GE 2013 Annual Report Download - page 51

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GE 2013 ANNUAL REPORT 49
in default or default appears imminent, and the potential for
intervention by an insurance or other regulator.
Monolines provide credit enhancement for certain of our
investment securities, primarily RMBS and municipal securities.
The credit enhancement is a feature of each specifi c security
that guarantees the payment of all contractual cash fl ows, and is
not purchased separately by GE. The Monoline industry contin-
ues to experience fi nancial stress from increasing delinquencies
and defaults on the individual loans underlying insured secu-
rities. We continue to rely on Monolines with adequate capital
and claims paying resources. We have reduced our reliance on
Monolines that do not have adequate capital or have experienced
regulator intervention. At December 31, 2013, our investment
securities insured by Monolines on which we continue to place
reliance were $1.0 billion, including $0.3 billion of our $0.4 billion
investment in subprime RMBS. At December 31, 2013, the unre-
alized loss associated with securities subject to Monoline credit
enhancement, for which there is an expected credit loss, was
$0.1 billion.
Total pre-tax, other-than-temporary impairment losses during
2013 were $0.8 billion, which was recognized in earnings and pri-
marily relates to credit losses on corporate debt securities and
other-than-temporary losses on equity securities and an insig-
nifi cant amount primarily relates to non-credit-related losses on
RMBS and is included within accumulated other comprehensive
income (AOCI).
Total pre-tax, other-than-temporary impairment losses
during 2012 were $0.2 billion, of which $0.1 billion was rec-
ognized in earnings and primarily relates to credit losses on
non-U.S. corporate, U.S. corporate and RMBS securities and oth-
er-than-temporary losses on equity securities and $0.1 billion
primarily relates to non-credit-related losses on RMBS and is
included within AOCI.
At December 31, 2013 and 2012, unrealized losses on invest-
ment securities totaled $0.7 billion and $0.8 billion, respectively,
including $0.4 billion and $0.8 billion, respectively, aged 12
months or longer. Of the amount aged 12 months or longer at
December 31, 2013, more than 70% are debt securities that were
considered to be investment grade by the major rating agencies.
In addition, of the amount aged 12 months or longer, $0.1 billion
and $0.2 billion related to structured securities (mortgage-backed
and asset-backed) and corporate debt securities, respectively.
With respect to our investment securities that are in an unre-
alized loss position, aged 12 months or longer at December 31,
2013, the majority relate to debt securities held to support obli-
gations to holders of GICs. We presently do not intend to sell the
vast majority of our debt securities that are in an unrealized loss
position and believe that it is not more likely than not that we will
be required to sell these securities before recovery of our amor-
tized cost. For additional information, see Note 3.
FAIR VALUE MEASUREMENTS. For fi nancial assets and liabilities
measured at fair value on a recurring basis, fair value is the price
we would receive to sell an asset or pay to transfer a liability in an
orderly transaction with a market participant at the measurement
date. In the absence of active markets for the identical assets or
liabilities, such measurements involve developing assumptions
based on market observable data and, in the absence of such
data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs
at the measurement date. Additional information about our
application of this guidance is provided in Notes 1 and 21. At
December 31, 2013, the aggregate amount of investments that
are measured at fair value through earnings totaled $3.2 billion
and consisted primarily of various assets held for sale in the ordi-
nary course of business, as well as equity investments.
WORKING CAPITAL, representing GE current receivables and
inventories, less GE accounts payable and progress collections,
decreased $0.7 billion at December 31, 2013, compared to
December 31, 2012 due to increases in accounts payable and
progress collections, partially offset by increases in current
receivables and inventory. As Power & Water, Oil & Gas and
Aviation deliver units out of their backlogs to fulfi ll commitments
over the next few years, progress collections of $13.2 billion at
December 31, 2013, will be earned, which, along with progress
collections on new orders, will impact working capital. We dis-
cuss current receivables and inventories, two important elements
of working capital, in the following paragraphs.
CURRENT RECEIVABLES, BEFORE ALLOWANCE FOR LOSSES, for GE
totaled to $11.4 billion at December 31, 2013 and $9.7 billion at
December 31, 2012, and included $7.4 billion due from custom-
ers at the end of 2013 compared with $6.3 billion at the end of
2012. GE current receivables turnover was 9.9 in 2013, compared
with 10.5 in 2012. The overall increase in current receivables was
primarily due to higher volume at Power & Water and Oil & Gas.
See Note 4.
INVENTORIES for GE totaled $17.3 billion at December 31, 2013, an
increase of $2.0 billion from 2012. This increase refl ected higher
inventories at Power & Water, Oil & Gas and Aviation to fulfi ll
commitments and backlog. GE inventory turnover was 6.1 and 6.7
in 2013 and 2012, respectively. See Note 5.
FINANCING RECEIVABLES is our largest category of assets and
represents one of our primary sources of revenues. Our portfolio
of fi nancing receivables is diverse and not directly comparable to
major U.S. banks. A discussion of the quality of certain elements
of the fi nancing receivables portfolio follows.
Our consumer portfolio is composed primarily of non-U.S.
mortgage, sales fi nance, auto and personal loans in various
European and Asian countries and U.S. consumer credit card and