<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-K
-----------
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
-----------
Commission file number 0-14804
-----------
General Electric Capital Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1109503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 Long Ridge Road, Stamford, Connecticut 06927 (203) 357-4000
(Address of principal executive offices) (Zip Code) (Registrant's telephone
number, including area code)
-----------
SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT:
Name of each
Title of each class exchange on which registered
------------------- ----------------------------
7-1/2% Guaranteed Subordinated Notes Due August 21, 2035 New
York Stock Exchange
SECURITIES REGISTERED PURSUANT
TO SECTION 12(g) OF THE ACT:
Title of each class
Common Stock, par value $10,000 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by nonaffiliates
of the registrant at March 25, 1996. None.
At March 25, 1996, 101 shares of common stock with a par value of
$10,000 were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The consolidated financial statements of General Electric
Company, set forth in the Annual Report on Form 10-K of General
Electric Company for the year ended December 31, 1995 are
incorporated by reference into Part IV hereof.
Item 1. Business- Property and Casualty Reserves for Unpaid
Losses and Loss Adjustment Expenses, set forth in the Annual
Report on Form 10-K of GE Global Insurance Holding Corporation
for the year ended December 31, 1995 is incorporated by
reference into Part I hereof.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM
10-K WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
TABLE OF CONTENTS
Page
-----
PART I
Item 1. Business...................................... 1
Item 2. Properties.................................... 12
Item 3. Legal Proceedings............................ 12
Item 4. Submission of Matters to a Vote of Security
Holders....................................... 12
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............... 13
Item 6. Selected Financial Data..................... 13
Item 7. Management's Discussion and Analysis of
Results of Operations......................... 14
Item 8. Financial Statements and Supplementary Data... 24
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.................................... 51
PART III
Item 10. Directors and Executive Officers of the
Registrant.................................... 51
Item 11. Executive Compensation....................... 51
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................... 51
Item 13. Certain Relationships and Related
Transactions.................................. 51
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................... 51
<PAGE>
PART I
Item 1. Business.
GENERAL ELECTRIC CAPITAL SERVICES, INC.
General Electric Capital Services, Inc. (herein, together
with its consolidated affiliates, called "GE Capital Services",
"the Corporation" or "GECS" unless the context otherwise requires)
was incorporated in 1984 in the State of Delaware. Until February
1993, the name of the Corporation was General Electric Financial
Services, Inc. All outstanding common stock of GE Capital
Services is owned by General Electric Company, a New York
corporation ("GE Company"). The business of GE Capital Services
consists of ownership of two principal subsidiaries which,
together with their affiliates, constitute GE Company's principal
financial services businesses. GE Capital Services is the sole
owner of the common stock of General Electric Capital Corporation
("GE Capital" or "GECC") and GE Global Insurance Holding
Corporation ("GE Global Insurance" or "GIH").
In November 1994, the Corporation elected to terminate the
operations of Kidder, Peabody Group Inc. ("Kidder, Peabody") by
initiating an orderly liquidation of its assets and liabilities.
As part of the liquidation plan, the Corporation received
securities of Paine Webber Group Inc. in exchange for certain
broker-dealer assets and operations. Principal activities that
were discontinued include securities underwriting, sales and
trading of equity and fixed income securities, financial futures
activities, advisory services for mergers, acquisitions, and other
corporate finance matters, research services and asset management.
Kidder, Peabody has been classified as a discontinued operation in
the financial statements and supplementary data in Item 8 of this
Form 10-K.
GE Capital Services' principal executive offices are located
at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone
number (203) 357-4000).
GENERAL ELECTRIC CAPITAL CORPORATION
GE Capital was incorporated in 1943 in the State of New York
under the provisions of the New York Banking Law relating to
investment companies, as successor to General Electric Contracts
Corporation, which was formed in 1932. The capital stock of GE
Capital was contributed to GE Capital Services by GE Company in
June 1984. Until November 1987, the name of the corporation was
General Electric Credit Corporation. The business of GE Capital
originally related principally to financing the distribution and
sale of consumer and other products of GE Company. Currently,
however, the types and brands of products financed and the
financial services offered are significantly more diversified.
Very little of the financing provided by GE Capital involves
products that are manufactured by GE Company.
GE Capital operates in four financing industry segments and
in a specialty insurance industry segment. GE Capital's financing
activities include a full range of leasing, lending, equipment
management services and annuities. GE Capital's specialty
insurance activities include providing financial guaranty insurance,
principally on municipal bonds and structured finance issues, private
mortgage insurance and creditor insurance covering international
customer loan repayments. GE Capital is an equity investor in a
retail organization and certain other service and financial services
organizations. GE Capital's operations are subject to a variety of
regulations in their respective jurisdictions.
1
<PAGE>
Services of GE Capital are offered primarily throughout the
United States, Canada, Europe and the Pacific rim. GE Capital's
principal executive offices are located at 260 Long Ridge Road,
Stamford, Connecticut 06927. At December 31, 1995, GE Capital and
affiliates employed approximately 37,000 persons.
GE GLOBAL INSURANCE HOLDING CORPORATION
GE Global Insurance, together with its affiliates, writes all
lines of reinsurance other than title and annuities. Employers
Reinsurance Corporation ("ERC"), GE Global Insurance's principal
U.S. affiliate, reinsures property and casualty risks written by
more than 1,000 insurers around the world, and also writes certain
specialty lines of insurance on a direct basis, principally excess
workers' compensation for self-insurers, errors and omissions
coverage for insurance and real estate agents and brokers, excess
indemnity for self-insurers of medical benefits, and libel and
allied torts. Other U.S. property and casualty affiliates write
excess and surplus lines insurance, and provide reinsurance
brokerage services. GE Global Insurance also is engaged in the
reinsurance of traditional life insurance products, including
term, whole and universal life, annuities, group long term health
products and the provision of financial reinsurance to life
insurers.
In July 1995, GE Global Insurance, through its ERC affiliate,
acquired a majority of two German reinsurance businesses, Frankona
Reinsurance Group in Munich, Germany, and Aachen Reinsurance Group
located in Aachen, Germany. These businesses together with other
ERC affiliates located in Denmark and the United Kingdom write
property and casualty and life reinsurance, principally in Europe
and elsewhere throughout the world.
In December 1994, certain life and property and casualty
affiliates of GE Capital were transferred to ERC. These
affiliates had been managed by ERC since 1986.
Insurance and reinsurance operations are subject to
regulation by various insurance regulatory agencies.
GE Global Insurance and its affiliates conduct business
through 14 U.S. offices and 16 non-U.S. offices. GE Global
Insurance and certain U.S. subsidiaries are licensed in all of the
United States, the District of Columbia and certain provinces of
Canada and write property and casualty reinsurance on a direct
basis and through brokers. The principal offices of GE Global
Insurance are located at 5200 Metcalf Avenue, Overland Park,
Kansas 66201. At December 31, 1995, GE Global Insurance and
affiliates employed approximately 2,200 persons.
Item 1. Business - Property and Casualty Reserves for Unpaid
Losses and Loss Adjustment Expenses, set forth in the Annual
Report on Form 10-K of GE Global Insurance Holding Corporation for
the year ended December 31, 1995 is incorporated by reference
hereto.
2
<PAGE>
INDUSTRY SEGMENTS
The Corporation provides a wide variety of financing, asset
management, and insurance products and services which are
organized into the following industry segments:
Consumer Services--private-label and bank credit card loans,
personal loans, time sales and revolving credit and
inventory financing for retail merchants, auto leasing and
inventory financing, mortgage servicing and annuity and
mutual fund sales.
Specialized Financing--loans and financing leases for major
capital assets, including industrial facilities and
equipment, and energy-related facilities; commercial and
residential real estate loans and investments; and loans to
and investments in management buy-outs, including those
with high leverage, and corporate recapitalizations.
Equipment Management--leases, loans and asset management
services for portfolios of commercial and transportation
equipment including aircraft, trailers, auto fleets,
modular space units, railroad rolling stock, data
processing equipment, ocean-going containers and
satellites.
Mid-Market Financing--loans and leases for middle-market
customers including manufacturers, distributors and end
users, of a variety of commercial equipment, including data
processing equipment, medical and diagnostic equipment, and
equipment used in construction, manufacturing, office
applications and telecommunications activities.
Specialty Insurance--U.S. and international multiple-line
property and casualty reinsurance, certain directly
written specialty insurance and life reinsurance; financial
guaranty insurance, principally on municipal bonds and structured
finance issues; private mortgage insurance; and creditor
insurance covering international customer loan repayments.
Refer to Item 7, "Management's Discussion and Analysis of
Results of Operations," in this Form 10-K for discussion of the
Corporation's Portfolio Quality. A description of GECS principal
businesses by industry segment follows:
CONSUMER SERVICES
GNA
GNA writes and markets tax-deferred, structured and immediate
annuities, traditional and universal life insurance, accident and
health insurance including long-term care insurance and sells
proprietary and third party mutual funds through independent and
captive agents and financial institutions. In 1995, GNA acquired
AMEX Life Assurance Company's long-term care insurance business,
as well as its long-term disability, corporate owned life
insurance and accidental death insurance businesses.
GNA is headquartered in Seattle, Washington.
3
<PAGE>
Auto Financial Services
Auto Financial Services ("AFS") is a full service provider of
automobile financing for automobile dealers, manufacturers and their
customers in North America, Europe and Asia.
In the United States, AFS is the leading independent auto
lessor and provides leasing products for new automobiles and
the growing used automobile leasing market. During 1995, AFS entered
the sub-prime loan financing market through the start-up of a new
business, Customized Auto Credit Services. AFS provides the private
label financing for American Isuzu Motors, Inc. and is a joint
venture partner with Volvo of North America. In addition, AFS provides
inventory financing programs and direct loans to segments of the
automotive industry, including dealers, rental car companies and leasing
companies.
In 1995, AFS expanded its European presence through
acquisitions of Credit de l'Est and Sovac SA in France, and Filea
S.p.A in Italy. Other European businesses include Mercurbank
(Austria), GE Capital Motor Finance (United Kingdom), Finanzia
(Spain) and Skandic-Bilfinans (Sweden).
AFS is active in the Asian automotive market through equity
investments in ASTRA Sedaya Finance (Indonesia), Taiwan Acceptance
Corporation, United Merchants Finance Private Ltd. (Singapore),
United Motor Works (Malaysia), GS Capital Corporation (Thailand)
and through majority ownership (80%) of Australian Guarantee
Limited (Taiwan). In 1995, AFS acquired 100% of United Merchants
Finance Ltd. (Hong Kong) and continues to provide financing under
the name GE Capital Finance Ltd.
AFS is headquartered in Barrington, Illinois.
Retailer Financial Services
Retailer Financial Services ("RFS") provides sales financing
services to distribution chains for various consumer industries.
Financing plans differ considerably by client, but fall into two
major categories: customized private-label credit card programs
with retailers and inventory financing programs with manufacturers,
distributors and retailers.
RFS purchases consumer receivables from retailers, primarily
in the United States and Canada, most of whom sell a variety of products
of various manufacturers on a time sales basis. The terms for these
financing plans differ according to the size of contract and credit
standing of the customer. Maximum maturities ordinarily do not
exceed 40 months. RFS generally maintains a security interest in
the merchandise financed. Financing is provided to consumers under
contractual arrangements both with and without recourse to retailers.
RFS' wide range of financial services includes application processing,
sales authorization, statement billings, customer services and
collection services.
RFS provides inventory financing for retailers primarily in
the appliance and consumer electronics industries. RFS maintains a
security interest in the inventory and, as part of the agreement,
retailers are required to provide insurance coverage for the
merchandise financed.
4
<PAGE>
GE Capital Credit Services ("GECCS") is a services
venture which provides statement printing, mailing, remittance
processing, credit card embossing, and specialized collections
services to over 75 million accounts. GECCS offers services to
the banking, utilities, telecommunications, insurance and
transportation industries.
RFS is headquartered in Stamford, Connecticut.
Global Consumer Finance
Global Consumer Finance ("GCF") is a leading provider of
credit services to non-U.S. retailers and consumers. GCF provides
private label credit cards and proprietary credit services to
retailers in Europe & Asia, as well as offering a variety of
direct-to-the-consumer credit programs such as consumer loans,
bankcards and credit insurance.
GCF provides financing to consumers in the United Kingdom
under contractual arrangements with retailers. GCF's wide range
of proprietary financial services includes private label credit
cards, credit promotion and accounting services, billing (in the
store's name) and customer credit and collection services.
Similar services are provided through GCF operations in Japan,
Scandinavia, Austria and Thailand and joint ventures in Spain,
Indonesia and India. GCF also provides consumers with MasterCard
(registered trademark) products.
During 1995, GCF acquired operations that provide credit card
services and consumer loans in Germany, Australia and Poland.
Service Bank provides financial services to German consumers
through its branch offices located inside Metro Group stores.
With the acquisition of the credit card operations of Coles Myer
Ltd., GCF entered the Australian private label retail credit
market. GCF entered the Eastern European financial services markets
through its purchase of Solidarnosc Chase D.T. Bank in Poland.
GCF is headquartered in Stamford, Connecticut.
Mortgage Servicing
GE Capital Mortgage Services, Inc. ("GECMSI"), wholly owned
by GE Capital Mortgage Corporation ("GECMC"), is engaged in the
business of servicing residential mortgage loans collateralized by
one-to-four-family homes located throughout the United States.
GECMSI obtains servicing through the purchase of mortgage loans
and servicing rights, and packages the loans it purchases into
mortgage-backed securities which it sells to investors. GECMSI
also originates and services home equity loans.
GECMSI is headquartered in Cherry Hill, New Jersey.
Consumer Financial Services
Consumer Financial Services ("CFS") issues and services
MasterCard (registered trademark) and Visa (registered trademark)
products originated through direct mail campaigns, private-label credit
card conversions, telemarketing and point-of-sale applications. CFS
also issues and services the GE Capital Corporate Card, providing payment
and information systems to help medium and large-size companies reduce
travel costs, and the GE Capital Purchasing Card, which helps companies
streamline purchasing and accounts payable processes.
5
<PAGE>
CFS originates, acquires and services home equity loans and
lines of credit, and services HUD-insured home improvement loans.
In addition to its headquarters in Mason, Ohio, CFS also has
offices in Connecticut, New Jersey, Ohio and Utah.
SPECIALIZED FINANCING
Commercial Real Estate
Commercial Real Estate Financing and Services ("CRE")
provides funds for the acquisition, refinancing and renovation of
a wide range of commercial and residential properties located
throughout the United States, and, to a lesser extent, in Canada,
Mexico and Europe. CRE also provides asset management services to
real estate investors and selected services to real estate owners.
Lending is a major portion of CRE's business in the form of
intermediate-term senior or subordinated fixed and floating-rate
loans secured by existing income-producing commercial properties
such as office buildings, rental apartments, shopping centers,
industrial buildings, mobile home parks, hotels and warehouses.
Loans range in amount from single-property mortgages typically
greater than $5 million to multi-property portfolios of several
hundred million dollars. Approximately 90% of all loans are
senior mortgages.
During 1995, CRE continued to broaden its investment base by
buying or providing restructuring financing for portfolios of real
estate, mortgage loans, limited partnerships, and tax-exempt
bonds.
CRE also offers a variety of real estate management services
to outside investors, institutions, corporations, investment
banks, and others through its GE Capital Realty Group subsidiary.
Services include acquisitions and dispositions, strategic asset
positioning, asset restructuring, facilities management and loan
servicing. CRE, through its GE Capital-ResCom venture, also
offers owners of multi-family housing ways to reduce costs and
enhance value in properties by offering buying services (e.g.
lighting, appliances) and bundled telecommunications and video
services.
CRE has offices located throughout the United States, as well
as offices in Canada, Mexico, Singapore, Sweden, and throughout
the United Kingdom, in addition to its headquarters in Stamford,
Connecticut.
Global Project and Structured Finance
Global Project and Structured Finance ("GPSF") provides
financing for major capital investments in the energy, industrial
and infrastructure sectors, historically concentrating in the
United States market but more recently conducting business in
Asia, Latin America and Europe. At year-end 1995, GPSF's portfolio
included investments in energy-related facilities, industrial
facilities and equipment, infrastructure projects,
telecommunications equipment, railcars and marine vessels.
At December 31, 1995, GPSF's portfolio consisted of finance
leases (both direct financing and leveraged leases), operating
leases, loans (both senior and subordinated) and equity
investments (including collateralized, sinking fund and adjustable
rate preferred stock, joint ventures, and partnerships). The
portfolio is generally secured by liens on the financial assets,
preferred mortgages, assignments of earnings, insurance,
guarantees, and rights to cash flow streams.
6
<PAGE>
GPSF provides syndication and private placement services for
GE Capital and GE Company transactions. When such services are
performed, GPSF typically retains a portion of the transaction and
places the remainder with one or more other financial
institutions.
In addition to its Stamford, Connecticut headquarters, GPSF
has offices in Mexico, the United Kingdom, Singapore, Hong Kong,
China and India.
Commercial Finance
Commercial Finance ("CF") provides revolving and term debt
financing for working capital and capital expansion. The
portfolio is diversified with approximately 140 accounts dispersed
throughout the United States and, to a lesser degree, Canada and
Europe. Loans range in amount from $5 million to several hundred
million dollars, and represent investments in the cable
television/media, retail, healthcare, manufacturing and food and
beverage industries. CF is active in the loan syndication market,
selling and occasionally purchasing participations in leveraged
transactions.
CF has offices throughout the United States including its
headquarters in Stamford, Connecticut and plans to open its
European office in the United Kingdom.
Equity Capital Group
Equity Capital Group ("ECG") purchases equity investments,
primarily convertible preferred and common stock investments
including, in some cases, stock warrants convertible into equity
ownership. ECG's primary objective is to realize long-term
capital appreciation. Investments include the retail, financial
services, healthcare, food and beverage, cable and broadcasting
industries.
The portfolio is geographically diversified with customers
located throughout the United States, as well as in Canada and Europe.
ECG is headquartered in Stamford, Connecticut.
EQUIPMENT MANAGEMENT
Aviation Services
GE Capital Aviation Services ("GECAS") is a global commercial
aviation financial services business that offers a broad range of
financial products to airlines and aircraft operators, aircraft
owners, lenders and investors. Financial products include
financing leases, operating leases, tax-advantaged and other
incentive-based financing. GECAS also provides asset management,
marketing, and technical support services to aircraft owners,
lenders and investors.
At December 31, 1995, the GECAS fleet comprised 890 owned and
managed aircraft on lease to 157 customers in 54 countries.
GECAS has offices in California, Ireland and a number of
other locations worldwide including Great Britain, China, Hong
Kong and Singapore and is headquartered in Stamford, Connecticut.
7
<PAGE>
Fleet Services
GE Capital Fleet Services ("GECFS") is the leading corporate
fleet management company in North America and Europe with 750,000
cars, trucks and specialty vehicles under lease and service
management. GECFS offers finance and operating leases to several
thousand customers with an average lease term of 33 months. The
primary product in North America is a Terminal Rental Adjustment
Clause (TRAC) lease through which the customer assumes the
residual risk--that is, risk that the book value will be greater
than market value at lease termination. In Europe, the primary
product is a closed-end lease in which GECFS assumes residual
risk. In addition to the services directly associated with the
lease, GECFS offers fleet management services designed to reduce
customers' total fleet management costs. These services include,
among others, maintenance management programs, accident services,
national account purchasing programs, fuel programs, title and
licensing services and safety programs. GECFS' customer base is
diversified with respect to industry and geography and includes
many Fortune 500 companies.
During 1995, GECFS added 13,000 vehicles to its European
fleet, which now totals 175,000 vehicles, with the purchase of
Leasecontracts, plc in the United Kingdom.
GECFS' headquarters are located in Eden Prairie, Minnesota.
Genstar Container
Genstar Container Corporation ("Genstar") is the world's
largest lessor of intermodal shipping containers. Genstar
maintains a fleet of over 1,300,000 TEU ('twenty-foot equivalent
units') of dry-cargo, refrigerated and specialized containers for
global intermodal cargo transport. Lessees are primarily shipping
lines which lease on a long-term or master lease basis.
Genstar is headquartered in San Francisco, California.
Transport International Pool
Transport International Pool ("TIP") is the leading trailer
specialist offering diverse trailer programs and associated
services. TIP's fleet of over 100,000 dry freight, refrigerated
and double vans, flatbeds and specialized trailers is available
for rent, lease or purchase at over 180 locations in the United
States, Canada, Mexico and Europe. TIP also finances new and used
trailers, buys trailer fleets, and structures sale-leaseback
transactions. TIP's customer base comprises trucking companies,
manufacturers and retailers worldwide.
TIP is headquartered in Devon, Pennsylvania.
Railcar Services
General Electric Railcar Services Corporation ("GERSCO") has
a fleet of approximately 140,000 railcars leased to others in
North America, principally under operating leases. Railcar maintenance
and repair services are provided by General Electric Railcar Repair
Services Corporation, a wholly-owned affiliate of GERSCO, at its
15 repair centers in the United States and Canada.
GERSCO is headquartered in Chicago, Illinois.
8
<PAGE>
Technology Management Services
GE Capital Technology Management Services ("GE Capital TMS"),
is a leader in providing a broad spectrum of services that enable customers
to utilize information technology more efficiently by combining consulting,
services and financing options to help businesses plan, acquire, manage
and refresh technology assets. These services and financing options
include, among others, acquisition, leasing, rental, installation, help
desk network services, audio visual rental and show services, and
test equipment rental, repair and calibration services.
During 1995, GE Capital TMS assumed responsibility for GE
Capital's Commercial Processing Service Center, an information
technology data center and outsourcing provider, and established
the Network and Asset Management business unit, enhancing GE
Capital TMS' information technology help desk and network service
capabilities. Also in 1995, GE Capital TMS acquired Andersen
Consulting's OM/NI Solution Center as part of an alliance formed
between GE Capital TMS and Andersen Consulting designed to promote
full service information technology.
GE Capital TMS is headquartered in Norcross, Georgia, and has
other principal locations in Canada and California.
Satellite Telecommunications Services
GE American Communications ("GE Americom") is a leading
satellite service supplier to a diverse array of customers,
including the broadcast and cable TV industries, broadcast radio,
business information and integrated communications services for
government and commercial customers. GE Americom operates 13
communications satellites and maintains a supporting network of
earth stations, central terminal offices, and telemetry, tracking
and control facilities. GE Americom's GE Capital Spacenet
Services business offers a full range of one-way and two-way Very
Small Aperture Terminal (VSAT) network products and services.
GE Americom is headquartered in Princeton, New Jersey.
Modular Space
GE Capital Modular Space ("GECMS") maintains a fleet of
approximately 68,000 non-residential relocatable modular
structures for rental, lease and sale from over 100 facilities in
North America and Europe. Markets served include construction,
education, healthcare, financial, commercial, institutional and
government. GECMS' operating leases average 12-18 months.
During 1995, GECMS acquired the fleet assets of HOB Units,
N.V. in Europe and Elder Equipment Leasing, Inc. in the U.S.
GECMS is headquartered in Malvern, Pennsylvania.
MID-MARKET FINANCING
Commercial Equipment Financing
Commercial Equipment Financing ("CEF") offers a broad line of
financial products including leases, loans and municipal financing
to middle-market customers including manufacturers, distributors,
dealers and end-users. Products are designed to meet customers'
financing needs and are either held for CEF's own account or
brokered to third parties.
9
<PAGE>
Generally, transactions range in size from $50 thousand to
$50 million, with financing terms from 36 to 120 months. CEF also
maintains an asset management operation that both redeploys
off-lease equipment and monitors asset values.
The portfolio includes loans and leases for vehicles,
manufacturing equipment, corporate aircraft, construction
equipment, medical diagnostic equipment, office equipment,
telecommunications equipment and electronics.
CEF operates from offices throughout the United States,
Puerto Rico, Canada, Mexico, Europe, India and Asia and through
joint ventures in Indonesia and China. CEF is headquartered in
Danbury, Connecticut.
Vendor Financial Services
Vendor Financial Services ("VFS") provides captive financing
services to over 75 equipment manufacturers in 22 countries and
3,500 distributors and dealers in seven countries. Customers
include telecommunications, information technology, healthcare,
manufacturing and office equipment businesses. Financing programs
are tailored to meet the individual needs of each manufacturer and
distributor and include sales force training, marketing support
and customized financing products. Funding, billing, collections
and other related services are provided by several highly
automated service operations around the world. VFS' typical
transaction size ranges from $2,000 to $150,000, with typical
terms between 36 to 60 months. Security interests are generally
maintained in the assets being financed.
During 1995, VFS acquired Pallas Leasing Group located in the
United Kingdom. Pallas provides financing services to leading
manufacturers, dealers and distributors in the telecommunications,
information technology and office equipment industries.
Sales offices are located worldwide at sites that include the
United States, Canada, the United Kingdom, Spain, Sweden, Mexico,
France, Hong Kong, India and elsewhere in Asia. VFS is
headquartered in Danbury, Connecticut.
GE Capital Hawaii
GE Capital Hawaii Inc. ("GECH") operates in the state of
Hawaii and territory of Guam. Through a network of 10 branch
offices, GECH offers commercial and residential real estate loans,
auto and equipment leasing, inventory financing and equity lines
of credit.
GECH is headquartered in Honolulu, Hawaii.
SPECIALTY INSURANCE
In addition to GE Global Insurance Holding Corporation (discussed
above), GECS' principal specialty insurance businesses are as
follows.
Financial Guaranty Insurance
FGIC Corporation ("FGIC"), through its wholly-owned
subsidiary Financial Guaranty Insurance Company ("Financial
Guaranty"), is an insurer of municipal bonds, including new issues
and bonds traded in the secondary market and bonds held in unit
investment trusts and mutual funds. Financial Guaranty also
guarantees certain structured debt issues in the taxable market.
The guaranteed principal, after reinsurance, amounted to
approximately $99 billion at December 31, 1995. Approximately 87%
of the business written to date by Financial Guaranty has been
municipal bond insurance.
10
<PAGE>
Companies affiliated with Financial Guaranty offer a variety
of other services to state and local governments and agencies.
These affiliates provide liquidity facilities in variable-rate
transactions, municipal investment products and cash management
services.
FGIC is headquartered in New York, New York.
Mortgage Insurance
GE Capital Mortgage Insurance is engaged principally in providing
residential mortgage guaranty insurance. Operating in 25 field
locations, GE Capital Mortgage Insurance is licensed in 50 states
and the District of Columbia and, at December 31, 1995, was the
primary insurance carrier for over 1,305,000 residential homes,
with total insurance in force aggregating approximately $160 billion
and total risk in force aggregating approximately $33 billion. When a
claim is received, GE Capital Mortgage Insurance proceeds by either
paying a guaranteed percentage based on the specified coverage, or
paying the mortgage and delinquent interest, taking title to the
property and arranging for its sale. In 1995, GE Capital Mortgage
Insurance also began providing mortgage quaranty insurance in the
United Kingdom and Canada.
GE Capital Mortgage Insurance is headquartered in Raleigh,
North Carolina.
Creditor Insurance
Consolidated Financial Insurance ("CFI"), headquartered in
Brentford, Middlesex, England, provides creditor insurance in the
European Union. The insurance, which covers loan repayments, is
sold through banks, building societies and other lenders to retail
borrowers.
Insurance Services
Heritage Insurance Group primarily comprises a California
property and casualty company and an Arizona life insurance
company. Heritage is licensed to offer life, accident and health
and property coverage in the District of Columbia and all states
except New York. Viking Insurance Company, based in Bermuda,
provides life, property and casualty reinsurance coverage. Other
GE Capital Insurance Services' operations market and distribute
insurance-related products through direct brokerage and agent
networks.
Insurance Services is headquartered in Stamford, Connecticut.
REGULATIONS AND COMPETITION
The Corporation's activities are subject to a variety of
federal and state regulations including, at the federal level, the
Consumer Credit Protection Act, the Equal Credit Opportunity Act
and certain regulations issued by the Federal Trade Commission. A
majority of states have ceilings on rates chargeable to customers
in retail time sales transactions, installment loans and revolving
credit financing. Common carrier services of GE Americom are
subject to regulation by the Federal Communications Commission.
Insurance and reinsurance operations are subject to regulation by
various state insurance commissions or foreign regulatory
authorities, as applicable. The Corporation's international
operations are subject to regulation in their respective
jurisdictions. To date such regulations have not had a material
adverse effect on the Corporation's volume of financing operations
or profitability.
11
<PAGE>
The Corporation's charges for providing financing services
are changed from time to time either on a general basis or for
specific types of financing when warranted in light of competition
or interest and other costs. The businesses in which the
Corporation engages are highly competitive. The Corporation is
subject to competition from various types of financial
institutions, including banks, thrifts, investment banks, credit
unions, leasing companies, consumer loan companies, independent
finance companies, finance companies associated with manufacturers
and reinsurance companies.
Item 2. Properties.
GE Capital Services and its subsidiaries conduct their
businesses from various facilities, most of which are leased.
Item 3. Legal Proceedings.
The following is not material to the Corporation but is
provided for informational purposes. As previously reported,
following GE Company's announcement on April 17, 1994, of a $210
million charge to net earnings based upon its discovery of false
trading profits at its indirect subsidiary, Kidder, Peabody & Co.,
Incorporated ("Kidder"), the United States Securities and Exchange
Commission ("SEC"), the United States Attorney for the Southern
District of New York, and the New York Stock Exchange initiated
investigations relating to the false trading profits. On January
9, 1996, the SEC initiated administrative enforcement proceedings
against the former head of Kidder's government securities trading
desk, Joseph Jett, alleging that he engaged in securities fraud
and other violations and against two of his former supervisors for
failure to supervise. Also, two civil suits purportedly brought
on behalf of GE Company as shareholder derivative actions were
filed in New York State Supreme Court in New York County. Both
suits claim that GE Company's directors breached their fiduciary
duties to GE Company by failing to adequately supervise and
control the Kidder employee responsible for the irregular trading.
One suit, claiming damages of over $350 million, was filed on May
10, 1994, by the Teachers' Retirement System of Louisiana against
GE Company, its directors (other than Messrs. Dammerman, Opie and
Penske), Kidder, its parent, Kidder, Peabody Group Inc., and
certain of Kidder's former officers and directors. The other suit
was filed on June 3, 1994, by William Schrank and others against
GE Company's directors claiming unspecified damages and other
relief. On May 19, 1995, GE Company and the director defendants
moved to dismiss the amended consolidated complaint for failure to
make a pre-litigation demand, among other reasons. In addition,
various shareholders of GE Company have filed two purported class
action suits claiming that GE Company and Kidder, and certain of
Kidder's former officers and employees, allegedly violated federal
securities laws by issuing statements concerning GE Company's
financial condition that included the false trading profits at
Kidder, and seeking compensatory damages for shareholders who
purchased GE Company's stock beginning as early as January 1993.
The defendants filed motions to dismiss these purported class
action suits. On October 4, 1995, the court dismissed the
complaint against GE Company, but denied the motion to dismiss the
complaint against Kidder. On November 3, 1995, the plaintiffs in
the case against GE Company appealed the trial court's dismissal
of their complaint to the Second Circuit Court of Appeals.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted
12
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
See note 12 to the consolidated financial statements. The
common stock of the Corporation is owned entirely by GE Company
and, therefore, there is no trading market in such stock.
Item 6. Selected Financial Data
The following selected financial data should be read in
conjunction with the financial statements of GE Capital Services
and consolidated affiliates and the related notes to consolidated
financial statements.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1995 1994 1993 1992 1991
(Dollar amounts in millions) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earned Income.................................... $ 26,492 $ 19,875 $ 17,276 $ 14,418 $ 13,053
Earnings from continuing operations.............. 2,415 2,085 1,567 1,331 1,215
Earnings (loss) from discontinued operations..... - (1,189) 240 168 41
Net earnings..................................... 2,415 896 1,807 1,499 1,256
Return on common equity<F1><F2>.................. 21.98% 20.14% 16.59% 15.82% 16.48%
GECS ratio of earnings to fixed charges.......... 1.53 1.65 1.63 1.46 1.35
GECC ratio of earnings to fixed charges.......... 1.51 1.63 1.62 1.44 1.34
GECC ratio of debt to equity<F1>................. 7.89 7.94 7.96 7.91 7.80
Financing receivables - net...................... 93,272 $ 76,357 $ 63,948 $ 59,388 $ 55,752
Percent of allowance for losses on financing
receivables to total financing receivables....... 2.63% 2.63% 2.63% 2.63% 2.63%
Total assets..................................... $185,729 $144,967 $126,637 $ 99,010 $86,539
Short-term borrowings............................ 62,808 57,087 55,243 50,481 45,042
Long-term senior notes........................... 47,794 33,615 25,112 21,182 17,946
Long-term subordinated notes..................... 996 697 697 697 325
Minority interest................................ 2,522 1,465 1,301 994 865
Equity<F3>....................................... 12,774 9,380 10,809 8,884 7,758
Insurance premiums written for the year.......... 6,158 3,962 3,956 2,900 2,155
<FN>
<F1> Equity excludes unrealized gains and losses on investment
securities, net of tax.
<F2> Return on common equity is calculated using earnings from
continuing operations. Earnings are adjusted for preferred stock
dividends and equity excludes preferred stock.
<F3> The Corporation adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in
Debt and Equity Securities, on December 31, 1993, resulting in the
inclusion in equity, net of tax, of net unrealized gains on
investment securities of $989 million, net unrealized losses of
$821 million and net unrealized gains of $812 million at December
31, 1995, 1994 and 1993, respectively.
</TABLE>
13
<PAGE>
Item 7. Management's Discussion and Analysis of Results of
Operations.
Overview
The Corporation's net earnings were $2,415 million in 1995,
compared with $896 million in 1994 which were 50% less than
1993's earnings of $1,807 million. The 1995 increase reflected no
current year counterpart to the 1994 discontinued operations loss
from the Kidder, Peabody Group Inc. ("Kidder, Peabody"). Net
earnings from continuing operations (exclusive of Kidder,
Peabody) were $2,415 million in 1995 up 16% from $2,085 million in
1994, which increased 33% from 1993. Improved earnings from
continuing operations during 1995 and 1994 reflect the effects of
asset growth with approximately equal contributions from
origination volume and from acquisitions of businesses and
portfolios.
Discontinued Operations
In 1994 the Corporation elected to terminate the operations
of its securities broker-dealer, Kidder, Peabody. Discontinued
operations had no impact on 1995 earnings compared with a net loss
of $1,189 million in 1994 and earnings of $240 million in 1993.
The 1994 net loss from discontinued operations included a
provision of $868 million after taxes for exit costs related to
the liquidation of Kidder, Peabody. This liquidation was
substantially complete as of December 31, 1995. See note 2 to the
consolidated financial statements for further details of
discontinued operations.
Operating Results from Continuing Operations
Earnings from continuing operations were $2,415 million in
1995 up 16% from $2,085 million in 1994, which increased 33% from
1993. The 1995 increase reflected strong performances in the
financing segments resulting from asset growth partially offset by
a decrease in financing spreads (the excess of yields over
interest rates on borrowings) as the increase in borrowing rates
outpaced the improvements in yields. Earnings in the Specialty
Insurance segment increased due to growth, primarily from
acquisitions, and no current year counterpart to the 1994 adverse
loss development in private mortgage pool insurance. The 1994
increase reflected strong performances in the financing segments
resulting primarily from asset growth, improved financing spreads
and asset quality. Earnings in the Specialty Insurance segment
declined in 1994 due to higher insurance losses.
The correlation between interest rate changes and financing
spreads is subject to many factors and cannot be forecasted with
reliability. Although not necessarily relevant to future effects,
management estimates that, all else constant, an increase of 100
basis points in interest rates for all of 1995 would have reduced
net earnings by approximately $65 million.
Earned income increased 33% to $26.5 billion in 1995
following a 15% increase to $19.9 billion in 1994. Asset growth
in each of the Corporation's financing segments was the primary
reason for increased income from time sales, loans, financing
leases and operating lease rentals in both 1995 and 1994. Yields
on related assets increased during 1995 and 1994 after holding
essentially flat in 1993.
14
<PAGE>
Specialty Insurance revenues increased 51% to $7.4 billion in
1995 from $4.9 billion in 1994, which was essentially flat
compared with 1993. The 1995 increase reflected growth, primarily
associated with business acquisitions, in the property and
casualty reinsurance business. The 1994 increase reflected steady
growth in premium revenue, offset by a reduction in assumed life
reinsurance.
Interest expense on borrowings in 1995 was $6.7 billion, 47%
higher than in 1994 which was 28% higher than in 1993. Increases
in 1995 and 1994 reflected the effects of higher average
borrowings used to finance asset growth as well as the effects of
higher interest rates. Part of the 1995 increase resulted from a
shift during the year to longer-term funding. The composite
interest rate on the Corporation's borrowings was 6.76% in 1995
compared with 5.47% in 1994 and 4.96% in 1993.
