<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

                   For the fiscal year ended December 31, 1997
                                             
                                       OR

           [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from ________to________

                                 ---------------
                         Commission file number 0-27394
                                 ---------------

                     GE Global Insurance Holding Corporation
              (Exact name of registrant as specified in its charter)

                Delaware                                  95-3435367
    (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                  Identification No.)

   5200 Metcalf, Overland Park, Kansas      66201       (913) 676-5200
(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% Notes Due February 15, 2026                  New York Stock Exchange
                         

                         SECURITIES REGISTERED PURSUANT
                          TO SECTION 12(g) OF THE ACT:

                               Title of each class
                               -------------------
                    Common Stock, par value $5,000 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  the  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 February 27, 1998. None.

At February  27,  1998,  1,000 shares of common stock with a par value of $5,000
were outstanding.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED  DISCLOSURE
FORMAT.


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>    
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 Registrant's Common Equity and Related Stockholder Matters......12
   Item 6.    Selected Financial Data....................................................12
   Item 7.    Management's Discussion and Analysis of Financial Condition
                  and Results of Operations..............................................13
   Item 8.    Financial Statements and Supplementary Data................................21
   Item 9.    Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosures..............................................21


PART III
   Item 10.   Directors and Executive Officers...........................................21
   Item 11.   Executive Compensation.....................................................21
   Item 12.   Security Ownership of Certain Beneficial Owners and Management.............21
   Item 13.   Certain Relationships and Related Transactions.............................22

PART IV
   Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K............22
</TABLE>


<PAGE>
                                     PART I

Item 1.  Business.

GE Global  Insurance  Holding  Corporation  ("GE Global" and,  together with its
subsidiaries,  the "Company"),  through its direct and indirect subsidiaries, is
principally  engaged  in the  reinsurance  business  in the  United  States  and
throughout the world. All the outstanding  common stock of GE Global is owned by
General Electric Capital Services, Inc. ("GE Capital Services") which in turn is
wholly-owned by General Electric Company ("GE Company").

GE Global's  principal  executive offices are located at 5200 Metcalf,  Overland
Park, Kansas 66201 (Telephone number (913) 676-5200).


Overview of the Reinsurance Industry

Reinsurance  is a form of insurance in which a reinsurer  indemnifies  a primary
insurer  against  part or all of the  liability  assumed by the primary  insurer
under one or more insurance policies.  Reinsurance may provide a primary insurer
with several major benefits:  a reduction in net liability of individual  risks,
protection  against  catastrophic  losses,  reduction of financial  leverage and
stabilization  of  operating  results.  Reinsurance  may also  provide a primary
insurer the  ability to  increase  its  underwriting  capacity  by allowing  the
primary  insurer to accept  larger risks and to more rapidly  expand its book of
business.

The  global   reinsurance   industry   continues  to  be  impacted  by  industry
consolidation,  excess market capacity and primary insurers seeking  alternative
forms of risk transfer such as insurance  captives,  structured  securities  and
derivative products.  Global reinsurers are offering ways to meet the demands of
this  changing  global  market by expanding  their  markets,  entering  into new
reinsurance niches,  offering new reinsurance products and spreading their risks
geographically.  This changing reinsurance environment may affect the industry's
profitability which has historically been influenced by the insurance industry's
underwriting cycle, changes in interest rates and catastrophic events.


General

GE Global is one of the largest reinsurance  companies in the world with certain
subsidiaries  providing  reinsurance  solutions  for  well  over a  century.  GE
Global's principal subsidiary,  Employers  Reinsurance  Corporation ("ERC"), was
established in 1914 and principally  writes  property and casualty  reinsurance.
ERC is the third largest reinsurance company in the United States, based on 1997
statutory net premiums  written.  The Company is also a global  provider of life
and healthcare reinsurance and writes some lines of primary health, property and
casualty and workers' compensation insurance.

The Company  conducts  business and  services its accounts  through a network of
local offices located in cities  throughout the world. At December 31, 1997, the
Company had 20 offices in the North American region,  12 offices in the European
region, 8 offices in the Asia/Pacific region and 3 offices in the Latin American
region.

As one of the largest direct  writers of  reinsurance in the world,  the Company
works directly with its clients which enhances the Company's ability to evaluate
its  clients  and their  respective  risks and  allows  the  Company  to be more
responsive to the individual  needs of its customers.  The Company  utilizes its
network of local offices throughout the world to service the particular needs of
its  reinsurance  clients.  This  system  enables the Company to provide a wider
range of services  targeted at the needs of a particular  market. To enhance its
responsiveness  to customer  needs in the  property and  casualty  segment,  the
Company  operates in a  decentralized  environment  with respect to underwriting
decisions and customer service.


                                       1


<PAGE>
The Company manages and diversifies its risk through the careful underwriting of
risks, active claims management and the purchase of retrocessional coverage. The
Company  monitors  adherence  to  underwriting  guidelines  through  the  use of
computer systems and internal audits.

The  Company's  business  strategy is to continue  to increase  its  reinsurance
market share by expanding its international  operations through internal growth,
enhancing the Company's  domestic  position with the large regional and national
primary  insurers,  while  retaining  the  Company's  focus on small and  medium
regional  customers,  expanding the Company's product lines to take advantage of
market niche opportunities and selectively  acquiring existing  businesses.  The
Company does not intend, however, to increase market share at the expense of its
underwriting results.

The  Company  in 1997,  as a  result  of GE  Capital's  acquisition  of  Coregis
Insurance Company  ("Coregis"),  acquired the renewal rights of certain domestic
property and casualty business to continue expansion of its specialty  insurance
product  line.  On January 6, 1998,  the Company  purchased for $235 million the
assets and assumed the renewal  rights of Industrial  Risk Insurers  ("IRI"),  a
leader in providing  highly  protected  risk  property  insurance.  The business
underwritten  through IRI will be managed by a joint venture  formed between the
Company and The Hartford Steam Boiler  Inspection and Insurance  Company ("HSB")
as stipulated by a management  agreement.  IRI will write business utilizing the
licensing  authority of HSB and the business  underwritten  will be subsequently
allocated  to HSB  and  the  Company  in  accordance  with  certain  reinsurance
agreements  between HSB and the Company.  In conjunction with this  acquisition,
the Company purchased $300 million of 7% convertible  capital  securities from a
Delaware  business  trust formed by HSB's  parent,  HSB Group,  Inc., to provide
capital for HSB to support the  anticipated  increase in gross premiums  written
associated  with the IRI business.  The  expansion  into these two niche markets
positions  the Company to continue to meet the demands of the changing  domestic
market and provide services to a new base of customers.

Additionally in 1997, the Company announced it will form a subsidiary to provide
customers  financial and capital markets  expertise.  This financial and capital
markets  business will offer  customers  products such as  multi-line/multi-year
"baskets"  of  insurance  and  financial  risk  protection,   "multiple-trigger"
insurance   products   (wherein  two  or  more  insured   events  are  covered),
securitizations  of  insurance  risks  and  equity-indexed  life  products.  The
expansion into the financial and capital markets business enables the Company to
be more  flexible,  creative  and  innovative  in  designing  solutions  to meet
increasingly  sophisticated customer demands. There are no results of operations
included in 1997 for this financial and capital markets business.

The Company has expanded its  international  operations  in recent years through
acquisitions of both property and casualty and life reinsurance business. In the
third   quarter  of  1995,   the   Company   acquired   over  93%  of   Frankona
Ruckversicherungs-Aktiengesellschaft   ("Frankona   Re")  and   certain   assets
comprising    a   majority   of   the    reinsurance    business   of   Aachener
Ruckversicherungs-Gesellschaft,  two major  reinsurance  businesses  in  Europe.
Recently,  the  Company's  ownership  percentage of Frankona Re has increased to
approximately  99% through the purchase of  additional  shares owned by minority
shareholders.  These acquisitions together with existing subsidiaries in London,
Folkestone  and  Copenhagen  have been  fully  integrated  and these  individual
companies  together are marketed as the "ERC  Frankona  Group." The  coordinated
activities of the individual  companies of the ERC Frankona Group provide strong
synergies in the global reinsurance business.

Also in recent years,  the Company has expanded its global business  through the
extension  of its local office  network.  The Company  opened  offices in Buenos
Aires and Montreal in 1997,  Sydney,  Melbourne,  Brisbane and Auckland in 1996,
and  Tokyo  and  Mexico  City in  1995.  Consistent  with its  global  expansion
strategy,  the  Company  anticipates  further  expanding  its  presence  in  the
Asia/Pacific and Latin American regions.

Unless otherwise  indicated,  all financial data has been prepared in accordance
with United States generally accepted accounting principles ("GAAP").


                                       2


<PAGE>
Lines of Business

The   Company's   two   business   segments   are  (1)   property  and  casualty
insurance/reinsurance and (2) life reinsurance.  The Company's principal product
lines under the  property  and  casualty  segment are  traditional  property and
casualty reinsurance,  healthcare reinsurance and specialty insurance (generally
primary property and casualty  insurance) and its principal  product lines under
the life  reinsurance  segment are  traditional  life  reinsurance and financial
reinsurance.  The Company also provides primary insurance products to hospitals,
health  maintenance  organizations  and  medical  professionals  as  part of its
healthcare  product  line  and to  niche  customers  as  part  of its  specialty
insurance product line.

Unless  otherwise  indicated,  the Company's  domestic  results include business
written in the United States  (including  business  written in the United States
where  the  reinsured  is  outside  the  United  States)  and  Canada,  and  the
international  results  include all other business  written by the Company.  The
following table shows the geographic  breakdown,  based on net premiums written,
of the Company's principal product lines.

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                       ------------------------------------------------------------------------
 (In millions)                                  1997                    1996                      1995
                                       ------------------------------------------------------------------------
                                                     Inter-                   Inter-                   Inter-
                                        Domestic    national     Domestic    national     Domestic    national
                                       ------------------------------------------------------------------------
<S>                                        <C>         <C>          <C>         <C>          <C>         <C>
Property and Casualty Segment
   Property and Casualty..............   $1,038      $1,592       $1,167      $2,196       $1,421      $1,002
   Healthcare.........................      432          92          405           -          522           -
   Specialty..........................      339           -          169           -          178           -
Life Segment..........................      512         540          189         447          116         322
                                         ------      ------       ------      ------       ------      ------
   Total..............................   $2,321      $2,224       $1,930      $2,643       $2,237      $1,324
                                         ======      ======       ======      ======       ======      ======
</TABLE>

The  following  is  a  summary   description  of  the  Company's   domestic  and
international business based on principal product lines.

Property and Casualty Insurance/Reinsurance Segment

Property  and  Casualty   Reinsurance.   The  Company's  largest  product  line,
traditional property and casualty  reinsurance,  accounted for approximately 58%
of the Company's  worldwide net premiums written in 1997. The Company's  premium
volume in the property and casualty  segment is derived  principally from treaty
agreements,  which enable the Company to maintain lower  operating costs because
fewer  personnel are required to  administer  treaty  business than  facultative
business.  Most of the  Company's  casualty  business is written on an excess of
loss basis  because it better  enables the  Company to control  its  exposure on
business that has a relatively longer "tail".

The  Company's  property  business  is  written  on both an excess of loss and a
proportional  basis.  Generally,  the  Company  is the  lead  reinsurer  for any
domestic program in which it participates, enabling it to negotiate the terms of
the reinsurance. The Company also acts as the lead reinsurer on a portion of its
international business.

The Company's  domestic  property and casualty  business is conducted  primarily
throughout  the United States and Canada.  For the year ended December 31, 1997,
approximately  46% of the  Company's  domestic  net  premiums  written  from the
property  and  casualty   segment  were  derived  from   property   reinsurance,
approximately 43% from casualty reinsurance,  approximately 4% from aviation and
marine  reinsurance and approximately 7% from other lines of reinsurance.  Based
on 1997  net  premiums  written,  approximately  59% of the  Company's  domestic
property and casualty  reinsurance  was written on a direct  basis.  The Company
writes  the  remaining  property  and  casualty   reinsurance  business  through
reinsurance brokers.


                                       3


<PAGE>
The Company's  international  property and casualty business services  worldwide
markets, including most European countries and countries in the Middle East, Far
East, and Latin America. For the year ended December 31, 1997, based on 1997 net
premiums  written,  61% of the  Company's  international  property  and casualty
business  was  written on a direct  basis  with the  remainder  written  through
brokers.  Approximately 47% of the Company's  international net premiums written
from property and casualty  reinsurance  was derived from property  reinsurance,
approximately 24% from casualty reinsurance, approximately 17% from aviation and
marine reinsurance and approximately 12% from other lines of reinsurance.

In  recent  years  insurance  companies  have  directed  more  business  to  the
better-capitalized,   more   highly-rated   reinsurers,   which  has  led  to  a
consolidation in the reinsurance industry. In competing with a smaller number of
global  reinsurers,  the Company has found that a number of its global customers
are increasingly demanding that reinsurers provide a broader range of coverages.
In response to this trend,  the Company has  expanded  the property and casualty
risks it reinsures beyond its more traditional property and casualty reinsurance
business to include risks such as errors and  omissions,  directors and officers
and  non-standard  auto  liability.  In  addition to the  expansion  of lines of
business,  property and casualty  reinsurance has aligned its marketing  efforts
with its core expertise in areas such as aviation,  national accounts and global
accounts.  Management believes that the Company is well positioned to compete on
a global basis in these markets.

The property and casualty  reinsurance  industry has  experienced  a significant
increase in  catastrophic  exposure and loss during the last  decade.  Increased
population  density,  particularly in regions  susceptible to tropical storms or
earthquakes, and the higher incidence and greater severity of catastrophes,  has
increased the losses incurred in many recent catastrophes.  As a result of these
developments,  the Company has taken  steps to limit its  exposure by  carefully
monitoring  and  allocating  its  property  and  casualty  exposure  to specific
geographic zones, both domestically and internationally.

Healthcare. As part of the Company's property and casualty business segment, the
Company  provides  insurance and reinsurance for the healthcare  industry,  also
targeting  employers,  public  entities,  manufacturers  and others for  certain
product lines.  Coverages  include primary insurance and reinsurance for medical
professional  liability and reinsurance  protecting primary insurers  (including
self-insurers)  in the healthcare  market (i.e.,  reinsurance of long-term care,
excess workers compensation, stop loss insurance and provider excess coverages).

The  healthcare  industry  continues  to  change  and  evolve  due to  voluntary
healthcare  reform,  expansion  of  managed  healthcare  initiatives,  increased
competition and the uncertainty related to the extent of government  regulation.
In addition,  companies  that  historically  specialized in one line of business
have  expanded  their lines of business  and are now writing  multiple  lines of
business.  The  Company,  to serve  the  growing  needs of  their  clients,  has
developed new and innovative  healthcare  products and has expanded coverages to
include   various   other  lines  of  business.   Additionally,   the  Company's
international  operations  have begun to write  accident and health  reinsurance
from the property and casualty insurance/reinsurance segment.

The Company  believes that it is well  positioned  to compete in the  healthcare
market because of its wide range of experience in providing healthcare liability
coverage and  accident  and health  coverage,  utilizing  multiple  products and
disciplines to provide healthcare solutions.

Specialty Insurance.  An additional component of the Company's domestic property
and casualty  business is its specialty  insurance product line, which generally
consists of commercial property and casualty policies written on a primary basis
in niche markets.  The Company's  specialty  business  concentrates on providing
commercial   insurance  products  for  target  markets,   usually   professional
associations  and  homogeneous  groups.  The  acquisition  of the renewal rights
associated  with Coregis will  significantly  increase the  specialty  business'
premium  volume and provides  access to several new customer  groups.  Specialty
products include professional liability programs, communications/media liability
coverages and some niche programs in the general  property/casualty  area.  This
coverage  provides  insurance for errors and omissions  (E&O) arising out of the
professional  activities  of the insureds and  commercial  property and casualty
coverages for niche programs.


                                       4


<PAGE>
Professional  classes  underwritten  include  lawyers,   property  and  casualty
insurance agents and brokers, life and health insurance agents and brokers, real
estate  professionals,  directors  and  officers  (not-for-profit),  and  a  few
miscellaneous classes such as travel agents,  computer consultants and marketing
consultants.  The  majority of this  business  provides  coverage to lawyers and
property and casualty and life insurance agents and brokers.

Competition  for the  classes of  business  underwritten  within  the  Company's
specialty  insurance product line has recently  increased as more companies have
redirected their resources to the specialty niche business.  In order to compete
for this  business,  the Company has provided  value-added  services,  including
enhanced  underwriting and automated processing services,  to its specialty line
customers.


Life Reinsurance Segment

Life  Reinsurance.  The Company is engaged in the  reinsurance  of various  life
insurance products,  including term, whole and universal life, annuities,  group
long-term health and health products and provides financial  reinsurance to life
insurers.  Based  on  net  premiums  written,  life  reinsurance  accounted  for
approximately 23% of the Company's worldwide business in 1997.

