Goldman Sachs 2007 Annual Report Download - page 117

Notes to Consolidated Financial Statements
In connection with its insurance business, the firm is contingently
liable to provide guaranteed minimum death and income benefits
to certain contract holders and has established a reserve related
to $10.84 billion and $8.04 billion of contract holder account
balances as of November 2007 and November 2006, respectively,
for such benefits. The weighted average attained age of these
contract holders was 67 years and 70 years as of November 2007
and November 2006, respectively. The net amount at risk,
representing guaranteed minimum death and income benefits
in excess of contract holder account balances, was $1.04 billion
and $1.27 billion as of November 2007 and November 2006,
respectively. See Note 10 for more information on the firm’s
insurance liabilities.
Guarantees
The firm enters into various derivative contracts that meet the
definition of a guarantee under FIN No. 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.” Such
derivative contracts include credit default and total return
swaps, written equity and commodity put options, written
currency contracts and interest rate caps, floors and swaptions.
FIN No. 45 does not require disclosures about derivative
contracts if such contracts may be cash settled and the firm has
no basis to conclude it is probable that the counterparties held,
at inception, the underlying instruments related to the derivative
contracts. The firm has concluded that these conditions have
been met for certain large, internationally active commercial
and investment bank end users and certain other users.
Accordingly, the firm has not included such contracts in the
tables below.
The firm, in its capacity as an agency lender, indemnifies most
of its securities lending customers against losses incurred in the
event that borrowers do not return securities and the collateral
held is insufficient to cover the market value of the securities
borrowed.
In the ordinary course of business, the firm provides other
financial guarantees of the obligations of third parties
(e.g., performance bonds, standby letters of credit and other
guarantees to enable clients to complete transactions and
merchant banking fund-related guarantees). These guarantees
represent obligations to make payments to beneficiaries if the
guaranteed party fails to fulfill its obligation under a contractual
arrangement with that beneficiary.
LEASES. The firm has contractual obligations under long-term
noncancelable lease agreements, principally for office space,
expiring on various dates through 2069. Certain agreements
are subject to periodic escalation provisions for increases in
real estate taxes and other charges. Future minimum rental
payments, net of minimum sublease rentals are set forth below:
(in millions)
Minimum rental payments
2008 $ 450
2009 478
2010 372
2011 313
2012 255
2013 – thereafter 2,022
Total $3,890
Rent charged to operating expense is set forth below:
(in millions)
Net rent expense
2005 $359
2006 404
2007 412
Contingencies
The firm is involved in a number of judicial, regulatory and
arbitration proceedings concerning matters arising in connection
with the conduct of its businesses. Management believes, based
on currently available information, that the results of such
proceedings, in the aggregate, will not have a material adverse
effect on the firm’s financial condition, but may be material to
the firm’s operating results for any particular period, depending,
in part, upon the operating results for such period. Given the
inherent difficulty of predicting the outcome of the firm’s litigation
and regulatory matters, particularly in cases or proceedings in
which substantial or indeterminate damages or fines are sought,
the firm cannot estimate losses or ranges of losses for cases or
proceedings where there is only a reasonable possibility that a
loss may be incurred.
115Goldman Sachs 2007 Annual Report