Operating and administrative expenses were $7.8 billion in
1995, a 25% increase over 1994, which was 10% higher than 1993,
primarily reflecting higher investment levels and costs associated
with acquired businesses and portfolios over the past two years.
These increases were partially offset by reductions in provisions
for losses on investments charged to operating and administrative
expenses, principally those relating to commercial real estate
assets during 1995 and a combination of commercial real estate
assets, highly leveraged transactions and commercial aircraft
during 1994.
Insurance losses and policyholder and annuity benefits
increased 51% to $5.3 billion in 1995, compared with an 11%
increase to $3.5 billion in 1994. The 1995 increase primarily
resulted from the property and casualty reinsurance business' and
annuity business' acquisitions along with growth in originations.
The 1994 increase was the result of annuity benefits credited to
customers of the annuity business which was acquired in 1993 and
adverse loss development in private mortgage pool insurance,
particularly related to the effects of poor economic conditions
and housing value declines in southern California. These
increases were partially offset by lower policyholder benefits in
the life reinsurance business resulting from reduced assumed
volume.
Provision for losses on financing receivables increased to
$1,117 million in 1995 from $873 million in 1994, which decreased
from $987 million in 1993. These provisions principally related
to private-label credit cards, bank credit cards, auto loans and
auto leases in the Consumer Segment along with commercial real
estate loans, all of which are discussed below under Portfolio
Quality.
Depreciation and amortization of buildings and equipment and
equipment on operating leases increased 21% to $2,013 million in
1995 compared with $1,662 million in 1994, a 4% increase over
1993. The increase in both years was the result of additions to
equipment on operating leases through origination volume as well
as business and portfolio acquisitions.
Provision for income taxes was $1,105 million in 1995 (an
effective tax rate of 31.4%), compared with $864 million in 1994
(an effective tax rate of 29.3%), and $642 million in 1993 (an
effective tax rate of 29.1%). The higher provision for income
taxes in both 1995 and 1994 reflected increased pre-tax earnings
subject to statutory tax rates. The 1995 increase in the
effective tax rate resulted primarily from proportionately lower
tax-exempt income and an increase in non-U.S. income taxes.
Increases affecting the effective tax rate in 1994, compared with
1993, included proportionately lower tax-exempt income
and an increase in state and local income taxes. In addition,
there was no 1994 counterpart to the effects of certain 1993
financing transactions that reduced the Corporation's obligation
for deferred taxes. These increases were offset by the absence of
a 1994 counterpart to the unfavorable effects of the 1993 increase
of 1% in the U.S. federal income tax rate.
15
<PAGE>
Operating profit by industry segment
Operating profit of the Corporation, by industry segment, is
summarized in note 16 to the consolidated financial statements and
discussed below.
Consumer Services operating profit was $1,030 million in
1995, compared with $1,067 million in 1994, and $709 million in
1993. Strong performances during 1995 in the bank credit card,
annuity and non-U.S. private label credit card businesses,
resulting primarily from acquisition growth, were offset by losses
from adverse market conditions in the mortgage servicing business.
The strong 1994 growth in operating profit resulted from
origination and acquisition growth in the auto leasing business
and the private-label and bank credit card businesses. In
addition, the operations of the annuity business, purchased in
1993, were included for a full year in 1994.
Specialized Financing operating profit increased to $673
million in 1995 from $536 million in 1994, which increased 46%
over 1993. The 1995 increase resulted from lower provisions for
losses, particularly in the commercial real estate business, and
increased end-of-lease residual realization. The increase in 1994
principally reflected much lower provisions for losses on highly
leveraged investments and commercial real estate assets.
Equipment Management operating profit increased to $897
million in 1995 from $624 million in 1994, which was up from $246
million in 1993. Increases in both years reflected higher volume
in most businesses, largely the result of portfolio and business
acquisitions. The 1995 increase also resulted from increased
prices at the trailer, modular space and railcar businesses along
with the sale of an outdoor media business. The 1994 increase
also reflected improved trailer, container and railcar
utilization, and reduced expenses associated with redeployment and
refurbishment of owned aircraft compared with 1993.
Mid-Market Financing operating profit increased slightly to
$445 million in 1995 compared with $435 million in 1994 primarily
due to continued asset growth somewhat offset by reduced financing
spreads. Operating profit during 1994 increased 7% over 1993
reflecting higher levels of invested assets, partially as a result
of business and portfolio acquisitions and increased financing
spreads.
Specialty Insurance operating profit increased to $1,020
million in 1995 from $589 million in 1994, principally because
there was no current-year counterpart to the 1994 adverse loss
development in private mortgage pool insurance, the result of poor
economic conditions and housing value declines in southern
California. Operating profit in 1995 also was enhanced by
improved returns on investment securities and effects of
acquisitions. 1994 operating profit declined from $770 million in
1993, as private mortgage pool insurance losses more than offset
operating profit increases in other parts of the segment,
including primary mortgage insurance.
16
<PAGE>
Capital Resources and Liquidity
Statement of Financial Position
Investment securities for each of the past two years
comprised mainly investment-grade debt securities held by the
Corporation's specialty insurance and annuity businesses in
support of obligations to policyholders and annuitants. The
increase of $10.2 billion during 1995 was principally related to
acquisitions, increases in fair value resulting from lower year-
end interest rates and investment of premiums.
Financing receivables were $93.3 billion at year-end 1995,
net of allowance for doubtful accounts, up $16.9 billion over
1994. These receivables are discussed on page 21 and in notes 4
and 5 to the consolidated financial statements.
Other receivables were $12.9 billion and $6.0 billion at
December 31, 1995 and 1994, respectively. The 1995 increase was
almost entirely attributable to premiums receivable and
reinsurance recoverables, reflecting acquired businesses and a
general increase in underwriting activity.
Equipment on operating leases was $13.8 billion at December
31, 1995, up $934 million from 1994. Details by category of
investment can be found in note 6 to the consolidated financial
statements. Additions to equipment on operating leases were
$4.5 billion during 1995 and $5.6 billion during 1994.
Other assets totaled $21.1 billion at year-end 1995, an
increase of $4.5 billion from the end of 1994. $1.5 billion of
the increase relates to goodwill attributable to various
acquisitions, none of which was individually significant. The
remaining increase of $3.0 billion related principally to
acquisitions.
Insurance liabilities, reserves and annuity benefits were
$39.7 billion at year-end 1995, $10.3 billion higher than in 1994.
The increase was primarily attributable to the acquisitions of the
Frankona and Aachen Reinsurance Groups.
Borrowings were $111.6 billion at December 31, 1995, of which
$62.8 billion is due in 1996 and $48.8 billion is due in
subsequent years. Comparable amounts at the end of 1994 were
$91.4 billion in total, $57.1 billion due within one year and
$34.3 billion due thereafter. A large portion of the
Corporation's borrowings ($41.2 billion and $43.7 billion at the
end of 1995 and 1994, respectively) was issued in active
commercial paper markets that management believes will continue to
be a reliable source of short-term financing. Most of this
commercial paper is issued by GE Capital. The average remaining
terms and interest rates of GE Capital's commercial paper were 41
days and 5.88%, respectively, at the end of 1995 compared with 45
days and 5.90% at the end of 1994. GE Capital's leverage (ratio
of debt to equity, excluding from equity all unrealized gains and
losses on investment securities, net of tax) was 7.89 to 1 at the
end of 1995, compared with 7.94 to 1 at the end of 1994. By
comparison, including in equity all unrealized gains and losses on
investment securities, net of tax, GE Capital's ratio of debt to
equity was 7.59 to 1 at the end of 1995, compared with 8.43 to 1
at the end of 1994.
17
<PAGE>
GE Company has committed to make contributions to GE Capital
in the event of either a significant, specified decrease in the
ratio of GE Capital's earnings to fixed charges or a failure to
maintain a specified debt-to-equity ratio in the event certain GE
Capital preferred stock is redeemed. GE Company also has
guaranteed the Corporation's subordinated debt with a face amount
of $1,000 million and $700 million at December 31, 1995 and 1994,
respectively. Management believes the likelihood that GE Company
will be required to make contributions or payments under either
the commitments or the guarantees is remote.
Statement of Cash Flows
The Corporation's primary source of cash is financing
activity involving the continued rollover of short-term borrowings
and appropriate addition of borrowings, with a reasonable balance
of maturities. Over the past three years, the Corporation's
borrowings with maturities of 90 days or less have decreased by
$4.4 billion. New borrowings of $74.5 billion having maturities
longer than 90 days were added during those years, while $38.3
billion of such longer-term borrowings were retired. The
Corporation also generated $24.3 billion of cash from continuing
operating activities during the last three years.
The Corporation's principal use of cash has been investing in
assets to grow its businesses. Of the $53.5 billion that the
Corporation invested in continuing operations over the past three
years, $25.0 billion was used for additions to financing
receivables, $13.5 billion was used to invest in new equipment,
principally for lease to others, and $9.5 billion was used for
acquisitions of new businesses.
With the financial flexibility that comes with excellent
credit ratings, management believes the Corporation should be well
positioned to meet the global needs of its customers for capital
and to continue growing its diversified asset base.
Interest Rate and Currency Risk Management
The Corporation uses various financial instruments,
particularly interest rate, currency and basis swaps, but also
options and currency forwards, to manage risks. The Corporation
is exclusively an end user of these instruments, which are
commonly referred to as derivatives. The Corporation does not
engage in any derivatives trading, market-making or other
speculative activities in the derivative markets.
The Corporation manages its exposure to changes in interest
rates, in part, by funding its assets with an appropriate mix of
fixed and variable rate debt and its exposure to currency
fluctuations principally by funding local currency denominated
assets with debt denominated in those same currencies. It uses
interest rate swaps and currency swaps (including non-U.S.
currency and cross currency interest rate swaps) to achieve lower
borrowing costs. Substantially all of these swaps have been
designated as modifying interest rates and/or currencies
associated with specific debt instruments.
These financial instruments allow the Corporation to lower
its cost of funds by substituting credit risk for interest rate
and currency risks. Since the Corporation's principal use of such
swaps is to optimize funding costs, changes in interest rates and
exchange rates underlying swaps would not be expected to have a
material impact on the Corporation's financial position or results
of operations. The Corporation conducts almost all activities
with these instruments in the over-the-counter markets.
18
<PAGE>
The Corporation is exposed to prepayment risk in certain of
its business activities, such as in its mortgage servicing and
annuities activities. In order to hedge those exposures, the
Corporation uses swaps and option-based financial instruments.
These instruments generally behave based on limits ("caps,"
"floors" or "collars") on interest rate movement. These swaps and
option-based instruments are governed by the credit risk policies
described below and are transacted in the over-the-counter
markets.
In addition, as part of its ongoing customer activities, the
Corporation may enter into swaps that are integrated with
investments in or loans to particular customers and do not involve
assumption of third-party credit risk. Such integrated swaps are
evaluated and monitored like their associated investments or
loans, and are not therefore subject to the same credit criteria
that would apply to a stand-alone swap. All other swaps, forward
contracts and other derivatives have been designated as hedges of
non-U.S. net investments or other assets.
Established practices require that derivative financial
instruments relate to specific asset, liability or equity
transactions or to currency exposures. Substantially all treasury
actions are centrally executed by the Corporation's Treasury
Department, which maintains controls on all exposures, adheres to
stringent counterparty credit standards and actively monitors
marketplace exposures.
Given the ways in which the Corporation uses swaps,
purchased options and forwards, the principal risk is credit risk
- - risk that counterparties will be financially unable to make
payments in accordance with the agreements. Associated market
risk is meaningful only as it relates to how changes in the market
value affect credit exposure to individual counterparties. Except
as noted above for positions that are integrated into financings,
all swaps, purchased options and forwards are carried out within
the following credit policy constraints:
<TABLE>
<CAPTION>
Counterparty credit criteria Credit rating
-----------------------------
Moody's Standard & Poor's
------- -----------------
<S> <C> <C>
Term of transaction
Between one and five years....... Aa3 AA-
Greater than five years.......... Aaa AAA
Credit exposure limits
Up to $50 million................ Aa3 AA-
Up to $75 million................ Aaa AAA
</TABLE>
All swaps are executed under master swap agreements
containing mutual credit downgrade provisions that provide the
ability to require assignment or termination in the event either
party is downgraded below A3 or A-. Because of their lower risk,
more credit latitude is permitted for original maturities shorter
than one year.
Once a counterparty exceeds credit exposure limits, no
additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the
established limit. Open contracts remain in force.
19
<PAGE>
The conversion of interest rate and currency risk into credit
risk results in a need to monitor counterparty credit risk
actively. At December 31, 1995, the notional amount of long-term
derivatives for which the counterparty was rated below Aa3/AA- was
$2,297 million. These amounts are the result of (1) counterparty
downgrades, (2) transactions executed prior to the adoption of the
Corporation's current counterparty credit standards, and (3)
transactions relating to acquired assets or businesses. The total
exposure to credit risk associated with in-the-money derivatives
at December 31, 1995 was $680 million. The Corporation does not
anticipate any loss from this exposure.
Following is an analysis of credit risk exposures for the
last three years.
<TABLE>
<CAPTION>
Percentage of Notional Derivative Exposure by Counterparty Credit Rating
------------------------------------------------------------------------
Moody's / S&P 1995 1994 1993
------------- ----- ----- -----
<S> <C> <C> <C>
Aaa/AAA........................... 75% 78% 67%
Aa/AA............................. 22% 17% 21%
A/A and below..................... 3% 5% 12%
</TABLE>
The optimal funding strategy is sometimes achieved by using
multiple swaps. For example, to obtain fixed rate U.S. dollar
funding, several alternatives are generally available. One
alternative is a swap of non-U.S. dollar denominated fixed rate
debt into U.S. dollars. The synthetic U.S. dollar denominated
debt would be effectively created by taking the following steps:
(1) issuing fixed rate, non-U.S. currency denominated debt, (2)
entering into a swap under which fixed rate non-U.S. currency
principal and interest will be received and floating rate non-U.S.
currency principal and interest will be paid, and (3) entering
into a swap under which floating rate non-U.S. currency principal
and interest will be received and fixed rate U.S. dollar
denominated principal and interest will be paid. The end result
is, in every important respect, fixed rate U.S. dollar denominated
financing with an element of controlled credit risk. This type of
structure usually results from using several swap counterparties
for steps (2) and (3). The Corporation uses multiple swaps only
as part of such transactions.
The interplay of the Corporations credit risk policy with
its funding activities is seen in the following example, in which
the Corporation is assumed to have been offered three alternatives
for funding five-year fixed rate U.S. dollar assets with five-year
fixed rate U.S. dollar debt.
<TABLE>
<CAPTION>
Spread over
U.S. Treasuries in
basis points Counterparty
------------------- -----------
<S> <C> <C>
1. Fixed rate 5 year medium term note........ +65 -
2. U.S. dollar commercial paper swapped
into 5 year U.S. dollar fixed rate
funding................................... +40 A
3. Swiss franc fixed rate debt swapped
into 5 year U.S. dollar fixed
rate funding............................. +35 B
</TABLE>
20
<PAGE>
Counterparty A is a major brokerage house with a Aaa/AAA rated
swap subsidiary and a current exposure to the Corporation of $39
million. Counterparty B is a Aa2/AA rated insurance company with
a current exposure of $50 million.
In this hypothetical case, the Corporation would have chosen
alternative 2. Alternative 1 is unacceptably costly. Although
alternative 3 would have yielded a lower immediate cost of funds,
the additional credit risk of Counterparty B would have exceeded
the Corporation's risk management limits.
Portfolio Quality
The portfolio of financing receivables, before allowance for
losses, increased to $95.8 billion at the end of 1995 from $78.4
billion at the end of 1994, with approximately equal contributions
from origination volume and from acquisitions of businesses and
portfolios. Financing receivables are the Corporation's largest
asset and its primary source of revenues. Related allowances for
losses at the end of 1995 aggregated $2.5 billion (2.63% of
receivables - the same level as 1994 and 1993) and are, in
management's judgment, appropriate given the risk profile of the
portfolio. Amounts written off in 1995 were approximately 1.01%
of the year's average financing receivables, compared with 1.04%
and 1.59% during 1994 and 1993, respectively. A discussion about
the quality of certain elements of the portfolio of financing
receivables follows. Further details are included in notes 4, 5
and 6 to the consolidated financial statements. Nonearning
receivables are those that are 90 days or more delinquent and
reduced earning receivables are receivables whose terms have been
restructured to a below-market yield.
<TABLE>
<CAPTION>
Consumer receivables at year-end 1995 and 1994 are shown in
the following table:
(In millions) 1995 1994
------- -------
<S> <C> <C>
Credit card and personal loans............. $23,937 $19,124
Auto loans................................. 5,555 3,991
Auto finance leases........................ 12,461 7,473
------- -------
Total consumer........................... $41,953 $30,588
------- -------
Nonearning and reduced earning............. $ 671 $ 422
- As a percentage of total.............. 1.6% 1.4%
Receivable write offs for the year......... $ 644 $ 482
</TABLE>
Most of the nonearning consumer receivables were U.S. private-
label credit card loans, the majority of which were subject to
various loss sharing arrangements that provide full or partial
recourse to the originating retailer. Delinquencies in the
consumer portfolio were slightly higher at the end of 1995 than
1994, consistent with overall industry experience.
21
<PAGE>
<TABLE>
<CAPTION>
Commercial real estate portfolio at year-end 1995 and 1994
amounted to $17.4 billion and $16.9 billion, respectively, as
shown in the following table:
(In millions) 1995 1994
------- -------
<S> <C> <C>
Loans..................................... $13,405 $13,282
Nonearning and reduced earning loans.... 179 179
Receivable write offs for the year...... 147 209
Assets acquired for resale................ 2,335 2,103
Other (primarily ventures)................ 1,651 1,508
</TABLE>
Commercial real estate loans are generally secured by first
mortgages. Assets are acquired for resale from various financial
institutions. Values realized during 1995 and 1994 on disposition
of assets acquired for resale have met or exceeded expectations at
the time of purchase.
The commercial real estate portfolio included investments in
a variety of property types and continues to be well dispersed
geographically, principally in the continental United States.
Write offs in the commercial real estate portfolio declined during
1995, as markets continued to stabilize.
Other financing receivables, totaling $40.4 billion at
December 31, 1995, consisted of a diverse commercial, industrial
and equipment loan and lease portfolio. This portfolio increased
$5.9 billion during 1995, primarily because of acquisitions. The
related nonearning and reduced-earning receivables increased to
$285 million at year-end 1995 from $165 million at year-end 1994.
The Corporation has loans and leases to commercial airlines,
as discussed in note 6 to the consolidated financial statements,
amounting to $8.3 billion at the end of 1995, up from $7.6 billion
at the end of 1994. At year-end 1995, the Corporation's
commercial aircraft positions included financial guarantees and
funding commitments amounting to $409 million ($506 million in
1994) and conditional commitments to purchase aircraft at a cost
of $141 million ($81 million at December 31, 1994). On January
22, 1996, the Corporation announced that it had placed a multi-
year order for various Boeing aircraft with list prices
approximating $4 billion.
Entering 1996, management believes that vigilant attention to
risk management and controllership and a strong focus on complete
satisfaction of customer needs position it to deal effectively
with the increasing competition in an ever-changing global
economy.
New Accounting Standards
Two newly-issued accounting standards will be adopted in the
first quarter of 1996 and are not expected to have a material
effect on the Corporation's financial position or results of
operations. A summary of these standards follows.
SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, requires that
certain long-lived assets be reviewed for impairment when events
or circumstances indicate that the carrying amounts of the assets
may not be recoverable. If such review indicates that the
carrying amount of an asset exceeds the sum of its expected future
cash flows, the asset's carrying value must be written down to
fair value.
22
<PAGE>
SFAS No. 122, Accounting for Mortgage Servicing Rights,
requires that capitalized rights to service mortgage loans be
assessed for impairment by individual risk stratum by comparing
each stratum's carrying amount with its fair value. Impairment,
if any, would be recognized in earnings.
23
<PAGE>
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
General Electric Capital Services, Inc.
We have audited the consolidated financial statements of
General Electric Capital Services, Inc. and consolidated
affiliates as listed in Item 14. In connection with our audits of
the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14. These
consolidated financial statements and financial statement
schedules are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of General Electric Capital Services, Inc. and
consolidated affiliates at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
February 9, 1996
24
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
Statement of Current and Retained Earnings
For the years ended December 31 1995 1994 1993
(In millions) ------ ------ ------
<S> <C> <C> <C>
EARNED INCOME
Time sales, loan, investment and other income
(Note 13)....................................... $13,004 $ 9,709 $ 7,997
Financing leases (Note 13)....................... 3,176 2,539 2,315
Operating lease rentals (Note 6)................. 4,080 3,802 3,267
Premium and commission income of insurance
affiliates (Note 10)............................ 6,232 3,825 3,697
------- ------- -------
Total earned income.......................... 26,492 19,875 17,276
------- ------- -------
EXPENSES
Interest (Note 9 )............................... 6,661 4,545 3,538
Operating and administrative (Note 14)........... 7,756 6,200 5,644
Insurance losses and policyholder and
annuity benefits (Note 10)...................... 5,285 3,507 3,172
Provision for losses on financing receivables
(Note 5)........................................ 1,117 873 987
Depreciation and amortization of buildings
and equipment and equipment on operating
leases (Notes 6 & 7)........................... 2,013 1,662 1,592
Minority interest in net earnings of
consolidated affiliates......................... 140 139 134
------- ------- -------
Total expenses............................... 22,972 16,926 15,067
------- ------- -------
Earnings from continuing operations before
income taxes.................................... 3,520 2,949 2,209
Provision for income taxes (Note 15)............. (1,105) (864) (642)
------- ------- -------
Earnings from continuing operations.............. 2,415 2,085 1,567
Earnings (loss) from discontinued operations
(Note 2)........................................ - (1,189) 240
------- ------- -------
NET EARNINGS..................................... 2,415 896 1,807
Dividends paid (Note 12)......................... (1,091) (914) (610)
Retained earnings at January 1................... 8,194 8,212 7,015
------- ------- -------
RETAINED EARNINGS AT DECEMBER 31................. $ 9,518 $ 8,194 $ 8,212
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
Statement of Financial Position
At December 31 1995 1994
(In millions) -------- --------
<S> <C> <C>
ASSETS
Cash and equivalents.................................... $ 1,949 $ 1,218
Investment securities (Note 3).......................... 41,063 30,872
Financing receivables (Note 4):
Time sales and loans, net of deferred income....... 59,591 50,021
Investment in financing leases, net of
deferred income................................... 36,200 28,398
-------- --------
95,791 78,419
Allowance for losses on financing.
receivables (Note 5).............................. (2,519) (2,062)
-------- --------
Financing receivables--net......................... 93,272 76,357
Other receivables--net.................................. 12,897 6,012
Equipment on operating leases (at cost),
less accumulated amortization of $4,670 and $4,029
(Note 6)............................................... 13,793 12,859
Buildings and equipment (at cost), less
accumulated depreciation of $964 and $794 (Note 7)..... 1,652 1,081
Other assets (Note 8)................................... 21,103 16,568
-------- --------
Total assets............................................ $185,729 $144,967
======== ========
LIABILITIES AND EQUITY
Short-term borrowings (Note 9).......................... $ 62,808 $ 57,087
Long-term borrowings (Note 9)........................... 48,790 34,312
-------- --------
Total borrowings.................................. 111,598 91,399
Accounts payable........................................ 5,952 3,777
Insurance liabilities, reserves and
annuity benefits (Note 10)............................. 39,699 29,438
Other liabilities....................................... 6,312 4,571
Deferred income taxes (Note 15)......................... 6,872 4,937
-------- --------
Total liabilities................................. 170,433 134,122
-------- --------
Minority interest in equity of consolidated
affiliates (Note 11)................................... 2,522 1,465
-------- --------
Cumulative preferred stock, $10,000 par value (80,000
shares authorized; 51,000 shares issued and held
primarily by consolidated affiliates at December 31,
1995 and December 31, 1994)............................ 10 10
Common stock, $10,000 par value
(101 shares authorized and outstanding)................ 1 1
Additional paid-in capital.............................. 2,314 2,064
Retained earnings....................................... 9,518 8,194
Unrealized gains (losses) on investment
securities............................................. 989 (821)
Foreign currency translation adjustments................ (58) (68)
-------- --------
Total equity (Note 12)............................ 12,774 9,380
-------- --------
Total liabilities and equity............................ $185,729 $144,967
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
Statement of Cash Flows
For the years ended December 31 1995 1994 1993
(In millions) ------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................ $ 2,415 $ 896 $1,807
Adjustments for discontinued operations............. - 1,189 (240)
Adjustments to reconcile net earnings to cash
provided from operating activities:
Provision for losses on financing receivables.... 1,117 873 987
Increase in insurance liabilities, reserves
and annuity benefits............................ 2,490 1,624 1,479
Increase in deferred income taxes................ 678 653 428
Depreciation and amortization of buildings and
equipment and equipment on operating leases..... 2,013 1,662 1,592
Increase (decrease) in accounts payable.......... 418 (222) 540
Other--net....................................... 946 140 770
------- ------- -------
Cash from operating activities................. 10,077 6,815 7,363
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in financing receivables (Note 19)..... (11,309) (9,525) (4,164)
Buildings and equipment and equipment on operating
leases -- additions............................... (4,616) (5,749) (3,139)
-- dispositions............................ 1,504 2,420 1,084
Payments for principal businesses purchased,
net of cash acquired.............................. (5,403) (2,031) (2,090)
All other investing activities (Note 19)............ (3,913) 176 (6,793)
------- ------- -------
Cash used for investing activities................ (23,737) (14,709) (15,102)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or
less)............................................... (4,510) (2,261) 2,404
Newly issued debt (maturities longer than 90 days)
(Note 19)........................................... 36,778 22,473 15,253
Repayments and other reductions (maturities
longer than 90 days) (Note 19)..................... (17,045) (11,699) (9,526)
Dividends paid...................................... (1,091) (904) (610)
All other financing activities (Note 19)............ 259 183 (69)
------- ------- -------
Cash from financing activities.................... 14,391 7,792 7,452
------- ------- -------
Cash used for discontinued operations (Note 19)... - (200) -
------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING
THE YEAR........................................... 731 (302) (287)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR........... 1,218 1,520 1,807
------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR................. $ 1,949 $ 1,218 $1,520
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
Notes to Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation--GE Capital Services (the "Corporation") owns all of
the common stock of General Electric Capital Corporation ("GE
Capital") and GE Global Insurance Holding Corporation ("GE Global
Insurance"). The consolidated financial statements represent the
adding together of GE Capital Services and all majority-owned and
controlled affiliates ("consolidated affiliates"), including GE
Capital and GE Global Insurance.
All significant transactions among the Corporation and
consolidated affiliates have been eliminated. Other affiliates,
generally companies in which the Corporation owns 20 to 50 percent
of the voting rights ("non-consolidated affiliates"), are
included in other assets and valued at the appropriate share of
equity plus loans and advances. Certain prior period data have
been reclassified to conform to the current year presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from those
estimates.
Cash Equivalents--Certificates and other time deposits are
treated as cash equivalents.
Methods of Recording Earned Income--Income on all loans is
recognized on the interest method. Accrual of interest income is
suspended at the earlier of the time at which collection of an
account becomes doubtful or the account becomes 90 days
delinquent. Interest income on impaired loans is recognized
either as cash is collected or on a cost recovery basis as
conditions warrant.
Financing lease income is recorded on the interest method so
as to produce a level yield on funds not yet recovered. Estimated
unguaranteed residual values of leased assets are based primarily
on periodic independent appraisals of the values of leased assets
remaining at expiration of the lease terms. Operating lease
income is recognized on a straight-line basis over the terms of
the underlying leases.
Origination, commitment and other nonrefundable fees related
to fundings are deferred and recorded in earned income on the
interest method. Commitment fees related to loans not expected to
be funded and line-of-credit fees are deferred and recorded in
earned income on a straight-line basis over the period to which
the fees relate. Syndication fees are recorded in earned income
at the time the related services are performed unless significant
contingencies exist.
Premiums on insurance contracts are reported as earned income
over the terms of the related reinsurance treaties or insurance
policies. In general, earned premiums are calculated on a
pro-rata basis or are determined based on reports received from
reinsureds. Premium adjustments under retrospectively rated
assumed reinsurance contracts are recorded based on estimated
losses and loss expenses, including both case and
incurred-but-not-reported reserves. Premiums received under
annuity contracts that do not have significant
28
<PAGE>
mortality or morbidity risk are not reported as revenues but as
annuity benefits - a liability - and are adjusted according to the
terms of the respective policies.
Allowance for Losses on Financing Receivables and Investments-
- -GE Capital maintains an allowance for losses on financing
receivables at an amount that it believes is sufficient to provide
adequate protection against future losses in the portfolio. For
small-balance receivables, the allowance for losses is determined
principally on the basis of actual experience during the preceding
three years. Further allowances are also provided to reflect
management's judgment of additional loss potential. For other
financing receivables, principally the larger loans and leases,
the allowance for losses is determined primarily on the basis of
management's judgment of net loss potential, including specific
allowances for known troubled accounts.
All accounts or portions thereof deemed to be uncollectible
or to require an excessive collection cost are written off to the
allowance for losses. Generally, small-balance accounts are
progressively written down (from 10% when more than three months
delinquent to 100% when nine to twelve months delinquent) to
record the balances at estimated realizable value. However, if at
any time during that period an account is judged to be
uncollectible, such as in the case of a bankruptcy, the
uncollectible balance is written off. Large-balance accounts are
reviewed at least quarterly, and those accounts with amounts that
are judged to be uncollectible are written down to estimated
realizable value.
When collateral is repossessed in satisfaction of a loan, the
receivable is written down against the allowance for losses to
estimated fair value less costs to sell, transferred to other
assets and subsequently carried at the lower of cost or estimated
fair value less costs to sell. This accounting method has been
employed principally for specialized financing transactions.
Investment Securities--The Corporation has designated its
investments in debt securities and marketable equity securities as
available-for-sale. Those securities are reported at fair value,
with net unrealized gains and losses included in equity, net of
applicable taxes. Unrealized losses that are other than temporary
are recognized in earnings.
Equipment on Operating Leases--Equipment is amortized,
principally on a straight-line basis, to estimated net salvage
value over the lease term or the estimated economic life of the
equipment.
Buildings and Equipment--Depreciation is recorded on either a
sum-of-the-years digits formula or a straight-line basis over the
lives of the assets.
Goodwill--Goodwill is amortized over its estimated period of
benefit on a straight-line basis. No amortization period exceeds
30 years. Goodwill in excess of associated expected operating
cash flows is considered to be impaired and is written down to
fair value.
Deferred Insurance Acquisition Costs--For the property and
casualty businesses, deferred insurance acquisition costs are
amortized pro-rata over the contract periods in which the related
premiums are earned. For the life insurance businesses, these
costs are amortized over the premium-paying periods of the
contracts in proportion either to anticipated premium income or to
gross profit, as appropriate. For certain annuity contracts, such
costs are
29
<PAGE>
amortized on the basis of anticipated gross profits. For other
lines of business, acquisition costs are amortized over the life
of the related insurance contracts. Deferred insurance
acquisition costs are reviewed for recoverability; anticipated
investment income is considered in making recoverability
evaluations.
Insurance Liabilities and Reserves--The estimated liability
for insurance losses and loss expenses consists of both case and
incurred-but-not-reported reserves. Where experience is not
sufficient to determine reserves, industry averages are used.
Estimated amounts of salvage and subrogation recoverable on paid
and unpaid losses are deducted from outstanding losses.
The liability for future policyholder benefits of the life
insurance affiliates has been computed mainly by a net-level-
premium method based on assumptions for investment yields,
mortality and terminations that were appropriate at date of
purchase or at the time the policies were developed, including
provisions for adverse deviations.
Interest Rate and Currency Risk Management--As a matter of
policy, the Corporation does not engage in derivatives trading,
market-making or other speculative activities. Any instrument
designated but ineffective as a hedge is marked to market and
recognized in operations immediately. The Corporation uses swaps
primarily to optimize funding costs. To a lesser degree, and in
combination with options and limit contracts, the Corporation uses
swaps to stabilize cash flows from mortgage-related assets.
Interest rate and currency swaps that modify borrowings or
designated assets, including swaps associated with forecasted
commercial paper renewals, are accounted for on an accrual basis.
The Corporation requires all other swaps, as well as options and
forwards, to be designated and accounted for as hedges of specific
assets, liabilities or committed transactions; resulting payments
and receipts are recognized contemporaneously with effects of
hedged transactions. A payment or receipt arising from early
termination of an effective hedge is accounted for as an
adjustment to the basis of the hedged transaction.
NOTE 2. DISCONTINUED OPERATIONS
In November 1994, the Corporation elected to terminate the
operations of Kidder, Peabody Group, Inc. ("Kidder, Peabody"), its
securities broker-dealer, by initiating an orderly liquidation of
its assets and liabilities. As part of the liquidation plan, the
Corporation received securities of Paine Webber Group Inc. valued
at $657 million in exchange for certain broker-dealer assets and
operations. Summary operating results of the discontinued
operations are as follows.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Revenues.................................. $ 4,578 $4,861
------- ------
Earnings (loss) before income taxes....... (551) 439
Income tax benefit (provision)............ 230 (199)
------- ------
Earnings (loss) from discontinued
operations............................... (321) 240
Provision for loss, net of income tax
benefit of $266.......................... (868) -
------- ------
Earnings (loss) from discontinued
operations............................... $(1,189) $ 240
======= ======
</TABLE>
30
<PAGE>
The 1994 provision of $868 million after taxes, shown in the
summary above, related to exit costs associated with liquidation
of Kidder, Peabody. This liquidation was substantially complete
as of December 31, 1995.
NOTE 3. INVESTMENT SECURITIES
A summary of investment securities follows:
<TABLE>
<CAPTION>
(In millions) Gross Gross Estimated
Amortized unrealized unrealized fair
December 31, 1995 cost gains losses value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Corporate and other............... $12,313 $ 463 $ (63) $12,713
State and municipal............... 9,460 570 (11) 10,019
Mortgage-backed................... 5,991 255 (65) 6,181
Non-U.S........................... 6,887 213 (37) 7,063
Equity............................ 2,843 412 (59) 3,196
U.S. government and federal
agency........................... 1,817 77 (3) 1,891
------- ------- ------- -------
$39,311 $ 1,990 $ (238) $41,063
======= ======= ======= =======
December 31, 1994
Corporate and other............... $10,883 $ 4 $ (763) $10,124
State and municipal............... 9,193 146 (392) 8,947
Mortgage-backed................... 4,927 82 (220) 4,789
Non-U.S........................... 3,892 20 (76) 3,836
Equity............................ 2,147 201 (180) 2,168
U.S. government and federal
agency........................... 1,185 - (177) 1,008
------- ------- ------- -------
$32,227 $ 453 $(1,808) $30,872
======= ======= ======= =======
</TABLE>
Contractual maturities of debt securities at December 31,
1995, other than mortgage-backed securities, are shown below.
<TABLE>
<CAPTION>
Estimated
Amortized fair
(In millions) cost value
--------- ----------
<S> <C> <C>
Due in
1996................. $ 2,359 $ 2,386
1997-2000............ 9,753 9,982
2001-2005............ 6,821 7,129
2006 and later....... 11,544 12,189
</TABLE>
It is expected that actual maturities will differ from
contractual maturities because borrowers have the right to call or
prepay certain obligations, sometimes without call or prepayment
penalties. Proceeds from sales of investment securities in 1995,
1994 and 1993 were $11,017 million, $5,821 million and $6,112
million, respectively; gross realized gains were $503 million,
$281 million and $173 million, respectively; and gross realized
losses were $157 million, $112 million and $34 million,
respectively.
31
<PAGE>
NOTE 4. FINANCING RECEIVABLES
Financing receivables at December 31, 1995 and 1994 are shown
below.
<TABLE>
<CAPTION>
(In millions) 1995 1994
------ ------
<S> <C> <C>
Time sales and loans:
Consumer services....................... $33,430 $25,906
Specialized financing................... 18,230 17,988
Mid-market financing.................... 8,795 5,916
Equipment management.................... 1,371 1,516
Specialty insurance..................... 189 -
------- -------
62,015 51,326
Deferred income............................. (2,424) (1,305)
------- -------
Time sales and loans--net of deferred
income..................................... 59,591 50,021
------- -------
Investment in financing leases:
Direct financing leases................. 33,291 25,916
Leveraged leases........................ 2,909 2,482
------- -------
Investment in financing leases....... 36,200 28,398
------- -------
95,791 78,419
Less allowance for losses (Note 5).......... (2,519) (2,062)
------- -------
$93,272 $76,357
======= =======
</TABLE>
Time sales and loans represent transactions in a variety of
forms, including time sales, revolving charge and credit
arrangements, mortgages, installment loans, intermediate-term
loans and revolving loans secured by business assets. The
portfolio includes time sales and loans carried at the principal
amount on which finance charges are billed periodically, and time
sales and loans carried at gross book value, which includes
finance charges. At year-end 1995 and 1994, specialized financing
and consumer services loans included $13,405 million and $13,282
million, respectively, for commercial real estate loans. Note 6
contains information on commercial airline loans and leases.