With respect to life  reinsurance,  the Company  writes mostly on a direct basis
with  primary  insurers.   The  Company's  life  reinsurance  business  consists
principally of treaty business and is written generally on a pro-rata basis. The
Company's  domestic life  reinsurance  business is written in every state in the
United States. The Company's  international  life reinsurance  business services
worldwide markets,  including the United Kingdom,  France,  Spain,  Scandinavia,
Italy,  Singapore,  Mexico,  Israel and Greece.  For the year ended December 31,
1997, 63% of the Company's  international  life reinsurance net premiums written
were  for  traditional   life   reinsurance  with  the  balance  for  healthcare
reinsurance.

The Company  believes  that  increases in life  expectancy,  decreases in public
funding for social programs in Europe and  deregulation of the life  reinsurance
markets in Europe and Japan present  increased  opportunities  for the Company's
life  reinsurance  business  line. In response to these trends,  the Company has
expanded its international life reinsurance market by increasing its presence in
the market for reinsurance of annuity providers.

Financial  Reinsurance.  Financial  reinsurance is primarily designed to enhance
the  current  statutory  surplus of the ceding  company  while  reducing  future
statutory  earnings  as amounts  are  repaid to the  reinsurer.  This  financial
transaction is effectively  collateralized by anticipated  future income streams
from selected insurance policies.  The Company writes financial reinsurance on a
direct basis and through  brokers and generally  only for companies  with credit
ratings  of not less than "A" at the  inception  of the  policy  and that have a
minimum capital and surplus of $15 million.  Financial reinsurance typically has
a duration of three to five years.  The Company  has  expanded  this  segment in
recent years to include  transactions  that  provide  financial  reinsurance  of
existing portfolios of in force business.


Property and Casualty Reserves for Unpaid Claims and Claim Expenses

Domestic.  The Company's domestic  subsidiaries maintain reserves to cover their
estimated  ultimate  liability for unpaid claims and claim expenses 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  claim  reserves  are
exacerbated for reinsurers by the significant  periods of time that often elapse
between the  occurrence of an insured  claim,  the reporting of the claim to the
primary insurer and,  ultimately,  to the reinsurer,  and the primary  insurer's
payment of that  claim and  subsequent  indemnification  by the  reinsurer  (the
"tail").  As a  consequence,  actual claims and claim expenses paid may deviate,
perhaps  substantially,  from  estimates  reflected in the insurance  companies'
reserves in their  financial  statements.  Adjustments  to  previously  reported
reserves  for net claims  and claim  expenses  are  reflected  in the  financial
statements in the period in which the adjustment occurs.


                                       5


<PAGE>
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  based on subsequent  developments  and
audits of ceding companies.

In accordance with industry practice,  the Company maintains 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 claim  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 claims 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, 1997,  approximately 2% of the Company's net international reserves
($65  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,  during 1998,  90% of
the  amount of claim  reserve  development  (adjusted  for  certain  income  and
expenses) from 1988 through December 31, 1997.

Reserve  Development.  The table that follows  presents the  development  of net
balance sheet  property and casualty  liabilities  of ERC and  subsidiaries  for
unpaid claims and claim expenses for 1987 through 1997.

Net  Liability.  The first row of data shows the  estimated  net  liability  for
unpaid claims and claim expenses at December 31 for each year from 1987 to 1997.
The liability includes both case and IBNR reserves as of each year-end date, net
of anticipated recoveries from other reinsurers.  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  respective  columns.  The amount in the line titled  "Redundancy
(Deficiency) at December 31, 1997", represents for each calendar year (the "Base
Year")  the  aggregate  change in (i) the  Company's  original  estimate  of net
liability  for  unpaid  claims  and claim  expenses  for all years  prior to and
including  the Base  Year  compared  to (ii)  the  Company's  re-estimate  as of
December 31, 1997, of net liability for unpaid claims and claim expenses for all
years prior to and including the Base Year. A redundancy means that the original
estimate  was  greater  than the  re-estimate  and a  deficiency  means that the
original  estimate  was  less  than  the  re-estimate.  By way of  example,  the
deficiency for the year 1994,  calculated as of December 31, 1997,  represents a
deficiency  in the  Company's  original  estimate  of  unpaid  claims  and claim
expenses 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.


                                       6


<PAGE>
<TABLE>
<CAPTION>
                                           Changes in Historical Reserves for Unpaid Claims and Claim Expenses
                                               For the Last Ten Years - GAAP Basis as of December 31, 1997                          

                                                                Year ended December 31,
                         -------------------------------------------------------------------------------------------------------
(In millions)             1987     1988     1989      1990      1991      1992      1993     1994      1995       1996     1997
                         -------------------------------------------------------------------------------------------------------
<S>                        <C>      <C>      <C>       <C>       <C>       <C>      <C>       <C>       <C>        <C>      <C>     
Net liability for unpaid
   claims and claim
   expenses              $2,620   $3,087   $3,338    $3,579    $3,596    $3,991   $4,525    $5,071    $9,351     $9,458   $9,114
Paid (cumulative) as of:
One year later.......       615      681      706       747       665       802      949     1,115     1,964      1,949      ---
Two years later......     1,006    1,064    1,125     1,119     1,103     1,274    1,602     1,804     3,130        ---      ---
Three years later....     1,314    1,432    1,469     1,524     1,499     1,739    2,054     2,341       ---        ---      ---
Four years later.....     1,553    1,687    1,746     1,772     1,784     2,036    2,424       ---       ---        ---      ---
Five years later.....     1,754    1,919    1,929     1,989     2,008     2,293      ---       ---       ---        ---      ---
Six years later......     1,945    2,065    2,072     2,173     2,208       ---      ---       ---       ---        ---      ---
Seven years later....     2,063    2,221    2,229     2,348       ---       ---      ---       ---       ---        ---      ---
Eight years later....     2,181    2,347    2,380       ---       ---       ---      ---       ---       ---        ---      ---
Nine years later.....     2,284    2,478      ---       ---       ---       ---      ---       ---       ---        ---      ---
Ten years later......     2,394      ---      ---       ---       ---       ---      ---       ---       ---        ---      ---

Net liability
   re-estimated as of:
One year later.......    $2,746   $3,134   $3,390    $3,616    $3,625    $3,919   $4,612    $5,173    $9,192     $9,229      ---
Two years later......     2,861    3,220    3,482     3,583     3,587     4,066    4,656     5,313     8,959        ---      ---
Three years later....     2,941    3,346    3,462     3,564     3,701     4,095    4,793     5,256       ---        ---      ---
Four years later.....     3,057    3,360    3,472     3,654     3,687     4,238    4,747       ---       ---        ---      ---
Five years later.....     3,094    3,406    3,537     3,635     3,818     4,154      ---       ---       ---        ---      ---
Six years later......     3,151    3,470    3,521     3,758     3,771       ---      ---       ---       ---        ---      ---
Seven years later....     3,210    3,494    3,626     3,734       ---       ---      ---       ---       ---        ---      ---
Eight years later....     3,259    3,582    3,608       ---       ---       ---      ---       ---       ---        ---      ---
Nine years later.....     3,324    3,575      ---       ---       ---       ---      ---       ---       ---        ---      ---
Ten years later......     3,321      ---      ---       ---       ---       ---      ---       ---       ---        ---      ---
Redundancy (Deficiency)
   at December 31, 1997    (701)    (488)    (270)     (155)     (175)     (163)    (222)     (185)      392        229      ---
Effect of foreign
   exchange (1)             ---        6       16       (15)      (21)        3       23         8      (352)      (289)     ---
                         ------   ------   ------    ------    ------    ------   ------    ------    ------     ------   ------
Redundancy (Deficiency)
   at December 31, 1997,
   excluding foreign
   exchange              $ (701)  $ (482)  $ (254)   $ (170)   $ (196)   $ (160)  $ (199)   $ (177)   $   40     $  (60)  $  ---
                         ======   ======   ======    ======    ======    ======   ======    ======    ======     ======   ======
</TABLE>

<TABLE>
<CAPTION>
(In millions)                                                              1992     1993      1994       1995      1996      1997
                                                                         ----------------------------------------------------------
<S>                                                                         <C>      <C>       <C>        <C>       <C>       <C>
Gross liability-end of year............................................   $4,815   $5,312    $6,020    $11,145   $10,869   $10,936
Reinsurance recoverables...............................................      824      787       949      1,794     1,411     1,822
                                                                          ------   ------    ------    -------   -------   -------
Net liability-end of year..............................................    3,991    4,525     5,071      9,351   $ 9,458   $ 9,114
                                                                          ------   ------    ------    -------   -------   -------
Gross re-estimated liability-latest....................................    5,210    5,766     6,352     10,808    11,033       ---  
Re-estimated reinsurance recoverables..................................    1,056    1,019     1,096      1,849     1,804       ---
                                                                          ------   ------    ------    -------   -------   -------  
Net re-estimated liability-latest......................................    4,154    4,747     5,256      8,959     9,229       ---
                                                                          ------   ------    ------    -------   -------   -------  
Gross redundancy (deficiency)..........................................     (395)    (454)     (332)       337      (164)      ---  
Effect of foreign exchange (1).........................................        3       24         7       (457)     (363)      ---
                                                                          ------   ------    ------    -------   -------   -------  
Gross redundancy (deficiency) excluding foreign exchange...............   $ (392)  $  430    $ (325)   $  (120)  $  (527   $   ---
                                                                          ======   ======    ======    =======   =======   =======
</TABLE>
                                                                                
(1)  The  results of the  Company's  international  operations  translated  from
     functional  currencies  into U.S.  dollars are included  with the Company's
     U.S.  underwriting  operations in this table from 1988 to 1996. The foreign
     currency  translation  impact  on the  cumulative  redundancy  (deficiency)
     arises from the difference between reserve  developments  translated at the
     exchange  rates  at the  end of the  year in  which  the  liabilities  were
     originally  estimated,  and the  exchange  rates  at the end of the year in
     which the liabilities were re-estimated.

Note:  For a description of the purpose of the above table and the various table
sections,  please refer to the immediately  preceding  section entitled "Reserve
Development."


                                       7


<PAGE>
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 claim expenses during
the period covered by the preceding table. The claims and claim expenses reserve
deficiencies  developed  to December 31,  1997,  as  reflected in the  preceding
table, included reserve deficiencies of approximately $236 million in 1987, $161
million in 1988,  $110  million in 1989,  $78 million in 1990 and $54 million in
1991 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.  Claims and claim expenses  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  generally  reacted  to the rate
deficiencies and the resulting claims and claim expenses reserve  development by
increasing rates and strengthening  claims and claim expenses 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.  Higher than anticipated levels of inflation in
certain  lines of  reinsurance  businesses  has also had an  adverse  effect  on
liabilities  for  claims  and  claim  expenses,  particularly  in excess of loss
reinsurance.  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 reconciliation of property and casualty reserves for unpaid claims and claim
expenses on a GAAP basis for each of the years indicated is shown below.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,       
                                                                  ---------------------------------------
 (In millions)                                                       1997            1996          1995
                                                                  ---------------------------------------
<S>                                                                   <C>             <C>           <C>    
Gross reserves at beginning of year......................          $10,869         $11,145       $ 6,020 
Reinsurance recoverables.................................            1,411           1,794           949
                                                                   -------         -------       -------
Net reserves at beginning of year........................            9,458           9,351         5,071                            
                                                                   -------         -------       -------
Net incurred related to:
   Current year..........................................            2,438           2,763         2,638
   Prior years...........................................               71             106           104
                                                                   -------         -------       -------
   Total net incurred....................................            2,509           2,869         2,742
                                                                   -------         -------       -------

Net payments related to:
   Current year..........................................              612             485           295
   Prior years...........................................            1,949           1,990         1,426
                                                                   -------         -------       -------
   Total net payments....................................            2,561           2,475         1,721
                                                                   -------         -------       -------

Acquired businesses' net unpaid claims and
   claim expenses........................................              ---             ---         3,313

Foreign exchange and other...............................             (292)           (287)          (54)
                                                                   -------         -------       -------
Net reserves at end of year..............................            9,114           9,458         9,351
Reinsurance recoverables.................................            1,822           1,411         1,794
                                                                   -------         -------       -------
Gross reserves at end of year............................          $10,936         $10,869       $11,145
                                                                   =======         =======       =======
</TABLE>

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,  total liabilities for
claims and claim  expenses  have been reduced by an estimated 3% at December 31,
1997 and 1996.  The  amortization  of discount is included in current  operating
results as part of the development of prior year liabilities.


                                       8


<PAGE>
For the years ended  December  31,  1997,  1996 and 1995,  long-term  disability
discounts accrued as a percentage of claims,  claim expenses and policy benefits
were  approximately 1%, 5% and 5%,  respectively,  and discounts  amortized were
approximately 1% in 1997, 2% in 1996 and 1% in 1995.

The reconciliation of property and casualty reserves for unpaid claims and claim
expenses between  statutory basis and GAAP basis for each of the years indicated
is shown below:

<TABLE>
<CAPTION>
                                                                            Year ended December 31,                  
                                                                  -------------------------------------------
 (In millions)                                                       1997             1996            1995
                                                                  -------------------------------------------
<S>                                                                   <C>              <C>             <C>    
Statutory basis U.S. reserves.............................         $ 5,527          $ 5,875         $ 5,758
Adjustments to GAAP basis (1).............................            (118)            (435)           (413)
                                                                   -------          -------         -------
Net GAAP reserves for U.S. companies......................           5,409            5,440           5,345
Net GAAP reserves for non-U.S. companies..................           3,705            4,018           4,006
                                                                   -------          -------         -------
Net GAAP reserves.........................................           9,114            9,458           9,351
Reinsurance recoverables..................................           1,822            1,411           1,794
                                                                   -------          -------         -------
Gross reserves on a GAAP basis............................         $10,936          $10,869         $11,145
                                                                   =======          =======         =======
</TABLE>

--------
(1) Statutory basis reserves  reclassified to contract deposit liabilities based
on risk transfer provisions of FAS No. 113.

Environmental  and Asbestos  Exposure.  Included in the Company's  liability for
claims  and claim  expenses  are  liabilities  for  environmental  and  asbestos
exposures.  These claims and claim  expenses are  primarily  related to policies
written  prior  to 1986 as the  policies  written  since  1986  have  tended  to
explicitly  exclude  environmental  and asbestos risks from coverage and most of
the environmental and asbestos  exposures arise from risks located in the United
States.  The Company's  international  operations have now completed the initial
process of identifying  environmental and asbestos claims that had been reserved
in prior  periods but were  initially  aggregated  and coded under other general
lines of business rather than being specifically  identified as environmental or
asbestos claims.

The following  table  presents the  three-year  development  of claims and claim
expenses  reserves  associated  with the  Company's  asbestos and  environmental
claims, including case and IBNR reserves.

<TABLE>
<CAPTION>
                                                                           Year ended December 31,         
                                                                     ----------------------------------
 (In millions)                                                        1997          1996          1995
                                                                     ----------------------------------
<S>                                                                   <C>           <C>           <C>    
Gross reserves at beginning of year.......................            $368          $436          $317 
Reinsurance recoverables..................................             174           240           178
                                                                      ----          ----          ----
Net reserves at beginning of year.........................             194           196           139

Incurred claims and claim expenses........................              54            19            23
Claim identification and IBNR allocation..................              43 (1)         -            51 (2)
Claims and claim expense payments.........................              22            21            17
                                                                      ----          ----          ----

Net reserves at end of year...............................             269           194           196
Reinsurance recoverables..................................             193           174           240
                                                                      ----          ----          ----
Gross reserves at end of year.............................            $462          $368          $436
                                                                      ====          ====          ====
</TABLE>

--------
(1)  Prior to 1997,  the  Company's  international  operations  were  unable  to
     identify recorded claim reserves that related to asbestos and environmental
     exposures,  as they were  grouped with claim  reserves in various  lines of
     business  such as  general  liability.  The  Company in 1997 is now able to
     identify the asbestos and environmental claims related to its international
     operations.

(2)  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.


                                       9


<PAGE>
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 increase in incurred claims in 1997 is
principally  due to the inclusion of  international  environmental  and asbestos
claim activity for the first time in 1997 as discussed previously.

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 claims and
claim expenses,  or the range of net claims and claim expenses,  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.

Year 2000 Exposure.  The Company is currently monitoring the possibility of Year
2000  related  claims  arising  in  the  future  under  specific   insurance  or
reinsurance contracts and will establish  liabilities,  if appropriate,  at such
time when sufficient  information has been developed to indicate a liability has
been  incurred and can be  reasonably  estimated.  In  addition,  the Company is
evaluating  certain  actions which can be taken to mitigate the exposure to such
losses.  It is not possible to estimate  with any certainty the future amount of
additional  net loss,  or the range of net loss,  that may arise  from Year 2000
issues;  therefore,  there can be no assurance that future  liabilities will not
materially affect the Company's  results of operations,  cash flows or financial
position.


Life and Health  Reserves for Future Policy  Benefits and  Accumulated  Contract
Values

Future policy benefits for  traditional  life and health  reinsurance  contracts
represent  the  present  value of such  benefits  based on  mortality  and other
assumptions  which were  appropriate at the time the policies were issued or, in
the event the policies were acquired by the Company from another insurer, at the
date of acquisition.  Interest rate  assumptions used in calculating the present
value range from 3.0% to 8.5% per annum at December 31, 1997.  Payments received
from  sales of  universal  life  and  investment  contracts  are  recognized  by
providing   liabilities  equal  to  the  accumulated   contract  values  of  the
policyholders'  contracts.  Interest  rates  credited to such universal life and
universal life and investment contracts are guaranteed for the policy terms with
renewal rates  determined by the Company.  Such crediting  interest rates ranged
from 3.75% to 9.00% per annum in 1997.


