
– 
 
        Corporate - non-U.S.
 
970 
   
– 
   
(48)
   
(10)
   
(42)
   
870 
     
– 
 
        Government
                                           
             - non-U.S.
 
148 
   
– 
   
(21)
   
16 
   
– 
   
143 
     
(7)
 
        U.S. government and
                                           
            federal agency
 
– 
   
– 
   
– 
   
– 
   
– 
   
– 
     
– 
 
    Retained interests
 
43 
   
(1)
   
   
(2)
   
– 
   
41 
     
– 
 
    Equity
                                           
        Available-for-sale
 
16 
   
– 
   
(1)
   
– 
   
– 
   
15 
     
– 
 
        Trading
 
– 
   
– 
   
– 
   
– 
   
– 
   
– 
     
– 
 
Derivatives(d)
 
171 
   
40 
   
   
   
– 
   
224 
     
42 
 
Other
 
497 
   
   
(45)
   
   
28 
   
486 
     
(1)
 
Total
$
5,137 
 
$
54 
 
$
(112)
 
$
214 
 
$
(82)
 
$
5,211 
   
$
34 
 
                                             
                                             
(a)  
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
 
(b)  
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
 
(c)  
Represented the amount of unrealized gains or losses for the period included in earnings.
 
(d)  
Represented derivative assets net of derivative liabilities and included cash accruals of $35 million not reflected in the fair value hierarchy table.
 

 
(22)

 


Changes in Level 3 Instruments for the Three Months Ended June 30, 2009
 

(In millions)
       
Net realized/
               
Net change
 
         
unrealized
               
in unrealized
 
         
gains (losses)
               
gains (losses)
 
     
Net realized/
 
included in
               
relating to
 
     
unrealized
 
accumulated
 
Purchases,
 
Transfers
       
instruments
 
     
gains(losses)
 
other
 
issuances
 
in and/or
       
still held at
 
 
April 1,
 
included in
 
comprehensive
 
and
 
out of
 
June 30,
   
June 30,
 
 
2009 
 
earnings
(a)
income
 
settlements
 
Level 3
(b)
2009 
   
2009 
(c)
                                             
Investment securities   
                                           
    Debt
                                           
        U.S. corporate
$
1,376 
 
$
 
$
106 
 
$
57 
 
$
 
$
1,550 
   
$
– 
 
        State and municipal
 
89 
   
– 
   
44 
   
(1)
   
25 
   
157 
     
– 
 
        Residential
                                           
            mortgage-backed
 
58 
   
– 
   
– 
   
– 
   
(7)
   
51 
     
– 
 
        Commercial
                                           
            mortgage-backed
 
50 
   
– 
   
– 
   
– 
   
– 
   
50 
     
– 
 
        Asset-backed
 
1,250 
   
(4)
   
109 
   
90 
   
(14)
   
1,431 
     
– 
 
        Corporate - non-U.S.
 
444 
   
(6)
   
48 
   
(34)
   
– 
   
452 
     
– 
 
        Government
                                           
             - non-U.S.
 
124 
   
– 
   
15 
   
   
– 
   
142 
     
– 
 
        U.S. government and
                                           
            federal agency
 
– 
   
– 
   
– 
   
– 
   
– 
   
– 
     
– 
 
    Retained interests
 
6,444 
   
350 
   
127 
   
604 
   
– 
   
7,525 
     
124 
 
    Equity
                                           
        Available-for-sale
 
15 
   
   
   
– 
   
– 
   
19 
     
– 
 
        Trading
 
– 
   
– 
   
– 
   
– 
   
– 
   
– 
     
– 
 
Derivatives(d)(e)
 
398 
   
52 
   
(22)
   
(60)
   
12 
   
380 
     
54 
 
Other
 
512 
   
(9)
   
28 
   
40 
   
– 
   
571 
     
– 
 
Total
$
10,760 
 
$
389 
 
$
458 
 
$
699 
 
$
22 
 
$
12,328 
   
$
178 
 
                                             
                                             
(a)  
Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.
 
(b)  
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
 
(c)  
Represented the amount of unrealized gains or losses for the period included in earnings.
 
(d)  
Gains from derivatives were partially offset by $15 million in losses from related derivatives included in Level 2.
 
(e)  
Represented derivative assets net of derivative liabilities and included cash accruals of $49 million not reflected in the fair value hierarchy table.
 


 
(23)

 

Changes in Level 3 Instruments for the Six Months Ended June 30, 2010
 

(In millions)
       
Net realized/
               
Net change
 
         
unrealized
               
in unrealized
 
         
gains (losses)
               
gains (losses)
 
     
Net realized/
 
included in
               
relating to
 
     
unrealized
 
accumulated
 
Purchases,
 
Transfers
       
instruments
 
     
gains(losses)