At December 31, 1995, contractual maturities for time sales
and loans were $24,543 million in 1996, $11,933 million in 1997,
$6,635 million in 1998, $5,052 million in 1999, $4,424 million in
2000 and $9,428 million thereafter, aggregating $62,015 million.
Experience of the Corporation has shown that a substantial portion
of receivables will be paid prior to contractual maturity.
Accordingly, the contractual maturities of time sales and loans
are not to be regarded as forecasts of future cash collections.
Investment in financing leases consists of direct financing
and leveraged leases of aircraft, railroad rolling stock,
automobiles and other transportation equipment, data processing
equipment, medical equipment, as well as other manufacturing,
power generation, mining and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and
as the equity participant in leveraged leases, the Corporation is
taxed on total lease payments received and is entitled to tax
deductions based on the cost of leased assets and tax deductions
for interest paid to third-party participants. The
32
<PAGE>
Corporation is also generally entitled to any residual value of
leased assets and to any investment tax credit on leased
equipment.
Investments in direct financing and leveraged leases
represent unpaid rentals and estimated unguaranteed residual
values of leased equipment, less related deferred income. Because
the Corporation has no general obligation for principal and
interest on notes and other instruments representing third-party
participation related to leveraged leases, such notes and other
instruments have not been included in liabilities but have been
offset against the related rentals receivable. The Corporation's
share of rentals receivable on leveraged leases is subordinate to
the share of the other participants who also have security
interests in the leased equipment.
The Corporation's net investment in financing leases at
December 31, 1995 and 1994, is shown below.
<TABLE>
<CAPTION>
Direct Total
financing leases Leveraged leases financing leases
------------------- ----------------- ------------------
(In millions) 1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable.... $37,434 $30,338 $12,625 $ 9,630 $50,059 $39,968
Less principal and interest on
third-party nonrecourse debt............. - - (9,329) (7,103) (9,329) (7,103)
------- ------- ------- ------- ------- -------
Net rentals receivable............... 37,434 30,338 3,296 2,527 40,730 32,865
Estimated unguaranteed residual value
of leased assets......................... 4,630 3,767 1,138 1,122 5,768 4,889
Less deferred income....................... (8,773) (8,189) (1,525) (1,167) (10,298) (9,356)
------- ------- ------- ------- ------- -------
Investment in financing leases............. 33,291 25,916 2,909 2,482 36,200 28,398
Less:
Allowance for losses................. (669) (471) (76) (99) (745) (570)
Deferred taxes arising from
financing leases.................... (2,959) (2,470) (2,787) (2,605) (5,746) (5,075)
------- ------- ------- ------- ------- -------
Net investment in financing leases......... $29,663 $22,975 $ 46 $ (222) $29,709 $22,753
======= ======= ======= ======= ======= =======
</TABLE>
At December 31, 1995, contractual maturities for finance
lease rentals receivable were $8,780 million in 1996, $10,418
million in 1997, $6,837 million in 1998, $3,631 million in 1999,
$2,126 million in 2000 and $8,938 million thereafter aggregating
$40,730 million. As with time sales and loans, experience has
shown that a portion of receivables will be paid prior to
contractual maturity and these amounts should not be regarded as
forecasts of future cash flows.
In connection with the sales of financing receivables with
recourse, GE Capital received proceeds of $2,139 million in 1995,
$1,239 million in 1994 and $1,105 million in 1993. GE Capital's
exposure under such recourse provisions is included in "credit and
liquidity support - securitizations" in note 20.
Nonearning consumer receivables, primarily private-label
credit card receivables, amounted to $671 million and $422 million
at December 31, 1995 and 1994, respectively. A majority of these
receivables were subject to various loss-sharing arrangements that
provide full or partial recourse to the originating private-label
entity. Nonearning and reduced earning receivables other than
consumer receivables were $464 million and $346 million at
year-ends 1995 and 1994, respectively.
On January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, and the related SFAS No. 118,
Accounting by Creditors for Impairment of
33
<PAGE>
a Loan--Income Recognition and Disclosures. These Statements do
not apply to, among other things, leases or large groups of
smaller-balance, homogeneous loans, and therefore are principally
relevant to commercial loans. There was no effect of adopting the
Statements on 1995 results of operations or financial position
because the allowance for losses established under the previous
accounting policy continued to be appropriate following the
accounting change. The Statements require disclosures of impaired
loans--loans for which it is probable that the lender will be
unable to collect all amounts due according to original
contractual terms of the loan agreement, based on current
information and events. At December 31, 1995, loans that required
disclosure as impaired amounted to $867 million, principally
commercial real estate loans. For $647 million of such loans, the
required allowance for losses was $285 million. The remaining
$220 million of loans represents the recorded investment in loans
that are fully recoverable, but only because the recorded
investment had been reduced through charge-offs or deferral of
income recognition. These loans must be disclosed under the
Statements' technical definition of "impaired" because the
Corporation will be unable to collect all amounts due according to
original contractual terms of the loan agreement. Under the
Statements, such loans do not require an allowance for losses.
The average investment in impaired loans requiring disclosure
under the Statements was $1,037 million during 1995, with revenue
of $49 million recognized, principally on the cash basis.
NOTE 5. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
The allowance for losses on financing receivables represented
2.63% of total financing receivables at year-end 1995 and 1994.
The table below shows the activity in the allowance for losses on
financing receivables during each of the past three years.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Balance at January 1................. $2,062 $1,730 $1,607
Provisions charged to operations..... 1,117 873 987
Net transfers related to companies
acquired or sold................... 217 199 126
Amounts written off--net............. (877) (740) (990)
------ ------ ------
Balance at December 31............... $2,519 $2,062 $1,730
====== ====== ======
</TABLE>
NOTE 6. EQUIPMENT ON OPERATING LEASES
Equipment on operating leases by type of equipment and accumulated
amortization at December 31, 1995 and 1994, are shown below.
<TABLE>
<CAPTION>
(In millions) 1995 1994
------- -------
<S> <C> <C>
Original Cost
Aircraft........................... $5,682 $4,601
Vehicles........................... 4,948 4,542
Marine shipping containers......... 3,253 3,333
Railroad rolling stock............. 1,811 1,605
Other.............................. 2,769 2,807
------- -------
18,463 16,888
Accumulated amortization............. (4,670) (4,029)
------- -------
$13,793 $12,859
======= =======
</TABLE>
34
<PAGE>
Amortization of equipment on operating leases was $1,702
`million, $1,435 million and $1,395 million in 1995, 1994 and 1993,
respectively. Noncancelable future rentals due from customers for
equipment on operating leases at year-end 1995 totaled $8,412
million and are due as follows: $2,501 million in 1996, $1,657
million in 1997, $1,119 million in 1998, $732 million in 1999,
$450 million in 2000, and $1,953 million thereafter.
The Corporation acts as a lender and lessor to the commercial
airline industry. At December 31, 1995 and 1994, the balance of
such loans, leases and equipment leased to others was $8,337
million and $7,571 million, respectively. In addition, the
Corporation had issued financial guarantees and funding
commitments of $409 million at December 31, 1995 ($506 million at
year-end 1994) and had conditional commitments to purchase
aircraft at a cost of $141 million ($81 million at year-end 1994).
Included in the Corporation's equipment leased to others at
year-end 1995 was $101 million of commercial aircraft off-lease
($226 million at the end of 1994).
NOTE 7. BUILDINGS AND EQUIPMENT
Buildings and equipment include office buildings, satellite
communications equipment, data processing equipment, vehicles,
furniture and office equipment. Depreciation expense was $311
million for 1995, $227 million for 1994 and $197 million for 1993.
NOTE 8. OTHER ASSETS
Other assets at December 31, 1995 and 1994, are shown in the table
below.
<TABLE>
<CAPTION>
(In millions) 1995 1994
------- ------
<S> <C> <C>
Assets acquired for resale............... $ 3,998 $3,867
Goodwill................................. 3,984 2,513
Investments in and advances to
nonconsolidated affiliates.............. 3,566 2,098
Miscellaneous investments................ 2,072 1,652
Real estate ventures..................... 1,564 1,400
Mortgage servicing rights................ 1,688 1,351
Deferred insurance acquisition costs..... 1,336 1,290
Other intangibles........................ 1,027 1,173
Other.................................... 1,868 1,224
------ -------
$21,103 $16,568
======= =======
</TABLE>
Goodwill, mortgage servicing rights and other intangibles are
shown net of accumulated amortization of $1,494 million at
December 31, 1995 and $988 million at December 31, 1994.
35
<PAGE>
NOTE 9. BORROWINGS
Total short-term borrowings at December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
Average Average
(Dollars in millions) Amount rate Amount rate
------- ---- ------- ----
<S> <C> <C> <C> <C>
Commercial paper - U.S....... $37,432 5.82% $41,759 5.88%
Commercial paper - Non-U.S... 3,796 6.33 1,938 6.27
Current portion of long-term
debt........................ 15,719 9,695
Other........................ 5,861 3,695
------- -------
$62,808 $57,087
======= =======
</TABLE>
Total long-term borrowings at December 31, 1995 and 1994,
were as follows:
<TABLE>
<CAPTION>
Weighted
average
interest
(Dollars in millions) rate<F1> Maturities 1995 1994
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Senior notes............. 6.56% 1997-2055 $47,794 $33,615
Subordinated notes<F2>... 7.88 2006-2035 996 697
------- -------
$48,790 $34,312
======= =======
<FN>
<F1> Includes the effects of associated interest rate and currency
swaps.
<F2> Guaranteed by GE Company.
</TABLE>
Interest rate and currency swaps are employed to achieve the
lowest cost of funds for a particular funding strategy. The
Corporation enters into interest rate swaps and currency swaps
(including non-U.S. currency and cross-currency interest rate
swaps) to modify interest rates and/or currencies of specific debt
instruments. For example, to fund U.S. operations, GE Capital may
issue fixed-rate debt denominated in a currency other than the
U.S. dollar and simultaneously enter into a currency swap to
create synthetic fixed-rate U.S. dollar debt with a lower yield
than could be achieved directly. Such interest rate and currency
swaps have been designated as modifying interest rates, currencies
or both. The Corporation does not engage in derivatives trading,
market-making or other speculative activities.
The Corporation used a portion of this interest rate swap
portfolio to convert interest rate exposure on short-term and
floating rate long-term borrowings to interest rates that are
fixed over the terms of the related swaps; interest rate basis
swaps also are employed to manage short-term financing factors--
for example, to convert commercial paper-based interest costs to
prime rate-based costs. At December 31, 1995 and 1994, such swaps
were outstanding for principal amounts equivalent to $11,451
million and $9,301 million with maturities from 1996 to 2029 and
weighted average interest rates of 6.86% and 6.80%, respectively.
36
<PAGE>
At December 31, 1995, long-term borrowing maturities,
including the current portion of long-term debt, were $15,719
million in 1996, $14,012 million in 1997, $11,517 million in 1998,
$5,480 million in 1999, and $4,494 million in 2000. Additional
information about borrowings, as well as associated swaps, is
provided in note 20.
At December 31, 1995, GE Capital had committed lines of credit
aggregating $20.4 billion with 128 banks, including $9.5 billion
of revolving credit agreements pursuant to which GE Capital has
the right to borrow funds for periods exceeding one year. A total
of $2.5 billion and $1.5 billion of these lines were also
available for use by GE Capital Services and GE Company,
respectively. In addition, at December 31, 1995, approximately
$108 million of committed lines of credit were directly available
to a non-U.S. affiliate of GE Capital. Also, at December 31,
1995, substantially all of the approximately $3.1 billion of GE
Company's credit lines were available for use by GE Capital and GE
Capital Services. During 1995, GE Capital, GE Capital Services
and GE Company did not borrow under any of these credit lines.
The Corporation compensates banks for credit facilities in the
form of fees which were insignificant in each of the past three
years.
NOTE 10. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
Insurance liabilities, reserves and annuity benefits comprises
policyholders' benefits, unearned premiums and provisions for
policy losses and benefits relating to insurance and annuity
businesses. The related balances at December 31, 1995 and 1994,
follow:
<TABLE>
<CAPTION>
(In millions) 1995 1994
------- -------
<S> <C> <C>
Annuity benefits............................ $11,994 $13,186
Other policyholder benefits................. 11,781 6,569
Property and casualty reserves.............. 11,386 6,186
Financial and mortgage guaranty reserves.... 731 725
Unearned premiums........................... 3,807 2,772
------- -------
$39,699 $29,438
======= =======
</TABLE>
The liability for future policy benefits of the life
insurance affiliates, included in other policyholder benefits
above, has been computed using average yields of 2.0% to 9.0% in
1995 and 4.0% to 9.1% in 1994.
37
<PAGE>
Activity in the liability for unpaid claims and claims
adjustment expenses is summarized as follows for the past three
years.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1 - gross......... $ 7,032 $ 6,405 $ 5,484
Less reinsurance recoverables........ (1,084) (1,142) (1,191)
-------- ------- -------
Balance at January 1 - net........... 5,948 5,263 4,293
Claims and expenses incurred
Current year...................... 3,268 2,016 2,051
Prior years....................... 492 558 359
Claims and expenses paid
Current year...................... (706) (543) (378)
Prior years....................... (1,908) (1,432) (1,048)
Claim reserves related to acquired
companies........................... 3,696 49 -
Other................................ 19 37 (14)
-------- ------- -------
Balance at December 31 - net......... 10,809 5,948 5,263
Add reinsurance recoverables......... 1,853 1,084 1,142
-------- ------- -------
Balance at December 31 - gross....... $ 12,662 $ 7,032 $ 6,405
======== ======= =======
</TABLE>
Financial guarantees of insurance affiliates as of December
31, 1995 and 1994, are summarized below.
<TABLE>
<CAPTION>
(In millions) 1995 1994
-------- --------
<S> <C> <C>
Guarantees, principally on municipal
bonds and structured finance issues..... $119,406 $106,726
Mortgage insurance risk in force......... 32,599 31,463
Credit life insurance risk in force...... 13,670 13,713
Other.................................... 110 147
Less reinsurance......................... (21,749) (19,426)
-------- --------
$144,036 $132,623
======== ========
</TABLE>
The Corporation's Specialty Insurance businesses are involved
significantly in the reinsurance business, ceding reinsurance on
both a pro-rata and an excess basis. When the Corporation cedes
business to third parties, it is not relieved of its primary
obligation to policyholders and reinsureds. Consequently, the
Corporation establishes allowances for amounts deemed
uncollectible due to the failure of reinsurers to honor their
obligations. The Corporation monitors both the financial
condition of individual reinsurers and risk concentrations arising
from similar geographic regions, activities and economic
characteristics of reinsurers. The maximum amount of individual
life insurance retained on any one life is $2.5 million.
38
<PAGE>
The effects of reinsurance on premiums written and earned were
as follows for the past three years:
<TABLE>
<CAPTION>
Written premiums Earned premiums
------------------------ -----------------------
(In millions) 1995 1994 1993 1995 1994 1993
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Direct....... $2,984 $1,816 $1,639 $2,604 $1,787 $1,480
Assumed...... 3,978 2,696 2,540 4,414 2,596 2,424
Ceded........ (804) (550) (223) (786) (558) (207)
------ ------ ------ ------ ------ ------
Net Premium.. $6,158 $3,962 $3,956 $6,232 $3,825 $3,697
====== ====== ====== ====== ====== ======
</TABLE>
Reinsurance recoveries recognized as a reduction of insurance
losses and policyholder and annuity benefits amounted to $459
million, $434 million and $304 million for the periods ended
December 31, 1995, 1994 and 1993, respectively.
NOTE 11. MINORITY INTEREST
Minority interest in equity of consolidated GE Capital Services
affiliates includes preferred stock issued by GE Capital and by a
subsidiary of GE Capital. The preferred stock pays cumulative
dividends at variable rates. The liquidation preference of the
preferred shares at December 31, 1995 and 1994, is summarized
below.
<TABLE>
<CAPTION>
(In millions) 1995 1994
------ ------
<S> <C> <C>
GE Capital...................... $1,800 $875
GE Capital subsidiary........... 360 240
</TABLE>
Dividend rates on the preferred stock ranged from 4.2% to
5.2% during 1995, from 2.3% to 4.9% during 1994 and from 2.3% to
2.8% during 1993.
39
<PAGE>
NOTE 12 EQUITY
Changes in equity for each of the years ended December 31, 1995,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Unrealized Foreign
Cumulative Additional gains(losses) currency
preferred Common paid-in Retained on investment trans-
stock stock capital earnings securities lations Total
(In millions) --------- ------- --------- -------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993.... $ - $ 1 $1,877 $ 7,015 $ 36 $ (45) $8,884
Net unrealized gains on
investment securities........ - - - - 776 - 776
Currency translation
adjustments.................. - - - - - (48) (48)
Net earnings.................. - - - 1,807 - - 1,807
Dividends declared:
Common stock................ - - - (610) - - (610)
------- ------- ------ ------- ------- ------- -------
Balance at December 31, 1993.. - 1 1,877 8,212 812 (93) 10,809
Capital contributions......... - - 187 - - - 187
Net unrealized losses on
investment securities........ - - - - (1,633) - (1,633)
Currency translation
adjustments.................. - - - - - 25 25
Net earnings.................. - - - 896 - - 896
Dividends declared:
Stock dividend.............. 10 - - (10) - - -
Common stock................ - - - (903) - - (903)
Preferred stock............. - - - (1) - - (1)
------- ------- ------ ------- ------- ------- -------
Balance at December 31, 1994.. 10 1 2,064 8,194 (821) (68) 9,380
Capital contributions......... - - 250 - - - 250
Net unrealized gains on
investment securities........ - - - - 1,810 - 1,810
Currency translation
adjustments.................. - - - - - 10 10
Net earnings.................. - - - 2,415 - - 2,415
Dividends declared:
Common stock................ - - - (1,090) - - (1,090)
Preferred stock............. - - - (1) - - (1)
------- ------- ------ ------- ------- ------- -------
Balance at December 31, 1995.. $ 10 $ 1 $2,314 $ 9,518 $ 989 $ (58) $12,774
======= ======= ====== ======= ======= ======= =======
</TABLE>
GE Capital Services' outstanding preferred stock amounted to
$510 million at December 31, 1995, all of which was held by
consolidated affiliates with the exception of $10 million of such
shares, which were dividended to GE Company in 1994. All other
equity is owned entirely by GE Company. In 1995, GE Company
contributed to the Corporation certain assets of Caribe GE Products,
Inc. and Fee For Service, which increased the Corporation's
additional paid-in capital by $250 million. In 1994, GE Company
contributed to the Corporation the net assets of Consolidated
Insurance Group, which increased the Corporation's additional paid-
in capital by $187 million.
40
<PAGE>
Changes in fair value of investment securities are reflected,
net of tax, in equity. The changes from year to year were
primarily attributable to the effects of changes in year-end
market interest rates on the fair value of the securities.
At December 31, 1995 and 1994, the statutory capital and
surplus of the Corporation's insurance affiliates totaled $7,678
million and $5,657 million, respectively, and amounts available
for the payment of dividends without the approval of the insurance
regulators totaled $479 million and $413 million, respectively.
NOTE 13. EARNED INCOME
Time sales, loan, investment and other income includes the
Corporation's share of earnings from equity investees of
approximately $116 million, $169 million and $106 million for
1995, 1994 and 1993, respectively.
Included in earned income from financing leases for 1995,
1994 and 1993 were gains on the sale of equipment at lease
completion of $191 million, $180 million and $145 million,
respectively.
NOTE 14. OPERATING AND ADMINISTRATIVE EXPENSES
Employees and retirees of the Corporation and its affiliates are
covered under a number of pension, health and life insurance
plans. The principal pension plan is the GE Company Pension Plan,
a defined benefit plan, while employees of certain affiliates,
including ERC, are covered under separate plans. The Corporation
provides health and life insurance benefits to certain of its
retired employees, principally through GE Company's benefit
program, as well as through plans sponsored by ERC and other
affiliates. The annual cost to the Corporation of providing these
benefits is not material.
GE Company adopted SFAS No. 112, Employers' Accounting for
Postemployment Benefits, in the second quarter of 1993. The
Corporation adopted this standard in conjunction with its parent.
This Statement requires that employers expense the costs of
postemployment benefits (as distinct from postretirement pension,
medical and life insurance benefits) over the working lives of
their employees. This change principally affects the
Corporation's accounting for severance benefits, which previously
were expensed when the severance event occurred. The net
transition obligation related to the Corporation's employees
covered under GE Company postemployment benefit plans is not
separately determinable from the GE Company plans as a whole. The
net transition obligation for employees covered under separate
plans is not material.
Rental expense relating to equipment the Corporation leases
from others for the purposes of subleasing was $273 million in
1995, $262 million in 1994 and $239 million in 1993. Other rental
expense was $251 million in 1995, $206 million in 1994 and $174
million in 1993, principally for the rental of office space and
data processing equipment. Minimum future rental commitments
under noncancelable leases at December 31, 1995, are $434 million
in 1996, $384 million in 1997, $345 million in 1998, $320 million
in 1999, $288 million in 2000 and $1,348 million thereafter. The
Corporation, as a lessee, has no material lease agreements
classified as capital leases.
41
<PAGE>
Amortization of deferred insurance acquisition costs charged
to operations in 1995, 1994 and 1993 was $1,319 million, $945
million and $817 million, respectively.
NOTE 15. INCOME TAXES
The provision for income taxes is summarized in the following
table.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Estimated amounts payable............... $ 434 $ 447 $ 221
Deferred tax expense from temporary
differences............................ 678 431 428
Investment tax credit amortized - net... (7) (14) (7)
------ ------ ------
$1,105 $ 864 $ 642
====== ====== ======
</TABLE>
Estimated amounts payable includes amounts applicable to non-
U.S. jurisdictions of $172 million, $224 million and $138 million
in 1995, 1994 and 1993, respectively.
GE Company files a consolidated U.S. federal income tax
return which includes GE Capital Services. The provisions for
estimated taxes payable include the effect of the Corporation and
its affiliates on the consolidated return.
Except for certain earnings that GE Capital Services intends
to reinvest indefinitely, provision has been made for the
estimated U.S. federal income tax liabilities applicable to
undistributed earnings of affiliates and associated companies.
A reconciliation of the U.S. federal statutory rate to the
actual income tax rate follows.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate....... 35.0% 35.0% 35.0%
Increase (reduction) in rate resulting from:
Rate increase - deferred taxes............. - - 5.2
Amortization of goodwill................... 1.1 1.0 1.2
Tax-exempt income......................... (5.8) (6.9) (8.3)
Dividends received, not fully taxable...... (0.8) (0.8) (1.2)
All other--net............................ 1.9 1.0 (2.8)
----- ----- -----
Actual income tax rate....................... 31.4% 29.3% 29.1%
===== ===== =====
</TABLE>
42
<PAGE>
Principal components of the net deferred tax liability
balances at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994
------ ------
<S> <C> <C>
Assets
Allowance for losses........... $ (852) $ (876)
Net unrealized losses on
investment securities......... - (468)
Insurance reserves............. (497) (460)
Other.......................... (834) (838)
------ ------
Total deferred tax assets........ (2,183) (2,642)
------ ------
Liabilities
Financing leases............... 5,746 5,075
Operating leases............... 1,367 1,234
Net unrealized gains on
investment securities......... 608 -
Other.......................... 1,334 1,270
------ ------
Total deferred tax liabilities... 9,055 7,579
------ ------
Net deferred tax liability....... $6,872 $4,937
====== ======
</TABLE>
43
<PAGE>
NOTE 16. INDUSTRY SEGMENT DATA
Industry segment operating data and identifiable assets for
continuing operations are shown below. Corporate level expenses
principally include interest expense related to acquisition debt
and other unallocated expenses.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Earned income:
Consumer Services.................... $ 7,586 $ 5,508 $ 4,061
Specialized Financing................ 3,099 2,640 2,543
Equipment Management................. 6,173 5,209 4,323
Mid-Market Financing................. 2,184 1,575 1,472
Specialty Insurance.................. 7,444 4,926 4,862
-------- -------- --------
26,486 19,858 17,261
Corporate............................... 6 17 15
-------- -------- --------
Total earned income..................... $ 26,492 $ 19,875 $ 17,276
======== ======== ========
Segment operating profit:
Consumer Services.................... $ 1,030 $ 1,067 $ 709
Specialized Financing................ 673 536 366
Equipment Management................. 897 624 246
Mid-Market Financing................. 445 435 406
Specialty Insurance.................. 1,020 589 770
-------- -------- --------
Total segment operating profit.......... 4,065 3,251 2,497
Corporate............................ (545) (302) (288)
-------- -------- --------
Earnings from continuing operations
before income taxes.................... $ 3,520 $ 2,949 $ 2,209
======== ======== ========
Identifiable assets at December 31:
Consumer Services.................... $ 73,076 $ 54,171 $ 45,773
Specialized Financing................ 30,297 28,183 27,102
Equipment Management................. 25,145 23,250 19,968
Mid-Market Financing................. 21,544 16,362 14,011
Specialty Insurance.................. 34,795 22,058 18,915
Corporate............................ 872 943 868
-------- -------- --------
Total assets............................ $185,729 $144,967 $126,637
======== ======== ========
</TABLE>
44
<PAGE>
NOTE 17. QUARTERLY FINANCIAL DATA (unaudited)
Summarized quarterly financial data are as follows:
<TABLE>
<CAPTION>
First quarter Second quarter Third quarter Fourth quarter
--------------- --------------- --------------- ---------------
1995 1994 1995 1994 1995 1994 1995 1994
(In millions) ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earned income................ $5,754 $4,393 $6,415 $4,730 $7,099 $5,097 $7,224 $5,655
------ ------ ------ ------ ------ ------ ------ ------
Expenses:
Interest................... 1,543 1,011 1,677 1,083 1,726 1,128 1,715 1,323
Operating and
administrative............ 1,736 1,442 1,901 1,500 1,913 1,386 2,206 1,872
Insurance losses and
policyholder and annuity
benefits.................. 1,091 693 1,223 779 1,540 1,089 1,431 946
Provision for losses on
financing receivables..... 79 170 279 251 352 186 407 266
Depreciation and
amortization of
buildings and equipment
and equipment on
operating leases.......... 452 385 491 383 491 426 579 468
Minority interest in net
earnings of consolidated
affiliates.................. 27 24 26 50 29 25 58 40
------ ------ ------ ------ ------ ------ ------ ------
Earnings from continuing
operations before income
taxes...................... 826 668 818 684 1,048 857 828 740
Provision for income taxes... (267) (187) (246) (189) (337) (242) (255) (246)
------ ------ ------ ------ ------ ------ ------ ------
Earnings from continuing
operations................. 559 481 572 495 711 615 573 494
Earnings (loss) from
discontinued operations.... - (151) - (32) - (89) - (917)
------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)......... $ 559 $ 330 $ 572 $ 463 $ 711 $ 526 $ 573 $ (423)
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
NOTE 18. RESTRICTED NET ASSETS OF AFFILIATES
Certain consolidated affiliates are restricted from remitting
funds to the Corporation in the form of dividends or loans by a
variety of regulations, the purpose of which is to protect
affected insurance policyholders, depositors or investors. At
year-end 1995, net assets of the Corporation's regulated
affiliates amounted to $14.7 billion, of which $12.5 billion was
restricted.
NOTE 19. SUPPLEMENTAL CASH FLOWS INFORMATION
"Other-net operating activities" in the Statement of Cash Flows
consists principally of adjustments to current and noncurrent
accruals of costs and expenses, amortization of premium and
discount on debt, and adjustments to assets such as amortization
of goodwill and intangibles.
The Statement of Cash Flows excludes certain noncash
transactions that had no significant effect on the investing or
financing activities of the Corporation.
45
<PAGE>
<TABLE>
<CAPTION>
Certain supplemental information related to the Corporation's
cash flows is shown below.
For the years ended December 31 1995 1994 1993
(In millions) -------- -------- --------
<S> <C> <C> <C>
Financing receivables
Increase in loans to customers......... $(46,154) $(37,059) $(30,002)
Principal collections from customers... 44,840 31,264 27,571
Investment in equipment for
financing leases...................... (17,182) (10,528) (7,204)
Principal collections on financing
leases................................ 8,821 8,461 6,011
Net change in credit card receivables.. (3,773) (2,902) (1,645)
Sales of financing receivables with
recourse.............................. 2,139 1,239 1,105
-------- -------- --------
$(11,309) $ (9,525) $ (4,164)
======== ======== ========
All other investing activities
Purchases of securities by insurance
and annuity businesses................ $(14,452) $ (8,663) $(10,488)
Dispositions and maturities of
securities by insurance and annuity
businesses............................ 12,460 6,338 7,698
Proceeds from principal business
dispositions.......................... 575 - -
Other.................................. (2,496) 2,501 (4,003)
-------- - ------- --------
$ (3,913) $ 176 $ (6,793)
======== ======== ========
Newly issued debt having maturities
longer than 90 days
Short-term (91 to 365 days)........... $ 2,545 $ 3,214 $4,315
Long-term (longer than one year)...... 32,507 19,228 10,885
Long-term subordinated................ 298 - -
Proceeds -- nonrecourse, leveraged
lease debt........................... 1,428 31 53
-------- -------- --------
$ 36,778 $ 22,473 $ 15,253
======== ======== ========
Repayments and other reductions of debt having maturities
longer than 90 days
Short-term (91 to 365 days)........... $(16,075) $(10,460) $ (9,008)
Long-term (longer than one year)...... (678) (930) (206)
Principal payments -- nonrecourse,
leveraged lease debt................. (292) (309) (312)
-------- -------- --------
$(17,045) $(11,699) $ (9,526)
======== ======== ========
All other financing activities
Proceeds from sales of investment
and annuity contracts............... $ 1,754 $ 1,207 $ 509
Preferred stock issued by GE
Capital and consolidated
affiliate........................... 1,045 240 -
Redemption of investment and
annuity contracts................... (2,540) (1,264) (578)
-------- -------- --------
$ 259 $ 183 $ (69)
======== ======== ========
Cash from (used for) discontinued operations
Cash from (used for) GECS
broker-dealer operating
activities......................... $ 1,414 $ 1,635 $ (1,910)
Cash from (used for) GECS
broker-dealer investing
activities......................... 92 334 (107)
Cash (used for) from GECS
broker-dealer financing
activities......................... (1,506) (2,169) 2,017
-------- -------- --------
- (200) -
======== ======== ========
Cash recovered (paid) during the year for:
Interest.......................... $ (6,177) $ (4,150) $ (3,281)
Income taxes...................... 168 (321) (189)
</TABLE>
46
<PAGE>
Changes in operating assets and liabilities are net of
acquisitions and dispositions of businesses.
"Payments for principal businesses purchased" in the
Statement of Cash Flows is net of cash acquired and includes debt
assumed and immediately repaid in acquisitions. In conjunction
with the acquisitions, liabilities were assumed as follows.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets
acquired......................... $23,534 $10,197 $15,175
Cash paid......................... (5,980) (2,225) (2,988)
.......... ------- ------- -------
Liabilities assumed............... $17,554 $ 7,972 $12,187
======= ======= =======
</TABLE>
NOTE 20. ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial
instruments to which the Corporation is a party. Apart from the
Corporation's own borrowings and certain marketable securities,
relatively few of these instruments are actively traded. Thus,
fair values must often be determined using one or more models that
indicate value based on estimates of quantifiable characteristics
as of a particular date. Because this undertaking is, by its
nature, difficult and highly judgmental, for a limited number of
instruments, alternative valuation techniques may have produced
disclosed values different from those that could have been
realized at December 31, 1995 or 1994. Moreover, the disclosed
values are representative of fair values only as of the dates
indicated. Assets that, as a matter of accounting policy, are
reflected in the accompanying financial statements at fair value
are not included in the following disclosures; such assets include
cash and equivalents, investment securities, and other
receivables.
Values are estimated as follows.
Time sales and loans. Based on quoted market prices, recent
transactions and/or discounted future cash flows, using rates at
which similar loans would have been made to similar borrowers.
Borrowings. Based on quoted market prices or market comparables.
Fair values of interest rate and currency swaps on borrowings are
based on quoted market prices and include the effects of
counterparty creditworthiness.
Annuity benefits. Based on expected future cash flows,
discounted at currently offered discount rates for immediate
annuity contracts or cash surrender value for single premium
deferred annuities.
Financial guarantees. Based on future cash flows, considering
expected renewal premiums, claims, refunds and servicing costs,
discounted at a market rate.
All other instruments. Based on comparable transactions, market
comparables, discounted future cash flows, quoted market prices,
and/or estimates of the cost to terminate or otherwise settle
obligations to counterparties.
47
<PAGE>
Information about financial instruments that were not carried at
fair value at December 31, 1995 and 1994, is shown below.
<TABLE>
<CAPTION>
1995 1994
--------------------------------- ----------------------------------
Assets (liabilities) Assets (liabilities)
-------------------- -----------------------
Estimated fair Estimated fair
Carrying value Carrying value
Notional amount -------------- Notional amount --------------
amount (net) High Low amount (net) High Low
At December 31 (In millions) ------ ------- ---- ---- ------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Time sales and loans................. $ <F1> $57,817 $59,188 $58,299 $ <F1> $48,529 $49,496 $48,840
Integrated interest rate swaps....... 1,703 - (93) (93) 1,183 - 64 64
Purchased options.................... 1,213 24 11 11 103 2 2 2
Mortgage-related positions
Mortgage purchase commitments...... 1,360 - 17 17 205 - (2) (2)
Mortgage sale commitments.......... 1,334 - (11) (11) 1,792 - 2 2
Memo: mortgages held for sale<F2>. <F1> 1,663 1,663 1,663 <F1> 1,764 1,764 1,764
Options, including "floors"........ 18,522 67 144 144 - - - -
Interest rate swaps................ 1,990 - 31 31 950 - (127) (127)
Other cash financial instruments..... <F1> 1,514 1,967 1,705 <F1> 1,897 2,026 1,924
Liabilities
Borrowings and related instruments
Borrowings<F3><F4>................ <F1> (111,598) (113,105) (113,105) <F1> (91,399) (89,797) (89,797)
Interest rate swaps............... 43,681 - (630) (630) 21,996 - 198 195
Currency swaps.................... ..22,342 - 937 937 11,695 - 86 86
Purchased options................. 2,751 26 12 11 130 12 11 12
Other............................. 515 - (65) (65) - - - -
Annuity benefits...................... <F1> (11,994) (11,728) (11,728) <F1> (13,186) (12,788) (12,788)
Insurance -- financial guarantees
and credit life<F5>............... 144,036 (1,570) (832) (922) 132,623 (1,562) (663) (806)
Credit and liquidity support--
securitizations................... 7,035 (58) (65) (65) 5,808 (22) (22) (22)
Performance guarantees -- principally
letters of credit................. 2,920 (48) (78) (78) 2,227 (18) (98) (101)
Other -- principally liquidity
commitments....................... 3,556 1 (36) (45) 3,166 - 42 38
Other firm commitments
Currency forwards and options..... 7,657 - 69 69 3,372 - 12 12
Currency swaps.................... 280 - (22) (22) 488 - (3) (3)
Ordinary course of business lending
commitments..................... 6,929 - (60) (60) 6,687 - (50) (50)
Unused revolving credit lines
Commercial...................... 3,223 - - - 2,580 - - -
Consumer -- principally credit
cards........................ 118,710 - - - 101,582 - - -
<FN>
<F1> Not applicable.
<F2> Included in other cash financial instruments.
<F3> See note 9.
<F4> Includes interest rate and currency swaps.
<F5> See note 10.
</TABLE>
48
<PAGE>
Additional information about certain financial instruments in the
above table follows.
Currency forwards and options are employed by the Corporation to
manage exposures to changes in currency exchange rates associated
with commercial purchase and sale transactions. These financial
instruments generally are used to fix the local currency cost of
purchased goods or services or selling prices denominated in
currencies other than the functional currency. Currency exposures
that result from net investments in affiliates are managed
principally by funding assets denominated in local currency with
debt denominated in those same currencies. In certain
circumstances, net investment exposures are managed using currency
forwards and currency swaps.
Options other than currency options. The Corporation is exposed
to prepayment risk in certain of its business activities, such as
in its mortgage servicing and annuities activities. In order to
hedge those exposures, the Corporation uses one-sided financial
instruments containing option features. These instruments
generally behave based on limits ("caps," "floors" or "collars")
on interest rate movement.