Regulatory Matters

GE Global and its  domestic  subsidiaries  are subject to  regulation  under the
insurance  statutes,  including  insurance holding company statutes,  of various
states,  including  Missouri and Kansas,  the domiciliary  states of GE Global's
principal  domestic  insurance company  subsidiaries.  The ERC Frankona Group is
subject to regulation under insurance statutes of various foreign countries.

General.  The regulation and supervision to which GE Global's  subsidiaries  are
subject relate primarily to licensing requirements of reinsurers,  the standards
of solvency that must be met and maintained, the amount of dividends that may be
paid by  such  subsidiaries,  the  nature  of and  limitations  on  investments,
restrictions on the size of risks that may be insured or reinsured,  deposits of
securities for the benefit of ceding  companies,  periodic  examinations  of the
financial condition and affairs of reinsurers, the form and content of financial
statements  required to be filed with  regulatory  authorities  and reserves for
unearned premiums, losses and other purposes. In general, such regulation is for
the protection of the ceding  companies and,  ultimately,  their  policyholders,
rather than  securityholders of the regulated  reinsurer.  GE Global believes it
is, and that its  subsidiaries  are, in material  compliance with all applicable
laws and regulations pertaining to their business and operations.


                                       10


<PAGE>
U.S.  Insurance  Regulation.  U.S.  domestic  property  and  casualty  and  life
insurers,  including  reinsurers,  are subject to  regulation by their states of
domicile  and by those states in which they are  licensed.  The rates and policy
terms of primary  insurance  policies  generally are closely  regulated by state
insurance departments.  While reinsurance is not regulated as closely as primary
insurance,  some states do impose  control over certain terms and  conditions of
reinsurance  agreements by virtue of their authority to grant or deny credit for
ceded reinsurance by its domiciled primary insurers. In addition, as a practical
matter, the rates permitted to be charged by primary insurers can have an effect
on the rates that are charged by reinsurers.

Risk-Based Capital. The National Association of Insurance Commissioners ("NAIC")
has adopted minimum risk-based capital  requirements to evaluate the adequacy of
statutory  capital  and surplus in relation  to an  insurance  company's  risks.
Regulatory compliance with risk-based capital requirements is defined by a ratio
of a company's regulatory total adjusted capital to its authorized control level
risk-based  capital,  as defined by the NAIC.  At December 31, 1997,  each of GE
Global's domestic insurance subsidiaries exceeded the minimum risk-based capital
requirements.

Insurance  Holding Company  Regulations.  The insurance holding company laws and
regulations vary from state to state, but generally require an insurance holding
company to register with its domiciliary  state insurance  regulatory agency and
file certain  reports that include  current  information  concerning the capital
structure,  ownership,  management,  financial  condition  and general  business
operations of the insurance holding company and its subsidiary insurers that are
licensed in the state.  State insurance  holding  company laws and  regulations,
with  respect to domestic  insurers,  also require  prior  notice or  regulatory
approval  of changes in control  of an  insurer or its  holding  company  and of
material inter-affiliate transactions within the holding company structure.

Dividends by ERC.  Because the  operations of GE Global are conducted  primarily
through ERC, GE Global is dependent  upon dividends and tax allocation and other
payments  primarily from ERC to service its debt and meet its other obligations.
The payment of  dividends  and other  payments to GE Global by ERC is subject to
limitations  imposed by the Missouri Insurance Code. The payment of dividends to
ERC  by its  principal  life  reinsurance  subsidiaries,  Employers  Reassurance
Corporation  and ERC Life  Reinsurance  Corporation,  are subject to limitations
imposed by the Kansas and Missouri Insurance Codes, respectively.  No prediction
can be made as to whether any legislative  proposals  relating to dividend rules
in Kansas or Missouri will be made,  whether any such legislative  proposal will
be adopted in the future, or the effect, if any, any such proposal would have on
the Company.

The maximum amount  available for the payment of dividends during 1998 by ERC to
GE Global without prior regulatory  approval is $78 million through December 29,
1998, and $458 million thereafter. Of these amounts, $85 million is committed to
pay  dividends  on preferred  stock issued by ERC to a subsidiary  of GE Capital
Services.

International  Regulations.  Approximately  49% of  the  Company's  business  is
carried on outside of the United States based on 1997 net premiums written.  The
degree of  regulation  and  supervision  in foreign  jurisdictions  varies  from
minimal in some to stringent in others.  Licenses issued by foreign  authorities
to the ERC Frankona  Group are subject to  modification  or  revocation  by such
authorities,  and such subsidiaries could be prevented from conducting  business
in certain of the jurisdictions  where they currently operate.  In the past, the
ERC Frankona  Group has been allowed to modify their  operations to conform with
new  licensing  requirements  in all  jurisdictions  that  are  material  to the
Company's international operations.

In addition to licensing  requirements,  the ERC Frankona  Group is regulated in
various  jurisdictions  with respect to, among other  things,  currency,  policy
language  and terms,  methods of  accounting  and  auditing,  amount and type of
security  deposits,  amount  and  type of  reserves,  amount  and  type of local
investment  and  the  share  of  profits  to be  returned  to  policyholders  on
participant policies.  Regulations governing  constitution of technical reserves
(including  equalization reserves) in some countries could hinder the remittance
of profits and repatriation of assets and the payment of dividends; however, the
Company does not believe that these  regulations  will have a material impact on
the ERC Frankona Group's operations.


                                       11


<PAGE>
Item 2.  Properties.

The Company conducts business from various facilities, most of which are leased.
In  addition,  the Company  owns its  administrative  offices in Overland  Park,
Kansas, Copenhagen, Denmark and Aachen and Munich, Germany.


Item 3.  Legal Proceedings.

There are no pending legal  proceedings  beyond the ordinary  course of business
that could have a material financial effect on the Company.  On October 4, 1997,
an arbitration panel ruling was issued relieving the retrocessionaire,  St. Paul
Fire and Marine  Insurance  Company,  from certain  liabilities  under  specific
retrocession  agreements  relating to  disability  insurance.  As a result,  the
Company  determined  that  approximately  $38.5 million of  previously  recorded
reinsurance  recoverables  were not  collectible.  The  Company's  reserves were
adequate to absorb this loss.


Item 4.  Submission of Matters to a Vote of Security Holders.

Omitted

                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

All of GE Global's  Common  Stock,  its sole class of common  equity on the date
hereof, is owned by GE Capital Services. Accordingly, there is no public trading
market for the Company's  common equity.  GE Global paid dividends on its Common
Stock on December 29, 1997 of $225 million.


Item 6.  Selected Financial Data.

<TABLE>
<CAPTION>
                           Consolidated Financial Data

                                                                   Year ended December 31,                   
                                                -------------------------------------------------------------
(In millions)                                      1997         1996         1995         1994         1993
                                                -------------------------------------------------------------
<S>                                                 <C>          <C>          <C>          <C>          <C>    
Total revenues...........................        $ 5,784      $ 5,751      $ 4,798      $ 3,148      $ 2,927 
Net premiums written.....................          4,545        4,573        3,561        2,573        2,413
Net investment income....................            910          837          676          528          465
Net realized gains on investments........            303          223          191          103          147
Earnings before income taxes.............            882          780          561          409          395
Net earnings.............................            648          567          437          358          312
Total investments........................         18,343       16,479       15,394        9,850        8,561
Total assets.............................         27,532       25,388       25,613       14,496       11,928
Stockholder's equity.....................        $ 5,374      $ 4,760      $ 4,191      $ 2,722      $ 2,938
Return on equity (average)...............           12.8%        12.7%        12.6%        12.7%        11.4%
Stockholder's equity excluding unrealized
   gains (losses) on investment securities       $ 4,628      $ 4,260      $ 3,755      $ 2,888      $ 2,635
Return on equity excluding unrealized
   gains (losses) on investment securities          
   (average).............................           14.6%        14.1%        13.2%        13.0%        12.2%
</TABLE>


                                       12


<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
           of Operations

Overview

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net premiums  written in 1997 were $4.545 billion  compared to $4.573 billion in
1996.  The slight  decrease in net written  premiums was driven by a decrease in
international  property and casualty written  premiums,  reflecting  competitive
market   conditions,   repositioning   certain   portfolios   to  minimize  loss
accumulations  and foreign currency  translation due to the strengthening of the
U.S. dollar.  This decrease in international  property and casualty net premiums
written was substantially offset by an increase in domestic business, reflecting
strong  growth in life  reinsurance  business and the  assumption of the renewal
rights of a portfolio of specialty  property  and  casualty  insurance  business
obtained as a result of GE Capital's acquisition of Coregis Insurance Company.

Net  earnings in 1997  increased  $81 million or 14%,  including  an increase in
after-tax net realized investment gains on investments of $49 million. Excluding
after-tax net realized  gains on  investments,  1997 net earnings  increased $32
million or 7.0%. This 1997 increase was primarily  attributable to a $73 million
increase in investment  income resulting from continued growth in the investment
portfolio and a $61 million increase in other revenues reflecting an increase in
revenues  generated  from  investment-related  life  and  financial  reinsurance
products.  These  increases were partially  offset by a decrease in property and
casualty  underwriting results reflecting  increased  underwriting and operating
expenses and competitive market conditions.


Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net premiums written in 1996 increased  $1.012 billion,  of which $1.308 billion
reflects   recording  a  full  year  of  the  operating  results  for  the  1995
acquisitions   of  Frankona  Re  and  the  Aachen  Re  Business  (the  "Acquired
Businesses") in 1996 compared to recording only five months of operating results
in 1995.  This 1996 increase in net premiums  written was partially  offset by a
decrease in domestic property and casualty net written premiums.

Net earnings in 1996 increased $130 million,  including an increase in after-tax
net realized  gains on  investments  of $20  million.  Excluding  after-tax  net
realized gains on investments,  1996 net earnings  increased $110 million.  This
1996 increase was primarily attributable to the Acquired Businesses reflecting a
full year's operating  results in 1996 compared to recording only five months of
operating  results in 1995. The remainder of the increase was due to improvement
in the property and casualty  underwriting  results and growth in the investment
portfolio  due  mostly  from cash  flows from  international  operations.  These
increases were partially  offset by an increase in the effective tax rate due to
a greater proportion of earnings before taxes provided by operations that reside
in higher income tax jurisdictions.


                                       13


<PAGE>
Domestic Property and Casualty Business

<TABLE>
<CAPTION>
                                                                             Year ended December 31,           
                                                                   -------------------------------------------
 (In millions)                                                       1997             1996              1995
                                                                   -------------------------------------------
<S>                                                                   <C>              <C>               <C>    
Net premiums written......................................          $1,809           $1,741            $2,121 
Net underwriting loss.....................................             (64)             (98)             (138)
Net investment income.....................................             389              390               395
Earnings before income taxes..............................             489              415               364
Net realized gains on investments.........................             212              169               135
Earnings before income taxes, excluding
   net realized gains on investments......................             277              246               229
GAAP ratios (1):
   GAAP claims and claim expenses ratio...................            70.8%            75.7%             79.1%
   GAAP underwriting expense ratio........................            33.0%            29.7%             27.4%
                                                                     -----            -----             -----
   GAAP combined ratio....................................           103.8%           105.4%            106.5%
                                                                     =====            =====             =====
</TABLE>

--------
(1)  Represents  data for the applicable  periods  calculated in accordance with
     GAAP. Claims and claim expenses ratio represents  incurred claims and claim
     expenses as a percentage of net premiums earned. Underwriting expense ratio
     represents  acquisition costs and other  underwriting  expenses  (excluding
     amortization of intangibles,  interest expense and minority interest in net
     earnings of  consolidated  subsidiaries)  as a  percentage  of net premiums
     earned.  The  combined  ratio  represents  the sum of the  claims and claim
     expenses ratio and the underwriting expense ratio.

Domestic net premiums written increased $68 million or 3.9% in 1997,  reflecting
new business  associated  with GE  Capital's  acquisition  of Coregis  Insurance
Company and growth in the national  accounts  business  partially  offset by the
termination of certain long-term  disability business and continued  competitive
market  conditions.  Domestic net premiums written decreased $380 million or 18%
in  1996,  principally  due  to  management's  decision  to  not  renew  certain
unprofitable  reinsurance contracts and a slight decrease in reinsurance premium
rates.

The GAAP combined ratio is an indicator of underwriting  performance in property
and  casualty  reinsurance,  with a  percentage  lower than 100%  indicating  an
underwriting  profit. While underwriting results expressed as the combined ratio
have  been in  excess  of 100%,  indicating  an  underwriting  loss in all years
presented,  the  operating  results of insurance  companies  include  investment
income which generally yields an overall  operating profit as reflected above in
the caption  "Earnings  before  income taxes,  excluding  net realized  gains on
investments." The 1997 GAAP combined ratio was favorably impacted by a reduction
in  catastrophe  costs  due to a  decline  in both  frequency  and  severity  of
catastrophe  losses,  although  it was  moderately  impacted  by an  increase in
underwriting  and  operating  costs due to the  implementation  of new strategic
business  initiatives.  The 1996 and 1995 GAAP combined  ratios were  moderately
impacted by catastrophe costs and certain significant  unprofitable  reinsurance
contracts that management has elected not to renew.

Net investment income of $389 million in 1997 was comparable to the $390 million
in 1996.  Net investment  income  decreased $5 million in 1996, due primarily to
the transfer of significant  assets to the ERC Frankona Group in the second half
of 1995,  which  was  substantially  offset  by  investment  of cash  flow  from
operating activities.

Earnings  before income  taxes,  excluding  net realized  gains on  investments,
increased  $31 million or 13% in 1997,  primarily  due to a 1.6% decrease in the
GAAP combined ratio  associated  with a decrease in catastrophe  costs partially
offset by an increase in  underwriting  and  operating  costs.  Earnings  before
income taxes, excluding net realized gains on investments, increased $17 million
in 1996,  reflecting  lower  catastrophe  costs and the  non-renewal  of certain
unprofitable  contracts,  partially  offset by a slight reduction in reinsurance
premium rates, and a slight decline in net investment income.


                                       14


<PAGE>
International Property and Casualty Business

<TABLE>
<CAPTION>
                                                                           Year ended December 31,        
                                                                   ---------------------------------------
 (In millions)                                                       1997           1996            1995
                                                                   ---------------------------------------
<S>                                                                   <C>            <C>             <C>    
Net premiums written......................................          $1,684         $2,196          $1,002 
Net underwriting gain (loss)..............................             (64)            18             (38)
Net investment income.....................................             292            266             125
Earnings before income taxes..............................             241            247             107
Net realized gains on investments.........................              48             31              27
Earnings before income taxes, excluding
   net realized gains on investments......................             193            216              80
GAAP ratios (1):
   GAAP claims and claim expenses ratio...................            70.1%          68.0%           73.3%
   GAAP underwriting expense ratio........................            33.4%          31.2%           29.6%
                                                                     -----           ----           -----
   GAAP combined ratio....................................           103.5%          99.2%          102.9%
                                                                     =====           ====           =====
</TABLE>

--------
(1)  Represents  data for the applicable  periods  calculated in accordance with
     GAAP. Claims and claim expenses ratio represents  incurred claims and claim
     expenses as a percentage of net premiums earned. Underwriting expense ratio
     represents  acquisition costs and other  underwriting  expenses  (excluding
     amortization of intangibles,  interest expense and minority interest in net
     earnings of  consolidated  subsidiaries)  as a  percentage  of net premiums
     earned.  The  combined  ratio  represents  the sum of the  claims and claim
     expenses ratio and the underwriting expense ratio.

International  property and casualty net premiums written decreased $512 million
or 23% in 1997,  including  approximately a $235 million decrease resulting from
foreign  currency  translation  due to the  strengthening  of the  U.S.  dollar.
Excluding  the impact  related to foreign  currency  translation,  international
property and casualty net premiums written decreased  approximately $277 million
reflecting a $58 million  increase in ceded premium as the Company  expanded its
retrocession   program,   repositioned   certain  portfolios  to  minimize  loss
accumulation and a general decrease in premium rates associated with competitive
market  conditions.  International  property and  casualty net premiums  written
increased $1.194 billion in 1996, of which $1.203 billion  reflects  recording a
full year of the  Acquired  Businesses  operating  results in 1996  compared  to
recording  only five months of  operating  results in 1995.  This  increase  was
partially  offset  by a minor  decrease  in  other  international  net  premiums
written, primarily due to the integration of international operations.

The 4.3%  increase in the GAAP  combined  ratio for 1997 from 1996 was caused by
less favorable loss experience, a general decline in international premium rates
and market conditions and increased  underwriting and operating costs associated
with the  implementation of new strategic  business  initiatives.  The 1997 GAAP
combined ratio was also adversely  impacted by certain large catastrophe  losses
such as the Eastern Europe floods and aviation  losses.  The 3.7% improvement in
the 1996 GAAP  combined  ratio  compared  to 1995 was caused by  favorable  loss
experience  and a decline in both the  frequency  and severity of  international
catastrophe losses.

