Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

15. FAIR VALUE MEASUREMENTS

For a description of how we estimate fair value, see Note 1 in our 2012 consolidated financial statements.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities primarily supporting obligations to annuitants and policyholders in our run-off insurance operations and supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), investment securities held at our treasury operations and investments held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. Such securities are mainly investment grade.

									Netting
(In millions)	Level 1		(a)	Level 2		(a)	Level 3		adjustment		(b)	Net balance
March 31, 2013
Assets
Investment securities
Debt
U.S. corporate	$	0		$	20,357		$	3,571	$	0		$	23,928
State and municipal		0			4,558			90		0			4,648
Residential mortgage-backed		0			2,121			96		0			2,217
Commercial mortgage-backed		0			3,120			6		0			3,126
Asset-backed(c)		0			686			4,916		0			5,602
Corporate – non-U.S.		69			1,049			1,349		0			2,467
Government – non-U.S.		1,088			903			41		0			2,032
U.S. government and federal agency		0			3,226			264		0			3,490
Retained interests		0			0			91		0			91
Equity
Available-for-sale		501			17			11		0			529
Trading		196			3			0		0			199
Derivatives(d)		0			10,850			350		(6,550)			4,650
Other(e)		38			0			779		0			817
Total	$	1,892		$	46,890		$	11,564	$	(6,550)		$	53,796
Liabilities
Derivatives	$	0		$	3,537		$	11	$	(3,015)		$	533
Other(f)		0			1,039			0		0			1,039
Total	$	0		$	4,576		$	11	$	(3,015)		$	1,572
December 31, 2012
Assets
Investment securities
Debt
U.S. corporate	$	0		$	20,580		$	3,591	$	0		$	24,171
State and municipal		0			4,469			77		0			4,546
Residential mortgage-backed		0			2,162			100		0			2,262
Commercial mortgage-backed		0			3,088			6		0			3,094
Asset-backed(c)		0			715			5,023		0			5,738
Corporate – non-U.S.		71			1,132			1,218		0			2,421
Government – non-U.S.		702			1,019			42		0			1,763
U.S. government and federal agency		0			3,288			277		0			3,565
Retained interests		0			0			83		0			83
Equity
Available-for-sale		590			16			13		0			619
Trading		248			0			0		0			248
Derivatives(d)		0			11,432			434		(7,926)			3,940
Other(e)		35			0			799		0			834
Total	$	1,646		$	47,901		$	11,663	$	(7,926)		$	53,284
Liabilities
Derivatives	$	0		$	3,434		$	20	$	(3,177)		$	277
Other(f)		0			908			0		0			908
Total	$	0		$	4,342		$	20	$	(3,177)		$	1,185

(a)The fair value ofsecurities transferred between Level 1 and Level 2was $2 million in the three months ended March 31, 2013.

(b)       The netting of derivative receivables and payables (including the effects of any collateral posted or received) is permitted when a legally enforceable master netting agreement exists.

(c)Includes investments in our CLL business in asset-backed securities collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.

(d)The fair value of derivatives included an adjustment for non-performance risk. The cumulative adjustment was a gain (loss)of $(19) million and $(15) million at March 31, 2013 and December 31, 2012, respectively. See Note 16 for additional information on the composition of our derivative portfolio.

(e)       Included private equity investments and loans designated under the fair value option.

(f)       Primarily represented the liability associated with certain of our deferred incentive compensation plans.

The following tables present the changes in Level 3 instruments measured on a recurring basis for the three months ended March 31, 2013 and 2012, respectively. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners' equity.