Interest rate and currency swaps are used by the Corporation to
optimize borrowing costs for a particular funding strategy (see
note 9) and to establish specific hedges of mortgage-related
assets and to manage net investment exposures. Such swaps are
evaluated by management under the credit criteria set forth below.
In addition, as part of its ongoing customer activities, the
Corporation may enter into swaps that are integrated with
investments in or loans to particular customers and do not involve
assumption of third-party credit risk. Such integrated swaps are
evaluated and monitored like their associated investments or
loans, and are not therefore subject to the same credit criteria
that would apply to a stand-alone swap.
Counterparty credit risk. Given the ways in which the Corporation
uses swaps, purchased options and forwards, the principal risk is
credit risk--risk that counterparties will be financially unable
to make payments in accordance with the agreements. Associated
market risk is meaningful only as it relates to how changes in
market value affect credit exposure to individual counterparties.
Except as noted above for positions that are integrated into
financings, all swaps, purchased options and forwards are carried
out within the following credit policy constraints:
- - Once a counterparty reaches a credit exposure limit (see table
below), no additional transactions are permitted until the
exposure with that counterparty is reduced to an amount that is
within the established limit. Open contracts remain in force.
<TABLE>
<CAPTION>
Counterparty credit criteria Credit rating
----------------------------
Moody's Standard & Poor's
------- -----------------
<S> <C> <C>
Term of transaction
Five years or less............. Aa3 AA-
Greater than five years........ Aaa AAA
Credit exposure limits
Up to $50 million.............. Aa3 AA-
Up to $75 million.............. Aaa AAA
</TABLE>
49
<PAGE>
- All swaps are executed under master swap agreements containing
mutual credit downgrade provisions that provide the ability to
require assignment or termination in the event either party is
downgraded below A3 or A-.
Because of their lower risk, more credit latitude is permitted
for original maturities shorter than one year.
NOTE 21. GEOGRAPHIC SEGMENT INFORMATION
Geographic segment operating data and total assets are as follows.
<TABLE>
<CAPTION>
Earned income Operating profit
-------------------------------- -----------------------------
(In millions) 1995 1994 1993 1995 1994 1993
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
United States...... $ 18,374 $ 15,213 $ 13,722 $ 2,752 $ 2,413 $ 1,970
Europe............. 4,974 2,457 1,838 469 252 10
Global-including
other areas of
the world......... 3,144 2,205 1,716 299 284 229
-------- -------- -------- ------- ------- -------
Total........... $ 26,492 $ 19,875 $ 17,276 $ 3,520 $ 2,949 $ 2,209
======== ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Total assets
--------------------------------
(In millions) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
United States...... $132,415 $114,069 $104,717
Europe............. 33,462 14,378 8,250
Global-including
other areas of
the world......... 19,852 16,520 13,670
-------- -------- --------
Total............ $185,729 $144,967 $126,637
======== ======== ========
</TABLE>
The basis of presentation of geographic segment information was
revised in 1995 to reclassify the results of certain business
activities within GECS that are essentially global in nature to
"Global-including other areas of the world." Prior-year amounts
have been restated to conform to the current year presentation.
50
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant.
Omitted
Item 11. Executive Compensation.
Omitted
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Omitted
Item 13. Certain Relationships and Related Transactions.
Omitted
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) 1. Financial Statements
Included in Part II of this report:
Independent Auditors' Report
Statement of Current and Retained
Earnings for each of the years in the three-year
period ended December 31, 1995
Statement of Financial Position at
December 31, 1995 and 1994
Statement of Cash Flows for each of the
years in the three-year period ended December 31,
1995
Notes to Consolidated Financial Statements
Incorporated by reference:
The consolidated financial statements of
General Electric Company, set forth in the Annual
Report on Form 10-K of General Electric Company
(S.E.C. File No. 001-00035) for the year ended
December 31, 1995 (pages F-1 through F-40) and
Exhibit 12 (Ratio of Earnings to Fixed Charges) of
General Electric Company.
(a) 2. Financial Statement Schedules
I. Condensed financial information of registrant.
V. Supplemental information concerning
property and casualty insurance operations.
All other schedules are omitted because of the absence
of conditions under which they are required or because
the required information is shown in the financial
statements or notes thereto.
51
<PAGE>
(a) 3. Exhibit Index
The exhibits listed below, as part of Form 10-K,
are numbered in conformity with the numbering used in
Item 601 of Regulation S-K of the Securities and
Exchange Commission.
Exhibit Number Description
- -------------- -----------
3 (i) A complete copy of the Certificate of Incorporation
of the Corporation as last amended on February 10,
1993, and currently in effect. (Incorporated by
reference to Exhibit 3(i) of the Corporation's Form
10-K Report for the year ended December 31, 1993.)
3 (ii) A complete copy of the By-Laws of the Corporation
as last amended on June 30, 1994, and currently in
effect. (Incorporated by reference to Exhibit 3(ii)
of the Corporation's Form 10-K Report for the year
ended December 31, 1994.)
4 (iii) Agreement to furnish to the Securities and Exchange
Commission upon request a copy of instruments
defining the rights of holders of certain long-term
debt of the registrant and all subsidiaries for
which consolidated or unconsolidated financial
statements are required to be filed.
12 (a) Computation of ratio of earnings to fixed charges.
12 (b) Computation of ratio of earnings to combined fixed
charges and preferred stock dividends.
23 (ii) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
27 Financial Data Schedule (filed electronically
herewith).
99 (a) Income Maintenance Agreement dated March 28, 1991,
between General Electric Company and General
Electric Capital Corporation. (Incorporated by
reference to Exhibit 28 of the Corporation's Form
10-K Report for the year ended December 31, 1992).
99 (b) The consolidated financial statements of
General Electric Company, set forth in the Annual
Report on Form 10-K of General Electric Company
(S.E.C. File No. 001-00035) for the year ended
December 31, 1995, (pages F-1 through F-40) and
Exhibit 12 (Ratio of Earnings to Fixed Charges) of
General Electric Company.
99 (c) Item 1. Business - Property and Casualty
Reserves for Unpaid Losses and Loss Adjustment
Expenses, set forth in the Annual Report on Form 10-
K of GE Global Insurance Holding Corporation
(S.E.C. File No. 0-27394) for the year ended
December 31, 1995 (Pages 7 through 12).
52
<PAGE>
Exhibit Number Description
- -------------- -----------
99 (d) Letter, dated June 29, 1995, from Dennis D.
Dammerman of General Electric Company to Gary C.
Wendt of General Electric Capital Corporation
pursuant to which General Electric Company agrees
to provide additional equity to General Electric
Capital Corporation in conjunction with certain
redemptions by General Electric Capital Corporation
of shares of its Variable Cumulative Preferred
Stock. (Incorporated by reference to Exhibit 99(g)
General Electric Capital Corporation's Registration
Statement on Form S-3, File No. 33-61257)
(b) Reports on Form 8-K
None.
53
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GENERAL ELECTRIC CAPITAL SERVICES, INC.
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31 1995 1994 1993
(In millions) ------ ------ ------
<S> <C> <C> <C>
Earned income....................... $ - $ - $ -
------ ------ ------
Expenses:
Interest.......................... 195 132 91
Operating and administrative...... 293 128 211
------ ------ ------
Loss before income taxes and equity
in earnings of affiliates......... (488) (260) (302)
Income tax benefit................. 110 80 87
Equity in earnings from continuing
operations of affiliates.......... 2,793 2,265 1,782
------ ------ ------
Net earnings from continuing
operations....................... 2,415 2,085 1,567
Net earnings (loss) from
discontinued operations.......... - (1,189) 240
------ ------ ------
Net earnings...................... 2,415 896 1,807
Dividends paid.................... (1,091) (914) (610)
Retained earnings at January 1.... 8,194 8,212 7,015
------ ------ ------
Retained earnings at December 31.. $9,518 $8,194 $8,212
====== ====== ======
</TABLE>
See Notes to Condensed Financial Statements.
54
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--
(Continued)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
At December 31 1995 1994
(In millions) ------- -------
<S> <C> <C>
ASSETS
Cash and equivalents........... $ 27 $ 5
Investment securities.......... 55 -
Receivables--net............... 27 14
Investment in and advances to
affiliates.................... 16,722 12,640
------- -------
Total assets.................. $16,831 $12,659
======= =======
LIABILITIES AND EQUITY
Short-term borrowings.......... $ 2,936 $ 2,498
Long-term borrowings........... 298 -
Accounts payable............... 193 235
Other liabilities.............. 130 46
------- -------
Total liabilities............. 3,557 2,779
------- -------
Cumulative preferred stock,
$10,000 par value (80,000
shares authorized; 51,000
shares issued and held
primarily by affiliates at
December 31, 1995 and 1994)... 510 510
Common stock, $10,000 par value
(101 shares authorized and
outstanding).................. 1 1
Additional paid-in capital..... 2,314 2,064
Retained earnings.............. 9,518 8,194
Unrealized gains (losses) on
investment securities held
by affiliates................. 989 (821)
Foreign currency translation
adjustments................... (58) (68)
------- -------
Total equity................ 13,274 9,880
------- -------
Total liabilities and equity. $16,831 $12,659
======= =======
</TABLE>
See Notes to Condensed Financial Statements.
55
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--
(Continued)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31 1995 1994 1993
(In millions) ----- ----- -----
<S> <C> <C> <C>
CASH FROM OPERATING ACTIVITIES............................ $ 722 $ 549 $ 412
------- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Change in investment and advances to
affiliates............................................. (962) 16 18
Net change in investment securities..................... (55) 100 (100)
Net change in receivables............................... 672 (14) 26
------- ----- -----
CASH (USED FOR) PROVIDED FROM INVESTING ACTIVITIES...... (345) 102 (56)
------- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities).. 438 158 351
Newly issued debt--long-term subordinated............... 298 - -
Dividends paid.......................................... (1,091) (904) (610)
------- ----- -----
CASH USED FOR FINANCING ACTIVITIES...................... (355) (746) (259)
------- ----- -----
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
DURING THE YEAR.......................................... 22 (95) 97
CASH AND EQUIVALENTS AT BEGINNING OF YEAR................. 5 100 3
------- ----- -----
CASH AND EQUIVALENTS AT END OF YEAR....................... $ 27 $ 5 $ 100
======= ===== =====
</TABLE>
See Notes to Condensed Financial Statements.
56
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED
AFFILIATES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--
(Concluded)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Income taxes
GE Company files a consolidated U.S. federal income tax
return which includes GE Capital Services. Income tax benefit
includes the effect of GE Capital Services on the consolidated
return.
Dividends from affiliates
In 1995 and 1994, GE Capital Services received dividends of
$124 million and $150 million, respectively, from GE Global
Insurance and $1,588 million and $575 million, respectively, from
GE Capital. The 1995 dividend from GE Capital included certain
assets that were subsequently sold. The proceeds on the sale were
invested back into GE Capital.
Discontinued operations
In November 1994, GE Capital Services elected to terminate
the operations of Kidder, Peabody Group Inc. by initiating an
orderly liquidation of its assets and liabilities. As part of the
liquidation plan, GE Capital Services received securities of Paine
Webber Group Inc. valued at $657 million in exchange for certain
broker-dealer assets and operations. The liquidation was
substantially complete as of December 31, 1995.
57
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY AND CASUALTY INSURANCE OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Reserves for Discount
Deferred unpaid claims deducted from
policy and claims unpaid losses Net
acquisition adjustment and loss Unearned Earned investment
costs expenses expenses premiums premiums income
----------- ----------- ------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1995 $ 821 $12,117 $ 32 $ 3,232 $ 5,118 $ 890
======= ======= ======= ======= ======= =======
1994 $ 581 $ 6,911 $ 27 $ 2,372 $ 3,375 $ 721
======= ======= ======= ======= ======= =======
1993 $ 403 $ 6,405 $ 21 $ 1,639 $ 3,301 $ 594
======= ======= ======= ======= ======= =======
</TABLE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY AND CASUALTY INSURANCE OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Claims and claim
adjustment expenses
incurred related to Amortization Paid claims
------------------- of deferred and claim
Current Prior policy acquisition adjustment Premiums
years years costs expenses written
------- ----- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C>
1995 $3,033 $ 468 $ 927 $2,467 $4,976
====== ====== ====== ====== ======
1994 $1,885 $ 558 $ 606 $1,946 $3,514
====== ====== ====== ====== ======
1993 $2,040 $ 359 $ 550 $1,425 $3,547
====== ====== ====== ====== ======
</TABLE>
58
<PAGE>
Exhibit 4(iii)
March 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Services, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1995--File No. 0-14804
Dear Sirs:
Neither General Electric Capital Services, Inc. (the
"Corporation") nor any of its subsidiaries has outstanding any
instrument with respect to its long-term debt under which the
total amount of securities authorized exceeds 10% of the total
assets of the registrant and its subsidiaries on a consolidated
basis. In accordance with paragraph (b)(4)(iii) of Item 601 of
Regulation S-K (17 CFR 229.601), the Corporation hereby agrees to
furnish to the Securities and Exchange Commission, upon request, a
copy of each instrument which defines the rights of holders of
such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL SERVICES, INC.
By: /s/ J. A. Parke
------------------------------
J. A. Parke,
Senior Vice President, Finance
59
<PAGE>
Exhibit 12 (a)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
(Dollar amounts in millions) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings from continuing
operations............................ $ 2,415 $ 2,085 $ 1,567 $ 1,331 $ 1,215
Provision for income taxes............. 1,105 864 642 404 317
Minority interest...................... 140 139 134 40 33
Cumulative effect to January 1,
1991, of accounting change for
post retirement benefits other
than pensions......................... - - - - 6
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and accounting
change................................ 3,660 3,088 2,343 1,775 1,571
------- ------- ------- ------- -------
Fixed charges:
Interest............................. 6,731 4,598 3,585 3,780 4,413
One-third of rentals................. 175 156 138 92 36
------- ------- ------- ------- -------
Total fixed charges.................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Less interest capitalized, net of
amortization.......................... 21 9 4 6 7
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and accounting
change, plus fixed charges............ $10,545 $ 7,833 $ 6,062 $ 5,641 $ 6,013
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges............................... 1.53 1.65 1.63 1.46 1.35
======= ======= ======= ======= =======
</TABLE>
60
<PAGE>
Exhibit 12 (b)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
(Dollar amounts in millions) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings from continuing operations...... $ 2,415 $2,085 $1,567 $1,331 $1,215
Provision for income taxes............... 1,105 864 642 404 317
Minority interest........................ 140 139 134 40 33
Cumulative effect to January 1, 1991,
of accounting change for post
retirement benefits other than
pensions.............................. - - - - 6
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and
accounting change..................... 3,660 3,088 2,343 1,775 1,571
------- ------- ------- ------- -------
Fixed charges:
Interest.............................. 6,731 4,598 3,585 3,780 4,413
One-third of rentals.................. 175 156 138 92 36
------- ------- ------- ------- -------
Total fixed charges..................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Less interest capitalized, net of
amortization.......................... 21 9 4 6 7
------- ------- ------- ------- ------
Earnings before income taxes, minority
interest and accounting change,
plus fixed charges.................... $10,545 $ 7,833 $ 6,062 $ 5,641 $6,013
======= ======= ======= ======= =======
Preferred stock dividend requirements... $ 1 $ 1 $ - $ - $ -
Ratio of earnings from continuing
operations before provisions for
income taxes to earnings from
continuing operations................ 1.46 1.41 - - -
------- ------- ------- ------- -------
Preferred stock dividend factor on
pre-tax basis........................ 1 1 - - -
Fixed charges.......................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Total fixed charges and preferred
stock dividend requirements.......... $ 6,907 $ 4,755 $ 3,723 $ 3,872 $4,449
======= ======= ======= ======= =======
Ratio of earnings to combined
fixed charges and preferred stock
dividends............................ 1.53 1.65 1.63 1.46 1.35
======= ======= ======= ======= =======
</TABLE>
61
<PAGE>
Exhibit 23(ii)
To the Board of Directors
General Electric Capital Services, Inc.
We consent to incorporation by reference in the Registration
Statement (No. 33-7348) on Form S-3 of General Electric Capital
Services, Inc., and in the Registration Statement (No. 33-61029) on
Form S-3 jointly filed by General Electric Capital Services, Inc. and
General Electric Company, of our report dated February 9, 1996,
relating to the statement of financial position of General
Electric Capital Services, Inc. and consolidated affiliates as of
December 31, 1995 and 1994 and the related statements of current
and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1995, and related schedules
which report appears in the December 31, 1995 annual report on
Form 10-K of General Electric Capital Services, Inc.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 28, 1996
62
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being directors and/or officers of General Electric Capital
Services, Inc., a Delaware corporation (the "Corporation"), hereby
constitutes and appoints Gary C. Wendt, James A. Parke, Joan C.
Amble and Nancy E. Barton and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead in any
and all capacities, to sign one or more Annual Reports for the
Corporation's fiscal year ended December 31, 1995, on Form 10-K
under the Securities Exchange Act of 1934, as amended, or such
other form as such attorney-in-fact may deem necessary or
desirable, any amendments thereto, and all additional amendments
thereto in such form as they or any one of them may approve, and
to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done to the end that such
Annual Report or Annual Reports shall comply with the Securities
Exchange Act of 1934, as amended, and the applicable Rules and
Regulations of the Securities and Exchange Commission adopted or
issued pursuant thereto, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them or
their or his substitute or resubstitute, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set
his hand this 26th day of March, 1996.
/s/ Gary C. Wendt /s/ James A. Parke
- ---------------------------- ----------------------------
Gary C. Wendt, James A. Parke,
Chairman of the Board, Senior Vice President, Finance
President and Chief Executive Officer (Principal Financial Officer)
(Principal Executive Officer)
/s/ Joan C. Amble
----------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
(Page 1 of 2)
63
<PAGE>
/s/ Kaj Ahlmann
- ---------------------------- ----------------------------
Kaj Ahlmann, Benjamin W. Heineman, Jr.,
Director Director
/s/ Nigel D.T. Andrews
- ---------------------------- ----------------------------
Nigel D.T. Andrews, Hugh J. Murphy,
Director Director
/s/ James R. Bunt /s/ Denis J. Nayden
- ---------------------------- ----------------------------
James R. Bunt, Denis J. Nayden,
Director Director
/s/ Dennis D. Dammerman /s/ Michael A. Neal
- ---------------------------- ----------------------------
Dennis D. Dammerman, Michael A. Neal,
Director Director
- ---------------------------- ----------------------------
Paolo Fresco, John M. Samuels,
Director Director
/s/ Edward D. Stewart
- ---------------------------- ----------------------------
Dale F. Frey, Edward D. Stewart,
Director Director
/s/ John F. Welch, Jr.
----------------------------
John F. Welch, Jr.,
Director
A MAJORITY OF THE BOARD OF DIRECTORS
(Page 2 of 2)
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL ELECTRIC CAPITAL SERVICES, INC.
March 26, 1996 By: /s/ Gary C. Wendt
----------------------------
(Gary C. Wendt)
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Signature Title Date
--------- ----- ----
/s/ Gary C. Wendt
- ---------------------- Chairman of the Board, March 26, 1996
(Gary C. Wendt) President and Chief
Executive Officer
(Principal Executive Officer)
/s/ James A. Parke
- ---------------------- Senior Vice President, Finance March 26, 1996
(James A. Parke) (Principal Financial Officer)
/s/ Joan C. Amble
- ---------------------- Vice President and Controller March 26, 1996
(Joan C. Amble) (Principal Accounting Officer)
KAJ AHLMANN* Director
NIGEL D. T. ANDREWS* Director
JAMES R. BUNT* Director
DENNIS D. DAMMERMAN* Director
DENIS J. NAYDEN* Director
MICHAEL A. NEAL* Director
EDWARD D. STEWART* Director
JOHN F. WELCH, JR.* Director
A MAJORITY OF THE BOARD OF DIRECTORS
/s/ Joan C. Amble
*By ----------------------- March 26, 1996
(Joan C. Amble)
Attorney-in-fact
65
<PAGE>
Exhibit 4(iii)
March 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Services, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1995--File No. 0-14804
Dear Sirs:
Neither General Electric Capital Services, Inc. (the
"Corporation") nor any of its subsidiaries has outstanding any
instrument with respect to its long-term debt under which the
total amount of securities authorized exceeds 10% of the total
assets of the registrant and its subsidiaries on a consolidated
basis. In accordance with paragraph (b)(4)(iii) of Item 601 of
Regulation S-K (17 CFR 229.601), the Corporation hereby agrees to
furnish to the Securities and Exchange Commission, upon request, a
copy of each instrument which defines the rights of holders of
such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL SERVICES, INC.
By: /s/ J. A. Parke
------------------------------
J. A. Parke,
Senior Vice President, Finance
<PAGE>
Exhibit 12 (a)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
(Dollar amounts in millions) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings from continuing
operations............................ $ 2,415 $ 2,085 $ 1,567 $ 1,331 $ 1,215
Provision for income taxes............. 1,105 864 642 404 317
Minority interest...................... 140 139 134 40 33
Cumulative effect to January 1,
1991, of accounting change for
post retirement benefits other
than pensions......................... - - - - 6
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and accounting
change................................ 3,660 3,088 2,343 1,775 1,571
------- ------- ------- ------- -------
Fixed charges:
Interest............................. 6,731 4,598 3,585 3,780 4,413
One-third of rentals................. 175 156 138 92 36
------- ------- ------- ------- -------
Total fixed charges.................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Less interest capitalized, net of
amortization.......................... 21 9 4 6 7
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and accounting
change, plus fixed charges............ $10,545 $ 7,833 $ 6,062 $ 5,641 $ 6,013
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges............................... 1.53 1.65 1.63 1.46 1.35
======= ======= ======= ======= =======
</TABLE>
<PAGE>
Exhibit 12 (b)
GENERAL ELECTRIC CAPITAL SERVICES, INC.
AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
(Dollar amounts in millions) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings from continuing operations...... $ 2,415 $2,085 $1,567 $1,331 $1,215
Provision for income taxes............... 1,105 864 642 404 317
Minority interest........................ 140 139 134 40 33
Cumulative effect to January 1, 1991,
of accounting change for post
retirement benefits other than
pensions.............................. - - - - 6
------- ------- ------- ------- -------
Earnings before income taxes,
minority interest and
accounting change..................... 3,660 3,088 2,343 1,775 1,571
------- ------- ------- ------- -------
Fixed charges:
Interest.............................. 6,731 4,598 3,585 3,780 4,413
One-third of rentals.................. 175 156 138 92 36
------- ------- ------- ------- -------
Total fixed charges..................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Less interest capitalized, net of
amortization.......................... 21 9 4 6 7
------- ------- ------- ------- ------
Earnings before income taxes, minority
interest and accounting change,
plus fixed charges.................... $10,545 $ 7,833 $ 6,062 $ 5,641 $6,013
======= ======= ======= ======= =======
Preferred stock dividend requirements... $ 1 $ 1 $ - $ - $ -
Ratio of earnings from continuing
operations before provisions for
income taxes to earnings from
continuing operations................ 1.46 1.41 - - -
------- ------- ------- ------- -------
Preferred stock dividend factor on
pre-tax basis........................ 1 1 - - -
Fixed charges.......................... 6,906 4,754 3,723 3,872 4,449
------- ------- ------- ------- -------
Total fixed charges and preferred
stock dividend requirements.......... $ 6,907 $ 4,755 $ 3,723 $ 3,872 $4,449
======= ======= ======= ======= =======
Ratio of earnings to combined
fixed charges and preferred stock
dividends............................ 1.53 1.65 1.63 1.46 1.35
======= ======= ======= ======= =======
</TABLE>
<PAGE>
Exhibit 23(ii)
To the Board of Directors
General Electric Capital Services, Inc.
We consent to incorporation by reference in the Registration
Statement (No. 33-7348) on Form S-3 of General Electric Capital
Services, Inc., and in the Registration Statement (No. 33-61029) on
Form S-3 jointly filed by General Electric Capital Services, Inc. and
General Electric Company, of our report dated February 9, 1996,
relating to the statement of financial position of General
Electric Capital Services, Inc. and consolidated affiliates as of
December 31, 1995 and 1994 and the related statements of current
and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1995, and related schedules
which report appears in the December 31, 1995 annual report on
Form 10-K of General Electric Capital Services, Inc.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 28, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being directors and/or officers of General Electric Capital
Services, Inc., a Delaware corporation (the "Corporation"), hereby
constitutes and appoints Gary C. Wendt, James A. Parke, Joan C.
Amble and Nancy E. Barton and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead in any
and all capacities, to sign one or more Annual Reports for the
Corporation's fiscal year ended December 31, 1995, on Form 10-K
under the Securities Exchange Act of 1934, as amended, or such
other form as such attorney-in-fact may deem necessary or
desirable, any amendments thereto, and all additional amendments
thereto in such form as they or any one of them may approve, and
to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done to the end that such
Annual Report or Annual Reports shall comply with the Securities
Exchange Act of 1934, as amended, and the applicable Rules and
Regulations of the Securities and Exchange Commission adopted or
issued pursuant thereto, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them or
their or his substitute or resubstitute, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set
his hand this 26th day of March, 1996.
/s/ Gary C. Wendt /s/ James A. Parke
- ---------------------------- ----------------------------
Gary C. Wendt, James A. Parke,
Chairman of the Board, Senior Vice President, Finance
President and Chief Executive Officer (Principal Financial Officer)
(Principal Executive Officer)
/s/ Joan C. Amble
----------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
(Page 1 of 2)
<PAGE>
/s/ Kaj Ahlmann
- ---------------------------- ----------------------------
Kaj Ahlmann, Benjamin W. Heineman, Jr.,
Director Director
/s/ Nigel D.T. Andrews
- ---------------------------- ----------------------------
Nigel D.T. Andrews, Hugh J. Murphy,
Director Director
/s/ James R. Bunt /s/ Denis J. Nayden
- ---------------------------- ----------------------------
James R. Bunt, Denis J. Nayden,
Director Director
/s/ Dennis D. Dammerman /s/ Michael A. Neal
- ---------------------------- ----------------------------
Dennis D. Dammerman, Michael A. Neal,
Director Director
- ---------------------------- ----------------------------
Paolo Fresco, John M. Samuels,
Director Director
/s/ Edward D. Stewart
- ---------------------------- ----------------------------
Dale F. Frey, Edward D. Stewart,
Director Director
/s/ John F. Welch, Jr.
----------------------------
John F. Welch, Jr.,
Director
A MAJORITY OF THE BOARD OF DIRECTORS
(Page 2 of 2)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000797463
<NAME> GENERAL ELECTRIC CAPITAL SERVICES, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,949
<SECURITIES> 41,063
<RECEIVABLES> 95,791
<ALLOWANCES> 2,519
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,079
<DEPRECIATION> 5,634
<TOTAL-ASSETS> 185,729
<CURRENT-LIABILITIES> 0
<BONDS> 48,790
<COMMON> 1
0
10
<OTHER-SE> 12,763
<TOTAL-LIABILITY-AND-EQUITY> 185,729
<SALES> 0
<TOTAL-REVENUES> 26,492
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,756
<LOSS-PROVISION> 1,117
<INTEREST-EXPENSE> 6,661
<INCOME-PRETAX> 3,520
<INCOME-TAX> 1,105
<INCOME-CONTINUING> 2,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,415
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
F-1
(Annual Report Pages)
Annual Report Page No. 25
FINANCIAL SECTION
CONTENTS
44 INDEPENDENT AUDITORS' REPORT
AUDITED FINANCIAL STATEMENTS
26 Earnings
28 Financial Position
30 Cash Flows
45 Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION
32 Operations
32 Consolidated Operations
33 GE Continuing Operations
34 Industry Segments
36 GECS Continuing Operations
38 International Operations
39 Financial Resources and Liquidity
42 Selected Financial Data
44 Financial Responsibility
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
REVENUES
(In billions) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$51.283 $53.051 $55.701 $60.109 $70.028
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
EARNINGS PER SHARE FROM
CONTINUING OPERATIONS
BEFORE ACCOUNTING CHANGES
(In dollars) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.27 $2.41 $2.45 $3.46 $3.90
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
DIVIDENDS PER SHARE
(In dollars) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.04 $1.16 $1.305 $1.49 $1.69
- - -----------------------------------------------------------------------------
</TABLE>
<PAGE>
F-2
Annual Report Page No. 26
<TABLE>
STATEMENT OF EARNINGS
<CAPTION>
General Electric Company
and consolidated affiliates
-----------------------------------
For the years ended December 31 (In millions) 1995 1994 1993
- - -------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C>
REVENUES
Sales of goods $33,157 $30,740 $29,509
Sales of services 9,733 8,803 8,268
Other income (note 3) 752 793 735
Earnings of GECS from continuing operations - - -
GECS revenues from operations (note 4) 26,386 19,773 17,189
------- ------- -------
Total revenues 70,028 60,109 55,701
------- ------- -------
COSTS AND EXPENSES (note 5)
Cost of goods sold 24,288 22,748 22,606
Cost of services sold 6,682 6,214 6,308
Interest and other financial charges 7,286 4,949 4,054
Insurance losses and policyholder and annuity benefits 5,285 3,507 3,172
Provision for losses on financing receivables (note 8) 1,117 873 987
Other costs and expenses 15,429 12,987 12,287
Minority interest in net earnings of consolidated
affiliates 204 170 151
------- ------- -------
Total costs and expenses 60,291 51,448 49,565
------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
ACCOUNTING CHANGE 9,737 8,661 6,136
Provision for income taxes (note 9) (3,164) (2,746) (1,952)
------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 6,573 5,915 4,184
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) - (1,189) 993
------- ------- -------
EARNINGS BEFORE ACCOUNTING CHANGE 6,573 4,726 5,177
Cumulative effect of accounting change (note 20) - - (862)
------- ------- -------
NET EARNINGS $ 6,573 $ 4,726 $ 4,315
======= ======= =======
- - ---------------------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE (in dollars)
Continuing operations before accounting change $ 3.90 $ 3.46 $ 2.45
Discontinued operations before accounting change - (0.69) 0.58
------- ------- -------
Earnings before accounting change 3.90 2.77 3.03
Cumulative effect of accounting change - - (0.51)
------- ------- -------
Net earnings per share $ 3.90 $ 2.77 $ 2.52
======= ======= =======
- - ---------------------------------------------------------------------------------------------------------
DIVIDENDS DECLARED PER SHARE (in dollars) $ 1.69 $ 1.49 $ 1.305
- - ---------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral
part of this statement.
</TABLE>
<PAGE>
F-3
Annual Report Page No. 27
<TABLE>
STATEMENT OF EARNINGS
<CAPTION>
GE GECS
-------------------------------- --------------------------------
For the years ended December 31 (In millions) 1995 1994 1993 1995 1994 1993
- - ---------------------------------------------------------- -------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Sales of goods $33,177 $30,767 $29,533 $ - $ - $ -
Sales of services 9,836 8,863 8,289 - - -
Other income (note 3) 753 783 730 - - -
Earnings of GECS from continuing operations 2,415 2,085 1,567 - - -
GECS revenues from operations (note 4) - - - 26,492 19,875 17,276
------- ------- ------- ------- ------- -------
Total revenues 46,181 42,498 40,119 26,492 19,875 17,276
------- ------- ------- ------- ------- -------
COSTS AND EXPENSES (note 5)
Cost of goods sold 24,308 22,775 22,630 - - -
Cost of services sold 6,785 6,274 6,329 - - -
Interest and other financial charges 649 410 525 6,661 4,545 3,538
Insurance losses and policyholder and annuity benefits - - - 5,285 3,507 3,172
Provision for losses on financing receivables (note 8) - - - 1,117 873 987
Other costs and expenses 5,743 5,211 5,124 9,769 7,862 7,236
Minority interest in net earnings of consolidated
affiliates 64 31 17 140 139 134
------- ------- ------- ------- ------- -------
Total costs and expenses 37,549 34,701 34,625 22,972 16,926 15,067
------- ------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
ACCOUNTING CHANGE 8,632 7,797 5,494 3,520 2,949 2,209
Provision for income taxes (note 9) (2,059) (1,882) (1,310) (1,105) (864) (642)
------- ------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 6,573 5,915 4,184 2,415 2,085 1,567
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) - (1,189) 993 - (1,189) 240
------- ------- ------- ------- ------- -------
EARNINGS BEFORE ACCOUNTING CHANGE 6,573 4,726 5,177 2,415 896 1,807
Cumulative effect of accounting change (note 20) - - (862) - - -
------- ------- ------- ------- ------- -------
NET EARNINGS $ 6,573 $ 4,726 $ 4,315 $ 2,415 $ 896 $ 1,807
======= ======= ======= ======= ======= =======
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial
statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions
between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26.
</TABLE>
<PAGE>
F-4
Annual Report Page No. 28
<TABLE>
STATEMENT OF FINANCIAL POSITION
<CAPTION>
General Electric Company
and consolidated affiliates
-------------------------------
At December 31 (In millions) 1995 1994
- - -------------------------------------------------------------- -------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 2,823 $ 2,591
Investment securities (note 10) 41,067 30,965
Current receivables (note 11) 8,735 7,527
Inventories (note 12) 4,395 3,880
GECS financing receivables (investment in time sales, loans and
financing leases) - net (notes 8 and 13) 93,272 76,357
Other GECS receivables 12,417 5,763
Property, plant and equipment (including equipment leased
to others) - net (note 14) 25,679 23,465
Investment in GECS - -
Intangible assets (note 15) 13,342 11,373
All other assets (note 16) 26,305 23,950
-------- --------
TOTAL ASSETS $228,035 $185,871
======== ========
- - ------------------------------------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 18) $64,463 $57,781
Accounts payable, principally trade accounts 9,061 6,766
Progress collections and price adjustments accrued 1,812 2,065
Dividends payable 767 699
All other GE current costs and expenses accrued (note 17) 5,898 5,543
Long-term borrowings (note 18) 51,027 36,979
Insurance liabilities, reserves and annuity benefits (note 19) 39,699 29,438
All other liabilities (note 20) 15,363 13,161
Deferred income taxes (note 22) 7,380 5,205
-------- --------
Total liabilities 195,470 157,637
-------- --------
Minority interest in equity of consolidated affiliates (note 23) 2,956 1,847
-------- --------
Common stock (1,857,013,000 shares issued) 594 594
Unrealized gains (losses) on investment securities 1,000 (810)
Other capital 1,663 1,122
Retained earnings 34,528 30,793
Less common stock held in treasury (8,176) (5,312)
-------- --------
Total share owners' equity (notes 24 and 25) 29,609 26,387
-------- --------
TOTAL LIABILITIES AND EQUITY $228,035 $185,871
======== ========
- - ------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. Year-
end 1994 assets and liabilities of Kidder, Peabody Group Inc., the discontinued securities broker-dealer of
GECS, have been reclassified to "All other liabilities."
</TABLE>
<PAGE>
F-5
Annual Report Page No. 29
<TABLE>
STATEMENT OF FINANCIAL POSITION
<CAPTION>
GE GECS
------------------- --------------------
At December 31 (In millions) 1995 1994 1995 1994
- - -------------------------------------------------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $ 874 $ 1,373 $ 1,949 $ 1,218
Investment securities (note 10) 4 93 41,063 30,872
Current receivables (note 11) 8,891 7,807 - -
Inventories (note 12) 4,395 3,880 - -
GECS financing receivables (investment in time sales, loans and
financing leases) - net (notes 8 and 13) - - 93,272 76,357
Other GECS receivables - - 12,897 6,012
Property, plant and equipment (including equipment leased
to others) - net (note 14) 10,234 9,525 15,445 13,940
Investment in GECS 12,774 9,380 - -
Intangible assets (note 15) 6,643 6,336 6,699 5,037
All other assets (note 16) 11,901 12,419 14,404 11,531
------- ------- -------- --------
TOTAL ASSETS $55,716 $50,813 $185,729 $144,967
======= ======= ======== ========
- - ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 18) $1,666 $906 $62,808 $57,087
Accounts payable, principally trade accounts 3,968 3,141 5,952 3,777
Progress collections and price adjustments accrued 1,812 2,065 - -
Dividends payable 767 699 - -
All other GE current costs and expenses accrued (note 17) 5,747 5,798 - -
Long-term borrowings (note 18) 2,277 2,699 48,790 34,312
Insurance liabilities, reserves and annuity benefits (note 19) - - 39,699 29,438
All other liabilities (note 20) 8,928 8,468 6,312 4,571
Deferred income taxes (note 22) 508 268 6,872 4,937
------- ------- -------- --------
Total liabilities 25,673 24,044 170,433 134,122
------- ------- -------- --------
Minority interest in equity of consolidated affiliates (note 23) 434 382 2,522 1,465
------- ------- -------- --------
Common stock (1,857,013,000 shares issued) 594 594 1 1
Unrealized gains (losses) on investment securities 1,000 (810) 989 (821)
Other capital 1,663 1,122 2,266 2,006
Retained earnings 34,528 30,793 9,518 8,194
Less common stock held in treasury (8,176) (5,312) - -
------- ------- -------- --------
Total share owners' equity (notes 24 and 25) 29,609 26,387 12,774 9,380
------- ------- -------- --------
TOTAL LIABILITIES AND EQUITY $55,716 $50,813 $185,729 $144,967
======= ======= ======== ========
- - ------------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated
financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated
affiliates" columns on page 28.
