GE 2007 Annual Report Download - page 104

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    
102 ge 2007 annual report
Amounts recognized in our fi nancial statements related to
sales to off-balance sheet securitization entities are as follows:
December 31 (In millions) 2007 2006
Retained interests $5,812 $4,740
Servicing assets 8 14
Servicing liabilities (10) (5)
Recourse liabilities (2) (15)
Total
$5,808 $4,734
• RETAINED INTERESTS. When we securitize receivables, we
determine fair value of retained interests based on discounted
cash fl ow models that incorporate, among other things, assump-
tions about loan pool credit losses, prepayment speeds and
discount rates. These assumptions are based on our experience,
market trends and anticipated performance related to the
particular assets securitized. We classify retained interests in
securitized receivables as investment securities and mark
them to fair value each reporting period, updating our models
for current assumptions. These assets decrease as cash is
received in payment. We recorded a loss in operations of
$106 million in 2007 to refl ect decreases in fair value on
retained interests in accordance with SFAS 155, Accounting
for Certain Hybrid Financial Instruments. When the carrying
amounts of other retained interests exceed their fair value, we
evaluate whether the unrealized loss is other than temporary
and, if it is, record any indicated loss in operations. We recorded
$113 million and $37 million of other than temporary losses
in operations during 2007 and 2006, respectively.
• SERVICING. Following a securitization transaction, we also may
provide servicing for a market-based fee based on remaining
outstanding principal balances. Where the fee does not rep-
resent adequate compensation, a servicing asset or liability
is recorded, as appropriate. Their value is subject to credit,
prepayment and interest rate risk.
• RECOURSE LIABILITIES. Certain transactions involve credit sup-
port agreements. As a result, we provide for expected credit
losses at amounts that approximate fair value.
The following table summarizes data related to securitization
sales of revolving and long-term receivables that we completed
during 2007 and 2006.
Commercial Credit card Other
(Dollars in millions) Equipment real estate receivables assets
2007
Cash proceeds from
securitization $2,648 $3,245 $12,359 $ 2,400
Proceeds from
collections reinvested
in new receivables — — 24,109 32,509
Cash received on
retained interests 155 117 3,268 449
Cash received from
servicing and other
sources 24 26 354 168
Weighted average lives
(in months) 24 78 8 41
Assumptions as of
sale date
(a)
Discount rate 12.6% 12.8% 13.4% 12.0%
Prepayment rate
(b) 11.7 6.8 11.0 14.5
Estimate of credit losses 0.8 0.4 6.8 1.4
2006
Cash proceeds from
securitization $2,784 $4,427 $ 5,251 $ 6,826
Proceeds from
collections reinvested
in new receivables — — 16,360 30,584
Cash received on
retained interests 236 80 2,307 341
Cash received from
servicing and other
sources 45 26 219 113
Weighted average lives
(in months) 23 75 7 36
Assumptions as of
sale date
(a)
Discount rate
8.3% 12.8% 12.0% 7.0%
Prepayment rate
(b) 10.4 7.6 12.5 9.9
Estimate of credit losses 1.4 0.5 6.8 0.2
(a) Based on weighted averages.
(b) Represented a payment rate on credit card receivables.