GE 2008 Annual Report Download - page 74

72 ge 2008 annual report
notes to consolidated financial statements
Of our residential mortgage-backed securities (RMBS) at
December 31, 2008, we had approximately $1,310 million of
exposure to residential subprime credit, primarily supporting our
guaranteed investment contracts, a majority of which have
received investment-grade credit ratings from the major rating
agencies. Of the total residential subprime credit exposure,
$1,093 million was insured by monoline insurers. Our subprime
investment securities were collateralized primarily by pools of
individual, direct mortgage loans, not other structured products
such as collateralized debt obligations. Additionally, a majority
of exposure to residential subprime credit was investment
securities with underlying loans originated in 2006 and 2005.
At December 31, 2008, we had approximately $2,853 million of
exposure to commercial, regional and foreign banks, primarily
relating to corporate debt securities, with associated unrealized
losses of $373 million.
We presently intend to hold our investment securities that
are in an unrealized loss position at December 31, 2008, at least
until we can recover their respective amortized cost. We have
the ability to hold our debt securities until their maturities. In
reaching the conclusion that these investments are not other-
than-temporarily impaired, consideration was given to research
by our internal and third-party asset managers. With respect to
corporate bonds, we placed greater emphasis on the credit quality
of the issuers. With respect to RMBS and commercial mortgage-
backed securities (CMBS), we placed greater emphasis on our
expectations with respect to cash flows from the underlying
collateral, and with respect to RMBS, we considered the availability
of credit enhancements, principally monoline insurance.
CONTRACTUAL MATURITIES OF GECS INVESTMENT IN AVAILABLE-
FOR-SALE DEBT SECURITIES (EXCLUDING MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES)
Amortized Estimated
(In millions) cost fair value
Due in
2009 $ 1,820 $ 1,777
2010–2013 4,999 4,634
2014–2018 3,841 3,366
2019 and later 16,559 15,257
We expect actual maturities to differ from contractual maturities
because borrowers have the right to call or prepay certain
obligations.
The following tables present the gross unrealized losses and esti-
mated fair values 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
December 31 (In millions) fair value losses fair value losses
2008
Debt
U.S. corporate $ 6,602 $(1,108) $ 5,629 $(1,369)
State and municipal 570 (44) 278 (50)
Residential mortgage-
backed 1,355 (107) 1,614 (945)
Commercial mortgage-
backed 774 (184) 1,218 (604)
Asset-backed 1,064 (419) 1,063 (272)
Corporate —non-U.S. 454 (106) 335 (60)
Government —non-U.S. 88 (4) 275 (15)
U.S. government and
federal agency — — 150 (100)
Retained interests 1,403 (71) 274 (81)
Equity 268 (153) 9 (4)
Total $12,578 $(2,196) $10,845 $(3,500)
2007
Debt
U.S. corporate $ 5,766 $ (274) $ 4,341 $ (395)
State and municipal 198 (3) 131 (5)
Residential mortgage-
backed 3,268 (160) 1,223 (65)
Commercial mortgage-
backed 1,483 (33) 848 (16)
Asset-backed 1,417 (62) 478 (27)
Corporate —non-U.S. 505 (8) 124 (3)
Government — non-U.S . 29 (1) 311 (9)
U .S. government and
federal agency 255 (37) — —
Retained interests 548 (50) 10 (7)
Equity 443 (105) 18 (20)
Total $13,912 $ (733) $ 7,484 $ (547)
Investment securities amounted to $41,446 million at December 31,
2008, compared with $45,276 million at December 31, 2007. Most
of our investment securities relate to our run-off insurance oper-
ations and our issuances of guaranteed investment contracts.