</TABLE>
<PAGE>
F-6
Annual Report Page No. 30
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
General Electric Company
and consolidated affiliates
-----------------------------------
For the years ended December 31 (In millions) 1995 1994 1993
- - -------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 6,573 $ 4,726 $ 4,315
Adjustments for discontinued operations - 1,189 (993)
Adjustments to reconcile net earnings to cash provided
from operating activities
Cumulative effect of accounting change - - 862
Depreciation, depletion and amortization 3,594 3,207 3,223
Earnings retained by GECS - continuing operations - - -
Deferred income taxes 1,047 1,228 548
Decrease (increase) in GE current receivables (632) 668 (571)
Decrease (increase) in GE inventories 55 (56) 750
Increase (decrease) in accounts payable 244 697 639
Increase in insurance liabilities, reserves
and annuity benefits 2,490 1,624 1,479
Provision for losses on financing receivables 1,117 873 987
All other operating activities 458 (2,399) 782
-------- -------- --------
CASH FROM OPERATING ACTIVITIES 14,946 11,757 12,021
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (6,447) (7,492) (4,727)
Dispositions of property, plant and equipment 1,542 2,506 1,139
Net increase in GECS financing receivables (11,309) (9,525) (4,164)
Payments for principal businesses purchased (5,641) (2,606) (2,090)
All other investing activities (3,362) 372 (6,518)
-------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (25,217) (16,745) (16,360)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) (3,487) (2,784) 2,406
Newly issued debt (maturities longer than 90 days) 37,604 23,239 15,468
Repayments and other reductions (maturities longer than 90 days) (18,580) (13,098) (11,851)
Net purchase of GE shares for treasury (2,523) (353) (364)
Dividends paid to share owners (2,770) (2,462) (2,153)
All other financing activities 259 181 (69)
-------- -------- --------
CASH FROM (USED FOR) FINANCING ACTIVITIES 10,503 4,723 3,437
-------- -------- --------
CASH FROM (USED FOR) DISCONTINUED OPERATIONS - (200) 962
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 232 (465) 60
Cash and equivalents at beginning of year 2,591 3,056 2,996
-------- -------- --------
Cash and equivalents at end of year $ 2,823 $ 2,591 $ 3,056
======== ======== ========
- - ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (6,645) $ (4,524) $ (3,754)
Cash recovered (paid) during the year for income taxes (1,483) (1,777) (1,644)
- - ---------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement.
Data for 1994 and 1993 have been reclassified to combine cash flows of discontinued operations.
</TABLE>
<PAGE>
F-7
Annual Report Page No. 31
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For the years ended December 31 (in millions) GE GECS
-------------------------------- --------------------------------
1995 1994 1993 1995 1994 1993
- - -------------------------------------------------------- -------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 6,573 $ 4,726 $ 4,315 $ 2,415 $ 896 $ 1,807
Adjustments for discontinued operations - 1,189 (993) - 1,189 (240)
Adjustments to reconcile net earnings to cash provided
from operating activities
Cumulative effect of accounting change - - 862 - - -
Depreciation, depletion and amortization 1,581 1,545 1,631 2,013 1,662 1,592
Earnings retained by GECS - continuing operations (1,324) (1,181) (957) - - -
Deferred income taxes 369 575 120 678 653 428
Decrease (increase) in GE current receivables (739) 754 (625) - - -
Decrease (increase) in GE inventories 55 (56) 750 - - -
Increase (decrease) in accounts payable 462 810 114 418 (222) 540
Increase in insurance liabilities, reserves
and annuity benefits - - - 2,490 1,624 1,479
Provision for losses on financing receivables - - - 1,117 873 987
All other operating activities (912) (2,291) (16) 946 140 770
------- ------- ------- -------- -------- --------
CASH FROM OPERATING ACTIVITIES 6,065 6,071 5,201 10,077 6,815 7,363
------- ------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (1,831) (1,743) (1,588) (4,616) (5,749) (3,139)
Dispositions of property, plant and equipment 38 86 55 1,504 2,420 1,084
Net increase in GECS financing receivables - - - (11,309) (9,525) (4,164)
Payments for principal businesses purchased (238) (575) - (5,403) (2,031) (2,090)
All other investing activities 408 14 298 (3,913) 176 (6,793)
------- ------- ------- -------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (1,623) (2,218) (1,235) (23,737) (14,709) (15,102)
------- ------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) 1,061 (566) 46 (4,510) (2,261) 2,404
Newly issued debt (maturities longer than 90 days) 826 766 215 36,778 22,473 15,253
Repayments and other reductions (maturities longer
than 90 days) (1,535) (1,399) (2,325) (17,045) (11,699) (9,526)
Net purchase of GE shares for treasury (2,523) (353) (364) - - -
Dividends paid to share owners (2,770) (2,462) (2,153) (1,091) (904) (610)
All other financing activities - (2) - 259 183 (69)
------- ------- ------- -------- -------- --------
CASH FROM (USED FOR) FINANCING ACTIVITIES (4,941) (4,016) (4,581) 14,391 7,792 7,452
------- ------- ------- -------- -------- --------
CASH FROM (USED FOR) DISCONTINUED OPERATIONS - - 962 - (200) -
------- ------- ------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (499) (163) 347 731 (302) (287)
Cash and equivalents at beginning of year 1,373 1,536 1,189 1,218 1,520 1,807
------- ------- ------- -------- -------- --------
Cash and equivalents at end of year $ 874 $ 1,373 $ 1,536 $ 1,949 $ 1,218 $ 1,520
======= ======= ======= ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (468) $ (374) $ (473) $ (6,177) $ (4,150) $ (3,281)
Cash recovered (paid) during the year for income taxes (1,651) (1,456) (1,455) 168 (321) (189)
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial
statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions
between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 30.
</TABLE>
<PAGE>
F-8
Annual Report Page No. 32
MANAGEMENT'S DISCUSSION OF OPERATIONS
OVERVIEW
General Electric Company's consolidated financial statements represent the
combination of the Company's manufacturing and nonfinancial services
businesses ("GE") and the accounts of General Electric Capital Services,
Inc. ("GECS"). See note 1 to the consolidated financial statements, which
explains how the various financial data are presented.
Management's Discussion of Operations is presented in four parts:
Consolidated Operations, GE Continuing Operations, GECS Continuing Operations
and International Operations.
CONSOLIDATED OPERATIONS
GE achieved record revenues and earnings in 1995, as broad strength across
its businesses, coupled with continued emphasis on globalization,
productivity and effective asset management, produced top-line growth,
higher margins and strong cash generation. Consolidated revenues, including
acquisitions, rose to a record $70.0 billion, a 17% increase that was
attributable primarily to the Company's increasing international activities.
Eleven of twelve businesses increased revenues, with six businesses - led by
GE Capital Services, Plastics and NBC - achieving double-digit increases.
Consolidated earnings per share from continuing operations increased to
$3.90, up 13% from last year's $3.46 from continuing operations, and earnings
increased 11% to $6.573 billion. Earnings per share grew faster than earnings,
reflecting the cumulative impact of $3.2 billion of shares purchased under a
three-year, $9 billion share repurchase program initiated in December 1994.
Net earnings in 1995 were 39% higher than 1994's $4.726 billion ($2.77
per share), which were 10% higher than 1993's $4.315 billion ($2.52 per
share). Three factors affecting 1994 and 1993 are important to these
comparisons: discontinued operations of the GECS securities broker-dealer and
the GE Aerospace businesses; 1993 restructuring provisions; and the effect of
an accounting change in 1993. Each is discussed separately below. Excluding
the effects of these items, 1994 earnings would have been $5.915 billion, up
22% from $4.862 billion in 1993.
* DISCONTINUED OPERATIONS reflected the results of the GECS securities
broker-dealer, Kidder, Peabody Group Inc. (Kidder, Peabody) in 1994 and 1993,
and the results of the discontinued GE Aerospace businesses in 1993. Note 2
provides additional information about these discontinued operations. The 1994
loss from discontinued operations included a provision of $868 million after
taxes for exit costs related to the liquidation of Kidder, Peabody. This
liquidation was substantially complete as of December 31, 1995.
* RESTRUCTURING PROVISIONS in 1993, amounting to $678 million after
taxes, covered costs of actions that have reduced GE's cost structure.
Essentially all restructuring expenditures were completed by the end of 1994.
Savings arising from these restructuring programs can best be observed in the
growth in operating margin seen in the chart at the bottom of the page and in
the productivity measurements discussed on page 33.
* THE 1993 ACCOUNTING CHANGE represented effects of adopting Statement
of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for
Postemployment Benefits (see note 20). The transition effect of the accounting
change decreased net earnings by $862 million ($0.51 per share), with a
corresponding decrease in share owners' equity.
TWO NEWLY ISSUED ACCOUNTING STANDARDS will be adopted in the first quarter
of 1996 and are not expected to have a material effect on financial position
or results of operations of GE or GECS. A summary of these standards
follows.
* SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, requires that certain long-lived
assets be reviewed for impairment when events or circumstances indicate that
the carrying amounts of the assets may not be recoverable. If such review
indicates that the carrying amount of an asset exceeds the sum of its expected
future cash flows, the asset's carrying value must be written down to fair
value.
* SFAS No. 122, Accounting for Mortgage Servicing Rights, requires that
capitalized rights to service mortgage loans be assessed for impairment by
individual risk stratum by comparing each stratum's carrying amount with its
fair value. Impairment, if any, would be recognized in earnings.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE OPERATING MARGIN AS
A PERCENTAGE OF SALES
1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As reported 11.2% 11.1% 9.9% 13.6% 14.4%
Restructuring charges 0.3 0.4 2.6 - -
- - -----------------------------------------------------------------------------
</TABLE>
<PAGE>
F-9
Annual Report Page No. 33
DIVIDENDS DECLARED totaled $2.838 billion in 1995. Per-share dividends of
$1.69 were up 13% from the previous year, following a 14% increase from the
year before. The 1995 increase marks the 20th consecutive year of dividend
growth. The chart at right compares GE's dividend growth for the last five
years with dividend growth of companies in the Standard and Poor's 500 stock
index.
GE CONTINUING OPERATIONS
GE total revenues were $46.2 billion in 1995, compared with $42.5 billion in
1994 and $40.1 billion in 1993.
* GE's sales of goods and services were $43.0 billion in 1995, an
increase of 9% from 1994, which in turn was 5% higher than in 1993. The
improvement was led by Plastics and NBC. Volume was about 8% higher in 1995,
reflecting growth in most businesses and the effect of consolidating Nuovo
Pignone, a European energy equipment manufacturer. The effects of selling
prices on sales differed markedly among businesses during the year. Overall,
selling prices were essentially flat in 1995, while the effect of currency
exchange rates on the translation of sales denominated in other than U.S.
dollars contributed modestly to the sales increase. Volume in 1994 was about
6% higher than in 1993, but was partially offset by the effects of lower
selling prices. Currency exchange rates had a minor negative effect on 1994
sales.
* GE's other income, earned from a wide variety of sources, was $753
million in 1995, $783 million in 1994 and $730 million in 1993. Details of
GE's other income are provided in note 3.
* Earnings of GECS from continuing operations were up 16% in 1995,
following a 33% increase the year before. See page 36 for an analysis of these
earnings.
PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods
and services sold, and selling, general and administrative expenses.
OPERATING MARGIN is sales of goods and services less the costs of goods and
services sold, and selling, general and administrative expenses. In 1995,
GE's operating margin rose to a record 14.4% of sales, an improvement of 0.8
percentage points from 1994. The operating margin increase was led by strong
improvements in Plastics, Aircraft Engines and NBC. Operating margin was
13.6% of sales in 1994, compared with 12.5% (before restructuring
provisions) in 1993. Including restructuring provisions, 1993 operating
margin was 9.9% of sales. The improved performance in 1994 was attributable
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE/S&P DIVIDEND GROWTH
SINCE 1990 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE 7.22% 18.39% 32.91% 51.63% 68.00%
S&P 500 0.83 2.31 3.97 8.93 14.05
- - -----------------------------------------------------------------------------
</TABLE>
to Appliances, NBC, Power Systems and Transportation Systems, which
increased their margin rates by one percentage point or more.
TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant
dollar basis) has been a major source of improvements in operating margin,
accounting for more than $1 billion of the increases in margin in each of
the last three years. The productivity rate was 3.7% in 1995, reflecting the
sharp improvement at Aircraft Engines and improvements at Plastics and
Medical Systems, largely offset by adverse productivity performance by Power
Systems, the result of its lower 1995 capacity utilization. While the
productivity rate in 1994 was reasonably strong throughout most businesses,
at 3.2% overall, it reflected adverse results of Aircraft Engines' lower
volume. Cost savings provided by productivity improvements more than offset
the impact of inflation in each of the last three years.
GE INTEREST EXPENSE in 1995 was $649 million, up from $410 million in 1994,
which was down from $525 million in 1993. The increase in interest expense
was attributable to a number of factors, including higher interest rates and
average borrowing levels. The decrease in interest expense in 1994 was
primarily the result of lower borrowings partially offset by the effects of
higher interest rates.
ENTERING 1996 with excellent cash flows and a strong balance sheet, the
Company continues to be well positioned to deliver strong performance in the
current global economic environment.
<PAGE>
F-10
Annual Report Page No. 34
GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years
are shown in the table on page 35. For additional information, including a
description of the products and services included in each segment, see note
27.
* AIRCRAFT ENGINES revenues increased 7% from 1994, which was down 13%
from 1993. The revenue increase was primarily attributable to higher volume in
commercial and military spares and related services, partially offset by
effects of lower selling prices. Operating profit increased 26% from 1994, as
significant productivity gains and, to a lesser degree, higher volume more
than offset the effects of lower prices. Operating profit increased 17% during
1994, principally because there was no counterpart to 1993 restructuring
provisions ($267 million). Excluding 1993 restructuring provisions, operating
profit decreased 12% in 1994, largely as a result of lower volume.
In 1995, $1.7 billion of revenues were from sales to the U.S.
government, down $0.1 billion from 1994, which was $0.6 billion lower than in
1993. The lower 1994 revenues were primarily attributable to declines in sales
for the F110 and T700 engine programs.
Firm orders received during 1995 totaled $5.9 billion, up 7% from $5.5
billion in 1994. The firm orders backlog at year-end 1995 was $7.7 billion
($7.6 billion at the end of 1994), about 38% of which was scheduled for
delivery in 1996.
* APPLIANCES revenues were about the same as in 1994, as softening North
American sales offset strong growth in Europe and Asia. Operating profit
increased 2% despite higher material costs, primarily as a result of
productivity. Operating profit rose 84% in 1994 on a 7% increase in revenues,
in part because there was no counterpart to restructuring provisions of $136
million in 1993. Excluding 1993 restructuring provisions, operating profit
increased 34% in 1994, primarily as a result of strong productivity and higher
volume.
* BROADCASTING revenues increased 17% in 1995, following an 8% increase
in 1994. The revenue increase in both years was principally attributable to
sharply stronger prime-time ratings and improved cable and owned-and-operated
station performance, resulting in improved advertising prices throughout the
period. Operating profit was up 48% in 1995, as a result of the stronger
advertising revenues. Operating profit also increased sharply in 1994, in part
because of restructuring provisions of $81 million in 1993. Excluding the
effect of those provisions, operating profit improved 45% from 1993,
reflecting the impact of stronger advertising, improved ratings performance
and substantially improved cable operations.
* INDUSTRIAL PRODUCTS AND SYSTEMS revenues rose 8% in 1995, following a
10% increase in 1994. The improvements in revenues in both years were largely
attributable to increased volume in Transportation Systems, Lighting, and
Motors and Industrial Systems (Motors). Operating profit increased 14% in
1995, after a 47% increase in 1994. The improvement in 1995 resulted from the
combination of productivity across the segment and the volume increases, which
more than offset higher material costs. The 1994 increase in operating profit
reflected primarily the effect of $253 million of restructuring provisions in
1993. Absent restructuring provisions, operating profit increased 15% in 1994,
principally because of improved European operations in Lighting and the
combination of higher volume and productivity in Motors and Transportation
Systems.
Transportation Systems received orders of $1.6 billion in 1995, down
$1.2 billion from 1994's record level. The backlog at year-end 1995 was $3.4
billion ($3.5 billion at the end of 1994), about 29% of which was scheduled
for shipment in 1996.
* MATERIALS revenues increased 17% in 1995, reflecting principally the
effects of higher selling prices and the consolidation of Toshiba Silicones.
Operating profit increased 51%, primarily because of higher prices,
productivity and volume growth, the combination of which more than offset
increases in material costs. Revenues were up 13% in 1994, primarily because
of increased volume across all major product groups. Operating profit rose 16%
in 1994, in part because there was no counterpart to $52 million of
restructuring provisions in 1993. Excluding 1993 restructuring provisions,
operating profit increased 9%, as ongoing productivity and improved volume
more than offset the impact of lower selling prices and much higher material
costs.
* POWER GENERATION revenues were 10% higher in 1995, following a 7%
increase in 1994. The current-year revenue increase was more than accounted
for by the 1995 consolidation of Nuovo Pignone ($1.5 billion in revenues).
Excluding Nuovo Pignone, the revenue decrease in 1995 resulted from lower
volume in both gas and steam turbines. Operating profit decreased 38% in 1995,
as the profit contribution of Nuovo Pignone was more than offset by the
effects of difficult market conditions on volume and prices, cost inflation,
and modification costs related to series "F" gas turbines. Operating profit in
1994 increased 21%, reflecting the effect of 1993 restructuring provisions of
$82 million. Adjusting for 1993 restructuring provisions, operating profit
increased 12%, primarily as a result of lower material costs and volume
improvements that more than offset lower selling prices.
<PAGE>
F-11
Annual Report Page No. 35
<TABLE>
<CAPTION>
SUMMARY OF INDUSTRY SEGMENTS
<CAPTION>
General Electric Company and consolidated affiliates
-------------------------------------------------------
For the years ended December 31 (In millions) 1995 1994 1993 1992 1991
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
GE
Aircraft Engines $ 6,098 $ 5,714 $ 6,580 $ 7,368 $ 7,777
Appliances 5,933 5,965 5,555 5,330 5,225
Broadcasting 3,919 3,361 3,102 3,363 3,121
Industrial Products and Systems 10,194 9,406 8,575 8,210 8,248
Materials 6,647 5,681 5,042 4,853 4,736
Power Generation 6,545 5,933 5,530 5,106 4,813
Technical Products and Services 4,424 4,285 4,174 4,674 4,686
All Other 2,707 2,348 1,803 1,581 1,485
Corporate items and eliminations (286) (195) (242) (399) (538)
------- ------- ------- ------- -------
Total GE 46,181 42,498 40,119 40,086 39,553
------- ------- ------- ------- -------
GECS
Financing 19,042 14,932 12,399 10,544 10,069
Specialty Insurance 7,444 4,926 4,862 3,863 2,989
All Other 6 17 15 11 (5)
------- ------- ------- ------- -------
Total GECS 26,492 19,875 17,276 14,418 13,053
------- ------- ------- ------- -------
Eliminations (2,645) (2,264) (1,694) (1,453) (1,323)
------- ------- ------- ------- -------
CONSOLIDATED REVENUES $70,028 $60,109 $55,701 $53,051 $51,283
======= ======= ======= ======= =======
- - ------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT
GE
Aircraft Engines $ 1,176 $ 935 $ 798 $ 1,274 $ 1,390
Appliances 697 683 372 386 400
Broadcasting 738 500 264 204 209
Industrial Products and Systems 1,519 1,328 901 1,071 1,088
Materials 1,465 967 834 740 800
Power Generation 769 1,238 1,024 854 679
Technical Products and Services 801 787 706 912 693
All Other 2,683 2,309 1,725 1,495 1,405
------- ------- ------- ------- -------
Total GE 9,848 8,747 6,624 6,936 6,664
------- ------- ------- ------- -------
GECS
Financing 3,045 2,662 1,727 1,366 1,327
Specialty Insurance 1,020 589 770 641 501
All Other (545) (302) (288) (272) (290)
------- ------- ------- ------- -------
Total GECS 3,520 2,949 2,209 1,735 1,538
------- ------- ------- ------- -------
Eliminations (2,396) (2,072) (1,554) (1,317) (1,199)
------- ------- ------- ------- -------
CONSOLIDATED OPERATING PROFIT 10,972 9,624 7,279 7,354 7,003
GE interest and financial charges, net of eliminations (644) (417) (529) (752) (881)
GE items not traceable to segments (591) (546) (614) (629) (515)
------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND ACCOUNTING CHANGES $ 9,737 $ 8,661 $ 6,136 $ 5,973 $ 5,607
======= ======= ======= ======= =======
- - ------------------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. "GE" means the
basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric
Capital Services, Inc. and all of its affiliates and associated companies. Operating profit of GE segments excludes
interest and other financial charges; operating profit of GECS includes interest and discount expense, which is the
largest element of GECS' operating costs.
</TABLE>
<PAGE>
F-12
Annual Report Page No. 36
Power Generation orders were $6.7 billion for 1995, compared with $5.7
billion in 1994. The backlog of unfilled orders at year-end 1995 was $10.2
billion ($9.4 billion at the end of 1994), about 43% of which was scheduled to
be shipped in 1996. The increases in orders and backlog were more than
accounted for by the consolidation of Nuovo Pignone in 1995.
* TECHNICAL PRODUCTS AND SERVICES revenues were up 3% in 1995, following
a similar increase in 1994, as higher volume was partially offset by lower
selling prices in both Medical Systems and Information Services. Medical
Systems achieved strong volume growth in Asia and Europe, but the U.S. market
was weak throughout both years. Information Services revenues increased in
1995 and 1994, reflecting continued worldwide growth in services associated
with electronic commerce. Segment operating profit increased 2% in 1995,
primarily a result of productivity gains. The 1994 increase in operating
profit of 11% was partially attributable to 1993 restructuring provisions of
$60 million. Excluding such provisions, 1994 operating profit was 3% ahead of
1993, reflecting productivity and volume improvements that were partially
offset by weaker pricing at both Medical Systems and Information Services.
Orders received by Medical Systems in 1995 were $3.7 billion, up 12%
from 1994. The backlog of unfilled orders at year-end 1995 was $1.6 billion
($1.5 billion at the end of 1994), about 94% of which was scheduled to be
shipped in 1996.
* ALL OTHER consists primarily of GECS' earnings, which are discussed in
the next section. Also included are revenues derived from licensing the use of
GE technology to others.
GECS CONTINUING OPERATIONS
GECS conducts its operations in two segments: Financing and Specialty
Insurance. The Financing segment includes financing operations of General
Electric Capital Corporation (GE Capital). The Specialty Insurance segment
includes operations of GE Global Insurance Holding Corporation (GE Global
Insurance), the principal subsidiary of which is Employers Reinsurance
Corporation (ERC), and the other insurance businesses described on page 61.
IMPROVED OPERATING RESULTS for 1995 and 1994 reflect the effects of asset
growth with approximately equal contributions from origination volume and
from acquisitions of businesses and portfolios.
* GECS revenues from operations were $26.5 billion in 1995, up 33% from
1994, which was up 15% from 1993.
* GECS earnings from continuing operations were $2.4 billion in 1995, up
16% from 1994, which was up 33% from 1993. The 1995 increase reflected asset
growth partially offset by a decrease in financing spreads (the excess of
yields over interest rates on borrowings). The 1994 increase resulted
primarily from asset growth, increased financing spreads and improved asset
quality, which were partially offset by higher insurance losses.
* GECS interest on borrowings in 1995 was $6.7 billion, 47% higher than
in 1994, which was 28% higher than in 1993. Increases in 1995 and 1994
reflected the effects of higher average borrowings used to finance asset
growth as well as the effects of higher interest rates. Part of the 1995
increase resulted from a shift during the year to longer-term funding. The
composite interest rate on GECS' borrowings was 6.76% in 1995, compared with
5.47% in 1994 and 4.96% in 1993.
* GECS insurance losses and policyholder and annuity benefits increased
to $5.3 billion during 1995, compared with $3.5 billion in 1994 and $3.2
billion in 1993, primarily because of business acquisitions and growth in
originations throughout the period.
* GECS other costs and expenses increased to $9.8 billion in 1995 from
$7.9 billion in 1994 and $7.2 billion in 1993, reflecting costs associated
with acquired businesses and portfolios, and higher investment levels.
GECS industry segment revenues and operating profit for the past five
years are shown in the table on page 35. Revenues from operations (earned
income) are detailed in note 4.
* FINANCING SEGMENT revenues from operations were $19.0 billion in 1995,
up 28% from 1994, which was up 20% from 1993. Asset growth and increased
yields were significant factors in both years.
Operating profit was $3.0 billion in 1995, up 14% from 1994, as the
effects of the asset growth were partially offset by declining financing
spreads and losses from adverse market conditions in the Mortgage Services
business. Financing spreads declined during 1995, as the increase in borrowing
rates outpaced the improvements in yields. Operating profit increased 54% in
1994 over 1993, the result of asset growth of 14%, increased financing spreads
and improved asset quality. The provision for losses on financing receivables
increased in 1995, principally reflecting portfolio growth, following a
decline in 1994 that was attributable to improved quality of the portfolio.
Other costs and expenses increased in both years, primarily as a result of
asset growth.
The portfolio of financing receivables, before allowance for losses,
increased to $95.8 billion at the end of 1995 from $78.4 billion at the end of
1994. Financing receivables are the Financing segment's largest asset and its
primary source of revenues. The related allowance for losses at the end of
<PAGE>
F-13
Annual Report Page No. 37
1995 amounted to $2.5 billion (2.63% of receivables - the same as for 1994
and 1993) and, in management's judgment, is appropriate given the risk
profile of the portfolio. Amounts written off in 1995 were approximately
1.01% of the year's average financing receivables, compared with 1.04% and
1.59% during 1994 and 1993, respectively. A discussion of the quality of
certain elements of the Financing segment portfolio follows. Nonearning
receivables are those that are 90 days or more delinquent and reduced-
earning receivables are receivables whose terms have been restructured to a
below-market yield.
Consumer receivables at year-end 1995 and 1994 are shown in the
following table:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Credit card and personal loans $23,937 $19,124
Auto loans 5,555 3,991
Auto finance leases 12,461 7,473
------- -------
Total consumer $41,953 $30,588
======= =======
Nonearning and reduced-earning $671 $422
- As percentage of total 1.6% 1.4%
Receivable write-offs for the year $644 $482
- - -------------------------------------------------------------------------
</TABLE>
Most of the nonearning consumer receivables were U.S. private-label
credit card loans, the majority of which were subject to various loss-sharing
agreements that provide full or partial recourse to the originating retailer.
Delinquencies in the consumer portfolio were slightly higher at the end of
1995 than for 1994, consistent with overall industry experience.
Commercial real estate portfolio at year-end 1995 and 1994 amounted to
$17.4 billion and $16.9 billion, respectively, as shown in the following
table:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Commercial real estate loans $13,405 $13,282
Nonearning and reduced-earning loans 179 179
Receivable write-offs for the year 147 209
Assets acquired for resale 2,335 2,103
Other (primarily ventures) 1,651 1,508
- - -------------------------------------------------------------------------
</TABLE>
Commercial real estate loans are generally secured by first mortgages.
Assets are acquired for resale from various financial institutions. Values
realized during 1995 and 1994 on disposition of assets acquired for resale
have met or exceeded expectations at the time of purchase.
The commercial real estate portfolio includes investments in a variety
of property types and continues to be well dispersed geographically,
principally in the continental United States. Write-offs in the commercial
real estate portfolio declined during 1995, as markets continued to stabilize.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GECS EARNINGS FROM
CONTINUING OPERATIONS
(In billions) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.221 $1.331 $1.567 $2.085 $2.415
- - -----------------------------------------------------------------------------
</TABLE>
Other financing receivables, totaling $40.4 billion at December 31,
1995, consisted of a diverse commercial, industrial and equipment loan and
lease portfolio. This portfolio increased $5.9 billion during 1995, primarily
because of acquisitions. The related nonearning and reduced-earning
receivables increased to $285 million at year-end 1995 from $165 million at
year-end 1994.
GECS held loans and leases to commercial airlines, as discussed in note
16, amounting to $8.3 billion at the end of 1995, up from $7.6 billion at the
end of 1994, reflecting purchases of aircraft. At year-end 1995, GECS'
commercial aircraft positions included financial guaranties and funding
commitments amounting to $409 million ($506 million at year-end 1994) and
conditional commitments to purchase aircraft at a cost of $141 million ($81
million at year-end 1994). On January 22, 1996, GECS announced that it had
placed a multi-year order for various Boeing aircraft with list prices
approximating $4 billion.
* SPECIALTY INSURANCE SEGMENT revenues from operations were $7.4 billion
in 1995, an increase of 51% from 1994, which was essentially the same as 1993.
The increase in 1995 reflected growth, primarily associated with business
acquisitions, in the property and casualty reinsurance business. Operating
profit increased to $1,020 million in 1995 from $589 million in 1994,
principally because there was no current-year counterpart to the 1994 adverse
loss development in the private mortgage pool insurance, the result of poor
economic conditions and housing value declines in southern California.
Operating profit in 1995 also was enhanced by improved returns on investment
securities and effects of acquisitions. For 1994, private mortgage pool
insurance losses more than offset operating profit increases in other parts of
the segment, including primary mortgage insurance.
<PAGE>
F-14
Annual Report Page No. 38
INTERNATIONAL OPERATIONS
Estimated results of international operations include all exports from the
United States plus the results of GE's and GECS' operations located outside
the United States. International revenues in 1995 were $26.9 billion (38% of
consolidated revenues), compared with $20.0 billion in 1994 and $18.2
billion in 1993. In 1995, about 46% of GE's sales of goods and services were
international, compared with about 40% in the previous two years. The chart
below left depicts the growth in international revenues in relation to total
revenues over the past five years. International operating profit was $3.0
billion (27% of consolidated operating profit) in 1995, compared with $2.6
billion in 1994 and $2.3 billion in 1993.
GE's international revenues were $20.2 billion in 1995, an increase of
24% from 1994, reflecting strong growth in Europe and the Pacific Basin.
European revenues increased by $2.5 billion, largely because of the 1995
consolidation of Nuovo Pignone's $1.5 billion of sales. Additionally, many GE
businesses, especially Aircraft Engines and Plastics, achieved strong revenue
performance in Europe during the year. GE's Pacific Basin revenues were up
$0.9 billion in 1995, the result of consolidating Toshiba Silicones in the
Plastics business, as well as growth across many other businesses,
particularly Medical Systems and Lighting.
GECS' international revenues were $6.7 billion in 1995 and year-end
assets were about $43.3 billion. These revenues, which were derived primarily
from operations in Europe, Canada and the Pacific Basin, were up sharply from
$3.7 billion in 1994; year-end assets more than doubled during the year from
approximately $21.5 billion at the end of 1994. The increase is attributable
to expansion of GECS' operations into the international marketplace -
expansion that management expects to continue.
The accompanying financial results reported in U.S. dollars are
unavoidably affected by currency exchange. A number of techniques are used to
manage the effects of currency exchange, including selective borrowings in
local currencies and selective hedging of significant cross-currency
transactions. International activity is diverse, as shown for revenues in the
chart at the bottom right of this page. Principal currencies include those of
countries in the European Monetary Union, as well as the Japanese yen and the
Canadian dollar.
GE's export sales by major world areas follow.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
GE'S TOTAL EXPORTS FROM THE UNITED STATES
(In millions) 1995 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Basin $3,397 $3,260 $2,645
Europe 1,701 1,319 2,320
Americas 1,023 1,027 981
Other 964 821 1,039
------ ------ ------
Exports to external customers 7,085 6,427 6,985
Exports to affiliates 2,123 1,683 1,513
------ ------ ------
Total exports $9,208 $8,110 $8,498
====== ====== ======
- - ---------------------------------------------------------------------------
</TABLE><
GE made a positive 1995 contribution of approximately $5.2 billion to
the U.S. balance of trade. Total exports in 1995 were $9.2 billion; direct
imports from external suppliers were $2.8 billion; and imports from GE
affiliates were $1.2 billion.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
CONSOLIDATED REVENUES
(In billions) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States $34.631 $35.228 $37.471 $40.064 $43.164
International 16.652 17.823 18.230 20.045 26.864
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
CONSOLIDATED INTERNATIONAL
REVENUES
(In billions) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Europe $7.972 $8.721 $9.042 $9.116 $14.117
Pacific Basin 4.030 4.349 4.531 5.997 7.136
Americas 3.194 3.315 3.215 3.763 4.105
Other 1.456 1.438 1.442 1.169 1.506
- - -----------------------------------------------------------------------------
</TABLE>
<PAGE>
F-15
Annual Report Page No. 39
MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
This discussion of financial resources and liquidity focuses on the
Statement of Financial Position (page 28) and the Statement of Cash Flows
(page 30).
Throughout the discussion, it is important to understand the differences
between the businesses of GE and GECS. Although GE's manufacturing and
nonfinancial services activities involve a variety of different businesses,
their underlying characteristics are development, preparation for market and
delivery of tangible goods and services. Risks and rewards are directly
related to the ability to manage and finance those activities.
GECS' principal businesses provide financing, asset management,
insurance and other financial services to third parties. The underlying
characteristics of these businesses involve the management of financial risk.
GECS' risks and rewards stem from the abilities of its businesses to continue
to design and provide a wide range of financial services in a competitive
marketplace and to receive adequate compensation for such services. GECS is
not a "captive finance company" nor a vehicle for "off-balance-sheet
financing" for GE; very little of GECS' business is directly related to other
GE operations.
Despite the different business profiles of GE and GECS, the global
commercial airline industry is one significant example of an important source
of business for both. GE assumes financing positions primarily in support of
engine sales, whereas GECS is a significant source of lease and loan financing
for the industry (see details in note 16). Management believes that,
particularly as the industry regains financial strength, these financing
positions are reasonably protected by collateral values and by its ability to
control assets, either by ownership or security interests.
The fundamental differences between GE and GECS are reflected in the
measurements commonly used by investors, rating agencies and financial
analysts. These differences will become clearer in the discussion that follows
with respect to the more significant items in the financial statements.
STATEMENT OF FINANCIAL POSITION
* INVESTMENT SECURITIES for each of the past two years comprised mainly
investment-grade debt securities held by GECS' specialty insurance and annuity
businesses in support of obligations to policyholders and annuitants. The
increase of $10.2 billion at GECS during 1995 was principally related to
acquisitions, increases in fair value resulting from lower year-end interest
rates and investment of premiums.
* GE'S CURRENT RECEIVABLES were $8.9 billion and $7.8 billion at the end
of 1995 and 1994, respectively, and included $6.6 billion and $5.7 billion due
from customers at the end of 1995 and 1994, respectively. As a measure of
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE ANNUAL INVENTORY
TURNOVER 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4.71 5.26 5.97 6.86 6.90
- - -----------------------------------------------------------------------------
</TABLE>
asset utilization, customer receivables turnover was 6.7 in 1995, compared
with 6.9 in 1994, a decline solely attributable to consolidation of Nuovo
Pignone. Current receivables other than amounts owed by customers are
primarily amounts that did not originate from sales of GE goods or services,
such as advances to suppliers in connection with large contracts.
* INVENTORIES were $4.4 billion at December 31, 1995, up $0.5 billion
from the end of 1994. As a measure of inventory utilization, turnover was 6.9
in 1995, about the same as in 1994. Absent the consolidation of Nuovo Pignone,
inventory turnover would have been 7.2 in 1995, continuing the improvements
achieved over the past five years. Last-in, first-out (LIFO) revaluations
decreased $87 million in 1995, compared with decreases of $197 million in 1994
and $179 million in 1993. Included in these changes were decreases of $88
million, $72 million and $101 million (1995, 1994 and 1993, respectively) that
resulted from lower LIFO inventory levels. There was no cost change in 1995
and net cost decreases in 1994 and 1993.
* GECS FINANCING RECEIVABLES were $93.3 billion at year-end 1995, net of
allowance for doubtful accounts, up $16.9 billion over 1994. These receivables
are discussed on page 36 and in notes 8 and 13.
* GECS OTHER RECEIVABLES were $12.9 billion and $6.0 billion at December
31, 1995 and 1994, respectively. The 1995 increase was almost entirely
attributable to premiums receivable and reinsurance recoverables, reflecting
acquired businesses and a general increase in underwriting activity.
* PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others)
was $25.7 billion at December 31, 1995, up $2.2 billion from 1994. GE's
property, plant and equipment consists of investments for its own productive
use, whereas the largest element of GECS' investment is in equipment provided
to third parties on operating leases. Details by category of investment can be
found in note 14.
<PAGE>
F-16
Annual Report Page No. 40
GE's total expenditures for new plant and equipment during 1995 totaled
$1.8 billion, up slightly from $1.7 billion in 1994. Total expenditures for
the past five years were $8.8 billion, of which 36% was investment in
productivity, through new equipment and process improvements; 35% was
investment for growth, through new capacity and product development; and 29%
was investment for such other purposes as improvement of research and
development facilities and safety and environmental protection.
GECS' additions to its equipment leased to others were $4.5 billion
during 1995 ($5.6 billion during 1994).
* INTANGIBLE ASSETS were $13.3 billion at year-end 1995, up from $11.4
billion at year-end 1994. GE's intangibles increased to $6.6 billion from $6.3
billion at the end of 1994. The $1.7 billion increase in GECS' intangibles was
primarily goodwill attributable to various acquisitions, none of which was
individually material.
* ALL OTHER ASSETS totaled $26.3 billion at year-end 1995, an increase
of $2.4 billion from the end of 1994. GE's other assets decreased $0.5
billion, reflecting the 1995 consolidation of Nuovo Pignone, which was
classified in other assets in 1994, and an increase in the prepaid pension
asset. GECS' increase of $2.9 billion related principally to acquisitions.
* INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $39.7
billion, $10.3 billion higher than in 1994. The increase was primarily
attributable to acquisitions.
* CONSOLIDATED BORROWINGS aggregated $115.5 billion at December 31,
1995, compared with $94.8 billion at the end of 1994. The major debt-rating
agencies evaluate the financial condition of GE and of GE Capital (GECS' major
public borrowing entity) differently because of their distinct business
characteristics. Using criteria appropriate to each and considering their
combined strength, those major rating agencies continue to give the highest
ratings to debt of both GE and GE Capital.
GE has committed to contribute capital to GE Capital in the event of
either a significant, specified decrease in the ratio of GE Capital's earnings
to fixed charges or a failure to maintain a specified debt-to-equity ratio in
the event certain GE Capital preferred stock is redeemed. GE also has
guarantied subordinated debt of GECS with a face amount of $1,000 million and
$700 million at December 31, 1995 and 1994, respectively. Management believes
the likelihood that GE will be required to contribute capital under either the
commitments or the guaranties is remote.
GE's total borrowings were $3.9 billion at year-end 1995 ($1.6 billion
short-term, $2.3 billion long-term), an increase of about $0.3 billion from
year-end 1994. GE's total debt at the end of 1995 equaled 11.6% of total
capital, down from 11.9% at the end of 1994.
GECS' total borrowings were $111.6 billion at December 31, 1995, of
which $62.8 billion is due in 1996 and $48.8 billion is due in subsequent
years. Comparable amounts at the end of 1994 were $91.4 billion total, $57.1
billion due within one year and $34.3 billion due thereafter. GECS' composite
interest rates are discussed on page 36. A large portion of GECS' borrowings
($41.2 billion and $43.7 billion at the end of 1995 and 1994, respectively)
was issued in active commercial paper markets that management believes will
continue to be a reliable source of short-term financing. Most of this
commercial paper is issued by GE Capital. The average remaining terms and
interest rates of GE Capital's commercial paper were 41 days and 5.88%,
respectively, at the end of 1995, compared with 45 days and 5.90% at the end
of 1994. GE Capital's leverage (ratio of debt to equity, excluding from equity
all net unrealized gains and losses on investment securities) was 7.89 to 1 at
the end of 1995, compared with 7.94 to 1 at the end of 1994. By comparison,
including in equity all net unrealized gains and losses on investment
securities, GE Capital's ratio of debt to equity was 7.59 to 1 at the end of
1995, compared with 8.43 to 1 at the end of 1994.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
Both GE and GECS are exposed to various types of risk, although the nature
of their activities means that the respective risks are different. The
multinational nature of GE's operations and the relatively low level of GE's
borrowings means that currency management is more important than managing
exposure to changes in interest rates.
On the other hand, changes in interest rates are the more significant
exposure for GECS because of the potential effects of such changes on
financing spreads.
The correlation between interest rate changes and financing spreads is
subject to many factors and cannot be forecast with reliability. Although not
necessarily relevant to future effects, management estimates that, all
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE BORROWINGS AS A PERCENTAGE
OF TOTAL CAPITAL INVESTED
1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26.18% 22.39% 15.51% 11.87% 11.60%
- - -----------------------------------------------------------------------------
</TABLE>
<PAGE>
F-17
Annual Report Page No. 41
else constant, an increase of 100 basis points in interest rates for all of
1995 would have reduced GECS net earnings by approximately $65 million.
GE and GECS use various financial instruments, particularly interest
rate, currency and basis swaps, but also options and currency forwards, to
manage their respective risks. GE and GECS are exclusively end users of these
instruments, which are commonly referred to as derivatives; neither GE nor
GECS engages in trading, market-making or other speculative activities in the
derivatives markets. Established practices require that derivative financial
instruments relate to specific asset, liability or equity transactions or to
currency exposures. The total exposure of GE and GECS to credit risk
associated with in-the-money derivatives at December 31, 1995, was $50 million
and $680 million, respectively. Management does not anticipate any loss from
this exposure.
More detailed information regarding these financial instruments, as well
as the strategies and policies for their use, is contained in notes 1, 18 and
29.
STATEMENT OF CASH FLOWS
Because cash management activities of GE and GECS are separate and distinct,
it is more useful to review their cash flows statements separately.
GE
GE's cash and equivalents aggregated $0.9 billion at the end of 1995, about
$0.5 billion lower than at the end of 1994. During 1995, GE generated $6.1
billion in cash from operating activities, about the same as in 1994. The
1995 cash generation provided most of the resources to repurchase $3.1
billion of GE common stock under share repurchase programs, to pay $2.8
billion in dividends to share owners, and to invest $1.8 billion in new
plant and equipment.
Operating activities are the principal source of GE's cash flows from
continuing operations. Over the past three years, operating activities have
provided more than $17.3 billion of cash. Principal applications were payment
of dividends to share owners ($7.4 billion), investment in new plant and
equipment ($5.2 billion) and reduction of debt ($2.9 billion). In addition,
the Company repurchased and placed into treasury $3.4 billion of its common
stock during the past three years under share repurchase programs.
In December 1994, GE's Board of Directors authorized the repurchase of
up to $5 billion of the Company's common stock over the following two years.
In December 1995, the Board increased the authorized amount of the repurchase
to $9 billion and extended the program through 1997. This program is a direct
result of GE's solid financial condition and cash-generating capability, and
it was authorized after evaluating various alternatives to enhance long-term
share owner value.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE CUMULATIVE CASH FLOWS
(In billions) 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities $3.626 $8.199 $13.400 $19.471 $25.536
Dividends paid 1.780 3.705 5.858 8.320 11.090
Shares repurchased 1.043 2.175 2.882 3.955 7.057
- - -----------------------------------------------------------------------------
</TABLE>
Based on past performance and current expectations, in combination with
the financial flexibility that comes with a strong balance sheet and the
highest credit ratings, management believes that GE is in a sound position to
complete the share repurchase program, to grow dividends in line with
earnings, and to continue making long-term investments for future growth,
including selective acquisitions and investments in joint ventures.
Expenditures for new plant and equipment in 1996 are expected to be about 20%
higher than in 1995, principally for productivity and growth.
GECS
GECS' primary source of cash is financing activities involving the continued
rollover of short-term borrowings and appropriate addition of borrowings
with a reasonable balance of maturities. Over the past three years, GECS'
borrowings with maturities of 90 days or less have decreased by $4.4
billion. New borrowings of $74.5 billion having maturities longer than 90
days were added during those years, while $38.3 billion of such longer-term
borrowings were retired. GECS also generated $24.3 billion from continuing
operating activities.
GECS' principal use of cash has been investing in assets to grow its
businesses. Of the $53.5 billion that GECS invested over the past three years,
$25.0 billion was used for additions to financing receivables, $13.5 billion
was used to invest in new equipment, principally for lease to others, and $9.5
billion was used for acquisitions of new businesses.
With the financial flexibility that comes with excellent credit ratings,
management believes that GECS should be well positioned to meet the global
needs of its customers for capital and to continue providing GE share owners
with good returns.
<PAGE>
F-18
Annual Report Page No. 42
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA summarizes on the opposite page some data frequently
requested about General Electric Company. The data are divided into three
sections: upper portion - consolidated data; middle portion - GE data that
reflect various conventional measurements for industrial enterprises; and
lower portion - GECS data that reflect key information pertinent to
financial services.
GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,892 million in
1995, up $151 million (or 9%) from 1994. In 1995, expenditures of $1,299
million were from GE's own funds, up 10% from 1994. Expenditures reflected
continuing research and development work related to new product programs,
including the next generation of gas turbines, a more powerful version of
the recently introduced AC locomotive and, in Aircraft Engines, introduction
of the new GE90 and development of more fuel-efficient versions of the best-
selling CFM56. Expenditures from funds provided by customers (mainly the
U.S. government) were $593 million in 1995, up $28 million from 1994,
primarily reflecting additional research efforts in advanced propulsion
technologies at Aircraft Engines.
GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1995 was $25.5
billion, up $1.2 billion from the 1994 level. The increase was more than
accounted for by the 1995 consolidation of Nuovo Pignone. Orders
constituting this backlog may be canceled or deferred by customers, subject
in certain cases to cancellation penalties. See Industry Segments beginning
on page 34 for further discussion on unfilled orders of relatively long-
cycle manufacturing businesses. About 46% of total unfilled orders at the
end of 1995 was scheduled to be shipped in 1996, with most of the remainder
to be shipped in the two years after that. For comparison, about 50% of the
1994 backlog was expected to be shipped in 1995.
REGARDING ENVIRONMENTAL MATTERS, the Company's operations, like operations
of other companies engaged in similar businesses, involve the use, disposal
and cleanup of substances regulated under environmental protection laws.
In 1995, GE had capital expenditures of about $75 million for projects
related to the environment. The comparable amount in 1994 was $63 million.
These amounts exclude expenditures for remediation actions, which are
principally expensed and are discussed below. Capital expenditures for
environmental purposes have included pollution control devices - such as
wastewater treatment plants, groundwater monitoring devices, air strippers or
separators, and incinerators - at new and existing facilities constructed or
upgraded in the normal course of business. Consistent with policies stressing
environmental responsibility, average annual capital expenditures other than
for remediation projects are presently expected to be about $85 million over
the next two years. This level is in line with existing levels for new or
expanded programs to build facilities or modify manufacturing processes to
minimize waste and reduce emissions.
GE also is involved in a sizable number of remediation actions to clean
up hazardous wastes as required by federal and state laws. Such statutes
require that responsible parties fund remediation actions regardless of fault,
legality of original disposal or ownership of a disposal site. Expenditures
for site remediation actions amounted to approximately $76 million in 1995,
compared with $98 million in 1994. It is presently expected that remediation
actions will require average annual expenditures in the range of $80 million
to $110 million over the next two years. Liabilities for remediation costs are
based on management's best estimate of future costs; when there appears to be
a range of possible costs with equal likelihood, liabilities are based on the
lower end of such range. Possible insurance recoveries are not considered in
estimating liabilities.
It is difficult to estimate with any meaning the annual level of future
remediation expenditures because of the many uncertainties, including
uncertainties about the status of laws, regulations, technology and
information related to individual sites. Subject to the foregoing, management
believes that capital expenditures and remediation actions to comply with the
present laws governing environmental protection will not have a material
effect on consolidated earnings, liquidity or competitive position. In making
this determination, management considered the fact that, if remediation
expenditures were to continue at the 1995 level, liabilities recorded at the
end of 1995 would be sufficient to cover expenditures through the end of 2001,
and that the probability of incurring more than nominal expenditures beyond
2015 is remote. Of course, lower annual expenditures could be incurred over a
longer period without increasing the total expenditures.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
GE SHARE PRICE ACTIVITY
1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High $39.00 $43.75 $53.50 $54.875 $73.125
Low 26.50 36.375 40.375 45.00 49.875
Close 38.25 42.75 52.44 51.00 72.00
- - -----------------------------------------------------------------------------
</TABLE>
<PAGE>
F-19
Annual Report Page No. 43
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
-----------------------------------------------------------------
(Dollar amounts in millions;
per-share amounts in dollars) 1995 1994 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Revenues $ 70,028 $60,109 $55,701 $53,051 $51,283
Earnings from continuing operations 6,573 5,915 4,184 4,137 3,943
Earnings (loss) from discontinued operations - (1,189) 993 588 492
Earnings before accounting changes 6,573 4,726 5,177 4,725 4,435
Net earnings 6,573 4,726 4,315 4,725 2,636
Dividends declared 2,838 2,546 2,229 1,985 1,808
Earned on average share owners' equity 23.5% 18.1% 17.5% 20.9% 12.2%
Per share
Earnings from continuing operations $ 3.90 $ 3.46 $ 2.45 $ 2.41 $ 2.27
Earnings (loss) from discontinued operations - (0.69) 0.58 0.34 0.28
Earnings before accounting changes 3.90 2.77 3.03 2.75 2.55
Net earnings 3.90 2.77 2.52 2.75 1.51
Dividends declared 1.69 1.49 1.305 1.16 1.04
Stock price range 73 1/8-49 7/8 54 7/8-45 53 1/2-40 3/8 43 3/4-36 3/8 39-26 1/2
Total assets of continuing operations 228,035 185,871 166,413 135,472 123,115
Long-term borrowings 51,027 36,979 28,194 25,298 22,602
Shares outstanding - average (in thousands) 1,683,812 1,708,738 1,707,979 1,714,396 1,737,863
Share owner accounts - average 460,000 458,000 464,000 481,000 495,000
Employees at year end
United States 150,000 156,000 157,000 168,000 173,000
Other countries 72,000 60,000 59,000 58,000 62,000
Discontinued operations (primarily U.S.) - 5,000 6,000 42,000 49,000
-------- ------- ------- ------- -------
Total employees 222,000 221,000 222,000 268,000 284,000
======== ======= ======= ======= =======
- - -----------------------------------------------------------------------------------------------------------------------
GE DATA
Short-term borrowings $ 1,666 $ 906 $ 2,391 $ 3,448 $ 3,482
Long-term borrowings 2,277 2,699 2,413 3,420 4,332
Minority interest 434 382 355 350 353
Share owners' equity 29,609 26,387 25,824 23,459 21,683
-------- ------- ------- ------- -------
Total capital invested $ 33,986 $30,374 $30,983 $30,677 $29,850
======== ======= ======= ======= =======
Return on average total capital invested 21.3% 15.9% 15.2% 16.9% 11.1%
Borrowings as a percentage of total capital invested 11.6% 11.9% 15.5% 22.4% 26.2%
Working capital $ 204 $ 544 $ (419) $ (822) $ (231)
Property, plant and equipment additions 1,831 1,743 1,588 1,445 2,164
Year-end orders backlog 25,507 24,324 22,861 25,434 26,049
- - -----------------------------------------------------------------------------------------------------------------------
GECS DATA
Revenues $ 26,492 $19,875 $17,276 $14,418 $13,053
Earnings from continuing operations 2,415 2,085 1,567 1,331 1,221
Earnings (losses) from discontinued operations - (1,189) 240 168 54
Net earnings 2,415 896 1,807 1,499 1,256
Share owner's equity 12,774 9,380 10,809 8,884 7,758
Minority interest 2,522 1,465 1,301 994 865
Borrowings from others 111,598 91,399 81,052 72,360 63,313
Ratio of debt to equity at GE Capital <F1> 7.89:1 7.94:1 7.96:1 7.91:1 7.80:1
Total assets of GE Capital $160,825 $130,904 $117,939 $92,632 $80,528
Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63%
Insurance premiums written $ 6,158 $ 3,962 $ 3,956 $ 2,900 $ 2,155
- - ------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Equity excludes unrealized gains and losses on investment securities.
See note 20 to the consolidated financial statements for information about the 1993 accounting change. The 1991
accounting change represented the adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS"
means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between
GE and GECS have been eliminated from the "consolidated information."
</TABLE>
<PAGE>
F-20
Annual Report Page No. 44
MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY
The financial data in this report, including the audited financial
statements, have been prepared by management using the best available
information and applying judgment. Accounting principles used in preparing
the financial statements are those that are generally accepted in the United
States.
Management believes that a sound, dynamic system of internal financial
controls that balances benefits and costs provides the best safeguard for
Company assets. Professional financial managers are responsible for
implementing and overseeing the financial control system, reporting on
management's stewardship of the assets entrusted to it by share owners and
maintaining accurate records.
GE is dedicated to the highest standards of integrity, ethics and social
responsibility. This dedication is reflected in written policy statements
covering, among other subjects, environmental protection, potentially
conflicting outside interests of employees, compliance with antitrust laws,
proper business practices and adherence to the highest standards of conduct
and practices in transactions with the U.S. government. Management continually
emphasizes to all employees that even the appearance of impropriety can erode
public confidence in the Company. Ongoing education and communication programs
and review activities, such as those conducted by the Company's Policy
Compliance Review Board, are designed to create a strong compliance culture -
one that encourages employees to raise their policy questions and concerns and
that prohibits retribution for doing so.
KPMG Peat Marwick LLP provides an objective, independent review of
management's discharge of its obligations relating to the fairness of
reporting operating results and financial condition. Their report for 1995
appears below.
The Audit Committee of the Board (consisting solely of Directors from
outside GE) maintains an ongoing appraisal - on behalf of share owners - of
the activities and independence of the Company's independent auditors, the
activities of its internal audit staff, financial reporting process, internal
financial controls and compliance with key Company policies.
/s/ John F. Welch, Jr. /s/ Dennis D. Dammerman
- - ---------------------------- ---------------------------
John F. Welch, Jr. Dennis D. Dammerman
Chairman of the Board and Senior Vice President
Chief Executive Officer Finance
February 9, 1996
Independent Auditors' Report
To Share Owners and Board of Directors of
General Electric Company
We have audited the financial statements of General Electric Company and
consolidated affiliates as listed in Item 14 (a)(1) on page 27. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in Item 14 (a)(2) on
page 27. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of General Electric Company
and consolidated affiliates at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in note 20 to the consolidated financial statements, the
Company in 1993 adopted a required change in its method of accounting for
postemployment benefits.
/s/ KPMG Peat Marwick LLP
- - ----------------------------------------
KPMG Peat Marwick LLP
Stamford, Connecticut
February 9, 1996
<PAGE>
F-21
Annual Report Page No. 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements represent the adding
together of all affiliates - companies that General Electric directly or
indirectly controls, either through majority ownership or otherwise. Results
of associated companies - generally companies that are 20% to 50% owned and
over which GE, directly or indirectly, has significant influence - are
included in the financial statements on a "one-line" basis.
FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements
are presented in the following categories.
* GE. This represents the adding together of all affiliates other than
General Electric Capital Services, Inc. ("GECS"), whose continuing operations
are presented on a one-line basis.
* GECS. This affiliate owns all of the common stock of General Electric
Capital Corporation (GE Capital) and GE Global Insurance Holding Corporation
(GE Global Insurance). GE Capital, GE Global Insurance and their respective
affiliates are consolidated in the GECS columns and constitute its business.
* CONSOLIDATED. These data represent the adding together of GE and GECS.
The effects of transactions among related companies within and between
each of the above-mentioned groups are eliminated. Transactions between GE and
GECS are not material.
Certain prior-year amounts have been reclassified to conform to the 1995
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual
results could differ from those estimates.
SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the
customer or when services are performed in accordance with contracts.
GECS REVENUES FROM OPERATIONS ("EARNED INCOME"). Income on all loans is
recognized on the interest method. Accrual of interest income is suspended
at the earlier of the time at which collection of an account becomes
doubtful or the account becomes 90 days delinquent. Interest income on
impaired loans is recognized either as cash is collected or on a cost-
recovery basis as conditions warrant.
Financing lease income is recorded on the interest method so as to
produce a level yield on funds not yet recovered. Estimated unguarantied
residual values of leased assets are based primarily on periodic independent
appraisals of the values of leased assets remaining at expiration of the lease
terms.
Operating lease income is recognized on a straight-line basis over the
terms of underlying leases.
Origination, commitment and other nonrefundable fees related to fundings
are deferred and recorded in earned income on the interest method. Commitment
fees related to loans not expected to be funded and line-of-credit fees are
deferred and recorded in earned income on a straight-line basis over the
period to which the fees relate. Syndication fees are recorded in earned
income at the time related services are performed unless significant
contingencies exist.
Premiums on insurance contracts are reported as earned income over the
terms of the related reinsurance treaties or insurance policies. In general,
earned premiums are calculated on a pro rata basis or are determined based on
reports received from reinsureds. Premium adjustments under retrospectively
rated reinsurance contracts are recorded based on estimated losses and loss
expenses, including both case and incurred-but-not-reported reserves. Premiums
received under annuity contracts that do not have significant mortality or
morbidity risk are not reported as revenues but as annuity benefits - a
liability - and are adjusted according to terms of the respective policies.
DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant
and equipment is depreciated using an accelerated method based primarily on
a sum-of-the-years digits formula. If manufacturing plant and equipment is
subject to abnormal economic conditions or obsolescence, additional
depreciation is provided.
The cost of GECS' equipment leased to others on operating leases is
amortized, principally on a straight-line basis, to estimated net salvage
value over the lease term or over the estimated economic life of the
equipment. Depreciation of property and equipment for GECS' own use is
recorded on either a sum-of-the-years digits formula or a straight-line basis
over the lives of the assets.
RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. GECS
maintains an allowance for losses on financing receivables at an amount that
it believes is sufficient to provide adequate protection against future
losses in the portfolio. When collateral is repossessed in satisfaction of a
loan, the receivable is written down against the allowance for losses to
estimated fair value less costs to sell, transferred to other assets and
subsequently carried at the lower of cost or estimated fair value less costs
to sell. This accounting method has been employed principally for
specialized financing transactions.
See note 8 for further information on GECS' allowance for losses on
financing receivables.
<PAGE>
F-22
Annual Report Page No. 46
CASH EQUIVALENTS. Marketable securities with original maturities of three
months or less are included in cash equivalents.
INVESTMENT SECURITIES. The Company has designated its investments in debt
securities and marketable equity securities as available-for-sale. Those
securities are reported at fair value, with net unrealized gains and losses
included in equity, net of applicable taxes. Unrealized losses that are
other than temporary are recognized in earnings.
INVENTORIES. All inventories are stated at the lower of cost or realizable
values. Cost for virtually all of GE's U.S. inventories is stated on a last-
in, first-out (LIFO) basis; cost of other inventories is primarily
determined on a first-in, first-out (FIFO) basis.
INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of
benefit on a straight-line basis; other intangible assets are amortized on
appropriate bases over their estimated lives. No amortization period exceeds
40 years. Goodwill in excess of associated expected operating cash flows is
considered to be impaired and is written down to fair value.
DEFERRED INSURANCE ACQUISITION COSTS. For the property and casualty
business, deferred insurance acquisition costs are amortized pro rata over
the contract periods in which the related premiums are earned. For the life
insurance business, these costs are amortized over the premium-paying
periods of the contracts in proportion either to anticipated premium income
or to gross profit, as appropriate. For certain annuity contracts, such
costs are amortized on the basis of anticipated gross profits. For other
lines of business, acquisition costs are amortized over the life of the
related insurance contracts. Deferred insurance acquisition costs are
reviewed for recoverability; anticipated investment income is considered in
making recoverability evaluations.
INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither
GE nor GECS engages in derivatives trading, market-making or other
speculative activities. Any instrument designated but ineffective as a hedge
is marked to market and recognized in operations immediately.
GE and GECS use swaps primarily to optimize funding costs. To a lesser
degree, and in combination with options and limit contracts, GECS uses swaps
to stabilize cash flows from mortgage-related assets.
Interest rate and currency swaps that modify borrowings or designated
assets, including swaps associated with forecasted commercial paper renewals,
are accounted for on an accrual basis. Both GE and GECS require all other
swaps, as well as options and forwards, to be designated and accounted for as
hedges of specific assets, liabilities or committed transactions; resulting
payments and receipts are recognized contemporaneously with effects of hedged
transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
2. DISCONTINUED OPERATIONS
A summary of discontinued operations follows.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Earnings (loss) from GECS securities
broker-dealer $(1,189) $240
Earnings from GE Aerospace - 753
------- ----
Earnings (loss) from discontinued operations $(1,189) $993
======= ====
- - -------------------------------------------------------------------------
</TABLE>
GECS SECURITIES BROKER-DEALER. In November 1994, GE elected to terminate the
operations of Kidder, Peabody Group Inc. (Kidder, Peabody), the GECS
securities broker-dealer, by initiating an orderly liquidation of its assets
and liabilities. As part of the liquidation plan, GE received securities of
Paine Webber Group Inc. valued at $657 million in exchange for certain
broker-dealer assets and operations. Summary operating results of the
discontinued broker-dealer operations follow.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 4,578 $4,861
======= ======
Earnings (loss) before income taxes $(551) $ 439
Income tax benefit (provision) 230 (199)
------- ------
Earnings (loss) from discontinued operations (321) 240
Provision for loss, net of income tax
benefit of $266 (868) -
------- -----
Earnings (loss) from GECS securities
broker-dealer $(1,189) $ 240
======= ======
- - -------------------------------------------------------------------------
</TABLE>
The 1994 provision of $868 million after taxes, shown in the summary
above, related to exit costs associated with liquidation of Kidder, Peabody.
This liquidation was substantially complete as of December 31, 1995.
GE AEROSPACE. In April 1993, General Electric Company transferred GE's
Aerospace business segment, GE Government Services, Inc., and a component of
GE that operated Knolls Atomic Power Laboratory under a contract with the
U.S. Department of Energy to a new company controlled by the shareholders of
Martin Marietta Corporation in a transaction valued at $3.3 billion. Summary
operating results of discontinued aerospace operations follow.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1993
- - -------------------------------------------------------------------------
<S> <C>
Revenues $996
====
Earnings before income taxes $119
Provision for income taxes (44)
----
Earnings from discontinued operations 75
Gain on transfer, net of income taxes of $752 678
----
Earnings from GE Aerospace $753
====
- - -------------------------------------------------------------------------
</TABLE>
<PAGE>
F-23
Annual Report Page No. 47
3. GE OTHER INCOME
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Royalty and technical agreements $453 $395 $371
Associated companies 111 115 65
Marketable securities and bank deposits 70 77 75
Customer financing 26 28 29
Other investments
Dividends 62 62 50
Interest 18 21 21
Other items 13 85 119
---- ---- ----
$753 $783 $730
==== ==== ====
- - -------------------------------------------------------------------------
</TABLE>
4. GECS REVENUES FROM OPERATIONS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Time sales, loan, investment
and other income $13,004 $9,709 $7,997
Financing leases 3,176 2,539 2,315
Operating lease rentals 4,080 3,802 3,267
Premium and commission income of
insurance affiliates 6,232 3,825 3,697
------- ------- -------
$26,492 $19,875 $17,276
======= ======= =======
- - -------------------------------------------------------------------------
</TABLE>
Included in earned income from financing leases were pretax gains on the
sale of equipment at lease completion of $191 million in 1995, $180 million in
1994 and $145 million in 1993.
5. SUPPLEMENTAL COST DETAILS
Total expenditures for research and development were $1,892 million, $1,741
million and $1,955 million in 1995, 1994 and 1993, respectively. The Company-
funded portion aggregated $1,299 million in 1995, $1,176 million in 1994 and
$1,297 million in 1993.
Rental expense under operating leases is shown below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
GE $523 $514 $635
GECS 524 468 413
- - -------------------------------------------------------------------------
</TABLE>
At December 31, 1995, minimum rental commitments under noncancelable
operating leases aggregated $2,705 million and $3,119 million for GE and GECS,
respectively. Amounts payable over the next five years are shown below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1996 1997 1998 1999 2000
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE $358 $324 $275 $216 $164
GECS 434 384 345 320 288
- - -------------------------------------------------------------------------
</TABLE>
GE's selling, general and administrative expense totaled $5,743 million
in 1995, $5,211 million in 1994 and $5,124 million in 1993. Insignificant
amounts of interest were capitalized by GE and GECS in 1995, 1994 and 1993.
6. PENSION BENEFITS
GE and its affiliates sponsor a number of pension plans. Principal pension
plans are discussed below; other pension plans are not significant
individually or in the aggregate.
PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary
Pension Plan.
The GE Pension Plan covers substantially all GE employees and 65% of
GECS employees in the United States. Generally, benefits are based on the
greater of a formula recognizing career earnings or a formula recognizing
length of service and final average earnings. Benefit provisions are subject
to collective bargaining. At the end of 1995, the GE Pension Plan covered
approximately 462,000 participants, including 134,000 employees, 147,000
former employees with vested rights to future benefits, and 181,000 retirees
and beneficiaries receiving benefits.
The GE Supplementary Pension Plan is an unfunded plan providing
supplementary retirement benefits primarily to higher-level, longer-service
U.S. employees.
Details of income for principal pension plans follow.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
PENSION PLAN INCOME
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Actual return on plan assets $ 5,439 $ 316 $ 3,221
Unrecognized portion of return (3,087) 1,951 (1,066)
Service cost for benefits earned <F1> (469) (496) (452)
Interest cost on benefit obligation (1,580) (1,491) (1,486)
Amortization 394 294 352
------- ------- -------
Total pension plan income $ 697 $ 574 $ 569
======= ======= =======
- - -------------------------------------------------------------------------
<FN>
<F1> Net of employee contributions.
- - -------------------------------------------------------------------------
</TABLE>
Actual return on trust assets in 1995 was 21.2%, compared with the 9.5%
assumed return on such assets. The effect of this higher return will be
recognized in future years.
The 1993 gain on transfer of discontinued Aerospace operations included
a pretax pension plan curtailment/settlement loss of $125 million.
<PAGE>
F-24
Annual Report Page No. 48
FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient
to meet minimum funding requirements as set forth in employee benefit and
tax laws plus such additional amounts as GE may determine to be appropriate.
GE has not made contributions since 1987 because the fully funded status of
the GE Pension Plan precludes current tax deduction and because any Company
contribution would require payment of annual excise taxes.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
FUNDED STATUS OF PENSION PLANS
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Market-related value of assets $27,795 $25,441
Projected benefit obligation 23,119 19,334
- - -------------------------------------------------------------------------
</TABLE>
The market-related value of pension assets recognizes market
appreciation or depreciation in the portfolio over five years, a method that
reduces the short-term impact of market fluctuations.
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represents about 3% of trust assets.
An analysis of amounts shown in the Statement of Financial Position is
shown below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
PREPAID PENSION ASSET
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Fair value of trust assets $30,200 $26,166
Projected benefit obligation (23,119) (19,334)
------- -------
Assets in excess of obligation 7,081 6,832
Add (deduct) unamortized balances
SFAS No. 87 transition gain (769) (923)
Experience gains (2,127) (2,548)
Plan amendments 523 602
Pension liability 564 526
------- -------
PREPAID PENSION ASSET $5,272 $4,489
======= =======
- - -------------------------------------------------------------------------
</TABLE>
The accumulated benefit obligation was $22,052 million and $18,430
million at year-end 1995 and 1994, respectively; the vested benefit obligation
was approximately equal to the accumulated benefit obligation at the end of
both years.
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit
obligations for principal pension plans follow.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
December 31 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.0% 8.5%
Compensation increases 4.0 5.5
Return on assets for the year 9.5 9.5
- - -------------------------------------------------------------------------
</TABLE>
Experience gains and losses, as well as the effects of changes in
actuarial assumptions and plan provisions, are amortized over employees'
average future service period.
7. RETIREE HEALTH AND LIFE BENEFITS
GE and its affiliates sponsor a number of retiree health and life insurance
benefit plans. Principal retiree benefit plans are discussed below; other
such plans are not significant individually or in the aggregate.
PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance
benefits to employees who retire under the GE Pension Plan with 10 or more
years of service. Retirees share in the cost of their health care benefits.
Benefit provisions are subject to collective bargaining. At the end of 1995,
these plans covered approximately 252,000 retirees and dependents.
Details of cost for principal retiree benefit plans follow.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
COST OF RETIREE BENEFIT PLANS
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
RETIREE HEALTH PLANS
Service cost for benefits earned $73 $78 $49
Interest cost on benefit obligation 189 191 192
Actual return on plan assets - - (3)
Unrecognized portion of return - (1) 1
Amortization (12) (3) (26)
------- ------- -------
Retiree health plan cost 250 265 213
------- ------- -------
RETIREE LIFE PLANS
Service cost for benefits earned 13 24 21
Interest cost on benefit obligation 108 105 111
Actual return on plan assets (329) (2) (152)
Unrecognized portion of return 206 (120) 42
Amortization 1 8 7
------- ------- -------
Retiree life plan cost (income) (1) 15 29
------- ------- -------
TOTAL COST $249 $280 $242
======= ======= =======
- - -------------------------------------------------------------------------
</TABLE>
The 1993 gain on transfer of discontinued Aerospace operations included
a pretax retiree health and life plan curtailment/settlement gain of $245
million.
FUNDING POLICY for retiree health benefits is generally to pay covered
expenses as they are incurred. GE funds retiree life insurance benefits at
its discretion and within limits imposed by tax laws.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
FUNDED STATUS OF RETIREE BENEFIT PLANS
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> c> <C>
Market-related value of assets $1,430 $1,346
Accumulated postretirement benefit obligation 4,089 3,701
- - -------------------------------------------------------------------------
</TABLE>
The market-related value of assets of retiree life plans recognizes
market appreciation or depreciation in the portfolio over five years, a method
that reduces the short-term impact of market fluctuations.
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represents about 2% of trust assets.
<PAGE>
F-25
Annual Report Page No. 49
An analysis of amounts shown in the Statement of Financial Position is
shown below.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
RETIREE BENEFIT LIABILITY/ASSET
Retiree health plans Retiree life plans
-------------------- -------------------
December 31 (In millions) 1995 1994 1995 1994
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation
Retirees and dependents $1,984 $1,858 $1,314 $1,099
Employees eligible to retire 95 101 53 55
Other employees 451 427 192 161
------ ------ ------ ------
2,530 2,386 1,559 1,315
Less fair value of trust assets - - (1,556) (1,323)
------ ------ ------ ------
Obligation over (under) assets 2,530 2,386 3 (8)
Add (deduct) unamortized balances
Experience losses (292) (112) (199) (198)
Plan amendments 177 188 119 130
------ ------ ------ ------
RETIREE BENEFIT LIABILITY (PREPAID ASSET) $2,415 $2,462 $(77) $(76)
====== ====== ====== ======
- - -----------------------------------------------------------------------------------------------
</TABLE>
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit
obligations for principal retiree benefit plans are shown below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
December 31 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.0% 8.5%
Compensation increases 4.0 5.5
Health care cost trend 8.5 <F1> 9.0 <F2>
Return on assets for the year 9.5 9.5
- - -------------------------------------------------------------------------
<FN>
<F1> Gradually declining to 5.0% after 2002.
<F2> Gradually declining to 5.0% after 2022.
- - -------------------------------------------------------------------------
</TABLE>
Increasing the health care cost trend rates by one percentage point
would not have had a material effect on the December 31, 1995, accumulated
postretirement benefit obligation or the annual cost of retiree health plans.
Experience gains and losses, as well as the effects of changes in
actuarial assumptions and plan provisions, are amortized over employees'
average future service period.
8. GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
GECS allowance for losses on financing receivables represented 2.63% of
total financing receivables at year-end 1995 and 1994. The allowance for
small-balance receivables is determined principally on the basis of actual
experience during the preceding three years. Further allowances are provided
to reflect management's judgment of additional loss potential. For other
receivables, principally the larger loans and leases, the allowance for
losses is determined primarily on the basis of management's judgment of net
loss potential, including specific allowances for known troubled accounts.
The table below shows the activity in the allowance for losses on financing
receivables during each of the past three years.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $2,062 $1,730 $1,607
Provisions charged to operations 1,117 873 987
Net transfers related to companies
acquired or sold 217 199 126
Amounts written off - net (877) (740) (990)
------ ------ ------
Balance at December 31 $2,519 $2,062 $1,730
====== ====== ======
- - -------------------------------------------------------------------------
</TABLE>
All accounts or portions thereof deemed to be uncollectible or to
require an excessive collection cost are written off to the allowance for
losses. Generally, small-balance accounts are progressively written down (from
10% when more than three months delinquent to 100% when 9 to 12 months
delinquent) to record the balances at estimated realizable value. If at any
time during that period an account is judged to be uncollectible, such as in
the case of a bankruptcy, the uncollectible balance is written off. Large-
balance accounts are reviewed at least quarterly, and those accounts with
amounts that are judged to be uncollectible are written down to estimated
realizable value.