Changes in Level 3 Instruments for the Three Months Ended March 31, 2013
						Net																Net
(In millions)						realized/																change in
						unrealized																unrealized
			Net			gains																gains
			realized/				(losses)															(losses)
			unrealized			included in																relating to
	Balance		gains			accumulated														Balance		instruments
	at		(losses)			other								Transfers			Transfers			at		still held at
	January 1,		included			comprehensive								into			out of			March 31,		March 31,
	2013		in earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2013		2013		(c)
Investment securities
Debt
U.S. corporate	$	3,591	$	(271)		$	219	$	63	$	(6)	$	(45)	$	93		$	(73)		$	3,571	$	0
State and municipal		77		0			0		4		0		(1)		10			0			90		0
Residential
mortgage-backed		100		0			(3)		0		0		(1)		0			0			96		0
Commercial
mortgage-backed		6		0			0		0		0		0		0			0			6		0
Asset-backed		5,023		1			(2)		144		0		(262)		12			0			4,916		0
Corporate
– non-U.S.		1,218		8			19		127		(3)		(35)		15			0			1,349		0
Government
– non-U.S.		42		0			(1)		0		0		0		0			0			41		0
U.S. government and
federal agency		277		0			(13)		0		0		0		0			0			264		0
Retained interests		83		3			10		0		0		(5)		0			0			91		0
Equity
Available-for-sale		13		0			0		0		0		0		0			(2)			11		0
Derivatives(d)(e)		416		(19)			0		(1)		0		(53)		0			0			343		12
Other		799		(22)			0		57		(55)		0		0			0			779		(21)
Total	$	11,645	$	(300)		$	229	$	394	$	(64)	$	(402)	$	130		$	(75)		$	11,557	$	(9)

• Earnings effects are primarily included in the “GECC revenues from services” and “Interest and other financial charges” captions in the Condensed Statement of Earnings.
• Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
• Represented the amount of unrealized gains or losses for the period included in earnings.
• Represented derivative assets net of derivative liabilities and included cash accruals of $4 million not reflected in the fair value hierarchy table.
• Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 16.

Changes in Level 3 Instruments for the Three Months Ended March 31, 2012
						Net																Net
(In millions)						realized/																change in
						unrealized																unrealized
			Net			gains																gains
			realized/				(losses)															(losses)
			unrealized			included in																relating to
	Balance		gains			accumulated														Balance		instruments
	at		(losses)			other								Transfers			Transfers			at		still held at
	January 1,		included			comprehensive								into			out of			March 31,		March 31,
	2012		in earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2012		2012		(c)
Investment securities
Debt
U.S. corporate	$	3,235	$	26		$	38	$	13	$	(31)	$	(16)	$	0		$	(13)		$	3,252	$	0
State and municipal		77		0			2		0		0		0		0			0			79		0
Residential
mortgage-backed		41		(3)			3		0		0		(1)		68			(1)			107		0
Commercial
mortgage-backed		4		0			0		0		0		0		0			(3)			1		0
Asset-backed		4,040		(4)			42		341		(31)		0		16			0			4,404		0
Corporate
– non-U.S.		1,204		(9)			60		10		0		(26)		14			(4)			1,249		0
Government
– non-U.S.		84		(34)			35		52		(71)		(14)		0			0			52		0
U.S. government and
federal agency		253		0			7		0		0		0		0			0			260		0
Retained interests		35		0			(4)		5		(1)		(1)		0			0			34		0
Equity
Available-for-sale		17		0			(1)		0		0		(1)		0			0			15		0
Derivatives(d)(e)		369		0			1		(2)		0		(2)		0			(45)			321		(3)
Other		817		5			0		1		(7)		0		0			0			816		5
Total	$	10,176	$	(19)		$	183	$	420	$	(141)	$	(61)	$	98		$	(66)		$	10,590	$	2

• Earnings effects are primarily included in the “GECC revenues from services” and “Interest and other financial charges” captions in the Condensed Statement of Earnings.
• Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
• Represented the amount of unrealized gains or losses for the period included in earnings.
• Represented derivative assets net of derivative liabilities and included cash accruals of $4 million not reflected in the fair value hierarchy table.
• Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 16.

Non-Recurring Fair Value Measurements

The following table represents non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at March 31, 2013 and December 31, 2012. These assets can include loans and long-lived assets that have been reduced to fair value when they are held for sale, impaired loans that have been reduced based on the fair value of the underlying collateral, cost and equity method investments and long-lived assets that are written down to fair value when they are impaired and the remeasurement of retained investments in formerly consolidated subsidiaries upon a change in control that results in deconsolidation of a subsidiary, if we sell a controlling interest and retain a noncontrolling stake in the entity. Assets that are written down to fair value when impaired and retained investments are not subsequently adjusted to fair value unless further impairment occurs.