Net  investment  income  increased  $26 million or 9.8% in 1997.  This  increase
reflects   continued  growth  in  the  investment   portfolios  related  to  the
reinvestment  of earnings,  partially  offset by the impact of foreign  currency
translation. Net investment income increased $141 million in 1996, primarily due
to  including  $126  million  related to  recording a full year of the  Acquired
Businesses  operating  results in 1996 compared to recording only five months in
1995.

Earnings before income taxes, excluding realized gains, decreased $23 million or
11% in 1997.  This  decrease  reflects a 4.3%  increase  in the  combined  ratio
partially  offset by a $26 increase in net  investment  income and a $27 million
increase in other revenues related to growth in financial  reinsurance products.
Earnings  before income  taxes,  excluding  net realized  gains on  investments,
increased  $136 million in 1996  resulting  from the inclusion of a full year of
the Acquired  Businesses  operating  results in 1996 compared to recording  only
five months in 1995 and improvement in the underwriting  results, as illustrated
by the 3.7% improvement in the GAAP combined ratio.


                                       15


<PAGE>
Life Reinsurance Business

<TABLE>
<CAPTION>
                                                                          Year ended December 31,    
                                                                      -------------------------------
(In millions)                                                           1997         1996       1995
                                                                      -------------------------------
<S>                                                                      <C>         <C>        <C>    
Revenues..................................................             $1,283        $881       $656 
Earnings before income taxes..............................                152         118         90
</TABLE>

Revenues from the Company's  life  reinsurance  segment  include life  insurance
premium revenues,  net investment  income, net realized gains on investments and
income from  investment-related  and financial  reinsurance  products.  The 1997
increase in  revenues of $402  million or 46%  reflects  growth in the  domestic
traditional  life  and  credit  life  business   principally   related  to  four
significant   quota   share   reinsurance   contracts   as  well  as  growth  in
investment-related  and financial reinsurance life products.  Revenues increased
$225 million or 34% in 1996,  which primarily  reflected a full year's operating
results from the Acquired Businesses.

Earnings  before  income taxes  increased  $34 million in 1997,  including a $20
million increase in net realized gains from investments.  Excluding net realized
gains on  investments,  earnings  before  income  taxes  increased  $14  million
primarily due to an increase in net investment income  attributable to continued
growth in the investment  portfolio and fees  generated from  investment-related
and financial reinsurance  products.  Earnings before income taxes increased $28
million in 1996,  due  primarily  to the  inclusion  of a full year's  operating
results from the Acquired Businesses.


Liquidity and Capital Resources

GE  Global's  ability  to meet  its  obligations,  including  debt  service  and
operating expenses,  and pay dividends to its shareholder depends primarily upon
receiving  sufficient  funds from its  insurance  subsidiaries.  The  payment of
dividends by ERC is subject to  restrictions  set forth in the insurance laws of
Missouri, as well as other restrictions.  Historically,  the Company's liquidity
requirements  are met by funds  provided by operations and from the maturity and
sales of investments.

Cash flows from operating  activities  primarily  consists of premiums collected
during the period in excess of payments made for claims and claim expenses.  The
1997 and 1996 decrease in cash flows from  operating  activities is  principally
due to an increase in claim  settlements  relative to the collection of premiums
and  an  increase  in  underwriting  and  operating  cash  outlays  due  to  the
implementation of new strategic business initiatives.

Cash  flows  used for  investing  activities  increased  $290  million  in 1997,
principally  due to the purchase of other invested assets and the acquisition of
minority shares  associated with the Company's 1995  acquisition of Frankona Re.
Cash used for investing activities decreased $1.377 billion in 1996, principally
due to the $1.024  billion  purchase of the  Acquired  Businesses  in 1995.  The
purchases of the Acquired Businesses in 1995 were partially funded by GE Capital
Services  contributing  $300  million  to the equity of GE Global and GE Capital
Corporation, an affiliate of GE Global, purchasing 1,500 shares of 5% cumulative
preferred  stock  issued by GE Global for an  aggregate  purchase  price of $150
million.  The  remaining  $353 million 1996  decrease in cash used for investing
activities was primarily attributable to a decrease in purchases of investments,
net of sales and  maturities,  which was  caused by a decline in cash flows from
operations.

Cash flows from financing activities  decreased $47 million in 1997,  reflecting
an increase in dividends paid to affiliates  partially  offset by an increase in
contract  deposits  and proceeds  from  short-term  borrowings.  Cash flows from
financing  activities  decreased  $958  million in 1996,  due  primarily  to the
financing and capitalization of the 1995 acquisitions described above, partially
offset  by an  increase  in  contract  deposits  related  to the life  financial
reinsurance business.


                                       16


<PAGE>
In 1996, GE Global executed a $1 billion shelf registration  statement of senior
unsecured debt securities,  of which $600 million is outstanding and is rated AA
by Standard & Poor's.  The  remaining  unissued $400 million may be offered from
time to time in the future,  the  proceeds of which will be added to the general
funds  of GE  Global  and made  available  to  finance  its  operations,  unless
otherwise stated at the time of the offering.

In addition,  the Company,  as of January 1, 1997,  has a one-year  $600 million
revolving credit agreement with GE Capital Services which enables the Company to
borrow  from GE  Capital  Services  at an  interest  rate per annum  equal to GE
Capital  Services' cost of funds for a one year period.  The agreement  shall be
automatically  extended for successive terms of one year each unless  terminated
in accordance with terms of the agreement.


Investments

General. The Company follows a conservative  investment strategy that emphasizes
maintaining  a high quality  investment  portfolio.  The primary goals include a
growing stream of investment income and improving total investment returns.  All
investments are administered  under  guidelines  established and approved by the
Company's Board of Directors.  The Company's  guidelines  specify credit quality
and  concentration   limits  with  respect  to  both  fixed  income  and  equity
securities.

In structuring its fixed maturity portfolios, the Company considers the duration
of its  assets  and  claims and claim  expenses  reserves.  Most fixed  maturity
portfolios have total return  benchmarks  against which relative  performance is
measured. The total return benchmarks include investment income and realized and
unrealized  gains and losses on investments.  Equity funds are managed for total
return, and performance is measured against equity benchmarks.

On a worldwide  basis,  the Company manages 70% of its  investments  internally.
General  Electric  Investment  Corporation  manages  an  additional  20%  of the
Company's  investments,  and the  balance  is managed  by  unaffiliated  outside
managers.

The following table presents investment results for the Company's business.

<TABLE>
<CAPTION>
                                                                   Year ended December 31,              
                                                     ----------------------------------------------------
(In millions)                                           1997       1996       1995      1994       1993
                                                     ----------------------------------------------------
<S>                                                      <C>        <C>        <C>       <C>        <C>    
Average invested assets (at cost)...........          $16,417    $15,195    $12,153    $9,020     $7,395 
Net investment income.......................              910        837        676       528        465
Net effective yield.........................              5.5%       5.5%       5.6%      5.9%       6.3%
Net realized gains on investments...........          $   303    $   223    $   191    $  103     $  147
Unrealized gains (losses) on investment
   securities before deferred income taxes..            1,189        799        684      (251)       622
</TABLE>

The Company continues to seek  opportunities to enhance investment yield through
a  conservative,  primarily  fixed  maturity  investment  strategy.  Its current
investment  strategy does not  contemplate  material  additional  investments in
non-investment  grade  debt  securities,   commercial  real  estate,  commercial
mortgages, equity securities or derivatives.


                                       17


<PAGE>
Domestic  Investment  Operations.  The Company's  domestic property and casualty
investment portfolios are principally invested in tax-exempt state and municipal
bonds,  which the Company  believes provide the most attractive after tax yield.
Some  additional  commitment  was made to equity  securities in 1996 and 1995 to
enhance total investment returns in the longer term. The Company's domestic life
investment portfolios are largely invested in taxable debt securities.

The following  table  categorizes  the Company's  domestic  fixed  maturity
portfolios by rating based on market values.

<TABLE>
<CAPTION>
                                                                     Domestic Property
                                                                       and Casualty             Domestic Life   
                                                                   ---------------------------------------------
                                                                                    December 31,
                                                                   ---------------------------------------------
 (In millions)                                                       1997        1996          1997       1996
                                                                   ---------------------------------------------
<S>                                                                  <C>         <C>           <C>        <C>    
U.S. government and government agency securities............          1.4%        2.6%          8.3%       5.8% 
Aaa.........................................................         48.9        45.7           1.8       18.8
Aa..........................................................         27.1        26.3           2.8       13.2
A...........................................................         11.4        16.1          16.9       13.6
Baa.........................................................           .5          .2           9.4        2.3
Ba..........................................................           .1          .1           1.5         .7
Canadian securities.........................................          3.9         4.2           0.0        0.0
Mortgage-backed securities..................................           .3          .1          45.8       39.8
Other.......................................................          6.4         4.7          13.5        5.8
                                                                    -----       -----         -----      -----
   Total....................................................        100.0%      100.0%        100.0%     100.0%
                                                                    =====       =====         =====      =====
</TABLE>

Ratings are as assigned by Moody's when  available,  or by S&P and  converted to
the generally comparable Moody's rating.

The Company's  emphasis on  investment  quality is evidenced by the table above,
which  indicates  that the  bonds in the  Company's  investment  portfolios  are
principally  invested in either U.S. government and government agency securities
or issues rated "A" or above.  The Canadian  securities held by the Company were
similar in quality to the other  securities  held in its  domestic  property and
casualty  portfolio.  Bonds held by the Company in its domestic life  portfolios
include mortgage-backed  securities that are matched to the liability profile of
specific life reinsurance contracts.  Investments in mortgage-backed  securities
are  limited to lower risk  tranches  and do not include  any  interest  only or
principal only elements.  Mortgage-backed securities in the Company's investment
portfolio were principally issued by Federal agencies.  The balance of the other
securities held in the domestic life portfolios were principally U.S. government
and  government  agency  securities  and other  bonds with an  investment  grade
rating.   The  Company   does  not   contemplate   significant   investment   in
non-investment  grade  securities  in either the  property  and casualty or life
portfolios.

International Investment Operations.  The investment portfolios of the Company's
international  operations  (other  than  certain  equity  portfolios,  which are
managed by outside managers) are managed by the ERC Frankona Group's  investment
personnel based in Munich,  within  guidelines  established by the management of
the ERC  Frankona  Group and under the  overall  supervision  and  review of the
investment department of ERC.

The  principal  objective of the ERC Frankona  Group's  investment  policy is to
manage  the   investment   portfolios  on  a  total  return  basis  taking  into
consideration  the duration and currency  structure of the ERC Frankona  Group's
reinsurance  liabilities.  The ERC Frankona  Group's  investment  portfolios are
geographically  diversified with investments principally from the major European
markets and the United States.


                                       18


<PAGE>
As of December  31,  1997,  the ERC Frankona  Group's  investments  totaled $6.4
billion,  an increase of $151 million from December 31, 1996. The composition of
ERC Frankona Group's investments was as follows:

<TABLE>
<CAPTION>
                                                                                    December 31,    
                                                                                ---------------------
                                                                                  1997         1996
                                                                                ---------------------
            <S>                                                                   <C>          <C>    
            Fixed maturity securities............................                 81.4%        86.4% 
            Equity securities....................................                 13.2%        10.4%
            Other invested assets................................                  5.4%         3.2%
                                                                                 -----        -----

            Total................................................                100.0%       100.0%
                                                                                 =====        =====
</TABLE>

The ERC Frankona Group's investment  portfolios are globally  diversified,  with
most  fixed  maturities  having a term less than ten years.  The fixed  maturity
securities consist of high credit quality  securities,  and almost all bonds are
investment grade securities with a comparable average rating equal to or above a
Moody's or S&P "AA" rating.  Fixed maturity securities include German and Danish
mortgage-backed  securities,  although  these  mortgage-backed  securities  have
significantly  less  principal  and interest  prepayment  risk than typical U.S.
mortgage-backed securities, as the German and Danish tax and social environments
are not  conducive  to risks of  prepayment  of interest and  principal.  Equity
securities  and other  invested  assets were  internationally  diversified  with
principal holdings in Germany, the United Kingdom and the United States.


Interest Rate and Currency Risk Management

In normal operations,  the Company must deal with effects of changes in interest
rates and currency exchange rates. The following discussion presents an overview
of how such  changes  are  managed,  a view of  their  potential  effects,  and,
finally, what considerations arise from recent developments in Asia.

The  Company  utilizes  various  financial  instruments,  such as  currency  and
interest rate swaps,  options and currency forwards to manage risks. The Company
is exclusively an end user of these  financial  instruments,  which are commonly
referred  to as  derivatives.  The  Company  does not engage in any  derivatives
trading,  market-making  or  other  speculative  activities  in  the  derivative
markets.

The  Company  manages  its  exposure to  currency  principally  by matching  the
underlying reinsurance  liabilities with the corresponding assets. Any remaining
significant  net  asset/liability  positions in a given currency are hedged with
forward  currency  purchase  or sale  contracts  to  further  mitigate  currency
exposures.  The Company also hedges its currency risk on its foreign  subsidiary
investments  by utilizing  currency  swaps that have been  designated  to modify
currency exposure associated with specific debt instruments.

On a limited  basis,  and as part of ongoing  customer  activities,  the Company
utilizes  interest  rate swaps and options to minimize its exposure to movements
in interest  rates and  financial  markets that have a direct  correlation  with
certain of its reinsurance products.

Substantially all derivative transactions are executed by the Company's Treasury
Department  which works closely with GE Capital  Treasury  personnel to maintain
controls on all exposures, adhere to stringent counterparty credit standards and
actively  monitor  marketplace  exposures.  Although  the  Company is exposed to
credit risk that the  counterparty  may not be able to comply with the terms and
conditions of the contracts, the Company utilizes only highly rated institutions
as counterparties to the derivative transactions.


                                       19


<PAGE>
The  Securities  and  Exchange  Commission  requires  that  registrants  include
information  about  potential  effects of changes in interest rates and currency
exchange in their financial  statements.  Although the rules offer  alternatives
for  presenting  this   information,   none  of  the   alternatives  is  without
limitations. The following discussion is based on so-called "shock-tests," which
model  effects of interest rate and currency  shifts on the  reporting  company.
Shock  tests,  while  probably  the  most  meaningful  analysis  permitted,  are
constrained by several factors,  including the necessity to conduct the analysis
based  on a  single  point  in  time  and by  their  inability  to  include  the
extraordinarily  complex  market  reactions  that normally  would arise from the
market shifts modeled.  While the following  results of shock tests for interest
rates and currencies may have some limited use as benchmarks, they should not be
viewed as forecasts.

     One  means  of   assessing   exposure  to  interest   rate   changes  is  a
     duration-based  analysis that  measures the potential  loss in net earnings
     resulting  from a  hypothetical  decrease  in  interest  rates of 100 basis
     points across all maturities (sometimes referred to as a "parallel shift in
     the yield  curve").  Under  this  model,  it is  estimated  that,  all else
     constant,  such  a decrease,  including repricing effects in the securities
     portfolio,  would  reduce the 1998 net  earnings  of the  Company  based on
     December 31, 1997 positions by an insignificant amount.

     One  means of assessing  exposure to changes in currency  exchange rates is
     to  model  effects  on  reported  earnings  using a  sensitivity  analysis.
     Year-end  1997  consolidated   currency   exposures,   including  financial
     instruments  designated and effective as hedges,  were analyzed to identify
     Company  assets and  liabilities  denominated  in other than their relevant
     functional  currency.  Net unhedged  exposures in each  currency  were then
     remeasured assuming a 10 percent decrease (20 percent for hyperinflationary
     economies) in currency exchange rates compared with the U.S. dollar.  Under
     this model, it is estimated that, all else constant,  such a decrease would
     reduce the 1998 net  earnings  of the Company  based on  December  31, 1997
     positions by an insignificant amount.

Recent economic  developments  in parts of Asia have altered  somewhat the risks
and opportunities of Company activities in affected economies.  These activities
encompass  providing  certain  reinsurance  products and investing in marketable
securities  within those Asian  economies.  As such,  exposure  exists to, among
other  things,  increased  receivable  delinquencies  and  potential  bad debts,
impairment of marketable  securities and increased  reinsurance claims activity.
Conversely,  new reinsurance  opportunities may arise and the  liberalization of
financial and  reinsurance  regulation may open new  opportunities  to penetrate
Asian markets. Taken as a whole, while this situation bears close monitoring and
increased  management  attention,  the current  situation is expected to have an
immaterial impact on the Company's financial position, results of operations and
cash flows in 1998.


Cyclicality

The property and casualty reinsurance industry has been highly cyclical.  Demand
for reinsurance is significantly  influenced by underwriting  results of primary
property and casualty  insurance  companies and prevailing  general economic and
reinsurance  premium  rates.  The  cyclical  trends  in  the  industry  and  the
industry's  profitability  can also be affected  significantly  by volatile  and
unpredictable developments, including changes in what the Company believes to be
the  propensity  of courts to grant large  awards,  natural  disasters and other
catastrophic  events (such as hurricanes,  windstorms,  earthquakes,  floods and
fires),  fluctuations  in  interest  rates and other  changes in the  investment
environment which affect inflationary pressures that may tend to affect the size
of losses experienced by ceding primary insurance companies.


