GE 2008 Annual Report Download - page 96

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94 ge 2008 annual report
notes to consolidated financial statements
Note 29.
Financial Instruments
2008 2007
Assets (liabilities) Assets (liabilities)
Notional Carrying Estimated Notional Carrying Estimated
December 31 (In millions) amount amount (net) fair value amount amount (net) fair value
GE
Assets
Investments and notes receivable $(a) $ 269 $ 269 $(a) $ 538 $ 538
Liabilities
Borrowings (b) (a) (12,202) (12,267) (a) (15,762) (15,819)
GECS
Assets
Loans (a) 305,376 292,797 (a) 309,623 307,425
Other commercial mortgages (a) 1,501 1,427 (a) 4,891 4,939
Loans held for sale (a) 3,640 3,670 (a) 3,808 3,809
Other financial instruments (c) (a) 2,637 2,810 (a) 2,764 3,150
Liabilities
Borrowings (b) (d) (a) (514,601) (504,439) (a) (500,922) (503,607)
Investment contract benefits (a) (4,212) (4,536) (a) (4,536) (4,914)
Guaranteed investment contracts (a) (10,828) (10,677) (a) (11,705) (11,630)
Insurance —credit life (e) 1,165 (44) (31) 1,500 (35) (24)
(a) These financial instruments do not have notional amounts.
(b) See Note 18.
(c) Principally cost method investments.
(d) Included effects of interest rate and cross-currency derivatives.
(e) Net of reinsurance of $3,103 million and $2,815 million at December 31, 2008 and 2007, respectively.
Assets and liabilities not carried at fair value in our Statement
of Financial Position are discussed below. Consistent with
SFAS 107, Disclosure about Fair Value of Financial Instruments,
the disclosure excludes finance leases and non-financial assets
and liabilities. Apart from certain of our borrowings and certain
marketable securities, few of the instruments discussed below
are actively traded and their fair values must often be determined
using financial models. Realization of the fair value of these
instruments depends upon market forces beyond our control,
including marketplace liquidity.
A description of how we estimate fair values follows. Estimates
of fair value at December 31, 2008, were determined in accordance
with SFAS 107, as amended by SFAS 157.
Loans
Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates we would charge to
similar borrowers with similar maturities.
Borrowings
Valuation methodologies using current market interest rate data
which are comparable to market quotes adjusted for our non-
performance risk.
Investment Contract Benefits
Based on expected future cash flows, discounted at currently
offered rates for immediate annuity contracts or cash surrender
values for single premium deferred annuities.
Guaranteed Investment Contracts
Based on valuation methodologies using current market interest
rate data, adjusted for our non-performance risk.
All Other Instruments
Based on observable market transactions, valuation methodologies
using current market interest rate data adjusted for inherent
credit risk and/or quoted market prices.
Assets and liabilities that are reflected in the accompanying
financial statements at fair value are not included in the above
disclosures; such items include cash and equivalents, investment
securities and derivative financial instruments.
Additional information about certain categories in the table
above follows.
INSURANCE — CREDIT LIFE
Certain insurance affiliates, primarily in GE Money, issue credit
life insurance designed to pay the balance due on a loan if the
borrower dies before the loan is repaid. As part of our overall risk
management process, we cede to third parties a portion of this
associated risk, but are not relieved of our primary obligation to
policyholders.