<PAGE>
F-26
Annual Report Page No. 50
9. PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GE
Estimated amounts payable $1,696 $1,305 $1,207
Deferred tax expense from temporary differences 373 592 120
Investment credit amortized - net (10) (15) (17)
------ ------ ------
2,059 1,882 1,310
------ ------ ------
GECS
Estimated amounts payable 434 447 221
Deferred tax expense from temporary differences 678 431 428
Investment credit amortized - net (7) (14) (7)
------ ------ ------
1,105 864 642
------ ------ ------
CONSOLIDATED
Estimated amounts payable 2,130 1,752 1,428
Deferred tax expense from temporary differences 1,051 1,023 548
Investment credit amortized - net (17) (29) (24)
------ ------ ------
$3,164 $2,746 $1,952
====== ====== ======
- - ------------------------------------------------------------------------------------------
</TABLE>
GE includes GECS in filing a consolidated U.S. federal income tax
return. GECS' provision for estimated taxes payable includes its effect on the
consolidated return.
Estimated consolidated amounts payable includes amounts applicable to
non-U.S. jurisdictions of $721 million, $453 million and $302 million in 1995,
1994 and 1993, respectively.
Deferred income tax balances reflect the impact of temporary differences
between the carrying amounts of assets and liabilities and their tax bases and
are stated at enacted tax rates expected to be in effect when taxes are
actually paid or recovered. See note 22 for details.
Except for certain earnings that GE intends to reinvest indefinitely,
provision has been made for the estimated U.S. federal income tax liabilities
applicable to undistributed earnings of affiliates and associated companies.
Based on location (not tax jurisdiction) of the business providing goods
and services, consolidated U.S. income before taxes was $8.1 billion in 1995,
$7.5 billion in 1994 and $5.6 billion in 1993. The corresponding amounts for
non-U.S. based operations were $1.6 billion in 1995, $1.2 billion in 1994 and
$0.5 billion in 1993.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS
STATUTORY TAX RATE TO ACTUAL RATE ------------------------- ------------------------- --------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
---- ---- ---- ---- ---- ---- ---- ---- ----
Increase (reduction) in rate resulting from:
Inclusion of after-tax earnings of
GECS in before-tax earnings of GE - - - (9.8) (9.4) (10.0) - - -
Rate increase - deferred taxes - - 1.6 - - (0.2) - - 5.2
Amortization of goodwill 1.1 1.1 1.5 0.8 0.8 1.2 1.1 1.0 1.2
Tax-exempt income (2.1) (2.4) (2.9) - - - (5.8) (6.9) (8.3)
Foreign Sales Corporation tax
benefits (0.9) (1.1) (1.3) (1.1) (1.2) (1.5) - - -
Dividends received, not fully
taxable (0.5) (0.5) (0.7) (0.2) (0.3) (0.3) (0.8) (0.8) (1.2)
All other - net (0.1) (0.4) (1.4) (0.8) (0.8) (0.4) 1.9 1.0 (2.8)
---- ---- ---- ---- ---- ---- ---- ---- ----
(2.5) (3.3) (3.2) (11.1) (10.9) (11.2) (3.6) (5.7) (5.9)
---- ---- ---- ---- ---- ---- ---- ---- ----
Actual income tax rate 32.5% 31.7% 31.8% 23.9% 24.1% 23.8% 31.4% 29.3% 29.1%
==== ==== ==== ==== ==== ==== ==== ==== ====
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-27
Annual Report Page No. 51
10. GECS INVESTMENT SECURITIES
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Corporate and other $12,313 $ 463 $ (63) $12,713
State and municipal 9,460 570 (11) 10,019
Mortgage-backed 5,991 255 (65) 6,181
Non-U.S. 6,887 213 (37) 7,063
Equity 2,843 412 (59) 3,196
U.S. government and federal agency 1,817 77 (3) 1,891
------- ------- ------- -------
$39,311 $ 1,990 $ (238) $41,063
======= ======= ======= =======
DECEMBER 31, 1994
Corporate and other $10,883 $4 $(763) $10,124
State and municipal 9,193 146 (392) 8,947
Mortgage-backed 4,927 82 (220) 4,789
Non-U.S. 3,892 20 (76) 3,836
Equity 2,147 201 (180) 2,168
U.S. government and federal agency 1,185 - (177) 1,008
------- ------- ------- -------
$32,227 $453 $(1,808) $30,872
======= ======= ======= =======
- - -----------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, contractual maturities of debt securities, other
than mortgage-backed securities, were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
GECS CONTRACTUAL MATURITIES
(EXCLUDING MORTGAGE-BACKED SECURITIES)
Amortized Estimated
(In millions) cost fair value
- - -------------------------------------------------------------------------
<S> <C> <C>
Due in
1996 $2,359 $2,386
1997-2000 9,753 9,982
2001-2005 6,821 7,129
2006 and later 11,544 12,189
- - -------------------------------------------------------------------------
</TABLE>
It is expected that actual maturities will differ from contractual
maturities because borrowers have the right to call or prepay certain
obligations, sometimes without call or prepayment penalties. Proceeds from
sales of investment securities in 1995 were $11,017 million ($5,821 million in
1994 and $6,112 million in 1993). Gross realized gains were $503 million in
1995 ($281 million in 1994 and $173 million in 1993). Gross realized losses
were $157 million in 1995 ($112 million in 1994 and $34 million in 1993).
11. GE CURRENT RECEIVABLES
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Aircraft Engines $1,373 $1,183
Appliances 595 499
Broadcasting 556 493
Industrial Products and Systems 1,525 1,503
Materials 1,322 1,256
Power Generation 2,334 1,925
Technical Products and Services 692 603
All Other 94 282
Corporate 631 268
------ ------
9,122 8,012
Less allowance for losses (231) (205)
------ ------
$8,891 $7,807
====== ======
- - -------------------------------------------------------------------------
</TABLE>
Of receivables balances at December 31, 1995 and 1994 before allowance
for losses, $6,582 million and $5,668 million, respectively, were from sales
of goods and services to customers, and $293 million and $196 million,
respectively, were from transactions with associated companies.
Current receivables of $322 million at year-end 1995 and $387 million at
year-end 1994 arose from sales, principally of aircraft engine goods and
services, on open account to various agencies of the U.S. government, which is
GE's largest single customer. About 5%, 6% and 8% of GE's sales of goods and
services were to the U.S. government in 1995, 1994 and 1993, respectively.
12. GE INVENTORIES
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Raw materials and work in process $ 3,205 $ 2,933
Finished goods 2,277 2,165
Unbilled shipments 258 214
------- -------
5,740 5,312
Less revaluation to LIFO (1,345) (1,432)
------- -------
$ 4,395 $ 3,880
======= =======
- - -------------------------------------------------------------------------
</TABLE>
LIFO revaluations decreased $87 million in 1995, compared with decreases
of $197 million in 1994 and $179 million in 1993. Included in these changes
were decreases of $88 million, $72 million and $101 million in 1995, 1994 and
1993, respectively, that resulted from lower LIFO inventory levels. There was
no cost change in 1995 and net cost decreases in 1994 and 1993. As of December
31, 1995, GE is obligated to acquire raw materials at market prices through
the year 2000 under various take-or-pay or similar arrangements. Annual
minimum commitments under these arrangements are insignificant.
<PAGE>
F-28
Annual Report Page No. 52
13. GECS FINANCING RECEIVABLES (INVESTMENT IN TIME SALES, LOANS AND
FINANCING LEASES)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
TIME SALES AND LOANS
Consumer services $33,430 $25,906
Specialized financing 18,230 17,988
Mid-market financing 8,795 5,916
Equipment management 1,371 1,516
Specialty insurance 189 -
------- -------
62,015 51,326
Deferred income (2,424) (1,305)
------- -------
Time sales and loans - net 59,591 50,021
------- -------
INVESTMENT IN FINANCING LEASES
Direct financing leases 33,291 25,916
Leveraged leases 2,909 2,482
------- -------
Investment in financing leases 36,200 28,398
------- -------
95,791 78,419
Less allowance for losses (2,519) (2,062)
------- -------
$93,272 $76,357
======= =======
- - -------------------------------------------------------------------------
</TABLE>
Time sales and loans represents transactions in a variety of forms,
including time sales, revolving charge and credit, mortgages, installment
loans, intermediate-term loans and revolving loans secured by business assets.
The portfolio includes time sales and loans carried at the principal amount on
which finance charges are billed periodically, and time sales and loans
carried at gross book value, which includes finance charges. At year-end 1995
and 1994, specialized financing and consumer services loans included $13,405
million and $13,282 million, respectively, for commercial real estate loans.
Note 16 contains information on airline loans and leases.
At December 31, 1995, contractual maturities for time sales and loans
were $24,543 million in 1996; $11,933 million in 1997; $6,635 million in 1998;
$5,052 million in 1999; $4,424 million in 2000; and $9,428 million thereafter
- - - aggregating $62,015 million. Experience has shown that a substantial portion
of receivables will be paid prior to contractual maturity. Accordingly, the
maturities of time sales and loans are not to be regarded as forecasts of
future cash collections.
Investment in financing leases consists of direct financing and
leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment and medical equipment, as
well as other manufacturing, power generation, mining and commercial equipment
and facilities.
As the sole owner of assets under direct financing leases and as the
equity participant in leveraged leases, GECS is taxed on total lease payments
received and is entitled to tax deductions based on the cost of leased assets
and tax deductions for interest paid to third-party participants. GECS
generally is entitled to any residual value of leased assets.
Investment in direct financing and leveraged leases represents unpaid
rentals and estimated unguarantied residual values of leased equipment, less
related deferred income. GECS has no general obligation for principal and
interest on notes and other instruments representing third-party participation
related to leveraged leases; such notes and other instruments have not been
included in liabilities but have been offset against the related rentals
receivable. GECS' share of rentals receivable on leveraged leases is
subordinate to the share of other participants who also have security
interests in the leased equipment.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Total Direct
NET INVESTMENT IN FINANCING LEASES financing leases financing leases Leveraged leases
---------------- ---------------- ----------------
December 31 (In millions) 1995 1994 1995 1994 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable $50,059 $39,968 $37,434 $30,338 $12,625 $ 9,630
Less principal and interest on third-party
nonrecourse debt (9,329) (7,103) - - (9,329) (7,103)
------- ------- ------- ------- ------- -------
Net rentals receivable 40,730 32,865 37,434 30,338 3,296 2,527
Estimated unguarantied residual value of leased assets 5,768 4,889 4,630 3,767 1,138 1,122
Less deferred income (10,298) (9,356) (8,773) (8,189) (1,525) (1,167)
------- ------- ------- ------- ------- -------
INVESTMENT IN FINANCING LEASES (as shown above) 36,200 28,398 33,291 25,916 2,909 2,482
Less amounts to arrive at net investment
Allowance for losses (745) (570) (669) (471) (76) (99)
Deferred taxes arising from financing leases (5,746) (5,075) (2,959) (2,470) (2,787) (2,605)
------- ------- ------- ------- ------- -------
NET INVESTMENT IN FINANCING LEASES $29,709 $22,753 $29,663 $22,975 $ 46 $ (222)
======= ======= ======= ======= ======= =======
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-29
Annual Report Page No. 53
At December 31, 1995, contractual maturities for rentals receivable
under financing leases were $8,780 million in 1996; $10,418 million in 1997;
$6,837 million in 1998; $3,631 million in 1999; $2,126 million in 2000; and
$8,938 million thereafter - aggregating $40,730 million. As with time sales
and loans, experience has shown that a portion of receivables will be paid
prior to contractual maturity, and these amounts should not be regarded as
forecasts of future cash flows.
Nonearning consumer receivables, primarily private-label credit card
receivables, amounted to $671 million and $422 million at December 31, 1995
and 1994, respectively. A majority of these receivables were subject to
various loss-sharing arrangements that provide full or partial recourse to the
originating private-label entity. Nonearning and reduced-earning receivables
other than consumer receivables were $464 million and $346 million at year-end
1995 and 1994, respectively.
On January 1, 1995, GE adopted Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan,
and the related SFAS No. 118, Accounting by Creditors for Impairment of a Loan
- - - Income Recognition and Disclosures. These Statements do not apply to, among
other things, leases or large groups of smaller-balance, homogeneous loans,
and therefore are principally relevant to GECS' commercial loans. There was no
effect of adopting the Statements on 1995 results of operations or financial
position because the allowance for losses established under the previous
accounting policy continued to be appropriate following the accounting change.
The Statements require disclosures of impaired loans - loans for which it is
probable that the lender will be unable to collect all amounts due according
to original contractual terms of the loan agreement, based on current
information and events. At December 31, 1995, loans that required disclosure
as impaired amounted to $867 million, principally commercial real estate
loans. For $647 million of such loans, the required allowance for losses was
$285 million. The remaining $220 million of loans represents the recorded
investment in loans that are fully recoverable, but only because the recorded
investment had been reduced through charge-offs or deferral of income
recognition. These loans must be disclosed under the Statements' technical
definition of "impaired" because GECS will be unable to collect all amounts
due according to original contractual terms of the loan agreement. Under the
Statements, such loans do not require an allowance for losses. GECS' average
investment in impaired loans requiring disclosure under the Statements was
$1,037 million during 1995, with revenue of $49 million recognized,
principally on the cash basis.
14. PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
ORIGINAL COST
GE
Land and improvements $ 496 $ 416
Buildings, structures and related equipment 6,063 5,547
Machinery and equipment 17,184 15,847
Leasehold costs and manufacturing
plant under construction 1,100 1,073
Other 24 24
------- -------
24,867 22,907
------- -------
GECS
Buildings and equipment 2,616 1,875
Equipment leased to others
Aircraft <F1> 5,682 4,601
Vehicles 4,948 4,542
Marine shipping containers 3,253 3,333
Railroad rolling stock 1,811 1,605
Other 2,769 2,807
------- -------
21,079 18,763
------- -------
$45,946 $41,670
======= =======
ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION
GE $14,633 $13,382
GECS
Buildings and equipment 964 794
Equipment leased to others 4,670 4,029
------- -------
$20,267 $18,205
======= =======
- - -------------------------------------------------------------------------
<FN>
<F1> Includes $101 million and $226 million of commercial aircraft off-
lease in 1995 and 1994, respectively.
- - -------------------------------------------------------------------------
</TABLE>
Amortization of GECS' equipment leased to others was $1,702 million, $1,435
million and $1,395 million in 1995, 1994 and 1993, respectively.
Noncancelable future rentals due from customers for equipment on operating
leases at year-end 1995 totaled $8,412 million and are due as follows:
$2,501 million in 1996; $1,657 million in 1997; $1,119 million in 1998; $732
million in 1999; $450 million in 2000; and $1,953 million thereafter.
<PAGE>
F-30
Annual Report Page No. 54
15. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
GE
Goodwill $ 5,901 $ 5,605
Other intangibles 742 731
------- -------
6,643 6,336
------- -------
GECS
Goodwill 3,984 2,513
Mortgage servicing rights 1,688 1,351
Other intangibles 1,027 1,173
------- -------
6,699 5,037
------- -------
$13,342 $11,373
======= =======
- - -------------------------------------------------------------------------
</TABLE>
GE's intangible assets are shown net of accumulated amortization of
$2,347 million in 1995 and $2,049 million in 1994. GECS' intangible assets are
net of accumulated amortization of $1,494 million in 1995 and $988 million in
1994.
16. ALL OTHER ASSETS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
GE
Investments
Associated companies <F1> $ 1,201 $ 1,945
Government and government-guarantied
securities 100 273
Other 1,572 1,713
------- -------
2,873 3,931
Prepaid pension asset 5,272 4,489
Other 3,756 3,999
------- -------
11,901 12,419
------- -------
GECS
Investments
Assets acquired for resale 3,998 3,867
Associated companies <F1> 3,566 2,098
Real estate ventures 1,564 1,400
Other 2,072 1,652
------- -------
11,200 9,017
Deferred insurance acquisition costs 1,336 1,290
Other 1,868 1,224
------- -------
14,404 11,531
------- -------
$26,305 $23,950
======= =======
- - -------------------------------------------------------------------------
<FN>
<F1> Includes advances.
- - -------------------------------------------------------------------------
</TABLE>
In line with industry practice, sales of commercial jet aircraft engines
often involve long-term customer financing commitments. In making such
commitments, it is GE's general practice to require that it have or be able to
establish a secured position in the aircraft being financed. Under such
airline financing programs, GE had issued loans and guaranties (principally
guaranties) amounting to $1,433 million at year-end 1995 and $1,260 million at
year-end 1994; and it had entered into commitments totaling $1,505 million and
$1,136 million at year-end 1995 and 1994, respectively, to provide financial
assistance on future aircraft engine sales. Estimated fair values of the
aircraft securing these receivables and associated guaranties exceeded the
related account balances and guarantied amounts at December 31, 1995. GE sells
certain long-term receivables from the airline industry with recourse.
Proceeds from such sales amounted to $297 million in 1995 and $137 million in
1993. No receivables were sold in 1994. Balances outstanding were $487 million
and $269 million at December 31, 1995 and 1994, respectively. GECS acts as a
lender and lessor to the commercial airline industry. At December 31, 1995 and
1994, the balance of such GECS loans, leases and equipment leased to others
was $8,337 million and $7,571 million, respectively. In addition, GECS had
issued financial guaranties and funding commitments of $409 million at
December 31, 1995 ($506 million at year-end 1994) and had conditional
commitments to purchase aircraft at a cost of $141 million ($81 million at
year-end 1994).
At year-end 1995, the National Broadcasting Company had $7,953 million
of commitments to acquire broadcast material or the rights to broadcast
television programs, including U.S. television rights to future Olympic games,
and commitments under long-term television station affiliation agreements that
require payments through the year 2008.
In connection with numerous projects, primarily power generation bids
and contracts, GE had issued various bid and performance bonds and guaranties
totaling $2,462 million at year-end 1995 and $2,229 million at year-end 1994.
17. GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED
At year-end 1995 and 1994, this account included taxes accrued of $1,598
million and $1,238 million, respectively, and compensation and benefit
accruals of $1,233 million and $1,191 million, respectively. Also included
are amounts for product warranties, estimated costs on shipments billed to
customers and a variety of sundry items.
<PAGE>
F-31
Annual Report Page No. 55
18. BORROWINGS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS 1995 1994
---------------------- --------------------
December 31 Average Average
(In millions) Amount rate Amount rate
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GE
Payable to banks $ 266 8.18% $ 353 8.21%
Commercial paper (U.S.) 403 5.72 -
Current portion of long-term debt 697 243
Other 300 310
------- -------
1,666 906
------- -------
GECS
Commercial paper
U.S. 37,432 5.82 41,759 5.88
Non-U.S. 3,796 6.33 1,938 6.27
Current portion of long-term debt 15,719 9,695
Other 5,861 3,695
------- -------
62,808 57,087
------- -------
ELIMINATIONS (11) (212)
------- -------
$64,463 $57,781
======= =======
- - -----------------------------------------------------------------------------------------------
<CAPTION>
- - -----------------------------------------------------------------------------------------------
LONG-TERM BORROWINGS Weighted
December 31 average interest
(In millions) rate <F1> Maturities 1995 1994
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GE
Senior notes 7.16% 1997-2000 $ 988 $ 1,480
Payable to banks 6.11 1997-2003 482 283
Industrial development/pollution
control bonds 3.90 1997-2019 260 261
Other <F2> 547 675
------- -------
2,277 2,699
------- -------
GECS
Senior notes 6.56 1997-2055 47,794 33,615
Subordinated notes <F3> 7.88 2006-2035 996 697
------- -------
48,790 34,312
------- -------
ELIMINATIONS (40) (32)
------- -------
$51,027 $36,979
======= =======
- - -----------------------------------------------------------------------------------------------
<FN>
<F1> Includes the effects of associated interest rate and currency swaps.
<F2> Includes a variety of obligations having various interest rates and maturities, including
certain borrowings by parent operating components and affiliates.
<F3> Guarantied by GE.
- - -----------------------------------------------------------------------------------------------
</TABLE>
INTEREST RATE AND CURRENCY SWAPS are employed by GE and GECS to achieve the
lowest cost of funds for a particular funding strategy. GECS enters into
interest rate swaps and currency swaps (including non-U.S. currency and
cross-currency interest rate swaps) to modify interest rates and/ or
currencies of specific debt instruments. For example, to fund U.S.
operations, GE Capital may issue fixed-rate debt denominated in a currency
other than the U.S. dollar and simultaneously enter into a currency swap to
create synthetic fixed-rate U.S. dollar debt with a lower yield than could
be achieved directly. Such interest rate and currency swaps have been
designated as modifying interest rates, currencies, or both. Neither GE nor
GECS engages in derivatives trading, market-making or other speculative
activities.
GECS used a portion of this interest rate swap portfolio to convert
interest rate exposure on short-term and floating rate long-term borrowings to
interest rates that are fixed over the terms of the related swaps; interest
rate basis swaps also are employed to manage short-term financing factors -
for example, to convert commercial paper-based interest costs to prime rate-
based costs. At December 31, 1995 and 1994, such swaps were outstanding for
principal amounts equivalent to $11,451 million and $9,301 million with
maturities from 1996 to 2029 and weighted average interest rates of 6.86% and
6.80%, respectively.
Aggregate amounts of long-term borrowings that mature during the next
five years are as follows.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1996 1997 1998 1999 2000
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE $ 697 $ 527 $ 1,011 $ 28 $ 276
GECS 15,719 14,012 11,517 5,480 4,494
- - -------------------------------------------------------------------------
</TABLE>
Additional information about GE and GECS borrowings, as well as
associated swaps, is provided in note 29.
CONFIRMED CREDIT LINES of approximately $3.1 billion had been extended to GE
by 32 banks at year-end 1995. Substantially all of GE's credit lines are
available to GECS and its affiliates in addition to their own credit lines.
At year-end 1995, GECS and its affiliates had committed lines of credit
aggregating $20.4 billion with 128 banks, including $9.5 billion of revolving
credit agreements pursuant to which it has the right to borrow funds for
periods exceeding one year. A total of $1.5 billion of GE Capital's credit
lines is available for use by GE.
During 1995, neither GE nor GECS borrowed under any of these credit
lines. Both GE and GECS compensate banks for credit facilities in the form of
fees, which were insignificant in each of the past three years.
<PAGE>
F-32
Annual Report Page No. 56
19. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
Insurance liabilities, reserves and annuity benefits comprises
policyholders' benefits, unearned premiums and reserves for policy losses in
GECS' insurance and annuity businesses. The estimated liability for
insurance losses and loss expenses consists of both case and incurred-but-
not-reported reserves. Where GECS' experience is not sufficient to determine
reserves, industry averages are used. Estimated amounts of salvage and
subrogation recoverable on paid and unpaid losses are deducted from
outstanding losses. The insurance subsidiaries of GECS have no significant
permitted statutory accounting practices that differ from either
statutorially prescribed or generally accepted accounting principles.
Activity in the liability for unpaid claims and claims adjustment
expenses is summarized below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 - gross $ 7,032 $ 6,405 $ 5,484
Less reinsurance recoverables (1,084) (1,142) (1,191)
------- ------- -------
Balance at January 1 - net 5,948 5,263 4,293
Claims and expenses incurred
Current year 3,268 2,016 2,051
Prior years 492 558 359
Claims and expenses paid
Current year (706) (543) (378)
Prior years (1,908) (1,432) (1,048)
Claim reserves related to
acquired companies 3,696 49 -
Other 19 37 (14)
------- ------- -------
Balance at December 31 - net 10,809 5,948 5,263
Add reinsurance recoverables 1,853 1,084 1,142
------- ------- -------
Balance at December 31 - gross $12,662 $ 7,032 $ 6,405
======= ======= =======
- - -------------------------------------------------------------------------
</TABLE>
The liability for future policy benefits of the life insurance
affiliates has been computed mainly by a net-level-premium method based on
assumptions for investment yields, mortality and terminations that were
appropriate at date of purchase or at the time the policies were developed,
including provisions for adverse deviations. Average yields used in these
computations ranged from 2.0% to 9.0% in 1995 and 4.0% to 9.1% in 1994.
Financial guaranties and credit life risk of insurance affiliates are
summarized below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
Guaranties, principally on municipal
bonds and structured finance issues $119,406 $106,726
Mortgage insurance risk in force 32,599 31,463
Credit life insurance risk in force 13,670 13,713
Other 110 147
Less reinsurance (21,749) (19,426)
-------- --------
$144,036 $132,623
======== ========
- - -------------------------------------------------------------------------
</TABLE>
20. GE ALL OTHER LIABILITIES
This account includes noncurrent compensation and benefit accruals at year-
end 1995 and 1994 of $4,858 million and $4,632 million, respectively. Also
included are amounts for deferred incentive compensation, deferred income,
product warranties and a variety of sundry items.
SFAS No. 112, Employers' Accounting for Postemployment Benefits, was
adopted as of January 1, 1993. This Statement requires that employers
recognize over the service lives of employees the costs of postemployment
benefits if certain conditions are met. The principal effect for GE was to
change the method of accounting for severance benefits. Under the previous
accounting policy, the total cost of severance benefits was expensed when the
severance event occurred. The cumulative effect of the accounting change as of
January 1, 1993, amounted to $1,306 million before taxes ($862 million, or
$0.51 per share, after taxes).
21. RESTRICTED NET ASSETS OF AFFILIATES
Certain GECS consolidated affiliates are restricted from remitting funds to
GECS in the form of dividends or loans by a variety of regulations, the
purpose of which is to protect affected insurance policyholders, depositors
or investors. At year-end 1995, net assets of GECS' regulated affiliates
amounted to $14.7 billion, of which $12.5 billion was restricted.
<PAGE>
F-33
Annual Report Page No. 57
22. DEFERRED INCOME TAXES
Aggregate deferred tax amounts are summarized below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
GE $3,851 $ 3,720
GECS 2,183 2,642
------ -------
6,034 6,362
------ -------
LIABILITIES
GE 4,359 3,988
GECS 9,055 7,579
------ -------
13,414 11,567
------ -------
NET DEFERRED TAX LIABILITY $7,380 $5,205
====== =======
- - -------------------------------------------------------------------------
</TABLE>
Principal components of the net deferred tax liability balances for GE
and GECS are as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
GE
Provisions for expenses $(2,539) $(2,422)
Retiree insurance plans (818) (835)
Prepaid pension asset 1,845 1,571
Depreciation 928 860
Other - net 1,092 1,094
------- -------
508 268
------- -------
GECS
Financing leases 5,746 5,075
Operating leases 1,367 1,234
Net unrealized gains (losses) on securities 608 (468)
Allowance for losses (852) (876)
Insurance reserves (497) (460)
Other - net 500 432
------- -------
6,872 4,937
------- -------
NET DEFERRED TAX LIABILITY $ 7,380 $ 5,205
======= =======
- - -------------------------------------------------------------------------
</TABLE>
23. MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES
Minority interest in equity of consolidated GECS affiliates includes
preferred stock issued by GE Capital and by a subsidiary of GE Capital. The
preferred stock pays cumulative dividends at variable rates. The liquidation
preference of the preferred shares is summarized below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
December 31 (In millions) 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C>
GE Capital $1,800 $875
GE Capital subsidiary 360 240
- - -------------------------------------------------------------------------
</TABLE>
Dividend rates on the preferred stock ranged from 4.2% to 5.2% during
1995, from 2.3% to 4.9% during 1994 and from 2.3% to 2.8% during 1993.
24. SHARE OWNERS' EQUITY
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
(In millions) 1995 1994 1993
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK ISSUED
Balance at January 1 $ 594 $ 584 $ 584
Adjustment for stock split - 9 -
Newly issued stock - 1 -
------- ------- -------
Balance at December 31 $ 594 $ 594 $ 584
======= ======= =======
UNREALIZED GAINS (LOSSES) ON INVESTMENT SECURITIES $ 1,000 $ (810) $ 848
======= ======= =======
OTHER CAPITAL
Balance at January 1 $ 1,122 $ 550 $ 719
Currency translation adjustments 127 180 (279)
Gains on treasury stock dispositions 414 215 110
Newly issued stock - 186 -
Adjustment for stock split - (9) -
------- ------- -------
Balance at December 31 $ 1,663 $ 1,122 $ 550
======= ======= =======
RETAINED EARNINGS
Balance at January 1 $30,793 $28,613 $26,527
Net earnings 6,573 4,726 4,315
Dividends declared (2,838) (2,546) (2,229)
------- ------- -------
Balance at December 31 $34,528 $30,793 $28,613
======= ======= =======
COMMON STOCK HELD IN TREASURY
Balance at January 1 $ 5,312 $ 4,771 $ 4,407
Purchases 4,016 1,124 770
Dispositions (1,152) (583) (406)
------- ------- -------
Balance at December 31 $ 8,176 $ 5,312 $ 4,771
======= ======= =======
- - ------------------------------------------------------------------------------------------
</TABLE>
In December 1994, GE's Board of Directors authorized the repurchase of
up to $5 billion of Company common stock over a two-year period with funds
generated largely from free cash flow. In December 1995, the Board increased
the authorized amount of the repurchase to $9 billion, which will allow the
program to continue through 1997. A total of 54.7 million shares having an
aggregate cost of $3.2 billion had been repurchased under this program and
placed into treasury as of December 31, 1995.
Common shares issued and outstanding are summarized in the table below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
SHARES OF GE COMMON STOCK
December 31 (In thousands) 1995 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Issued 1,857,013 1,857,013 1,853,128
In treasury (190,501) (151,046) (145,826)
--------- --------- ---------
Outstanding 1,666,512 1,705,967 1,707,302
========= ========= =========
- - -------------------------------------------------------------------------
</TABLE>
GE has 50 million authorized shares of preferred stock ($1.00 par
value), but no such shares have been issued.
The effects of translating to U.S. dollars the financial statements of
non-U.S. affiliates whose functional currency is the local currency are
included in other capital. Asset and liability accounts are translated at year-
end exchange rates, while revenues and expenses are translated at average
rates for the period. The cumulative currency translation adjustment was an
addition to other capital of $61 million at year-end 1995 and a reduction of
other capital of $66 million and $246 million at December 31, 1994 and 1993,
respectively.
<PAGE>
F-34
Annual Report Page No. 58
25. OTHER STOCK-RELATED INFORMATION
Stock option plans, stock appreciation rights (SARs), restricted stock and
restricted stock units are described in GE's current Proxy Statement. More
than 20,000 individuals, nearly one third of all exempt professionals at GE
and GECS, hold stock options. With certain restrictions, requirements for
stock option shares can be met from either unissued or treasury shares.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
STOCK OPTION ACTIVITY Average per share
Shares subject Exercise Market
(Shares in thousands) to option price price
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1993 48,164 $32.19 $42.75
Options granted 17,580 45.90 45.90
Replacement options 882 28.60 28.60
Options exercised (6,072) 28.33 47.57
Options terminated (1,200) 36.84 -
------
Balance at December 31, 1993 59,354 36.50 52.44
Options granted 15,134 50.66 50.66
Replacement options 340 36.44 36.44
Options exercised (4,163) 30.35 50.58
Options terminated (1,167) 44.04 -
------
Balance at December 31, 1994 69,498 39.82 51.00
Options granted 12,089 55.88 55.88
Replacement options 753 41.82 41.82
Options exercised (7,784) 31.44 59.21
Options terminated (2,119) 47.33 -
------
Balance at December 31, 1995 72,437 43.20 72.00
======
- - -------------------------------------------------------------------------
</TABLE>
Options granted have been adjusted for the April 1994 2-for-1 stock
split. Without giving effect to that adjustment, options granted (in
thousands) were 12,089 in 1995; 10,117 in 1994; and 8,790 in 1993.
The replacement options replaced canceled SARs and have identical terms
thereto. At year-end 1995, there were 8.3 million SARs outstanding at an
average exercise price of $45.55. There were 4.4 million restricted stock
shares and restricted stock units outstanding at year-end 1995.
There were 20.8 million and 16.1 million shares available for grants of
options, SARs, restricted stock and restricted stock units at December 31,
1995 and 1994, respectively. Under the 1990 Long-Term Incentive Plan, 0.95% of
the Company's issued common stock (including treasury shares) as of the first
day of each calendar year during which the Plan is in effect becomes available
for granting awards in such year. Any unused portion, in addition to shares
allocated to awards that are canceled or forfeited, is available for later
years.
Outstanding options and SARs expire on various dates through December
14, 2005. Restricted stock grants vest on various dates up to normal
retirement of grantees.
GE adopted the disclosure-only option under SFAS No. 123, Accounting for
Stock-Based Compensation, as of December 31, 1995. If the accounting
provisions of the new Statement had been adopted as of the beginning of 1995,
the effect on 1995 net earnings would have been immaterial. Further, based on
current and anticipated use of stock options, it is not envisioned that the
impact of the Statement's accounting provisions would be material in any
future period.
The following table summarizes information about stock options
outstanding at December 31, 1995.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
STOCK OPTIONS OUTSTANDING
(Shares in thousands)
Outstanding Exercisable
------------------------------------- -------------------
Average Average
Exercise Average exercise exercise
price range Shares life <F1> price Shares price
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$19 3/4-$33 15/16 14,705 4.2 $29.25 14,705 $29.25
$34 5/16-$43 1/16 16,539 6.1 37.39 15,644 37.23
$43 1/4-$51 20,087 7.8 47.02 6,383 43.94
$51 1/16-$72 3/8 21,106 8.8 53.84 55 51.69
------ ------
Total 72,437 7.0 43.20 36,787 35.23
====== ======
- - -----------------------------------------------------------------------------------------
<FN>
<F1> Average contractual life remaining in years.
At December 31, 1994, there were approximately 38 million options
exercisable at an average exercise price of $33.43.
- - -----------------------------------------------------------------------------------------
</TABLE>
Stock options expire in 10 years from the date they are granted; options
vest over service periods that range from one to five years.
<PAGE>
F-35
Annual Report Page No. 59
26. SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities are net of acquisitions and
dispositions of businesses.
"Payments for principal businesses purchased" in the Statement of Cash
Flows is net of cash acquired and includes debt assumed and immediately repaid
in acquisitions.
"All other operating activities" in the Statement of Cash Flows consists
principally of adjustments to current and noncurrent accruals of costs and
expenses, amortization of premium and discount on debt, and adjustments to
assets such as amortization of goodwill and intangibles.
The Statement of Cash Flows excludes certain noncash transactions that
had no significant effects on the investing or financing activities of GE or
GECS.