Year 2000

Year 2000 compliance  programs and information  systems  modifications have been
initiated  in an attempt to ensure  that these  systems and key  processes  will
remain functional. This objective is expected to be achieved either by modifying
present systems using existing internal and external programming resources or by
installing new systems, including enterprise systems, and by monitoring supplier
and other third-party interfaces.  While there can be no assurance that all such
modifications  will be successful,  management does not expect that either costs
of modifications or consequences of any unsuccessful modifications should have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations or liquidity.


                                       20


<PAGE>
New Accounting Standards

New accounting  standards issued in 1997 are described  below.  Neither of these
standards  will  have  any  effect  on the  financial  position  or  results  of
operations of the Company.

The  Financial  Accounting  Standards  Board issued two  Statements of Financial
Accounting  Standards (SFAS) that will affect presentation in the Company's 1998
Annual Report on Form 10-K. SFAS No. 130, Reporting  Comprehensive  Income, will
require  display  of  certain  information  about  adjustments  to equity - most
notably, adjustments arising from market value changes in marketable securities.
SFAS  No.  131,   Disclosures  About  Segments  of  an  Enterprise  and  Related
Information, will require additional information about industry segments.


Effects of Inflation

The Company's  ultimate claims and claim expense costs on claims not yet settled
is  increased by the effects of  inflation,  and changes in the  inflation  rate
therefore could become a significant  factor in determining  appropriate  claims
and claim expense reserves, as well as reinsurance premium rates. Generally, the
Company's  methods  used to estimate  claims and claim  expense  reserves and to
calculate reinsurance premium rates take into account the anticipated effects of
inflation in estimating the ultimate claims and claim expense costs. The Company
uses both insurance industry data and government  economic indices in estimating
the  effects of  inflation  on  reinsurance  premium  rates and claims and claim
expense reserves.  However, until claims are ultimately settled, the full effect
of inflation on the Company's results cannot be known.


Item 8.  Financial Statements and Supplementary Data.

The Company's  Consolidated  Financial  Statements and the Independent  Auditors
Report thereon and the Supplementary Financial Statement Schedules listed on the
accompanying Index to Financial Statements and Financial Statement Schedules are
filed as part of this report.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosures.

Not applicable


                                    PART III


Item 10.    Directors and Executive Officers.

Omitted


Item 11.    Executive Compensation.

Omitted


Item 12.    Security Ownership of Certain Beneficial Owners and Management.

Omitted


                                       21


<PAGE>
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 and Schedules.

           The consolidated financial statements of the Company filed as part of
           this  report  are  listed  in the  Index  to  Consolidated  Financial
           Statements and Financial Statement Schedules (page 23).

   (a) 2.  Financial Statement Schedules.

           The consolidated  financial  statement schedules of the Company filed
           as part of this  report  are  listed  in the  Index  to  Consolidated
           Financial Statements and Financial Statement Schedules (page 23).

   (a) 3.  Listing of Exhibits.

           3.1    A  complete  copy  of the  Articles  of  Incorporation  of the
                  Company,  as last amended on August 30, 1995, and currently in
                  effect.  (Incorporated  by  reference  to  Exhibit  3.1 of the
                  Company's Form 10-K for the year ended December 31, 1995.)

           3.2    A complete copy of the By-laws of the Company, as last amended
                  on February 26, 1995,  and currently in effect.  (Incorporated
                  by  reference  to Exhibit  3.2 of the  Company's  Registration
                  Statement on Form 10, File No. 0-27394.)

           10.1   First  Whole  Account  Aggregate  Excess of Loss  Retrocession
                  Agreement (E1), between Employers Reinsurance  Corporation and
                  National  Indemnity  Company, dated  January 1, 1997 (portions
                  redacted  in accordance with application  for  confidentiality
                  to be filed).

           10.2   Second Whole  Account  Aggregate  Excess of Loss  Retrocession
                  Agreement (E2), between Employers Reinsurance  Corporation and
                  Centre Reinsurance Company of New York, dated  January 1, 1997
                  (portions  redacted  in   accordance   with   application  for
                  confidentiality to be filed).

           10.3   Second Whole  Account  Aggregate  Excess of Loss  Retrocession
                  Agreement (E2), between Employers Reinsurance  Corporation and
                  National Union Fire Insurance Company of Pittsburgh, PA, dated
                  January 1, 1997  (portions   redacted   in   accordance   with
                  application for confidentiality to be filed). 

           12     Computation of ratio of earnings to fixed charges.

           23     Consent of KPMG Peat Marwick LLP.


   (b)     Reports on Form 8-K.

           None.


                                       22


<PAGE>
                                   ITEM 14(a)

                     GE Global Insurance Holding Corporation
                                and Subsidiaries

                                    Index to
                        Consolidated Financial Statements
                                       and
                          Financial Statement Schedules


                                                                           Page
                                                                           ---- 
                                                                           
Consolidated Financial Statements
   Independent Auditors' Report.............................................24
   Consolidated Statement of Earnings.......................................25
   Consolidated Statement of Financial Position.............................26
   Consolidated Statement of Stockholder's Equity...........................28
   Consolidated Statement of Cash Flows.....................................29
   Notes to Consolidated Financial Statements...............................30

Financial Statement Schedules
   Schedule II - Condensed Financial Information of Registrant..............54
   Schedule III - Supplementary Insurance Information.......................58


                                       23


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholder
GE Global Insurance Holding Corporation:


We have audited the accompanying  consolidated  statements of financial position
of GE Global Insurance  Holding  Corporation and subsidiaries as of December 31,
1997  and  1996,   and  the  related   consolidated   statements   of  earnings,
stockholder's  equity  and cash  flows for each of the  years in the  three-year
period ended December 31, 1997. Our audits also included the financial statement
schedules listed in the Index at Item 14(a) as of December 31, 1997 and 1996 and
for each of the years in the three-year  period ended  December 31, 1997.  These
consolidated  financial  statements and schedules are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and 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 GE Global Insurance
Holding  Corporation and  subsidiaries as of December 31, 1997 and 1996, and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1997, 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.


                                                           KPMG Peat Marwick LLP


Kansas City, Missouri
January 23, 1998


                                       24


<PAGE>
<TABLE>
<CAPTION>
                                           GE GLOBAL INSURANCE HOLDING CORPORATION
                                                      AND SUBSIDIARIES

                                             Consolidated Statement of Earnings


                                                                             Year ended December 31,    
                                                                         --------------------------------
(In millions)                                                              1997        1996        1995
                                                                         --------------------------------
<S>                                                                         <C>         <C>         <C>    
Revenues
Net premiums written (Note 8)                                             $4,545      $4,573      $3,561 
                                                                          ======      ======      ======

Net premiums earned (Note 8)                                              $4,467      $4,648      $3,886
Net investment income (Note 4)                                               910         837         676
Net realized gains on investments (Note 4)                                   303         223         191
Other revenues                                                               104          43          45
                                                                          ------      ------      ------
Total revenues                                                             5,784       5,751       4,798
                                                                          ------      ------      ------

Costs and Expenses
Claims, claim expenses and policy benefits                                 3,260       3,373       2,994
Insurance acquisition costs                                                1,073       1,106         847
Amortization of intangibles                                                   78          82          60
Interest expense                                                              42          42          16
Other operating costs and expenses                                           366         284         225
Minority interest in net earnings of consolidated
   subsidiaries (Notes 3 and 9)                                               83          84          95
                                                                          ------      ------      ------
Total costs and expenses                                                   4,902       4,971       4,237
                                                                          ------      ------      ------

Earnings before income taxes                                                 882         780         561
                                                                          ------      ------      ------

Provision for income taxes (Note 6):
   Current                                                                   (37)        207         150
   Deferred                                                                  271           6         (26)
                                                                          ------      ------      ------
                                                                             234         213         124
                                                                          ------      ------      ------

Net earnings                                                              $  648      $  567      $  437
                                                                          ======      ======      ======
</TABLE>


See Notes to Consolidated Financial Statements.


                                       25


<PAGE>
<TABLE>
<CAPTION>
                                          GE GLOBAL INSURANCE HOLDING CORPORATION
                                                      AND SUBSIDIARIES

                                        Consolidated Statement of Financial Position


                                                                                  December 31,       
                                                                           ---------------------------
(In millions)                                                                 1997              1996
                                                                           ---------------------------
<S>                                                                            <C>               <C>    
Assets
Investments (Note 4):
   Fixed maturity securities available-for-sale, at fair value              $14,816           $13,572 
   Equity securities, at fair value                                           2,513             2,303
   Short-term investments, at amortized cost                                    661               339
   Other invested assets                                                        353               265
                                                                            -------           -------
   Total investments                                                         18,343            16,479

Cash                                                                            269               377

Securities and indebtedness of related parties                                  318               310

Accrued investment income                                                       369               391

Premiums receivable                                                           2,279             2,645

Funds held by reinsured companies                                               502               519

Reinsurance recoverables                                                      2,791             2,358

Deferred insurance acquisition costs                                            844               495

Intangible assets                                                               897               986

Other assets                                                                    920               828
                                                                            -------           -------

Total assets                                                                $27,532           $25,388
                                                                            =======           =======
</TABLE>


                                       26


<PAGE>
<TABLE>
<CAPTION>
                                       GE GLOBAL INSURANCE HOLDING CORPORATION
                                                   AND SUBSIDIARIES

                                Consolidated Statement of Financial Position (continued)


                                                                                  December 31,      
                                                                            -------------------------
(In millions)                                                                  1997            1996
                                                                            -------------------------
<S>                                                                             <C>             <C>    
Liabilities and equity
Claims and claim expenses (Note 5)                                           $10,961         $10,869 
Accumulated contract values                                                    2,305           1,643
Future policy benefits for life and health contracts                           1,604             831
Unearned premiums                                                              1,244           1,170
Other reinsurance balances                                                     1,125           1,836
Income taxes payable (Note 6)                                                    191             173
Contract deposit liabilities                                                   1,812           1,458
Other liabilities                                                                518             612
Deferred income taxes (Note 6)                                                   646             274
Long-term borrowings (Note 7)                                                    556             556
Indebtedness to related parties (Note 7)                                          19               -
                                                                             -------         -------
   Total liabilities                                                          20,981          19,422
                                                                             -------         -------

Minority interest in equity of consolidated
   subsidiaries (Notes 3 and 9)                                                1,177           1,206
                                                                             -------         -------


Common stock, $5,000 par value; authorized,
   issued and outstanding - 1,000 shares                                           5               5
Preferred stock, $100,000 par value; authorized,
   issued and outstanding - 1,500 shares                                         150             150
Paid-in capital                                                                  845             845
Unrealized gains on investment securities                                        746             500
Foreign currency translation adjustments                                         (32)             15
Retained earnings                                                              3,660           3,245
                                                                             -------         -------
   Total stockholder's equity                                                  5,374           4,760
                                                                             -------         -------

Total liabilities and equity                                                 $27,532         $25,388
                                                                             =======         =======
</TABLE>


See Notes to Consolidated Financial Statements.


                                       27


<PAGE>
<TABLE>
<CAPTION>
                                             GE GLOBAL INSURANCE HOLDING CORPORATION
                                                        AND SUBSIDIARIES

                                          Consolidated Statement of Stockholder's Equity


                                                                                Unrealized
                                                                                  Gains         Foreign
                                                                               (Losses) on     Currency
                                                 Common    Preferred  Paid-In   Investment    Translation    Retained
    (In millions)                                 Stock      Stock    Capital   Securities    Adjustments    Earnings      Total
                                                ----------------------------------------------------------------------------------
<S>                                                <C>       <C>        <C>         <C>          <C>            <C>          <C>
Balances, January 1, 1995                          $5        $  -       $545       $(166)        $  1         $2,337       $2,722 
  Issuance of preferred stock (Note 9)              -         150          -           -            -              -          150
  Contribution to capital (Note 9)                  -           -        300           -            -              -          300
  Unrealized gains on investment securities         -           -          -         602            -              -          602
  Foreign currency translation adjustments          -           -          -           -           11              -           11
  Net earnings                                      -           -          -           -            -            437          437
  Dividends paid on common stock                    -           -          -           -            -            (29)         (29)
  Dividends paid on preferred stock                 -           -          -           -            -             (2)          (2)
                                                   --        ----       ----       -----         ----         ------       ------
                                                                                                                                  
Balances, December 31, 1995                         5         150        845         436           12          2,743        4,191
  Unrealized gains on investment securities         -           -          -          64            -              -           64
  Foreign currency translation adjustments (Note 2) -           -          -           -            3              -            3
  Net earnings                                      -           -          -           -            -            567          567
  Dividends paid on common stock                    -           -          -           -            -            (58)         (58)
  Dividends paid on preferred stock                 -           -          -           -            -             (7)          (7)
                                                   --        -----      ----       -----         ----         ------       ------

Balances, December 31, 1996                         5         150        845         500           15          3,245        4,760
  Unrealized gains on investment securities         -           -          -         246            -              -          246
  Foreign currency translation adjustments (Note 2) -           -          -           -          (47)             -          (47)
  Net earnings                                      -           -          -           -            -            648          648
  Dividends paid on common stock                    -           -          -           -            -           (225)        (225)
  Dividends paid on preferred stock                 -           -          -           -            -             (8)          (8)
                                                   --        ----       ----       -----         ----         ------       ------

Balances, December 31, 1997                        $5        $150       $845       $ 746         $(32)        $3,660       $5,374
                                                   ==        ====       ====       =====         ====         ======       ======
</TABLE>


See Notes to Consolidated Financial Statements.


                                       28


<PAGE>
<TABLE>
<CAPTION>
                                            GE GLOBAL INSURANCE HOLDING CORPORATION
                                                        AND SUBSIDIARIES

                                              Consolidated Statement of Cash Flows

                                                                            Year ended December 31,          
                                                                      -----------------------------------
(In millions)                                                             1997         1996         1995
                                                                      -----------------------------------
<S>                                                                       <C>          <C>          <C>    
Cash Flows From Operating Activities
Net earnings                                                           $   648      $   567      $   437 
Adjustments to reconcile net earnings to cash
     from operating activities:
         Claims and claim expenses                                         621          489          608
         Future policy benefits for life and health contracts              211          157          (45)
         Unearned premiums                                                 137            1         (564)
         Funds held by reinsured companies                                  (5)         104          (10)
         Reinsurance recoverables                                          103          210         (268)
         Deferred income taxes                                             271            6          (26)
         Income taxes payable                                               25           66           12
         Other, net                                                       (510)        (460)       1,047
         Amortization of insurance acquisition costs                     1,073        1,106          847
         Insurance acquisition costs deferred                           (1,374)      (1,157)        (833)
         Net realized gains on investments                                (303)        (223)        (191)
                                                                       -------      -------      -------
     Cash from operating activities                                        897          866        1,014
                                                                       -------      -------      -------

Cash Flows From Investing Activities
Fixed maturity securities available-for-sale:
     Purchases                                                          (6,058)      (6,219)      (5,936)
     Sales                                                               4,494        4,896        4,432
     Maturities                                                            734          610          474
Equity securities:
     Purchases                                                          (1,240)      (1,330)      (1,337)
     Sales                                                               1,383        1,178        1,178
Net purchases of short-term investments                                   (231)         (28)         (50)
Cash paid for acquisitions and in force reinsurance
     transactions (Note 3)                                                 (89)           -         (807)
Other investing activities                                                 (70)         106         (118)
                                                                       -------      -------      -------
     Cash used for investing activities                                 (1,077)        (787)      (2,164)
                                                                       -------      -------      -------

Cash Flows From Financing Activities
Change in contract deposits                                                513          460          352
Net contract accumulation payments                                        (160)        (161)        (223)
Proceeds from short-term borrowings (Note 7)                                23            -          600
Principal payments on short-term borrowings (Note 7)                         -         (600)           -
Proceeds from long-term borrowings (Note 7)                                  -          556            -
Contribution to capital (Note 9)                                             -            -          300
Proceeds from issuance of preferred stock (Note 9)                           -            -          150
Dividends paid                                                            (233)         (65)         (31)
                                                                       -------      -------      -------
     Cash from financing activities                                        143          190        1,148
                                                                       -------      -------      -------

Effect of exchange rate changes on cash                                    (71)        (347)         116
                                                                       -------      -------      -------

Increase (decrease) in cash                                               (108)         (78)         114
Cash at beginning of year                                                  377          455          341
                                                                       -------      -------      -------
Cash at end of year                                                    $   269      $   377      $   455
                                                                       =======      =======      =======
</TABLE>


See Notes to Consolidated Financial Statements.


