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Assets and Liabilities of Businesses Held For Sale and Discontinued Operations
 12 Months Ended
Dec. 31, 2014
Assets and Liabilities of Businesses Held For Sale and Discontinued Operations [Abstract]  
Assets and Liabilities Of Business Held For Sale and Discontinued Operations

NOTE 2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets and Liabilities of Businesses Held for Sale

In the fourth quarter of 2014, we signed an agreement to sell our consumer finance business Budapest Bank with assets of $3,474 million and liabilities of $2,434 million to Hungary’s government. The transaction remains subject to customary closing conditions and regulatory approvals, and is targeted to close in 2015.

In the second quarter of 2014, we committed to sell GE Money Bank AB, our consumer finance business in Sweden, Denmark and Norway (GEMB-Nordic). We completed the sale on November 6, 2014 for proceeds of $2,320 million.

In the first quarter of 2013, we committed to sell our Consumer auto and personal loan business in Portugal and completed the sale on July 15, 2013 for proceeds of $83 million.

FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
December 31 (In millions)2014  2013
 
Assets
Cash and equivalents$676  $5
Investment securities4487
Financing receivables – net  2,144    -
Goodwill 106 24
Intangible assets – net132
Other  87    12
Assets of businesses held for sale$3,474  $50
       
Liabilities     
Bank deposits$1,931$-
Other 503 6
Liabilities of businesses held for sale$2,434 $6

Discontinued Operations

Discontinued operations primarily comprised our Real Estate business, GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our Commercial Lending and Leasing (CLL) trailer services business in Europe (CLL Trailer Services), our Consumer banking business in Russia (Consumer Russia) and our Consumer mortgage lending business in Ireland (Consumer Ireland). Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented.

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
(In millions)201420132012
Operations
Total revenues (loss)$2,701$4,101$3,844
Earnings (loss) from discontinued operations before income taxes$431$769$(340)
Benefit (provision) for income taxes450683761
Earnings (loss) from discontinued operations, net of taxes$881$1,452$421
Disposal
Gain (loss) on disposal before income taxes$14$(2,027)$(792)
Benefit (provision) for income taxes124649
Gain (loss) on disposal, net of taxes$15$(1,781)$(743)
Earnings (loss) from discontinued operations, net of taxes$896$(329)$(322)

December 31 (In millions)20142013
Assets
Cash and equivalents$320$375
Investment securities848834
Financing receivables – net 19,63620,418
Other receivables413521
Property, plant and equipment – net 141191
Goodwill(a)537799
Other intangible assets – net 109179
Deferred income taxes1,7552,603
Other13,02616,859
Assets of discontinued operations$36,785$42,779
Liabilities
Short-term borrowings$273$764
Accounts payable549620
Long-term borrowings234288
Deferred income taxes238250
Other8453,988
Liabilities of discontinued operations$2,139$5,910

(a) We tested Real Estate goodwill for impairment using data as of July 1 in both 2014 and 2013. Fair value was determined using an income approach and based upon results of testing, goodwill was not impaired in either period.

Other assets at December 31, 2014 and 2013 primarily comprised real estate investments at our Real Estate business.

REAL ESTATE

In connection with the GE Capital Exit Plan, we announced the planned disposition of our Real Estate business and classified the business as discontinued operations and recorded an estimated loss on disposal of $1,808 million ($2,354 million after tax) in the first quarter of 2015. We expect to complete the disposal by the end of 2015.

FINANCIAL INFORMATION FOR REAL ESTATE
(In millions)201420132012
Operations
Total revenues (loss)$2,969 $3,915$3,654
Interest$(1,079)$(1,278)$(1,883)
Operating and administrative(870)(960)(911)
Depreciation and amortization(326)(396)(542)
Provision for losses on financing receivables86(28)(72)
Earnings (loss) from discontinued operations before income taxes   780 1,253246
Benefit (provision) for income taxes 223 472 562
Earnings (loss) from discontinued operations, net of taxes$1,003 $1,725$808
Disposal
Gain (loss) on disposal before income taxes$- $-$-
Benefit (provision) for income taxes - - -
Gain (loss) on disposal, net of taxes$- $-$-
Earnings (loss) from discontinued operations, net of taxes(a)$1,003 $1,725$808

(a) Earnings (loss) from discontinued operations attributable to the company, before income taxes, was $782 million, $1,260 million and $251 million for the years ended December 31, 2014, 2013 and 2012, respectively.

GE Money Japan

During the third quarter of 2008, we completed the sale of GE Money Japan, which included our Japanese personal loan business. Under the terms of the sale, we reduced the proceeds from the sale for estimated refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese yen (approximately $3,000 million) remaining our responsibility. On February 26, 2014, we reached an agreement with the buyer to pay 175 billion Japanese yen (approximately $1,700 million) to extinguish this obligation. We have no remaining amount payable under the February 26, 2014 agreement as our reserve for refund claims of $1,836 million at December 31, 2013 was fully paid in the six months ended June 30, 2014.

FINANCIAL INFORMATION FOR GE MONEY JAPAN
(In millions)201420132012
Earnings (loss) from discontinued operations, net of taxes$59 $(1,636)$(649)

WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.