Certain supplemental information related to GE and GECS cash flows is
shown below.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
For the years ended December 31 (In millions) 1995 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GE
NET PURCHASE OF GE SHARES FOR TREASURY
Open market purchases under share repurchase programs $ (3,101) $ (69) $ (217)
Other purchases (915) (1,055) (553)
Dispositions (mainly to employee and dividend reinvestment plans) 1,493 771 406
-------- -------- --------
$ (2,523) $ (353) $ (364)
======== ======== ========
GECS
FINANCING RECEIVABLES
Increase in loans to customers $(46,154) $(37,059) $(30,002)
Principal collections from customers 44,840 31,264 27,571
Investment in equipment for financing leases (17,182) (10,528) (7,204)
Principal collections on financing leases 8,821 8,461 6,011
Net change in credit card receivables (3,773) (2,902) (1,645)
Sales of financing receivables with recourse 2,139 1,239 1,105
-------- -------- --------
$(11,309) $ (9,525) $ (4,164)
======== ======== ========
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses $(14,452) $(8,663) $(10,488)
Dispositions and maturities of securities by insurance and annuity businesses 12,460 6,338 7,698
Proceeds from principal business dispositions 575 - -
Other (2,496) 2,501 (4,003)
-------- -------- --------
$ (3,913) $ 176 $ (6,793)
======== ======== ========
NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $2,545 $3,214 $4,315
Long-term (longer than one year) 32,507 19,228 10,885
Long-term subordinated 298 - -
Proceeds - nonrecourse, leveraged lease debt 1,428 31 53
-------- -------- --------
$ 36,778 $ 22,473 $ 15,253
======== ======== ========
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $(16,075) $(10,460) $(9,008)
Long-term (longer than one year) (678) (930) (206)
Principal payments - nonrecourse, leveraged lease debt (292) (309) (312)
-------- -------- --------
$(17,045) $(11,699) $ (9,526)
======== ======== ========
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment and annuity contracts $ 1,754 $ 1,207 $ 509
Preferred stock issued by GE Capital 1,045 240 -
Redemption of investment and annuity contracts (2,540) (1,264) (578)
-------- -------- --------
$ 259 $ 183 $ (69)
======== ======== ========
OTHER
CASH FROM (USED FOR) DISCONTINUED OPERATIONS
Cash from GE Aerospace operating activities $ - $ - $ 76
Cash from GE Aerospace investing activities - - 886
Cash from (used for) GECS securities broker-dealer operating activities 1,414 1,635 (1,910)
Cash from (used for) GECS securities broker-dealer investing activities 92 334 (107)
Cash from (used for) GECS securities broker-dealer financing activities (1,506) (2,169) 2,017
-------- -------- --------
$ - $ (200) $ 962
======== ======== ========
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-36
Annual Report Page No. 60
27. INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
- - ---------------------------------------------------------------------------------------------------------------------------------
Total revenues Intersegment revenues External revenues
--------------------------- -------------------------- ----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 6,098 $ 5,714 $ 6,580 $ 115 $ 43 $ 59 $ 5,983 $ 5,671 $ 6,521
Appliances 5,933 5,965 5,555 4 3 3 5,929 5,962 5,552
Broadcasting 3,919 3,361 3,102 - - - 3,919 3,361 3,102
Industrial Products and Systems 10,194 9,406 8,575 436 368 409 9,758 9,038 8,166
Materials 6,647 5,681 5,042 19 43 50 6,628 5,638 4,992
Power Generation 6,545 5,933 5,530 57 44 135 6,488 5,889 5,395
Technical Products and Services 4,424 4,285 4,174 19 18 18 4,405 4,267 4,156
All Other 2,707 2,348 1,803 - - - 2,707 2,348 1,803
Corporate items and eliminations (286) (195) (242) (650) (519) (674) 364 324 432
------- ------- ------- ----- ----- ----- ------- ------- -------
Total GE 46,181 42,498 40,119 - - - 46,181 42,498 40,119
------- ------- ------- ----- ----- ----- ------- ------- -------
GECS
Financing 19,042 14,932 12,399 - - - 19,042 14,932 12,399
Specialty Insurance 7,444 4,926 4,862 - - - 7,444 4,926 4,862
All Other 6 17 15 - - - 6 17 15
------- ------- ------- ----- ----- ----- ------- ------- -------
Total GECS 26,492 19,875 17,276 - - - 26,492 19,875 17,276
------- ------- ------- ----- ----- ----- ------- ------- -------
Eliminations (2,645) (2,264) (1,694) - - - (2,645) (2,264) (1,694)
------- ------- ------- ----- ----- ----- ------- ------- -------
CONSOLIDATED REVENUES $70,028 $60,109 $55,701 $ - $ - $ - $70,028 $60,109 $55,701
======= ======= ======= ===== ===== ===== ======= ======= =======
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
GE revenues include income from sales of goods and services to customers and other income. Sales from one Company component to
another generally are priced at equivalent commercial selling prices. "All Other" GE revenues consists primarily of GECS'
earnings.
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
ASSETS PROPERTY, PLANT AND EQUIPMENT
(INCLUDING EQUIPMENT LEASED TO OTHERS)
(In millions) At December 31 For the years ended December 31
- - ---------------------------------------------------------------------------------------------------------------------------------
Depreciation, depletion
Additions and amortization
--------------------------- -------------------------- ----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------------------
GE
Aircraft Engines $ 4,890 $ 4,751 $ 5,329 $ 266 $ 254 $ 207 $ 273 $ 261 $ 333
Appliances 2,304 2,309 2,193 143 159 129 93 84 125
Broadcasting 3,915 3,881 3,742 97 86 56 64 67 98
Industrial Products and Systems 6,117 5,862 5,442 425 400 397 308 363 332
Materials 9,095 8,628 8,181 521 417 374 478 443 413
Power Generation 5,679 4,887 3,875 155 176 212 166 143 143
Technical Products and Services 2,200 2,362 2,179 110 154 124 109 95 88
All Other 13,113 9,768 11,604 1 - 1 1 2 3
Corporate items and eliminations 8,403 8,365 8,589 113 97 88 89 87 96
-------- -------- -------- ------ ------ ------ ------ ------ ------
Total GE 55,716 50,813 51,134 1,831 1,743 1,588 1,581 1,545 1,631
-------- -------- -------- ------ ------ ------ ------ ------ ------
GECS
Financing 150,062 121,966 106,854 5,144 5,889 3,352 1,962 1,607 1,545
Specialty Insurance 34,795 22,058 18,915 132 62 15 24 16 9
All Other 872 943 868 36 44 59 27 39 38
-------- -------- -------- ------ ------ ------ ------ ------ ------
Total GECS 185,729 144,967 126,637 5,312 5,995 3,426 2,013 1,662 1,592
-------- -------- -------- ------ ------ ------ ------ ------ ------
Eliminations (13,410) (9,909) (11,358) - - - - - -
-------- -------- -------- ------ ------ ------ ------ ------ ------
CONSOLIDATED TOTALS $228,035 $185,871 $166,413 $7,143 $7,738 $5,014 $3,594 $3,207 $3,223
======== ======== ======== ====== ====== ====== ====== ====== ======
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
"All Other" GE assets consists primarily of investment in GECS.
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-37
Annual Report Page No. 61
Details of operating profit by industry segment can be found on page 35 of
this report. A description of industry segments for General Electric Company
and consolidated affiliates follows.
* AIRCRAFT ENGINES. Jet engines and replacement parts and repair
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); for a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and for executive and commuter aircraft.
Sold worldwide to airframe manufacturers, airlines and government agencies.
Also, aircraft engine derivatives used as marine propulsion and industrial
power sources.
* APPLIANCES. Major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers
and dryers, microwave ovens and room air conditioning equipment. Sold in North
America and in global markets under various GE and private-label brands.
Distributed to retail outlets, mainly for the replacement market, and to
building contractors and distributors for new installations.
* BROADCASTING. Primarily the National Broadcasting Company (NBC).
Principal businesses are the furnishing of U.S. network television services to
more than 200 affiliated stations, production of television programs,
operation of six VHF television broadcasting stations, operation of five
cable/satellite networks around the world, and investment and programming
activities in multimedia and cable television.
* INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a wide
variety of lamps, lighting fixtures, wiring devices and quartz products);
electrical distribution and control equipment (including power delivery and
control products such as transformers, meters, relays, capacitors and
arresters); transportation systems products (including diesel-electric
locomotives, transit propulsion equipment and motorized wheels for off-highway
vehicles); electric motors and related products; a broad range of electrical
and electronic industrial automation products, including drive systems;
installation, engineering and repair services, which includes management and
technical expertise for large projects such as process control systems; and GE
Supply, a network of electrical supply houses. Markets are extremely diverse.
Products are sold to commercial and industrial end users, including utilities,
to original equipment manufacturers, to electrical distributors, to retail
outlets, to railways and to transit authorities. Increasingly, products are
developed for and sold in global markets.
* MATERIALS. High-performance engineered plastics used in applications
such as automobiles and housings for computers and other business equipment;
ABS resins; silicones; superabrasives such as man-made diamonds; and
laminates. Sold worldwide to a diverse customer base consisting mainly of
manufacturers.
* POWER GENERATION. Products and related maintenance services, mainly
for the generation of electricity. Markets and competition are global. Gas
turbines are sold principally as packaged power plants for electric utilities
and for industrial cogeneration and mechanical drive applications. Steam
turbine-generators are sold to electric utilities, to the U.S. Navy and, for
cogeneration, to industrial and other power customers. Marine steam turbines
are sold to the U.S. Navy. Power Generation also includes nuclear reactors and
fuel and support services for GE's installed boiling water reactors.
* TECHNICAL PRODUCTS AND SERVICES. Medical systems such as magnetic
resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging,
ultrasound, other diagnostic equipment and related services sold worldwide to
hospitals and medical facilities. This segment also includes a full range of
computer-based information and data interchange services for internal use and
external commercial and industrial customers.
* GECS FINANCING. Operations of GE Capital, as follows:
Consumer services - private-label and bank credit card loans, time sales
and revolving credit and inventory financing for retail merchants, auto
leasing and inventory financing, mortgage servicing, and annuity and mutual
fund sales.
Specialized financing - loans and financing leases for major capital
assets, including industrial facilities and equipment, and energy-related
facilities; commercial and residential real estate loans and investments; and
loans to and investments in management buyouts, including those with high
leverage, and corporate recapitalizations.
Equipment management - leases, loans and asset management services for
portfolios of commercial and transportation equipment, including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, oceangoing containers and satellites.
Mid-market financing - loans and financing and operating leases for
middle-market customers, including manufacturers, distributors and end users,
for a variety of equipment that includes data processing equipment, medical
and diagnostic equipment, and equipment used in construction, manufacturing,
office applications and telecommunications activities.
Very few of the products financed by GE Capital are manufactured by
other GE segments.
* GECS SPECIALTY INSURANCE. U.S. and international multiple-line
property and casualty reinsurance, certain directly written specialty
insurance and life reinsurance; financial guaranty insurance, principally on
municipal bonds and structured finance issues; private mortgage insurance; and
creditor insurance covering international customer loan repayments.
<PAGE>
F-38
Annual Report Page No. 62
28. GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED)
Revenues and operating profit shown below are classified according to their
country of origin (including exports from such areas). Revenues and
operating profit classified under the caption "United States" include
royalty and licensing income from non-U.S. sources. U.S. exports to
international customers by major areas of the world are shown on page 38.
At year-end 1995, net assets of operations classified under the captions
"Europe" and "Other areas of the world" were $20,793 million and $6,942
million, respectively.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
- - --------------------------------------------------------------------------------------------------------------------------------
Total revenues Intersegment revenues External revenues
---------------------------- --------------------------- -----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $54,319 $49,920 $47,495 $ 2,123 $ 1,683 $ 1,513 $52,196 $48,237 $45,982
Europe 12,417 7,797 6,722 656 579 525 11,761 7,218 6,197
Other areas of the world 6,967 5,493 4,171 896 839 649 6,071 4,654 3,522
Intercompany eliminations (3,675) (3,101) (2,687) (3,675) (3,101) (2,687) - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Total $70,028 $60,109 $55,701 $ - $ - $ - $70,028 $60,109 $55,701
======= ======= ======= ======= ======= ======= ======= ======= =======
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
OPERATING PROFIT ASSETS
(In millions) For the years ended December 31 At December 31
- - -------------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $ 9,175 $8,351 $6,635 $168,878 $152,151 $145,390
Europe 1,063 673 360 45,167 22,464 14,257
Other areas of the world 725 595 307 14,164 11,439 6,954
Intercompany eliminations 9 5 (23) (174) (183) (188)
------- ------ ------ -------- -------- --------
Total $10,972 $9,624 $7,279 $228,035 $185,871 $166,413
======= ====== ====== ======== ======== ========
- - -------------------------------------------------------------------------------------------------------
</TABLE>
29. ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which GE and GECS are parties. Apart from GE's and GECS' own borrowings and
certain marketable securities, relatively few of these instruments are
actively traded. Thus, fair values must often be determined by using one or
more models that indicate value based on estimates of quantifiable
characteristics as of a particular date. Because this undertaking is, by its
nature, difficult and highly judgmental, for a limited number of
instruments, alternative valuation techniques may have produced disclosed
values different from those that could have been realized at December 31,
1995 or 1994. Moreover, the disclosed values are representative of fair
values only as of the dates indicated. Assets that, as a matter of
accounting policy, are reflected in the accompanying financial statements at
fair value are not included in the following disclosures; such assets
include cash and equivalents and investment securities.
Values are estimated as follows:
BORROWINGS. Based on quoted market prices or market comparables. Fair values
of interest rate and currency swaps on borrowings are based on quoted market
prices and include the effects of counterparty creditworthiness.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions
and/or discounted future cash flows, using rates at which similar loans
would have been made to similar borrowers.
ANNUITY BENEFITS. Based on expected future cash flows, discounted at
currently offered discount rates for immediate annuity contracts or cash
surrender values for single premium deferred annuities.
FINANCIAL GUARANTIES. Based on future cash flows, considering expected
renewal premiums, claims, refunds and servicing costs, discounted at a
market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the
cost to terminate or otherwise settle obligations to counterparties.
<PAGE>
F-39
Annual Report Page No. 63
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS 1995 1994
--------------------------------------- -----------------------------------------
Assets (liabilities) Assets (liabilities)
----------------------------- ----------------------
Estimated Estimated
Carrying fair value Carrying fair value
Notional amount ------------------ Notional amount ---------------------
At December 31 (In millions) amount (net) High Low amount (net) High Low
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Investments $ <F1> $ 1,796 $ 2,886 $ 2,886 $ <F1> $ 2,128 $ 2,289 $ 2,269
Borrowings and related instruments
Borrowings <F2><F3> <F1> (3,943) (3,981) (3,981) <F1> (3,605) (3,530) (3,530)
Interest rate swaps 89 - (16) (16) 89 - 2 2
Currency swaps 180 - 50 50 393 - 26 26
Financial guaranties 1,722 - - - 1,520 - - -
Other firm commitments
Currency forwards and options 3,774 - 131 131 3,195 - - -
Financing commitments 1,505 - - - 1,153 - - -
GECS
Assets
Time sales and loans <F1> 57,817 59,188 58,299 <F1> 48,529 49,496 48,840
Integrated interest rate swaps 1,703 - (93) (93) 1,183 - 64 64
Purchased options 1,213 24 11 11 103 2 2 2
Mortgage-related positions
Mortgage purchase commitments 1,360 - 17 17 205 - (2) (2)
Mortgage sale commitments 1,334 - (11) (11) 1,792 - 2 2
Memo: mortgages held for sale <F4> <F1> 1,663 1,663 1,663 <F1> 1,764 1,764 1,764
Options, including "floors" 18,522 67 144 144 - - - -
Interest rate swaps 1,990 - 31 31 950 - (127) (127)
Other cash financial instruments <F1> 1,514 1,967 1,705 <F1> 1,897 2,026 1,924
Liabilities
Borrowings and related instruments
Borrowings <F2><F3> <F1> (111,598) (113,105) (113,105) <F1> (91,399) (89,797) (89,797)
Interest rate swaps 43,681 - (630) (630) 21,996 - 198 195
Currency swaps 22,342 - 937 937 11,695 - 86 86
Purchased options 2,751 26 12 11 130 12 11 12
Other 515 - (65) (65) - - - -
Annuity benefits <F1> (11,994) (11,728) (11,728) <F1> (13,186) (12,788) (12,788)
Insurance - financial guaranties
and credit life 144,036 (1,570) (832) (922) 132,623 (1,562) (663) (806)
Credit and liquidity support
- securitizations 7,035 (58) (65) (65) 5,808 (22) (22) (22)
Performance guaranties - principally
letters of credit 2,920 (48) (78) (78) 2,227 (18) (98) (101)
Other - principally liquidity
commitments 3,556 1 (36) (45) 3,166 - 42 38
Other firm commitments
Currency forwards and options 7,657 - 69 69 3,372 - 12 12
Currency swaps 280 - (22) (22) 488 - (3) (3)
Ordinary course of business
lending commitments 6,929 - (60) (60) 6,687 - (50) (50)
Unused revolving credit lines
Commercial 3,223 - - - 2,580 - - -
Consumer - principally credit cards 118,710 - - - 101,582 - - -
- - -------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Not applicable.
<F2> Includes interest rate and currency swaps.
<F3> See note 18.
<F4> Included in other cash financial instruments.
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional information about certain financial instruments in the above
table follows.
CURRENCY FORWARDS AND OPTIONS are employed by GE and GECS to manage
exposures to changes in currency exchange rates associated with commercial
purchase and sale transactions. These financial instruments generally are
used to fix the local currency cost of purchased goods or services or
selling prices denominated in currencies other than the functional currency.
Currency exposures that result from net investments in affiliates are
managed principally by funding assets denominated in local currency with
debt denominated in those same currencies. In certain circumstances, net
investment exposures are managed using currency forwards and currency swaps.
OPTIONS OTHER THAN CURRENCY OPTIONS. GECS is exposed to prepayment risk in
certain of its business activities, such as in its mortgage servicing and
<PAGE>
F-40
Annual Report Page No. 64
annuities activities. In order to hedge those exposures, GECS uses one-sided
financial instruments containing option features. These instruments
generally behave based on limits ("caps," "floors" or "collars") on interest
rate movement.
INTEREST RATE AND CURRENCY SWAPS are used by both GE and GECS to optimize
borrowing costs for a particular funding strategy (see note 18) and by GECS
to establish specific hedges of mortgage-related assets and to manage net
investment exposures. Such swaps are evaluated by management under the
credit criteria set forth below. In addition, as part of its ongoing
customer activities, GECS may enter into swaps that are integrated with
investments in or loans to particular customers and do not involve
assumption of third-party credit risk. Such integrated swaps are evaluated
and monitored like their associated investments or loans, and are not
therefore subject to the same credit criteria that would apply to a stand-
alone swap.
COUNTERPARTY CREDIT RISK. Given the ways in which GE and GECS each use
swaps, purchased options and forwards, the principal risk is credit risk -
risk that counterparties will be financially unable to make payments in
accordance with the agreements. Associated market risk is meaningful only as
it relates to how changes in market value affect credit exposure to
individual counterparties. Except as noted above for positions that are
integrated into financings, all swaps, purchased options and forwards are
carried out within the following credit policy constraints:
* Once a counterparty exceeds credit exposure limits (see table below),
no additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the established limit.
Open contracts remain in force.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------
COUNTERPARTY CREDIT CRITERIA Credit rating
--------------------------------
Moody's Standard & Poor's
- - --------------------------------------------------------------------------
<S> <C> <C>
Term of transaction
Between one and five years Aa3 AA-
Greater than five years Aaa AAA
Credit exposure limits
Up to $50 million Aa3 AA-
Up to $75 million Aaa AAA
- - --------------------------------------------------------------------------
</TABLE>
* All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require assignment or
termination in the event either party is downgraded below A3 or A-.
More credit latitude is permitted for transactions having original
maturities shorter than one year because of their lower risk.
30. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
First quarter Second quarter Third quarter Fourth quarter
(Dollar amounts in millions; ----------------- ------------------ ----------------- -----------------
per-share amounts in dollars) 1995 1994 1995 1994 1995 1994 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Earnings from continuing operations $1,372 $1,219 $ 1,726 $1,554 $1,610 $1,457 $ 1,865 $ 1,685
Losses from discontinued operations - (151) - (32) - (89) - (49)
Provision for loss on discontinued securities
broker-dealer operations - - - - - - - (868)
------ ------ ------- ------ ------ ------ ------- -------
Net earnings $1,372 $1,068 $ 1,726 $1,522 $1,610 $1,368 $ 1,865 $ 768
====== ====== ======= ====== ====== ====== ======= =======
Per share
Earnings from continuing operations $ 0.81 $ 0.71 $ 1.02 $ 0.91 $ 0.96 $ 0.85 $ 1.12 $ 0.99
Losses from discontinued operations - (0.09) - (0.02) - (0.05) - (0.54)
------ ------ ------- ------ ------ ------ ------- -------
Net earnings $ 0.81 $ 0.62 $ 1.02 $ 0.89 $ 0.96 $ 0.80 $ 1.12 $ 0.45
====== ====== ======= ====== ====== ====== ======= =======
SELECTED DATA
GE
Sales of goods and services $9,278 $8,264 $11,237 $10,038 $10,106 $9,384 $12,392 $11,944
Gross profit from sales 2,567 2,282 3,219 2,743 2,794 2,441 3,340 3,115
GECS
Revenues from operations 5,754 4,393 6,415 4,730 7,099 5,097 7,224 5,655
Operating profit 826 668 818 684 1,048 857 828 740
- - ---------------------------------------------------------------------------------------------------------------------------------
For GE, gross profit from sales is sales of goods and services less
costs of goods and services sold. For GECS, operating profit is income before
taxes.
First-quarter 1994 discontinued operations included a $210 million ($350
million before tax) charge resulting from the discovery of false trading
profits created by the then head U.S. government securities trader in the
discontinued securities broker-dealer. Approximately $143 million ($238
million before tax) of the charge related to periods prior to 1994.
Earnings-per-share amounts for each quarter are required to be computed
independently and, as a result, their sums do not equal the total year
earnings-per-share amounts.
</TABLE>
<PAGE>
<TABLE>
Exhibit 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year ended December 31
(Dollars in millions) -----------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GE except GECS
- - --------------
"Earnings" <F1> $ 5,329 $ 5,582 $ 5,511 $ 7,828 $ 8,696
Less: Equity in undistributed earnings
of General Electric Capital
Services, Inc. <F2> (871) (831) (957) (1,181) (1,324)
Plus: Interest and other financial
charges included in expense 893 768 525 410 649
One-third of rental expense <F3> 225 228 212 171 174
------- ------- ------- ------- -------
Adjusted "earnings" $ 5,576 $ 5,747 $ 5,291 $ 7,228 $8,195
======= ======= ======= ======= =======
Fixed Charges:
Interest and other financial charges $ 893 $ 768 $ 525 $ 410 $ 649
Interest capitalized 33 29 21 21 13
One-third of rental expense <F3> 225 228 212 171 174
------- ------- ------- ------- -------
Total fixed charges $ 1,151 $ 1,025 $ 758 $ 602 $ 836
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 4.84 5.61 6.98 12.01 9.80
======= ======= ======= ======= =======
General Electric Company and consolidated
affiliates
- - -----------------------------------------
"Earnings" <F1> $ 5,679 $ 6,026 $ 6,287 $ 8,831 $ 9,941
Plus: Interest and other financial
charges included in expense 5,270 4,512 4,096 4,994 7,336
One-third of rental expense <F3> 261 320 349 327 349
------- ------- ------- ------- -------
Adjusted "earnings" $11,210 $10,858 $10,732 $14,152 $17,626
======= ======= ======= ======= =======
Fixed Charges:
Interest and other financial charges $ 5,270 $ 4,512 $ 4,096 $ 4,994 $ 7,336
Interest capitalized 41 35 26 30 34
One-third of rental expense <F3> 261 320 349 327 349
------- ------- ------- ------- -------
Total fixed charges $ 5,572 $ 4,867 $ 4,471 $ 5,351 $ 7,719
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.01 2.23 2.40 2.64 2.28
======= ======= ======= ======= =======
<FN>
<F1> Earnings for all years consist of earnings from continuing operations before income taxes and
minority interest. For 1991 and 1993, earnings are before cumulative effects of changes in
accounting principle.
<F2> Earnings for all years consist of earnings from continuing operations after income taxes, net of
dividends. For 1991, earnings are before cumulative effect of change in accounting principle.
<F3> Considered to be representative of interest factor in rental expense.
</TABLE>
Exhibit 99(c)
Item 1. Business - Property and Casualty Reserves for Unpaid Losses and
Loss Adjustment Expenses, set forth in the Annual Report on Form 10-K of
GE Global Insurance Holding Corporation (S.E.C. File No. 0-27394) for the
year ended December 31, 1995 (Pages 7 through 12).
Property and Casualty Reserves for Unpaid Losses and Loss Adjustment Expenses
Domestic. The Company's domestic subsidiaries maintain reserves to cover
their estimated ultimate liability for unpaid losses and loss adjustment
expenses (''LAE'') with respect to reported and unreported claims incurred as of
the end of each accounting period (net of estimated related salvage and
subrogation claims). These reserves are estimates that involve actuarial and
statistical projections of the expected cost of the ultimate settlement and
administration of unpaid claims based on facts and circumstances then known,
estimates of future trends in claims severity and other variable factors such
as inflation and new concepts of liability. The inherent uncertainties of
estimating loss reserves are exacerbated for reinsurers by the significant
periods of time that often elapse between the occurrence of an insured loss,
the reporting of the loss to the primary insurer and, ultimately, to the
reinsurer, and the primary insurer's payment of that loss and subsequent
indemnification by the reinsurer (the ''tail''). As a consequence, actual
losses and LAE paid may deviate, perhaps substantially, from estimates
reflected in the insurance companies' reserves in their financial statements.
Adjustments to previously reported reserves for net losses and LAE are
reflected in the financial statements in the period in which the adjustment
occurs.
When a claim is reported to a ceding company, the ceding company's claims
personnel establish a ''case reserve'' for the estimated amount of the
ultimate payment. The estimate reflects the informed judgment of such
personnel based on general insurance reserving practices and on the experience
and knowledge of such personnel regarding the nature and value of the specific
type of claim. The Company, in turn, typically establishes a case reserve when
it receives notice of a claim from the ceding company. Such reserves are based
on an independent evaluation by the Company's claims departments, taking into
consideration coverage, liability, severity of injury or damage, jurisdiction,
an assessment of the ceding company's ability to evaluate and handle the
claim, and the amount of reserves recommended by the ceding company. Case
reserves are adjusted periodically by the claims departments of the Company
based on subsequent developments and audits of ceding companies.
In accordance with industry practice, the Company maintains loss reserves
for claims incurred but not reported (''IBNR''). Such reserves are established
to provide for future case reserves and loss payments on incurred claims that
have not yet been reported to an insurer or reinsurer. In calculating IBNR
reserves, the Company uses generally accepted actuarial reserving techniques
that take into account quantitative loss experience data, together with, where
appropriate, qualitative factors. IBNR reserves are based on loss experience
and are grouped both by class of business and by accident year. IBNR reserves
are also adjusted to take into account certain additional factors, such as
changes in the volume of business written, reinsurance contract terms and
conditions, the mix of business, claims processing and inflation, that can be
expected to affect the Company's liability for losses over time.
International. The Company's international property and casualty
reinsurance operations establish their reserves using analytical techniques
similar to those utilized by GE Global's domestic subsidiaries. They also
maintain IBNR reserves using actuarial and statistical projections. The
potential for adverse development of the Company's reserves for its
international business, as compared to that of its domestic business, is
reduced because the international operations have a relatively low proportion
of longer tail exposures. As of December 31, 1995, approximately 1% of the
Company's international reserves ($64 million) related to business acquired by
the Company from Assurance Compagniet Baltica Aktiesellskab (''Baltica'') in
1988. At the time of the acquisition, the Company obtained from Baltica a 90%
loss development guarantee, pursuant to which Baltica is obligated to pay the
Company, at December 31, 1997, 90% of the amount of loss reserve development
(adjusted for certain income and expenses) from 1988 to such date. Baltica has
recently been acquired by Tryg Insurance Group of Denmark.
Reserve Development. The table that follows presents the development of
net balance sheet liabilities of ERC and subsidiaries for unpaid claims and
claims expenses for 1985 through 1995.
Net Liability. The first row of data shows the estimated net liability
for unpaid claims and claims expenses at December 31 for each year from 1985
to 1995. The liability includes both case and IBNR reserves as of each year-
end date. The rows immediately following the first row of data show cumulative
paid data at December 31, as of one year, two years, etc., through up to 10
years of subsequent payments.
Net Liability Re-estimated. The middle rows of data show the re-estimated
amount for previously reported net liability based on experience as of the end
of each subsequent calendar year's results. This estimate is changed as more
information becomes known about the underlying claims for individual years.
The cumulative redundancy (deficiency) shown in the table is the aggregate net
change in estimates over the period of years subsequent to the calendar year
reflected at the top of the particular columns. The amount in the line titled
''Redundancy (Deficiency) at December 31, 1995'', represents for each calendar
year (the ''Base Year'') the aggregate change in (i) GE Global's original
estimate of net liability for unpaid losses and LAE for all years prior to and
including the Base Year compared to (ii) GE Global's re-estimate as of
December 31, 1995 of net liability for unpaid losses and LAE for all years
prior to and including the Base Year. A redundancy means that the original
estimate was greater than the reestimate and a deficiency means that the
original estimate was less than the reestimate. By way of example, the
deficiency for the year 1994, calculated as of December 31, 1995, represents a
deficiency in GE Global's original estimate of unpaid losses and LAE for 1994
and prior years.
The last seven lines of data present the development of reserves on a
''gross of reinsurance'' basis, reconciled to the ''net of reinsurance basis''
shown in the immediately preceding tables.
<TABLE>
Changes in Historical Reserves for Unpaid Losses and LAE
For the Last Ten Years-GAAP Basis as of December 31, 1995
<CAPTION>
Year Ended December 31,
(In millions) 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net liability for unpaid losses
and LAE $ 1,561 $2,083 $2,620 $3,087 $3,338 $3,579 $3,596 $3,991 $4,525 $5,071 $ 10,048
Paid (cumulative) as of:
One year later 538 554 615 681 706 747 665 802 949 1,115 -
Two years later 807 899 1,006 1,064 1,125 1,119 1,103 1,274 1,602 - -
Three years later 1,050 1,202 1,314 1,432 1,469 1,524 1,499 1,739 - - -
Four years later 1,281 1,429 1,553 1,687 1,746 1,772 1,784 - - - -
Five years later 1,472 1,612 1,754 1,919 1,929 1,989 - - - - -
Six years later 1,603 1,764 1,945 2,065 2,072 - - - - - -
Seven years later 1,720 1,901 2,063 2,221 - - - - - - -
Eight years later 1,829 1,998 2,181 - - - - - - - -
Nine years later 1,908 2,103 - - - - - - - - -
Ten years later 1,999 - - - - - - - - - -
Net liability re-estimated as
of:
One year later $ 1,672 $2,177 $2,746 $3,134 $3,390 $3,616 $3,625 $ 3,919 $4,612 $5,173 -
Two years later 1,899 2,385 2,861 3,220 3,482 3,583 3,587 4,066 4,656 - -
Three years later 2,108 2,541 2,941 3,346 3,462 3,564 3,701 4,095 - - -
Four years later 2,315 2,672 3,057 3,360 3,472 3,654 3,687 - - - -
Five years later 2,465 2,807 3,094 3,406 3,537 3,635 - - - - -
Six years later 2,569 2,848 3,151 3,470 3,521 - - - - - -
Seven years later 2,619 2,916 3,210 3,494 - - - - - - -
Eight years later 2,696 2,979 3,259 - - - - - - - -
Nine years later 2,756 3,036 - - - - - - - - -
Ten years later 2,830 - - - - - - - - - -
Redundancy (Deficiency) at
December 31, 1995 $(1,269) $ (953) $ (639) $ (407) $ (183) $ (56) $ (91) $ (104) $ (131) $ (102)
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Gross liability-end of year $4,815 $5,312 $6,020 $11,842
Reinsurance recoverables on
unpaid losses 824 787 949 1,794
------ ------ ------ -------
Net liability-end of year 3,991 4,525 5,071 $10,048
Gross re-estimated liability-
latest 5,137 5,766 6,250 -
Re-estimated reinsurance
recoverables on latest
unpaid losses 1,045 1,108 1,077 -
------ ------ ------
Net re-estimated liability-
latest 4,092 4,658 5,173 -
Gross cumulative redundancy
(deficiency) $ (322) $ (454) $ (230) -
</TABLE>
Note: For a description of the purpose of the above table and the various
table sections, please refer to the bottom of the preceding page entitled
''Reserve Development.''
A number of major trends that occurred within the insurance industry, the
economy in general and several Company-specific factors have had a significant
effect on the Company's liabilities for unpaid claims and claims expenses
during the period covered by the preceding table. The loss reserve
deficiencies developed to December 31, 1995, as reflected in the preceding
table, included reserve deficiencies of approximately $477 million in 1985,
$352 million in 1986, $242 million in 1987, $165 million in 1988 and $114
million in 1989 related to the general liability business on the books of
Puritan Excess and Surplus Lines Insurance Company (''PESLIC'') before the
Company's acquisition of PESLIC in 1994. Prior to 1994, PESLIC was owned by GE
Capital. Additionally, beginning in 1985 the Company strengthened the reserves
for its excess liability and workers' compensation business for qualified self-
insured employers. Loss reserve development in the mid 1980's in these
businesses reflected the inadequate premium rates which resulted from intense
competition in the market during that period. In the late 1980's the
reinsurance market, in general, reacted to the rate deficiencies and the
resulting loss reserve development by increasing rates and strengthening loss
reserves. This is reflected, with respect to the Company, in the significant
reductions in the reserve deficiencies in recent years.
To a lesser degree, development of asbestos and environmental claims has
affected the Company's results. Inflation in certain lines of reinsurance
business has also had an adverse effect on liabilities for claims and claim
expenses, particularly in excess of loss reinsurance. Also affecting the
reserve structure has been an increase in both frequency and severity of
claims, especially after 1985. Partially offsetting the above factors is
favorable development in recent years in medical professional liability and
facultative casualty businesses as well as an increase in net retentions by
ceding companies.
The liabilities for claims and claim expenses in the preceding table
include long-term disability claims that are discounted at a 6% rate. As a
result of discounting the Company's long-term disability claims, the Company's
total liabilities for claims and claim expenses have been reduced by an
estimated 3% and 7% at December 31, 1995 and 1994, respectively. The
amortization of discount is included in current operating results as part of
the development of prior year liabilities. For the years ended December 31,
1995, 1994 and 1993, long-term disability discounts accrued as a percentage of
claims, claim expenses and policy benefits were approximately 5%, 8% and 5%,
respectively and discounts amortized were approximately 1% in all years.
The reconciliation of reserves for unpaid losses and LAE on a GAAP basis
for each of the years indicated is shown below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Reserves at beginning of period $ 6,020 $5,312 $4,815
Reinsurance recoverables on unpaid losses 949 787 824
------- ------ ------
Net reserves at beginning of period 5,071 4,525 3,991
Net incurred related to:
Current period 2,638 1,657 1,751
Prior periods 104 87 (72)
------- ------ ------
Total net incurred 2,742 1,744 1,679
Net paid related to:
Current period 295 374 301
Prior periods 1,426 949 802
------- ------ ------
Total net paid 1,721 1,323 1,103
Foreign exchange and other (54) 125 (42)
------- ------ ------
Net balance at December 31 6,038 5,071 4,525
Reinsurance recoverables on unpaid losses 1,794 949 787
Acquired German Businesses unpaid claims
and claim expenses 4,010 - -
------- ------ ------
Reserves at end of period $11,842 $6,020 $5,312
======= ====== ======
</TABLE>
The reconciliation of reserves for unpaid losses and LAE between
statutory basis and GAAP basis for each of the years indicated is shown below:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Statutory Basis U.S. Reserves $ 5,758 $4,966 $4,397
Adjustments to GAAP Basis<F1> (413) (383) (193)
------- ------ ------
Net GAAP Reserves for U.S. Companies 5,345 4,583 4,204
Net GAAP Reserves for Non-U.S. Companies 4,703 488 321
------- ------ ------
Net GAAP Reserves 10,048 5,071 4,525
Reinsurance Recoverables 1,794 949 787
------- ------ ------
Gross Reserves on a GAAP Basis $11,842 $6,020 $5,312
======= ====== ======
<FN>
<F1>
Statutory basis reserves reclassified to other liabilities based on risk
transfer provisions of FAS No. 113 (as defined below).
</TABLE>
Environmental and Asbestos Exposure. Prior to 1986, the Company wrote
domestic property and casualty reinsurance principally for small to medium-
sized primary insurers that did not generally have environmental and asbestos
exposures. Although the Company has in the last few years increased its
marketing efforts with medium to larger-sized primary insurers, since 1986
primary policies have tended to explicitly exclude environmental and asbestos
risks from coverage.
The following table presents three calendar years of development of losses
and LAE reserves associated with the Company's asbestos and environmental
claims, including case and IBNR reserves.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Gross Basis:
Beginning net reserve balance $317 $309 $292
Incurred loss and LAE 61 25 36
IBNR allocation<F1> 99 - -
Loss and LAE paid 41 17 19
---- ---- ----
Ending reserve balance $436 $317 $309
==== ==== ====
Net Basis:
Beginning net reserve balance $139 $138 $125
Incurred loss and LAE 23 9 25
IBNR allocation (1) 51 - -
Loss and LAE paid 17 8 12
---- ---- ----
Ending reserve balance $196 $139 $138
==== ==== ====
<FN>
<F1>
Prior to 1995, the Company's allocation of asbestos and environmental IBNR
reserves associated with PESLIC was primarily made on a non-specific basis. As of
December 31, 1995, PESLIC specifically allocated IBNR reserves to asbestos and
environmental liabilities from a portion of previously established IBNR reserves.
</TABLE>
These amounts are management's best estimate, based on currently available
information, of claims and claim expense payments and recoveries that are
expected to develop in future years. The Company monitors evolving case law
and its effect on asbestos-related illness and toxic waste cleanup claims.
Changing domestic and foreign government regulations and legislation,
including continuing congressional consideration of federal Superfund law,
newly reported claims, new contract interpretations and other factors could
significantly affect future claim development. While the Company has recorded
its best estimate of its liabilities for asbestos-related illness and toxic
waste cleanup claims based on currently available information, it is possible
that additional liabilities may arise in the future. It is not possible to
estimate with any certainty the amount of additional net loss, or the range of
net loss, if any, that is reasonably possible; therefore there can be no
assurance that future liabilities will not materially affect the Company's
results of operations, cash flows and financial position.
Breast Implant Exposure. The Company has minimal exposure to products
liability claims involving silicone breast implants. The Company has, in the
past, generally avoided the products liability reinsurance business,
specifically pharmaceutical and chemical exposures.