                                       29


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


1.   Basis of Presentation

Principles of Consolidation

GE  Global  Insurance  Holding  Corporation  ("GE  Global")  is  a  wholly-owned
subsidiary of General Electric Capital Services,  Inc. ("GE Capital  Services"),
which is a wholly-owned  subsidiary of General  Electric Company ("GE Company").
The  accompanying  consolidated  financial  statements of GE Global  include the
accounts  and  operations,  after  intercompany  eliminations,  of GE Global and
Employers  Reinsurance  Corporation  ("ERC"),  a  property/casualty  reinsurance
company  with  various  property/casualty   reinsurance,  life  reinsurance  and
insurance intermediary subsidiaries.  GE Global owns 100% of the common stock of
ERC,  representing  89.5% of ERC's voting rights,  and General  Electric Capital
Corporation  ("GE Capital" - a wholly-owned  subsidiary of GE Capital  Services)
owns 100% of ERC's preferred stock,  representing  10.5% of ERC's voting rights.
GE Global and its consolidated subsidiaries are collectively referred to as "the
Company."

Other affiliates, generally companies in which the Company owns 20 to 50 percent
of the voting rights,  are included in other  invested  assets and valued at the
appropriate share of equity plus loans and advances.


Basis of Accounting

The  accompanying  consolidated  financial  statements have been prepared on the
basis of generally  accepted  accounting  principles  ("GAAP")  which, as to the
insurance  company  subsidiaries,   vary  from  statutory  accounting  practices
prescribed or permitted by insurance regulatory authorities.  The preparation of
financial  statements  in  conformity  with  GAAP  requires  management  to make
estimates and assumptions that affect reported amounts and related  disclosures.
Actual results could differ from those estimates.


2.   Summary of Significant Accounting Policies

Investments

The  Company's  fixed  maturity  and  marketable  equity  securities  have  been
designated  as  available-for-sale  and are  reported  at fair  value,  with net
unrealized gains or (losses) included in stockholder's equity, net of applicable
taxes.  Realized gains or (losses) on sales of investments are determined on the
specific-identification  method and include  adjustments  to the net  realizable
value of investments  for declines in value that are considered to be other than
temporary.  Investment income is recognized as earned and includes the accretion
of discounts and amortization of premiums related to fixed maturity securities.


Property and Casualty Insurance/Reinsurance Segment

Premiums   are   reported   as   earned   over   the   terms   of  the   related
insurance/reinsurance  treaties or  policies.  In general,  earned  premiums are
calculated on a pro rata basis,  are determined  based on reports  received from
reinsureds, or are estimated if reports are not received timely from reinsureds.
Premium  adjustments  under  retrospectively  rated  reinsurance  contracts  are
recorded based on estimated  claims and claim expenses,  including both case and
incurred  but not yet  reported  liabilities.  Assumed  foreign  reinsurance  is
accounted for using the periodic method.

Certain  insurance  acquisition  costs,  principally  commissions  and brokerage
expenses,  are deferred  and  amortized  over the  contract  period in which the
related  premiums  are  earned.   Future  investment  income  is  considered  in
determining the recoverability of deferred insurance acquisition costs.


                                       30


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


2.   Summary of Significant Accounting Policies (continued)

The value of property and casualty business recorded in connection with the 1984
acquisition of ERC by GE Capital Services is being amortized over 16 years using
the  straight-line  method.  Included in the  statement  of  financial  position
caption  "Intangible  assets" was the value of property and casualty business of
$262 million before accumulated amortization of $218 million and $202 million at
December 31, 1997 and 1996, respectively.

The  liabilities   for  claims  and  claim  expenses   represent  the  estimated
liabilities for reported claims plus those incurred but not yet reported and the
related estimated claim expenses.  The liabilities for claims and claim expenses
are  determined  using  case-basis  evaluations  and  statistical  analyses  and
represent estimates of the ultimate cost of all claims incurred through December
31  of  each  year.  Although  considerable  variability  is  inherent  in  such
estimates,  management  believes  that the  liabilities  for  claims  and  claim
expenses are adequate.  The estimates are  continually  reviewed and adjusted as
necessary; such adjustments are included in current operations and are accounted
for as changes in estimates.  Included in the  liabilities  for claims and claim
expenses  are $1.000  billion and $1.015  billion at December 31, 1997 and 1996,
respectively,  of long-term  disability  claims that are discounted at a 6% rate
(See Note 10).

Amounts  recoverable  from reinsurers  related to the liabilities for claims and
claim expenses are estimated in a manner consistent with the related liabilities
associated with the reinsured policies.


Life Reinsurance Segment

The Company  provides  reinsurance for life and health  insurance and annuities.
These  products  can be  classified  into three  groups:  traditional  insurance
contracts,   universal  life  insurance  contracts  and  investment   contracts.
Insurance  contracts are broadly defined to include  contracts with  significant
mortality and/or  morbidity risk while investment  contracts are broadly defined
to include contracts without significant  mortality or morbidity risk. Universal
life insurance  contracts are insurance  contracts with terms that are not fixed
and guaranteed.

Revenues for traditional insurance contracts are recognized as revenues when due
or over the terms of the policies.  For universal  life contracts and investment
contracts,  premiums received are reported as liabilities ("Accumulated contract
values"), not as revenues.  Revenues for universal life contracts and investment
contracts  are  recognized  for  assessments  made  against  the  policyholder's
accumulated contract values for insurance,  policy  administration,  surrenders,
and other authorized charges.

Future policy benefits for life and health contracts represent the present value
of such benefits based on mortality and other assumptions which were appropriate
at the time the policies  were issued or at the date of purchase.  Interest rate
assumptions  used in  calculating  the present  value range from 3.0% to 8.5% at
December 31, 1997 and 1996.  Interest rates credited to universal life contracts
and investment  contracts are guaranteed for the policy terms with renewal rates
determined by  management.  Such  crediting  interest rates ranged from 3.75% to
9.00% in 1997, 3.25% to 9.00% in 1996 and 4.25% to 12.30% in 1995.

Acquisition  costs  include  costs and expenses that vary with and are primarily
related to the  acquisition  of  insurance  and  investment  contracts,  such as
commissions  and certain support costs,  such as  underwriting  and policy issue
expenses.   For  universal  life  contracts  and   investment   contracts,   the
amortization  is  based  on the  anticipated  gross  profits  from  investments,
surrender and other charges net of interest credited,  mortality and maintenance
expenses.  As actual gross profits vary from projected gross profits, the impact
on  amortization  is  included  in net  income.  For  insurance  contracts,  the
acquisition   costs  are  amortized   over  the  premium  paying  periods  using
assumptions  consistent  with  those used in  computing  future  policy  benefit
reserves.


                                       31


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


2.   Summary of Significant Accounting Policies (continued)

As a result of  acquisitions,  the  Company  has  obtained  the right to receive
future  profits  from life  reinsurance  contracts  existing  at the date of the
acquisitions.  The  present  value of these  future  profits  ("PVFP")  has been
actuarially  determined  based  on the  projected  profits  from  the  contracts
acquired.  The calculation of the projected profits includes  anticipated future
premiums, benefit payments, lapse rates, expenses and related investment income.
The PVFP was  determined  using risk adjusted  discount rates from 8% to 15% and
the interest  rates  selected for the  valuation  were  determined  based on the
applicable  interest  rates in the country of risk and the risk  inherent in the
realization of the estimated  future profits.  The PVFP of $141 million and $164
million  at  December  31,  1997 and  1996,  respectively,  is  included  in the
statement  of  financial  position  caption  "Intangible  assets"  and is  being
amortized  using the  interest  method over the  duration  of the  related  life
business,  approximately  20 years, as the premiums on the books of business are
recognized.


Funds Held by Reinsured Companies

Funds held by  reinsured  companies  represent  ceded  premiums  retained by the
ceding companies  according to contractual  terms.  The Company  generally earns
investment income on these balances during the periods that the funds are held.


Allowance for Doubtful Accounts

The Company  establishes  an allowance for  uncollectible  premiums  receivable,
reinsurance  recoverables  and other  doubtful  receivables.  The  allowance  is
recorded as a  valuation  account  that  reduces the  corresponding  asset.  The
allowance  was $48  million  and $47  million  at  December  31,  1997 and 1996,
respectively.


Goodwill

The  Company  amortizes  goodwill  recorded  in  connection  with  its  business
combinations  over periods  ranging from 15 to 30 years using the  straight-line
method.  Included in the  statement of financial  position  caption  "Intangible
assets" was  goodwill of $712  million and $983 million at December 31, 1997 and
1996,  respectively.  Accumulated amortization was $260 million and $221 million
at December  31, 1997 and 1996,  respectively.  If goodwill is  identified  with
long-lived  assets that are subject to an impairment  loss, and an adjustment is
to be made to reflect fair value,  the goodwill  shall be reduced or  eliminated
before the  carrying  value of such  long-lived  assets are written down to fair
value.  Goodwill  in excess  of  associated  expected  operating  cash  flows is
considered to be impaired and is written down to fair value.


Statement of Cash Flows

Cash includes cash on hand,  demand deposits and  certificates  of deposit.  All
highly liquid  investments with an original maturity of three months or less are
classified as short-term investments in the statement of financial position, and
transactions  as such are considered  investing  activities in the  consolidated
statement of cash flows.


                                       32


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


2.   Summary of Significant Accounting Policies (continued)

Reinsurance

Reinsurance  contracts that do not both transfer significant  insurance risk and
result in the reasonable  possibility  that the reinsurer (or  retrocessionaire)
may realize a significant  loss from the insurance  risk assumed are required to
be accounted for as deposits.  These contract  deposits are included in contract
deposit assets  (included in "Other assets") or "Contract  deposit  liabilities"
and are accounted for as financing  transactions with interest income or expense
credited or charged to the contract deposits.


Income Taxes

In 1997,  GE Global,  together  with its  domestic  property/casualty  insurance
subsidiaries,  one domestic life subsidiary and its parent, GE Capital Services,
are included in the  consolidated  federal  income tax return of GE Company.  GE
Global's other  domestic life insurance  subsidiary is taxed as a life insurance
company, and that subsidiary files a separate income tax return.

Prior to 1997, GE Global, together with its domestic property/casualty insurance
subsidiaries  and  its  parent,  GE  Capital  Services,  were  included  in  the
consolidated  federal  income  tax  return of GE  Company.  Both of GE  Global's
domestic life insurance subsidiaries were taxed as life insurance companies, and
those subsidiaries filed separate federal income tax returns.

GE  Global's  international  insurance  subsidiaries  file  separate  income tax
returns in the countries where the subsidiaries are domiciled.

The Company  utilizes  the  liability  method,  whereby  deferred tax assets and
liabilities are determined based on differences  between the financial reporting
and tax bases of assets and  liabilities  and are measured using the enacted tax
rates and laws. The Company is required to establish a "valuation allowance" for
any  portion of the  deferred  tax asset that  management  believes  will not be
realized.


Interest Rate and Currency Risk Management

As a matter of policy,  the Company does not engage in any derivatives  trading,
market-making or other  speculative  activities in the derivative  markets.  The
Company utilizes various  financial  instruments,  such as currency and interest
rate swaps, options and currency forwards to lessen its exposure to movements in
interest rates and foreign currency exchange rates.

Interest rate and currency swaps that modify borrowings or designated assets are
accounted for on an accrual  basis.  The Company  requires all other  derivative
instruments, such 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.

Instruments  used as hedges must be effective  at reducing  the risk  associated
with  the  exposure  being  hedged  and  must be  designated  as a hedge  at the
inception  of the  contract.  Accordingly,  changes  in market  values of hedged
instruments  must  be  highly  correlated  with  changes  in  market  values  of
underlying hedged items, both at inception of the hedge and over the life of the
hedge contract.  Any instrument  designated but ineffective as a hedge is marked
to market and recognized in operations immediately.


                                       33


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


2.   Summary of Significant Accounting Policies (continued)

Foreign Currency Translation

The  Company  operates in a multiple  functional  currency  environment  whereby
revenues and expenses in functional currencies are translated using the weighted
average  exchange  rate  during  the year and  functional  currency  assets  and
liabilities are translated at the rate of exchange in effect at the close of the
year. Gains or losses resulting from translating the functional  currencies into
U.S. dollars are accumulated in a separate  component of  stockholder's  equity,
entitled  "Foreign  currency  translation  adjustments."  The Company  partially
hedges its  foreign  currency  risk on its  foreign  subsidiary  investments  by
utilizing a cross  currency  swap (See Note 12). The gain on the cross  currency
swap, which is included in "Foreign currency translation adjustments",  was $192
million  and $71 million at December  31, 1997 and 1996,  respectively.  The net
effect of foreign currency  transactions on operating  results during 1997, 1996
and 1995 was immaterial.


Benefit Plans

Employees  of  the  Company  and  its  subsidiaries,   excluding   international
subsidiaries,  are covered by a trusteed,  noncontributory  defined benefit plan
and  unfunded  postretirement  plans  that  provide  medical  benefits  and life
insurance benefits to substantially all employees and their dependents.  Certain
of the Company's international subsidiaries also sponsor noncontributory defined
benefit  plans for their  employees.  The net effect of all benefit plans on the
consolidated statement of financial position and statement of earnings for 1997,
1996 and 1995 was immaterial.


Reclassifications

Certain  reclassifications  of prior year  balances have been made to conform to
the current year presentation.


                                       34


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


3.   Acquisitions

In July 1995, the Company  consummated its purchase of certain assets comprising
a     majority     of     the      reinsurance      business     of     Aachener
Ruckversicherungs-Gesellschaft Aktiengesellschaft (the "Aachen Re Business") and
its   purchase   of   over   93%  of  the   outstanding   shares   of   Frankona
Ruckversicherungs-Aktiengesellschaft  ("Frankona Re"). The Aachen Re Business is
written primarily on a direct basis and principally consists of auto/motor, fire
and life  reinsurance of both German and non-German  business.  Frankona Re also
operates  primarily  on a direct  basis,  and its  written  premium  principally
consists of aviation,  auto/motor,  fire and life reinsurance of both German and
non-German business.

The  Aachen  Re  Business  and  the  Frankona  Re  shares  were   purchased  for
approximately $143 million and $879 million, respectively, and both transactions
were  accounted for as  purchases.  Accordingly,  the purchase  prices have been
allocated to assets acquired and liabilities assumed based on estimates of their
fair values as of the dates of the  acquisitions  and the results of  operations
have been included in the statement of earnings since the acquisition dates. The
allocation of the combined  purchase  price, as finalized in 1996, is summarized
as follows:

             (In millions)

             Assets acquired, excluding goodwill
               and present value of future profits         $ 7,729            
             Goodwill                                          583
             Present value of future profits                   146
             Liabilities assumed                            (7,436)
                                                           -------
             Total purchase price                          $ 1,022
                                                           =======

Goodwill is being amortized using the straight-line method over a 20 year period
and the  present  value of future  profits on the life  reinsurance  business is
being  amortized using the interest method over the duration of the related life
business,  approximately  20  years,  as the  premiums  on the life  reinsurance
business are recognized. Funding for these acquisitions is described in Note 7.

During  1997  and  1996,  the  Company   continued  to  purchase  the  remaining
outstanding  shares of  Frankona  Re held by  minority  shareholders.  Effective
December 7, 1996,  an  agreement  was entered into with the  remaining  minority
shareholders  whereby the Company offered to purchase the remaining  outstanding
shares at a stipulated  price and guaranteed a specified  compensation  payment.
The  Company  paid cash of $69  million  in 1997 for  shares  acquired  from the
minority  shareholders,  and the purchase of these shares has been accounted for
using the purchase  method of accounting.  The excess of the purchase price over
the fair market value of the net assets  acquired of  approximately  $40 million
was  recognized as goodwill and is being  amortized  over the remaining  initial
goodwill  amortization period.  Minority  shareholders who elected not to redeem
their  outstanding  shares under this  agreement  will  receive a stated  future
annual  dividend  and  forfeited  their right to  participate  in the future net
earnings of Frankona Re. As of December 31, 1997, the Company owns approximately
99% of the outstanding shares of Frankona Re.