 

The remaining active claims have been brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). At December 31, 2014, such claims consisted of $3,694 million of individual claims generally submitted before the filing of a lawsuit (compared to $5,643 million at December 31, 2013) and $9,225 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims) (compared to $6,780 million at December 31, 2013). The total amount of these claims, $12,919 million, reflects the purchase price or unpaid principal balances of the loans at the time of purchase and does not give effect to pay downs or potential recoveries based upon the underlying collateral, which in many cases are substantial, nor to accrued interest or fees. As of December 31, 2014, these amounts do not include approximately $1,070 million of repurchase claims relating to alleged breaches of representations that are not in litigation and that are beyond the applicable statute of limitations. WMC believes that repurchase claims brought based upon representations and warranties made more than six years before WMC was notified of the claim would be disallowed in legal proceedings under applicable statutes of limitations.

Reserves related to repurchase claims made against WMC were $809 million at December 31, 2014, reflecting a net increase to reserves in the twelve months ended December 31, 2014 of $9 million due to incremental provisions offset by settlement activity. The reserve estimate takes into account recent settlement activity and is based upon WMC’s evaluation of the remaining exposures as a percentage of estimated lifetime mortgage loan losses within the pool of loans supporting each securitization. Settlements in prior periods reduced WMC’s exposure on claims asserted in certain securitizations and the claim amounts reported above give effect to these settlements.

ROLLFORWARD OF THE RESERVE
December 31 (In millions)2014 2013
Balance, beginning of period$800 $633
Provision365354
Claim resolutions / rescissions (356) (187)
Balance, end of period$809 $800

Given the significant litigation activity and WMC’s continuing efforts to resolve the lawsuits involving claims made against WMC, it is difficult to assess whether future losses will be consistent with WMC’s past experience. Adverse changes to WMC’s assumptions supporting the reserve may result in an increase to these reserves. Taking into account both recent settlement activity and the potential variability of settlements, WMC estimates a range of reasonably possible loss from $0 to approximately $500 million over its recorded reserve at December 31, 2014. This estimate excludes any possible loss associated with an adverse court decision on the applicable statute of limitations, as WMC is unable at this time to develop such a meaningful estimate.

At December 31, 2014, there were 15 lawsuits involving claims made against WMC arising from alleged breaches of representations and warranties on mortgage loans included in 14 securitizations. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. Although the alleged claims for relief vary from case to case, the complaints and counterclaims in these actions generally assert claims for breach of contract, indemnification, and/or declaratory judgment, and seek specific performance (repurchase of defective mortgage loan) and/or money damages. Adverse court decisions, including in cases not involving WMC (such as the New York Court of Appeals’ decision on statute of limitations, expected in 2015), could result in new claims and lawsuits on additional loans. However, WMC continues to believe that it has defenses to the claims asserted in litigation, including, for example, based on causation and materiality requirements and applicable statutes of limitations. It is not possible to predict the outcome or impact of these defenses and other factors, any of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.

WMC has also received indemnification demands, nearly all of which are unspecified, from depositors/underwriters/sponsors of RMBS in connection with lawsuits brought by RMBS investors concerning alleged misrepresentations in the securitization offering documents to which WMC is not a party or, in two cases, involving mortgage loan repurchase claims made against RMBS sponsors. WMC believes that it has defenses to these demands.

To the extent WMC is required to repurchase loans, WMC’s loss also would be affected by several factors, including pay downs, accrued interest and fees, and the value of the underlying collateral. The reserve and estimate of possible loss reflect judgment, based on currently available information, and a number of assumptions, including economic conditions, claim and settlement activity, pending and threatened litigation, court decisions regarding WMC’s legal defenses, indemnification demands, government activity, and other variables in the mortgage industry. Actual losses arising from claims against WMC could exceed these amounts and additional claims and lawsuits could result if actual claim rates, governmental actions, litigation and indemnification activity, adverse court decisions, actual settlement rates or losses WMC incurs on repurchased loans differ from its assumptions.

FINANCIAL INFORMATION FOR WMC
(In millions)201420132012
Total revenues (loss)$(291) $(346)$(500)
Earnings (loss) from discontinued operations, net of taxes$(199) $(232)$(337)

Other

During the fourth quarter of 2013, we announced the planned disposition of Consumer Russia and classified the business as discontinued operations. We completed the sale in the first quarter of 2014 for proceeds of $232 million.

FINANCIAL INFORMATION FOR CONSUMER RUSSIA
(In millions)201420132012
Total revenues (loss)$24 $260$276
Gain (loss) on disposal, net of taxes$4 $(170)$-
Earnings (loss) from discontinued operations, net of taxes$(2) $(193)$33

During the first quarter of 2013, we announced the planned disposition of CLL Trailer Services and classified the business as discontinued operations. We completed the sale in the fourth quarter of 2013 for proceeds of $528 million.

FINANCIAL INFORMATION FOR CLL TRAILER SERVICES
(In millions)201420132012
Total revenues (loss)$1 $271$399
Gain (loss) on disposal, net of taxes$12 $18$-
Earnings (loss) from discontinued operations, net of taxes$37 $(2)$22

During the first quarter of 2012, we announced the planned disposition of Consumer Ireland and classified the business as discontinued operations. We completed the sale in the third quarter of 2012 for proceeds of $227 million.

FINANCIAL INFORMATION FOR CONSUMER IRELAND
(In millions)201420132012
Total revenues (loss)$- $-$7
Gain (loss) on disposal, net of taxes$1 $6$(121)
Earnings (loss) from discontinued operations, net of taxes$1 $6$(195)