	Remeasured during				Remeasured during
	the three months ended				the year ended
	March 31, 2013				December 31, 2012
(In millions)	Level 2		Level 3		Level 2		Level 3
Financing receivables and loans held for sale	$	116	$	2,281	$	366	$	4,094
Cost and equity method investments(a)		0		230		8		313
Long-lived assets, including real estate		312		2,050		702		2,182
Total	$	428	$	4,561	$	1,076	$	6,589

(a)       Includes the fair value of private equity and real estate funds included in Level 3 of $20 million and $84 million at March 31, 2013 and December 31, 2012, respectively.

The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at March 31, 2013 and 2012.

	Three months ended March 31
(In millions)	2013		2012
Financing receivables and loans held for sale	$	(128)	$	(126)
Cost and equity method investments(a)		(81)		(21)
Long-lived assets, including real estate(b)		(390)		(151)
Total	$	(599)	$	(298)

(a)       Includes fair value adjustments associated with private equity and real estate funds of $(3) million in both the threemonths ended March 31, 2013 and 2012.

(b)       Includes impairments related to real estate equity properties and investments recorded in other costs and expenses of $223 million and $50 million in the three months ended March 31, 2013 and 2012, respectively.

Level 3 Measurements

The following table presents information relating to the significant unobservable inputs of our Level 3 recurring and non-recurring measurements.

	Fair value at				Range
	March 31,		Valuation	Unobservable	(weighted
(Dollars in millions)	2013		technique	inputs	average)
Recurring fair value measurements
Investment securities
Debt
U.S. corporate	$	1,585	Income approach	Discount rate(a)	1.8%-38.0% (11.3%)
Asset-backed		4,869	Income approach	Discount rate(a)	1.7%-13.1% (3.6%)
Corporate - non-U.S.		1,016	Income approach	Discount rate(a)	2.3%-23.9% (11.8%)
Other financial assets		358	Income approach	Weighted average	8.1%-9.4% (8.8%)
				cost of capital
		253	Market comparables	EBITDA multiple	4.9X-11X (7.8X)
Non-recurring fair value measurements
Financing receivables and loans held for sale	$	1,513	Income approach	Capitalization rate(b)	5.4%-13.7% (8.0)%
		106	Business enterprise	EBITDA multiple	4.3X-7.0X (5.7X)
			value
Cost and equity method investments		38	Income approach	Capitalization rate(b)	7.7%-10.6% (10.3%)
Long-lived assets, including real estate		1,078	Income approach	Capitalization rate(b)	7.7%-14.5% (7.8%)
	Fair value at				Range
	December 31,		Valuation	Unobservable	(weighted
	2012		technique	inputs	average)
Recurring fair value measurements
Investment securities
Debt
U.S. corporate	$	1,652	Income approach	Discount rate(a)	1.3%-29.9% (11.1%)
Asset-backed		4,977	Income approach	Discount rate(a)	2.1%-13.1% (3.8%)
Corporate - non-U.S.		865	Income approach	Discount rate(a)	1.5%-25.0% (13.2%)
Other financial assets		360	Income approach	Weighted average	8.7%-10.2% (8.7%)
				cost of capital
		273	Market comparables	EBITDA multiple	4.9X-10.6X (7.9X)
Non-recurring fair value measurements
Financing receivables and loans held for sale	$	2,633	Income approach	Capitalization rate(b)	3.8%-14.0% (8.0%)
		202	Business enterprise	EBITDA multiple	2.0X-6.0X (4.8X)
			value
Cost and equity method investments		72	Income approach	Capitalization rate(b)	9.2%-12.8% (12.0%)
Long-lived assets, including real estate		985	Income approach	Capitalization rate(b)	4.8%-14.6% (7.3%)

• Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value.
• Represents the rate of return on net operating income which is considered acceptable for an investor and is used to determine a property's capitalized value. An increase in the capitalization rate would result in a decrease in the fair value.

At March 31, 2013 and December 31, 2012, other Level 3 recurring fair value measurements of $3,085 million and $3,146 million, respectively, and non-recurring measurements of $1,432 million and $2,412 million, respectively, are valued using non-binding broker quotes or other third-party sources. For a description of our process to evaluate third-party pricing servicers, see Note 1 in our 2012 consolidated financial statements. At March 31, 2013 and December 31, 2012, other recurring fair value measurements of $387 million and $370 million, respectively, and non-recurring fair value measurements of $394 million and $285 million, respectively, were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.