                                       35


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


4.   Investments

The cost,  fair value and gross  unrealized  gains and losses of fixed  maturity
securities, equity securities,  short-term investments and other invested assets
were as follows:

<TABLE>
<CAPTION>
                                                                                     December 31, 1997
                                                                        -------------------------------------------
                                                                                     Gross        Gross
                                                                                   Unrealized  Unrealized   Fair
             (In millions)                                                Cost       Gains        Losses    Value  
                                                                        -------------------------------------------
             <S>                                                            <C>        <C>        <C>         <C>    
             Fixed maturity securities:
                U.S. government                                          $   561     $   17       $ 1      $   577 
                International government                                   2,457        120         3        2,574
                Tax-exempt                                                 5,542        345         -        5,887
                Corporate                                                  3,342        107         9        3,440
                U.S. mortgage-backed                                       1,391         40         3        1,428
                International mortgage-backed                                865         45         -          910
                                                                         -------     ------       ---      -------
               Total fixed maturity securities                            14,158        674        16       14,816
             Equity securities                                             1,982        579        48        2,513
             Short-term investments                                          661          -         -          661
             Other invested assets                                           353          -         -          353
                                                                         -------     ------       ---      -------
             Total investments                                           $17,154     $1,253       $64      $18,343
                                                                         =======     ======       ===      =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                     December 31, 1996
                                                                        -------------------------------------------
                                                                                     Gross        Gross
                                                                                   Unrealized  Unrealized   Fair
             (In millions)                                                Cost       Gains        Losses    Value
                                                                        -------------------------------------------
             <S>                                                            <C>        <C>       <C>          <C>    
             Fixed maturity securities:
                U.S. government                                          $   514       $  3       $ 2      $   515 
                International government                                   2,281         91         1        2,371
                Tax-exempt                                                 5,830        279         8        6,101
                Corporate                                                  2,541         69         7        2,603
                U.S. mortgage-backed                                         912         18         7          923
                International mortgage-backed                              1,010         49         -        1,059
                                                                         -------       ----       ---      -------
                Total fixed maturity securities                           13,088        509        25       13,572
             Equity securities                                             1,988        352        37        2,303
             Short-term investments                                          339          -         -          339
             Other invested assets                                           265          -         -          265
                                                                         -------       ----       ---      -------
             Total investments                                           $15,680       $861       $62      $16,479
                                                                         =======       ====       ===      =======
</TABLE>


                                       36


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


4.   Investments (continued)

The  amortized  cost and estimated  fair value of fixed  maturity  securities at
December 31, 1997 are  summarized,  by stated  maturity,  as
follows:

<TABLE>
<CAPTION>
                                                                                           Fair
             (In millions)                                                      Cost       Value
                                                                              --------------------
             <S>                                                                  <C>        <C>    
             Maturity:
               Due in 1998                                                     $   341    $   347 
               Due in 1999-2002                                                  3,055      3,123
               Due in 2003-2007                                                  3,578      3,753
               Due after 2007                                                    4,928      5,255
                                                                               -------    -------
                                                                                11,902     12,478
             Mortgage-backed securities                                          2,256      2,338
                                                                               -------    -------
             Total fixed maturity securities                                   $14,158    $14,816
                                                                               =======    =======
</TABLE>

The foregoing data is based on the stated  maturities of the securities.  Actual
maturities will differ for some securities  because borrowers may have the right
to call or prepay obligations with or without call or prepayment penalties.

Major categories of investment income are summarized as follows:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                                    ----------------------------
             (In millions)                                           1997       1996       1995
                                                                    ----------------------------
             <S>                                                     <C>        <C>        <C>    
             Gross investment income:
                  Fixed maturity securities                          $773       $737       $581 
                  Equity securities                                    63         45         32
                  Short-term investments                               28         19         28
                  Securities and indebtedness of related parties       18         21         20
                  Other                                                41         35         30
                                                                     ----       ----       ----
                                                                      923        857        691
             Investment expenses                                       13         20         15
                                                                     ----       ----       ----
             Net investment income                                   $910       $837       $676
                                                                     ====       ====       ====
</TABLE>

                                                                  
                                       37


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


4.   Investments (continued)

The Company's  sales  proceeds and realized  gains and losses on securities  are
summarized as follows:

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                     ----------------------------------
          (In millions)                                                1997          1996        1995
                                                                     ----------------------------------
          <S>                                                           <C>           <C>         <C>    
          Sales proceeds from fixed maturity securities               $4,494        $4,896      $4,432 
                                                                      ======        ======      ======

          Net realized gains on investments  before income taxes: 
            Fixed maturiy securities:
               Gross realized gains                                     $119          $108        $114
               Gross realized losses                                     (18)          (36)        (29)
            Equity securities:
               Gross realized gains                                      285           201         154
               Gross realized losses                                     (83)          (50)        (48)
                                                                        ----          ----        ----
            Total net realized gains before income taxes                 303           223         191
          Provision for income taxes                                     110            79          67
                                                                        ----          ----        ----
          Net realized gains on investments, after income taxes         $193          $144        $124
                                                                        ====          ====        ====
</TABLE>

The  change in net  unrealized  gains  (losses),  before  income  tax,  on fixed
maturity  securities  was $174 million,  $(91) million and $782 million in 1997,
1996 and 1995,  respectively;  the  corresponding  amounts for equity securities
were  $216  million,  $206  million  and $153  million  in 1997,  1996 and 1995,
respectively.

At December 31, 1997 and 1996,  the Company had  investments  in fixed  maturity
securities   with  a  carrying   amount  of  $565  million  and  $563   million,
respectively,  on deposit with state insurance departments to satisfy regulatory
requirements.


                                       38


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


5.   Claims and Claim Expenses

The table below provides a reconciliation of the beginning and ending claims and
claim expense liabilities, net of reinsurance.

<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                                          --------------------------------------
             (In millions)                                                   1997           1996          1995
                                                                          --------------------------------------
             <S>                                                              <C>            <C>           <C>    
             Liability balances at January 1                               $10,869        $11,145       $ 6,020 
             Reinsurance recoverables on unpaid claims
               and claim expenses                                            1,411          1,794           949
                                                                           -------        -------       -------
             Net balances at January 1                                       9,458          9,351         5,071
                                                                           -------        -------       -------

             Incurred claims and claim expenses related to:
               Current year                                                  2,449          2,763         2,638
               Prior years                                                      71            106           104
                                                                           -------        -------       -------
               Total incurred                                                2,520          2,869         2,742
                                                                           -------        -------       -------

             Claims and claim expense payments related to:
               Current year                                                    626            485           295
               Prior years                                                   1,949          1,990         1,426
                                                                           -------        -------       -------
               Total payments                                                2,575          2,475         1,721
                                                                           -------        -------       -------

             Acquired businesses' net unpaid claims
               and claim expenses (See Note 3)                                   -              -         3,313
             Foreign exchange and other                                       (264)          (287)          (54)
                                                                           -------        -------       -------
             Net balances at December 31                                     9,139          9,458         9,351
             Reinsurance recoverables on unpaid claims
               and claim expenses                                            1,822          1,411         1,794
                                                                           -------        -------       -------
             Liability balances at December 31                             $10,961        $10,869       $11,145
                                                                           =======        =======       =======
</TABLE>

The Company's  liabilities for unpaid claims and claim expenses,  net of related
reinsurance recoverables, at December 31, 1996, 1995 and 1994, were increased in
the following year by $71 million, $106 million and $104 million,  respectively,
for claims that had occurred on or prior to those  balance  sheet  dates.  Those
deficiencies  resulted  principally from settling claims  established in earlier
accident  years for amounts that were more than  estimated and due to changes in
estimates  associated with a lag in receiving  underwriting  reports from ceding
companies that causes development of both premiums and claims,  especially as it
relates to the international operations.


                                       39


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


5.   Claims and Claim Expenses (continued)

In  establishing  the  liabilities  for  claims  and claim  expenses  related to
asbestos-related  illnesses and toxic waste cleanup,  management considers facts
currently  known  and the  current  state  of the law and  coverage  litigation.
Liabilities  are  recognized  for known  claims  (including  the cost of related
litigation)  when  sufficient  information  has been  developed  to indicate the
involvement of specific  insurance or  reinsurance  contracts and management can
reasonably estimate its liability. In addition, amounts have been established to
cover additional exposures on both known and unasserted claims, and estimates of
the liabilities are reviewed and updated continually.

The gross  liabilities  for  asbestos-related  illness and toxic  waste  cleanup
claims and claim  expenses and the related  reinsurance  recoverables  were $462
million and $193 million,  respectively, at December 31, 1997. These amounts are
management's best estimate, based on currently available information,  of future
claim 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  U.S.
government  regulations  and  legislation,  including  continuing  Congressional
consideration of a 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,  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.

No amounts have been  established for claims and claim expenses  related to Year
2000. The Company is currently  monitoring the  possibility of claims arising in
the future under specific insurance or reinsurance  contracts and will establish
liabilities,  if appropriate,  at such time when sufficient information has been
developed  to  indicate a  liability  has been  incurred  and can be  reasonably
estimated.  In addition,  the Company is evaluating certain actions which can be
taken to mitigate the  exposure to such  losses.  It is not possible to estimate
with any certainty the future amount of additional net loss, or the range of net
loss, that may arise from Year 2000 issues; therefore, there can be no assurance
that future  liabilities  will not  materially  affect the Company's  results of
operations, cash flows or financial position.


6.   Income Taxes

The Company's provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                   --------------------------------------------------------------------------------------------
                             1997                             1996                             1995
                   -----------------------         -------------------------         --------------------------
                    United  Inter-                  United  Inter-                    United   Inter-
    (In millions)   States national Total           States national   Total           States  national   Total
                   -----------------------         -------------------------         --------------------------
    <S>             <C>     <C>      <C>            <C>      <C>       <C>             <C>       <C>      <C>
    Current         $(77)   $ 40     $(37)          $79      $128      $207            $82       $68      $150 
    Deferred         172      99      271             7        (1)        6            (22)       (4)      (26)
                    ----    ----     ----           ---      ----      ----            ---       ---      ----
    Total           $ 95    $139     $234           $86      $127      $213            $60       $64      $124
                    ====    ====     ====           ===      ====      ====            ===       ===      ====
</TABLE>

The change in the Company's 1997 current and deferred tax provisions relative to
1996  principally  reflects  the  reversal  of  loss  reserve  discounting,  tax
provision adjustments to the 1996 tax return and new life reinsurance agreements
entered into in 1997.


                                       40


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


6.   Income Taxes (continued)

Income taxes (recovered) paid by the Company totaled $(53) million, $158 million
and $114 million in 1997, 1996 and 1995, respectively.

The  Company's  effective  income tax rate on  pre-tax  income is lower than the
prevailing U.S. corporate federal income tax rate and is summarized as follows:

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                    -----------------------------
                                                                     1997       1996        1995
                                                                    -----------------------------
             <S>                                                     <C>        <C>         <C>    
             Corporate federal income tax rate                        35%        35%         35% 
             Tax-exempt investment income                            (11)       (14)        (19)
             Intercompany dividend payment                             3          4           6
             Other items, net                                          -          2           -
                                                                      --         --          --
             Effective tax rate                                       27%        27%         22%
                                                                      ==         ==          ==
</TABLE>

The  significant  components  of the  Company's  net  deferred  tax  assets  and
liabilities are summarized as follows:

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                            --------------------
             (In millions)                                                     1997        1996
                                                                            --------------------
             <S>                                                               <C>         <C>    
             Deferred tax assets:
                Claim and claim expenses                                     $  324       $ 367 
                Unearned premiums                                                89          41
                Foreign tax credit carryforwards                                116          66
                Foreign currency translation                                     41          24
                Accruals not currently deductible                                40          23
                Other                                                            80         175
                                                                             ------       -----
                Total gross deferred tax assets                                 690         696
                Valuation allowance                                              54          66
                                                                             ------       -----
                Total deferred tax assets                                       636         630
                                                                             ------       -----

             Deferred tax liabilities:
                Deferred insurance acquisition costs                            261         153
                Tax reserves in excess of book reserves                         210         198
                Net unrealized gains on investment securities                   443         311
                Contract deposit liabilities                                    204          85
                Present value of future profits                                  44          49
                Other                                                           120         108
                                                                             ------       -----
                Total deferred tax liabilities                                1,282         904
                                                                             ------       -----
             Net deferred tax liability                                      $ (646)      $(274)
                                                                             ======       =====
</TABLE>


                                       41


<PAGE>
                    GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


6.   Income Taxes (continued)

A valuation  allowance is provided  when it is more likely than not that certain
deferred  tax  assets  will not be  realized.  The  Company  has  established  a
valuation  allowance for deferred tax assets  associated with foreign tax credit
carryforwards  that  exceed the  projected  future  benefit of such  foreign tax
credits.  The net change in the  valuation  allowance  for  deferred  tax assets
associated  with the  foreign  tax credits was a decrease of $12 million in 1997
and an  increase  of $3  million in 1996.  The 1997  decrease  in the  valuation
allowance  is the result of the change in the  Company's  judgment of the future
years'  realizability of the deferred tax assets associated with the foreign tax
credits.  The change in the Company's judgment is a result of additional foreign
tax credit  capacity  attributable  to the Company's life  insurance  subsidiary
inclusion in the consolidated  federal income tax return of GE Company beginning
in 1997.

The Company did not have a payable to (recoverable from) GE Capital Services for
income taxes due at December 31, 1997 or 1996.


7.   Borrowings

On July 27, 1995, the Company  entered into  short-term  borrowing  arrangements
totaling $600 million to provide  additional funding for the acquisitions of the
Aachen Re Business and Frankona Re. These  acquisitions are described in Note 3.
The debt carried a term of one year with interest payments made monthly based on
rates  ranging from 6.0% to 6.1%.

In February  1996,  the Company  issued $600  million of senior  unsecured  debt
securities  at 7% per  annum,  which are not  redeemable  prior to  maturity  on
February  15, 2026.  The Company  received  $556 million in proceeds  from these
notes (net of  original  issue  discount  and costs of an  interest  rate "lock"
contract)  and were  used to repay the $600  million  of  short-term  borrowings
described above.

The Company entered into a revolving  credit  agreement with GE Capital Services
on  January 1, 1997 for an amount up to $600  million.  This  unsecured  line of
credit has an  interest  rate per annum  equal to GE Capital  Services'  cost of
funds for a one-year  period.  This  agreement  is  automatically  extended  for
successive terms of one year each unless terminated in accordance with the terms
of the agreement.  No amounts have been drawn on this credit facility.

On October 21, 1997, the Company and a subsidiary of GE Capital Services entered
into  a  revolving  credit  agreement   whereby  they  are  participants  in  an
international cash pooling  arrangement on behalf of certain European affiliates
of the Company.  In such roles,  either participant may make short-term loans to
the other as part of the cash pooling arrangement.  Each such borrowing shall be
repayable upon demand, but not to exceed 364 days. This unsecured line of credit
has an interest rate per annum equal to GE Capital  Services'  cost of funds for
the currency in which such borrowing is denominated  and is available for a term
of five years and shall be  automatically  extended for successive  terms of one
year each, unless terminated in accordance with the terms of the agreement.  The
total  amount  drawn on this credit  facility by the Company as of December  31,
1997 was $19 million.

Total interest paid in 1997, 1996 and 1995 was $42 million,  $29 million and $13
million, respectively.


                                       42


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


8.   Supplemental Financial Statement and Reinsurance Data

Insurance premiums written and earned in 1997, 1996 and 1995 and life insurance
in force as of December 31, 1997, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                                    Insurance Premiums Written
                                           -----------------------------------------
                                            Property/ 
            (In millions)                   Casualty         Life            Total
                                           -----------------------------------------
            <S>                                <C>            <C>              <C>    
            1997:
              Direct                         $  392         $    4           $  396 
              Assumed                         3,778          1,170            4,948
              Ceded                            (677)          (122)            (799)
                                             ------         ------           ------
              Net                            $3,493         $1,052           $4,545
                                             ======         ======           ======

            1996:
              Direct                         $  338         $    3           $  341
              Assumed                         4,118            791            4,909
              Ceded                            (519)          (158)            (677)
                                             ------         ------           ------
              Net                            $3,937         $  636           $4,573
                                             ======         ======           ======

            1995:
              Direct                         $  379         $    3           $  382
              Assumed                         3,126            530            3,656
              Ceded                            (382)           (95)            (477)
                                             ------         ------           ------
              Net                            $3,123         $  438           $3,561
                                             ======         ======           ======
</TABLE>

<TABLE>
<CAPTION>
                                                    Insurance Premiums Earned                 
                                           -----------------------------------------          Life
                                            Property/                                       Insurance
            (In millions)                   Casualty         Life            Total          In Force
                                           -----------------------------------------------------------
            <S>                                <C>            <C>              <C>               <C>    
            1997:
              Direct                         $  369         $    3           $  372          $  1,865 
              Assumed                         3,815          1,058            4,873           266,840
              Ceded                            (661)          (117)            (778)          (54,870)
                                             ------         ------           ------          --------
              Net                            $3,523         $  944           $4,467          $213,835
                                             ======         ======           ======          ========

            1996:
              Direct                         $  339         $    3           $  342          $  1,478
              Assumed                         4,183            787            4,970           196,250
              Ceded                            (507)          (157)            (664)          (32,445)
                                             ------         ------           ------          --------
              Net                            $4,015         $  633           $4,648          $165,283
                                             ======         ======           ======          ========

            1995:
              Direct                         $  374         $    3           $  377          $  1,076
              Assumed                         3,586            520            4,106           208,356
              Ceded                            (514)           (83)            (597)          (34,828)
                                             ------         ------           ------          --------
              Net                            $3,446         $  440           $3,886          $174,604
                                             ======         ======           ======          ========
</TABLE>


                                       43


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


8.   Supplemental Financial Statement and Reinsurance Data (continued)

Claims, claim expenses and policy benefits in 1997, 1996 and 1995 are summarized
as follows:

<TABLE>
<CAPTION>
                                                             Property/
         (In millions)                                       Casualty         Life         Total 
                                                            --------------------------------------
         <S>                                                     <C>          <C>            <C>    
         1997:
            Direct                                             $  390         $  2         $  392 
            Assumed                                             2,611          818          3,429
            Ceded                                                (520)         (41)          (561)
                                                               ------         ----         ------
            Net                                                $2,481         $779         $3,260
                                                               ======         ====         ======

         1996:
            Direct                                             $  346         $  3         $  349
            Assumed                                             3,058          593          3,651
            Ceded                                                (535)         (92)          (627)
                                                               ------         ----         ------
            Net                                                $2,869         $504         $3,373
                                                               ======         ====         ======

         1995:
            Direct                                             $  312         $  3         $  315
            Assumed                                             2,673          357          3,030
            Ceded                                                (336)         (15)          (351)
                                                               ------         ----         ------
            Net                                                $2,649         $345         $2,994
                                                               ======         ====         ======
</TABLE>

The Company's insurance company subsidiaries both cede reinsurance to and assume
reinsurance from other insurance companies.  That portion of the risks exceeding
each subsidiary's  retention limit is reinsured with other insurers. The Company
also  acquires  other  reinsurance  coverages  with  retentions  and limits that
management  believes are appropriate for the circumstances.  In the accompanying
consolidated financial statements,  premiums,  claims, claim expenses and policy
benefits  and  deferred   insurance   acquisition  costs  are  reported  net  of
reinsurance ceded; reinsurance  liabilities,  unearned premiums and accruals are
reported gross of reinsurance ceded.

