Invest and Deliver - GE 2006 Annual Report Letter to InvestorsInvest and DeliverGovernanceCitizenshipFinancials
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Notes to Consolidated Financial StatementsNote 10: Investment Securities
 
 
 
 
 
2006
December 31 (In millions) Amortized cost     Gross unrealized gains     Gross unrealized losses     Estimated fair value  
GE                        
Debt — U.S. corporate  
$ 307
   
$ 24
   
$ —
   
$ 331
 
Equity   10     2     (1 )   11  
    317     26     (1 )   342  
GECS                        
Debt                          
U.S. corporate   21,323     1,042     (203 )   22,162  
State and municipal   915     38     (4 )   949  
Mortgage-backed(a) 6,356     38     (46 )   6,348  
Asset-backed   8,066     436     (23 )   8,479  
Corporate — non-U.S.   1,664     92     (5 )   1,751  
Government — non-U.S.   1,296     105     (3 )   1,398  
U.S. government and federal agency   820     45     (6 )   859  
Equity   4,500     1,060     (14 )   5,546  
    44,940     2,856     (304 )   47,492  
Eliminations   (7 )   (1 )   —     (8 )
Total  
$ 45,250
   
$ 2,881
   
$ (305
)  
$ 47,826
 
                         
2005
December 31 (In millions)   Amortized cost     Gross unrealized gains     Gross unrealized losses     Estimated fair value  
GE                        
Debt — U.S. corporate  
$ 307
   
$ 2
   
$ —
   
$ 309
 
Equity   26     131     (5 )   152  
    333     133     (5 )   461  
GECS                        
Debt                          
U.S. corporate   20,578     1,317     (339 )   21,556  
State and municipal   810     47     (2 )   855  
Mortgage-backed(a) 5,748     44     (56 )   5,736  
Asset-backed   8,433     205     (19 )   8,619  
Corporate — non-U.S.   2,043     209     (10 )   2,242  
Government — non-U.S.   675     91     —     766  
U.S. government and federal agency   803     61     (5 )   859  
Equity   879     231     (33 )   1,077  
    39,969     2,205     (464 )   41,710  (b)
Eliminations   (17 )   (6 )   —     (23 )
Total  
$ 40,285
   
$ 2,332
   
$ (469
)  
$ 42,148
 
 
(a) Substantially collateralized by U.S. residential mortgages.
(b) Included $16 million in 2005 of debt securities related to consolidated, liquidating securitization entities. See note 28.

The following tables present the gross unrealized losses and estimated fair values of our investment securities.

 
 
 
 
 
Less than 12 months 12 months or more
December 31 (In millions) Estimated fair value Gross unrealized losses Estimated fair value Gross unrealized losses
2006                        
Debt                        
U.S. corporate  
$ 2,478
   
$ (52
)  
$ 4,260
   
$ (151
)
State and municipal   164     (2 )   77     (2 )
Mortgage-backed   668     (4 )   1,851     (42 )
Asset-backed   1,393     (15 )   674     (8 )
Corporate — non-U.S.   112     (3 )   93     (2 )
Government — non-U.S.   33     (3 )   —     —  
U.S. government and                        
federal agency   66     (1 )   247     (5 )
Equity   40     (12 )   3,895     (3 )
Total  
$ 4,954
   
$ (92
)  
$ 11,097
   
$ (213
)
2005                        
Debt                        
U.S. corporate  
$ 3,633
   
$ (131
)  
$ 2,584
   
$ (208
)
State and municipal   77     (2 )   —     —  
Mortgage-backed   1,858     (22 )   1,190     (34 )
Asset-backed   1,494     (10 )   383     (9 )
Corporate — non-U.S.   221     (8 )   53     (2 )
U.S. government and                        
federal agency   297     (5 )   —     —  
Equity   84     (25 )   38     (13 )
Total  
$ 7,664
   
$ (203
)  
$ 4,248
   
$ (266
)
 

Our portfolio at December 31, 2006 and 2005, contained securities that had been, for 12 months or more, in an unrealized loss position for reasons other than changes in market interest rates. The level of this unrealized loss was insignificant, individually and in the aggregate, at December 31, 2006, reflecting improved pricing in the commercial aircraft Enhanced Equipment Trust Certificate market. We review all of our investment securities routinely for other than temporary impairment as described in note 1. In accordance with that policy, we have provided for all amounts that we did not expect either to collect in accordance with the contractual terms of the instruments or to recover based on underlying collateral values. We presently intend to hold our investment securities in an unrealized loss position at December 31, 2006, at least until we can recover their respective amortized cost and we have the ability to hold our debt securities until their maturities.

Contractual maturities of GECS investment in debt securities (excluding mortgage-backed and asset-backed securities)

 
 
 
(In millions) Amortized cost Estimated fair value
Due in            
2007  
$ 1,832
   
$ 1,826
 
2008–2011   4,766     4,784  
2012–2016   3,470     3,545  
2017 and later   15,950     16,964  

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on investment securities follows.

 
 
 
 
(In millions) 2006 2005 2004
GE                  
Gains  
$ 125
   
$ 6
   
$ 15
 
Losses, including impairments   (1 )   (5 )   —  
Net   124     1     15  
GECS                  
Gains   313     509     371  
Losses, including impairments   (181 )   (132 )   (149 )
Net   132     377     222  
Total  
$ 256
   
$ 378
   
$ 237
 
 

In the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders.

Proceeds from investment securities sales amounted to $12,394 million, $14,047 million and $11,685 million in 2006, 2005 and 2004, respectively, principally from the short-term nature of the investments that support the guaranteed investment contracts portfolio.

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