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Variable Interest Entities
 6 Months Ended
Jun. 30, 2015
Variable Interest Entities [Abstract]  
Variable Interest Entities

NOTE 16. VARIABLE INTEREST ENTITIES

We use variable interest entities primarily to securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business. Except as noted below, investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in 2015 or 2014.

Consolidated Variable Interest Entities

We consolidate VIEs because we have the power to direct the activities that significantly affect the VIE’s economic performance, typically because of our role as either servicer or manager for the VIE. Our consolidated VIEs fall into three main groups, which are further described below:

  • Trinity comprises two consolidated entities that hold investment securities, the majority of which are investment-grade, and were funded by the issuance of GICs. The GICs include conditions under which certain holders could require immediate repayment of their investment should the long-term credit ratings of GECC fall below AA-/Aa3 or the short-term credit ratings fall below A-1+/P-1. The outstanding GICs are subject to their scheduled maturities and individual terms, which may include provisions permitting redemption upon a downgrade of one or more of GECC’s ratings, among other things, and are reported in investment contracts, insurance liabilities and insurance annuity benefits.
  • Consolidated Securitization Entities (CSEs) were created to facilitate securitization of financial assets and other forms of asset-backed financing that serve as an alternative funding source by providing access to variable funding notes and term markets. The securitization transactions executed with these entities are similar to those used by many financial institutions and all are non-recourse. We provide servicing for substantially all of the assets in these entities.

The financing receivables in these entities have similar risks and characteristics to our other financing receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other financing receivables; however, the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually the cash flows from these financing receivables must first be used to pay third-party debt holders as well as other expenses of the entity. Excess cash flows are available to GE and GECC. The creditors of these entities have no claim on other assets of GE or GECC.

  • Other remaining assets and liabilities of consolidated VIEs relate primarily to three categories of entities: (1) joint ventures that lease equipment with $487 million of assets and $486 million of liabilities; (2) other entities that are involved in power generating and leasing activities with $327 million of assets and $180 million of liabilities; and (3) insurance entities that, among other lines of business, provide property and casualty and workers’ compensation coverage for GE with $1,162 million of assets and $548 million of liabilities.

ASSETS AND LIABILITIES OF CONSOLIDATED VIEs
Consolidated Securitization Entities(b)
Trade
(In millions)Trinity(a)Credit cardsreceivablesOtherTotal
June 30, 2015
Assets(c)
Financing receivables, net$-$24,199$-$898$25,097
Current receivables--3,148(d)4583,606
Investment securities2,203--9833,186
Other assets15414322,0192,318
Total$2,357$24,342$3,150$4,358$34,207
Liabilities(c)
Borrowings$-$-$-$621$621
Non-recourse borrowings-13,9482,70433916,991
Other liabilities98618341,3422,380
Total$986$13,966$2,738$2,302$19,992
December 31, 2014
Assets(c)
Financing receivables, net$-$25,645$-$1,030$26,675
Current receivables--3,028(d)5093,537
Investment securities2,369--1,0053,374
Other assets171,05922,3453,423
Total$2,386$26,704$3,030$4,889$37,009
Liabilities(c)
Borrowings$-$-$-$517$517
Non-recourse borrowings-14,9672,69243618,095
Other liabilities1,022332261,4902,870
Total$1,022$15,299$2,718$2,443$21,482

  • Excluded intercompany advances from GECC to Trinity, which were eliminated in consolidation of $1,138 million and $1,565 million at June 30, 2015 and December 31, 2014, respectively.
  • We provide servicing to the CSEs and are contractually permitted to commingle cash collected from customers on financing receivables sold to CSE investors with our own cash prior to payment to a CSE, provided our short-term credit rating does not fall below A-1/P-1. These CSEs also owe us amounts for purchased financial assets and scheduled interest and principal payments. At June 30, 2015 and December 31, 2014, the amounts of commingled cash owed to the CSEs were $921 million and $1,091 million, respectively, and the amounts owed to us by CSEs were $193 million and $391 million, respectively.
  • Asset amounts exclude intercompany receivables for cash collected on behalf of the entities by GECC as servicer, which are eliminated in consolidation. Such receivables provide the cash to repay the entities’ liabilities. If these intercompany receivables were included in the table above, assets would be higher. In addition, other assets, borrowings and other liabilities exclude intercompany balances that are eliminated in consolidation.
  • Included $785 million and $686 million of receivables at June 30, 2015 and December 31, 2014, respectively, originated by Appliances. We require third party debt holder consent to sell these assets. The receivables will be included in assets of businesses held for sale when the consent is received.

Total revenues from our consolidated VIEs were $1,671 million and $1,586 million in the three months ended June 30, 2015 and 2014, respectively, and $3,414 million and $3,174 million in the six months ended June 30, 2015 and 2014, respectively. Related expenses consisted primarily of provisions for losses of $313 million and $252 million in the three months ended June 30, 2015 and 2014, respectively, and $525 million and $547 million in the six months ended June 30, 2015 and 2014, respectively, and interest and other financial charges of $72 million and $67 million in the three months ended June 30, 2015 and 2014, respectively and $140 million and $127 million in the six months ended June 30, 2015 and 2014, respectively. These amounts do not include intercompany revenues and costs, principally fees and interest between GE and the VIEs, which are eliminated in consolidation.

Investments in Unconsolidated Variable Interest Entities

Our involvement with unconsolidated VIEs consists of the following activities: assisting in the formation and financing of the entity; providing recourse and/or liquidity support; servicing the assets; and receiving variable fees for services provided. We are not required to consolidate these entities because the nature of our involvement with the activities of the VIEs does not give us power over decisions that significantly affect their economic performance.

The classification of our variable interests in these entities in our financial statements is based on the nature of the entity and the characteristics of the investment we hold.

INVESTMENTS IN UNCONSOLIDATED VIEs
(In millions)June 30, 2015December 31, 2014
Other assets and investment securities$689$806
Financing receivables – net113120
Total investments802926
Contractual obligations to fund investments, guarantees or revolving lines of credit3937
Total$841$963

In addition to the entities included in the table above, we also hold passive investments in RMBS, CMBS and asset-backed securities issued by VIEs. Such investments were, by design, investment-grade at issuance and held by a diverse group of investors. Further information about such investments is provided in Note 3.