GE 2007 Annual Report Download - page 45

ge 2007 annual report 43
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subprime mortgage industry, GE Money decided to sell its U.S.
mortgage business (WMC). This liquidity-challenged environment
in which GE Money operates continues to cause issues for some
of its U.S. customers, and U.S. delinquencies increased in 2007.
In response, GE Money tightened underwriting standards related
to the U.S. consumer. GE Money will continue its process of reg-
ularly reviewing and adjusting reserve levels in response to when
it is probable that losses have been incurred in the portfolio.
We have achieved strong growth in Healthcare (11% and 12%
of consolidated three-year revenues and total segment profi t,
respectively) with a combination of organic growth and strategic
acquisitions. Healthcare realized benefi ts from the acquisitions of
IDX Systems Corporation in 2006 and Amersham plc (Amersham)
in 2004, expanding the breadth of our product and service offer-
ings to the healthcare industry. These increases were adversely
affected by the effects of the Defi cit Reduction Act on U.S. equip-
ment sales. In addition, lower sales of surgical imaging equipment
resulted from a regulatory suspension on shipments at one of
our facilities. We expect to begin shipping these products in early
2008. We believe that Healthcare is positioned well for continued
strong growth.
NBC Universal (10% and 12% of consolidated three-year rev-
enues and total segment profi t, respectively) has developed into a
diversifi ed world-class media company. While the technology and
business model for the entertainment media industry continues to
evolve, in 2007, we made signifi cant progress in our turnaround
efforts and believe that NBC Universal is well positioned to compete
in this challenging environment.
Industrial (11% and 6% of consolidated three-year revenues
and total segment profi t, respectively) is particularly sensitive to
economic conditions. Despite pressure from a weaker housing
market, the Consumer & Industrial business continued to grow
through product innovation and its focus on high-end appliances.
During 2007, Consumer & Industrial launched a comprehensive,
multi-year restructuring plan focused on reducing manufacturing
capacity as it moved to a “design, source and sell” model and to
make the business more cost competitive by transferring work
to lower-cost countries. Enterprise Solutions offers protection and
productivity solutions such as safe facilities, plant automation,
power control and sensing applications.
Overall, acquisitions contributed $7.7 billion, $3.9 billion and
$9.3 billion to consolidated revenues in 2007, 2006 and 2005,
respectively. Our consolidated earnings included approximately
$0.5 billion in both 2007 and 2006, and $0.9 billion in 2005, from
acquired businesses. We integrate acquisitions as quickly as
possible. Only revenues and earnings from the date we complete
the acquisition through the end of the fourth following quarter
are attributed to such businesses. Dispositions also affected our
ongoing results through lower revenues of $3.6 billion, $1.3 billion
and $1.9 billion in 2007, 2006 and 2005, respectively. This resulted
in higher earnings of $0.4 billion in 2007 and $0.1 billion in 2006
and lower earnings of $0.1 billion in 2005.
Signifi cant matters relating to our Statement of Earnings are
explained below.
DISCONTINUED OPERATIONS. In December 2007, we completed
the exit of WMC as a result of continued pressures in the U.S.
subprime mortgage industry. In September 2007, we committed
to a plan to sell our Japanese personal loan business (Lake).
We made the decision to sell this business upon determining
that, despite restructuring, Japanese regulatory limits for interest
charges on unsecured personal loans did not permit us to earn
an acceptable return. We are actively pursuing a buyer and
expect to complete the sale of this business by the end of the
third quarter of 2008. Both of these businesses were previously
reported in the GE Money segment.
In August 2007, we completed the sale of our Plastics business,
which was previously reported in the Industrial segment. We sold
this business because of its cyclicality, rising costs of natural gas
and raw materials, and the decision to redeploy capital resources
into higher-growth businesses.
In 2006, we substantially completed our planned exit of the
insurance businesses through the sale of the property and casualty
insurance and reinsurance businesses and the European life
and health operations of GE Insurance Solutions Corporation
(GE Insurance Solutions) and the sale of GE Life, our U.K.-based
life insurance operation, to Swiss Reinsurance Company (Swiss Re),
and the sale, through a secondary public offering, of our remain-
ing 18% investment in Genworth Financial, Inc. (Genworth), our
formerly wholly-owned subsidiary that conducted most of our
consumer insurance business, including life and mortgage insur-
ance operations. Also during 2006, we sold our Advanced Materials
business, which was previously reported in our Industrial segment.
We reported the businesses described above as discontinued
operations for all periods presented.
WE DECLARED $11.7 BILLION IN DIVIDENDS IN 2007. Per-share
dividends of $1.15 were up 12% from 2006, following a 13%
increase from the preceding year. In December 2007, our Board of
Directors raised our quarterly dividend 11% to $0.31 per share.
We have rewarded our shareowners with over 100 consecutive
years of dividends, with 32 consecutive years of dividend growth.
Except as otherwise noted, the analysis in the remainder of
this section presents the results of GE (with GECS included on a
one-line basis) and GECS. See the Segment Operations section for
a more detailed discussion of the businesses within GE and GECS.
GE SALES OF PRODUCT SERVICES were $32.2 billion in 2007, a 9%
increase over 2006. Increases in product services in 2007 and 2006
were widespread, led by growth at Infrastructure, Healthcare and
Industrial. Operating profi t from product services was $9.1 billion
in 2007, up 9% from 2006, refl ecting ongoing improvements at
Infrastructure.