The   Company's   insurance   company   subsidiaries   remain  liable  to  their
policyholders  if  their  reinsurers  are  unable  to  meet  their   contractual
obligations  under  the  applicable  reinsurance  agreements.  To  minimize  its
exposure  to  significant  losses  from  reinsurance  insolvencies,  the Company
evaluates the financial condition of its reinsurers and monitors  concentrations
of credit risk arising from similar geographic  regions,  activities or economic
characteristics  of  the  reinsurers.   At  December  31,  1997,  there  was  no
significant  concentration of reinsurance  recoverables and prepaid  reinsurance
premiums due from any one reinsurer.

For financial reinsurance assumed, the Company reports revenue for the risk fees
charged for those services. At December 31, 1997, statutory policyholder surplus
of the life insurance  subsidiaries has been reduced  approximately $501 million
in connection with financial  reinsurance  assumed.  Such amounts are secured by
future  profits  on  the  reinsured  business.   The  Company's  life  insurance
subsidiaries  are also subject to the risk that the ceding  companies may become
insolvent, and the right of offset would not be permitted;  however,  management
does not believe such risk is significant.


                                       44


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


9.   Stockholder's Equity

ERC has  issued  11,673  shares of  $100,000  par value,  nonredeemable,  voting
preferred  stock to GE Capital.  This preferred stock accrues  preferential  and
cumulative  dividends at an annual rate that is the average of the yield on high
grade  industrial  preferred  stock  and the yield on  medium  grade  industrial
preferred stock as of the close of the week preceding  December 31, as published
by Moody's  Investors  Service,  Inc.  ERC may,  upon  approval  by its Board of
Directors,  redeem the preferred  stock, in whole or in part, at 100% of the par
value of the preferred  stock plus all dividends  accrued thereon to the date of
redemption.  Preferred  stock  dividends  paid by ERC totaled $82  million,  $80
million and $93 million in 1997, 1996 and 1995, respectively.

On  September  28, 1995,  GE Capital  Services  contributed  $300 million to the
equity of the Company, and GE Capital purchased 1,500 newly authorized shares of
$100,000 par value, nonvoting,  cumulative preferred stock of the Company for an
aggregate  purchase price of $150 million.  Dividends on the preferred stock are
paid  at a rate of 5% per  annum  if,  as and  when  declared  by the  Board  of
Directors  of the Company  and totaled $8 million,  $7 million and $2 million in
1997, 1996 and 1995, respectively.


10.   Statutory Accounting Practices

ERC and its domestic insurance  subsidiaries are domiciled in Missouri or Kansas
and prepare  their  statutory-basis  financial  statements  in  accordance  with
accounting practices prescribed or permitted by the Missouri or Kansas Insurance
Department.  "Prescribed"  statutory  accounting  practices  include state laws,
regulations  and  general   administrative  rules,  as  well  as  a  variety  of
publications of the National  Association of Insurance  Commissioners  ("NAIC").
"Permitted"  statutory  accounting  practices encompass all accounting practices
that are not  prescribed;  such  practices  may differ from state to state,  may
differ from company to company within a state, and may change in the future. ERC
and  its  insurance   subsidiaries  have  no  significant  permitted  accounting
practices that vary from prescribed accounting practices, except as noted below.

Stockholder's  equity and net  income,  as  reported  to the  domiciliary  state
insurance  departments in accordance with its prescribed or permitted  statutory
accounting  practices,  for the Company's  domestic  insurance  subsidiaries are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                             -----------------
                 (In millions)                                                 1997     1996
                                                                             -----------------
                 <S>                                                            <C>      <C>    
                 Stockholder's equity:
                    ERC                                                       $4,584   $4,309 
                    Property and casualty subsidiaries of ERC                    672      657
                    Life and annuity subsidiaries of ERC                       2,176    2,371
</TABLE>

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                                     --------------------------
                 (In millions)                                        1997      1996      1995
                                                                     --------------------------
                 <S>                                                  <C>       <C>       <C>    
                 Net income:
                    ERC                                               $533      $434      $416 
                    Property and casualty subsidiaries of ERC           62        54        53
                    Life and annuity subsidiaries of ERC              (285)      278       108
</TABLE>


                                       45


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


10.  Statutory Accounting Practices (continued)

The payment of stockholder  dividends by insurance  companies  without the prior
approval of  regulators is limited to formula  amounts  based on net  investment
income and/or net income,  capital and surplus  determined  in  accordance  with
statutory  accounting  practices,  as well as the timing and amount of dividends
paid in the preceding 12 months. The maximum amount available for the payment of
dividends during 1998 by ERC to the Company without prior regulatory approval is
$78 million  through  December 29, 1998, and $458 million  thereafter.  Of these
amounts, $85 million is committed to pay dividends on the preferred stock issued
by ERC to GE Capital.

ERC has received written  approval from the Missouri  Department of Insurance to
discount its claim and claim expense liabilities related to long-term disability
business.  Prescribed  statutory accounting practice does permit claim and claim
expense liabilities  associated with long-term disability to be accounted for on
a discounted basis although the Missouri  Department of Insurance  requires that
insurance  companies  obtain  written  permission to discount  certain claim and
claim expense  liabilities.  Included in the discount  recognized  for statutory
purposes  at December  31,  1997 and 1996 is a benefit of $356  million and $348
million,   respectively,  for  long-term  disability  claim  and  claim  expense
liabilities.

The National Association of Insurance Commissioners ("NAIC") has adopted minimum
risk-based  capital  requirements to evaluate the adequacy of statutory  capital
and surplus in relation to an insurance company's risks.  Regulatory  compliance
with  risk-based  capital  requirements  is  defined  by a ratio of a  company's
regulatory  total adjusted  capital to its authorized  control level  risk-based
capital,  as defined by the NAIC.  At  December  31,  1997,  each of GE Global's
domestic  insurance   subsidiaries   exceeded  the  minimum  risk-based  capital
requirements.

The Company's  international  insurance subsidiaries prepare statutory financial
statements based on local laws and regulations. Some jurisdictions,  such as the
United Kingdom, impose complex regulatory requirements on reinsurance companies,
while other  jurisdictions,  such as Germany,  impose fewer requirements.  Local
reinsurance  business conducted by the Company's  subsidiaries in some countries
require  licenses  issued by  governmental  authorities.  These  licenses may be
subject to  modification  or revocation  dependent on such factors as amount and
types of reserves and minimum  capital and  solvency  tests.  Jurisdictions  may
impose  fines,  censure  and/or  criminal  sanctions for violation of regulatory
requirements.


11.   Contingencies

There are no pending legal  proceedings  beyond the ordinary  course of business
that could have a material financial effect on the Company.  On October 4, 1997,
an arbitration panel ruling was issued relieving the retrocessionaire,  St. Paul
Fire and Marine  Insurance  Company,  from certain  liabilities  under  specific
retrocession  agreements  relating to  disability  insurance.  As a result,  the
Company has determined that approximately  $38.5 million of previously  recorded
reinsurance  recoverables  were not  collectible.  The  Company's  reserves were
adequate to absorb this loss.


                                       46


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


12.   Fair Value of Financial Instruments

This  note  discloses  fair  value  information  about the  Company's  financial
instruments,  whether or not  recognized in the balance  sheet,  for which it is
practical to estimate the value.  No attempt has been made to estimate the value
of anticipated  future  business or the value of assets or liabilities  that are
not  considered  financial  instruments.  Fair  value  estimates  are  made at a
specific point in time based on relevant market  information about the financial
instrument.  In cases where quoted market prices are not available,  fair values
are estimated using  discounted cash flow or other valuation  techniques.  These
estimates may be subjective in nature and involve  uncertainties and, therefore,
cannot  be  determined  with  precision.   Changes  in  the  assumptions   could
significantly  affect the estimates.  As such, the derived fair value  estimates
cannot necessarily be substantiated by comparison to independent markets and may
differ from the amounts that might be involved in an immediate settlement of the
instrument.  Fair value  disclosures  are not  required  for  certain  financial
instruments,  the most  significant  of these for the Company are the  insurance
liabilities and related assets,  other than financial  guarantees and investment
contracts.

Certain financial  instruments that are reflected in the accompanying  financial
statement at fair value or for which fair values are disclosed  elsewhere in the
notes to the financial statements are not included in the following  disclosure.
The most  significant of which are investments,  cash,  amounts due from related
parties,  accrued investment income, separate accounts and other receivables and
payables.  Fair values of other  financial  instruments  have been determined as
follows:

Accumulated contract values - Based on expected future cash flows, discounted at
currently   offered  interest  rates  for  similar   contracts  with  maturities
consistent with those remaining for the contracts being valued.

Financial guaranty  reinsurance - Based on estimated premium rates that would be
charged and commissions that would be allowed at the financial statement date.

Borrowings - Based on quoted  market prices or market  comparables  and includes
the effects of counterparty creditworthiness.

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>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


12.  Fair Value of Financial Instruments (continued)

Information  about certain  financial  instruments that were not carried at fair
value at December 31, 1997 and 1996, is shown below:

<TABLE>
<CAPTION>
                                               December 31, 1997                           December 31, 1996
                                  --------------------------------------------  ------------------------------------------
                                                      Assets(liabilities)                      Assets(liabilities)
                                               -------------------------------           ---------------------------------
                                                         Estimated Fair Value                        Estimated Fair Value 
                                   Notional     Carrying ---------------------  Notional  Carrying   --------------------- 
(In millions)                       Amount       Amount     High       Low       Amount    Amount      High       Low
                                  --------------------------------------------  ------------------------------------------
<S>                                 <C>        <C>         <C>       <C>          <C>     <C>       <C>       <C>
Assets:
   Purchased options                $    1     $    -      $    -    $    -      $    -  $     -   $     -   $     -

Liabilities:
   Borrowings (b)                      (a)       (575)       (575)     (575)        (a)     (556)     (556)     (556)
   Purchased options                    13         10          30        17          14       10        13         9
   Interest rate swaps                  50          -           -         -           -        -         -         -
   Investment contract benefits        (a)     (1,342)     (1,329)   (1,329)        (a)   (1,643)   (1,664)   (1,664)
   Financial guaranty reinsurance    4,545        (60)        (55)      (75)      5,383      (65)      (60)      (81)
   Performance guarantees,
     principally letters of credit     146        (a)           -        (1)        328      (a)        (1)       (2)
Other firm commitments:
   Currency forwards                 1,067         11          11        11         599        6         6         6
   Cross currency swaps              1,073        192         192       192       1,107       71        71        71
   Letters of credit received          141        (a)           -        (1)        159      (a)         -        (1)
</TABLE>

(a)  Not applicable.
(b)  See Note 7.

Foreign currency forward purchase  contracts are employed to manage exposures to
changes in currency exchange rates.  These financial  instruments  generally are
used as hedges of identified  assets,  liabilities  or net  functional  currency
positions.

Cross currency  swaps are used by the Company to hedge foreign  currency risk on
net investment  exposure  resulting from exchange rate  fluctuations  in foreign
currency denominated assets and liabilities.  On a limited basis, and as part of
ongoing  customer  activities,  the  Company  utilizes  interest  rate swaps and
options to minimize its exposure to  movements in interest  rates and  financial
markets that have a direct correlation with certain of its reinsurance products.

The Company is exposed to credit-related  losses in the event of non-performance
by  the  counterparties  to  various  contracts,  but it  does  not  expect  the
counterparties  to  fail to meet  their  obligations  given  their  high  credit
ratings.


                                       48


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


13.   Segment Information

The Company  conducts  its  operations  principally  through the  following  two
business segments:

Property and Casualty Insurance/Reinsurance Segment (Property/Casualty)

The domestic property/casualty  operations of the Company include reinsurance of
most property/casualty lines of business, including general liability, property,
workers'  compensation  and auto  liability  in the  United  States,  Canada and
business  written in the United States where the reinsured is outside the United
States.  In addition,  the Company  provides  insurance and  reinsurance for the
healthcare  industry,  conducts  excess and surplus  lines and direct  specialty
insurance  business  and  participates  in  financially   oriented   reinsurance
treaties.

International  property/casualty  operations are conducted through  subsidiaries
and branch offices located in Australia, Denmark, England, France, Germany, Hong
Kong, Ireland, Italy, Japan, Lebanon, Luxembourg, Malaysia, Mexico, New Zealand,
Singapore and Spain, and include  reinsurance of  property/casualty  business in
those countries and elsewhere outside the United States and Canada.


Life Reinsurance Segment (Life)

The  domestic  and   international   life  operations  of  the  Company  include
reinsurance of life and health insurance and annuity products and  participation
in financially oriented reinsurance treaties.  The international life operations
are conducted  through  subsidiaries  and branch  offices as detailed  above and
include  reinsurance of life business in those  countries and elsewhere  outside
the United States and Canada.

The following is a summary of industry segment activity :

<TABLE>
<CAPTION>
                                                                           1997 - Industry Segments
                                                                    --------------------------------------
                                                                     Property/
(In millions)                                                        Casualty         Life   Consolidated
                                                                    --------------------------------------
<S>                                                                      <C>           <C>           <C>    
Net premiums written                                                  $ 3,493        $1,052       $ 4,545 
                                                                      =======        ======       =======

Net premiums earned                                                   $ 3,523        $  944       $ 4,467
Net investment income                                                     681           229           910
Net realized gains on investments                                         260            43           303
Other revenues                                                             37            67           104
                                                                      -------        ------       -------
Total revenues                                                          4,501         1,283         5,784
                                                                      -------        ------       -------

Claims, claim expenses and policy benefits                              2,481           779         3,260
Insurance acquisition costs                                               883           190         1,073
Other operating costs and expenses                                        407           162           569
                                                                      -------        ------       -------
Total costs and expenses                                                3,771         1,131         4,902
                                                                      -------        ------       -------

Earnings before income taxes                                          $   730        $  152       $   882
                                                                      =======        ======       =======

Total assets - December 31                                            $19,356        $8,176       $27,532
                                                                      =======        ======       =======
</TABLE>


                                       49


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


13.  Segment Information (continued)

<TABLE>
<CAPTION>
                                                                            1996 - Industry Segments
                                                                    --------------------------------------
                                                                     Property/
(In millions)                                                        Casualty         Life   Consolidated
                                                                    --------------------------------------
<S>                                                                      <C>           <C>           <C>    
Net premiums written                                                  $ 3,937        $  636       $ 4,573 
                                                                      =======        ======       =======

Net premiums earned                                                   $ 4,015        $  633       $ 4,648
Net investment income                                                     656           181           837
Net realized gains on investments                                         200            23           223
Other revenues                                                             (1)           44            43
                                                                      -------        ------       -------
Total revenues                                                          4,870           881         5,751
                                                                      -------        ------       -------

Claims, claim expenses and policy benefits                              2,869           504         3,373
Insurance acquisition costs                                               989           117         1,106
Other operating costs and expenses                                        350           142           492
                                                                      -------        ------       -------
Total costs and expenses                                                4,208           763         4,971
                                                                      -------        ------       -------

Earnings before income taxes                                          $   662        $  118       $   780
                                                                      =======        ======       =======

Total assets - December 31                                            $18,880        $6,508       $25,388
                                                                      =======        ======       =======
</TABLE>

<TABLE>
<CAPTION>
                                                                            1995 - Industry Segments
                                                                    --------------------------------------
                                                                     Property/
(In millions)                                                        Casualty         Life   Consolidated
                                                                    --------------------------------------
<S>                                                                      <C>           <C>           <C>    
Net premiums written                                                  $ 3,123        $  438       $ 3,561 
                                                                      =======        ======       =======

Net premiums earned                                                   $ 3,446        $  440       $ 3,886
Net investment income                                                     519           157           676
Net realized gains on investments                                         162            29           191
Other revenues                                                             15            30            45
                                                                      -------        ------       -------
Total revenues                                                          4,142           656         4,798
                                                                      -------        ------       -------

Claims, claim expenses and policy benefits                              2,649           345         2,994
Insurance acquisition costs                                               761            86           847
Other operating costs and expenses                                        261           135           396
                                                                      -------        ------       -------
Total costs and expenses                                                3,671           566         4,237
                                                                      -------        ------       -------

Earnings before income taxes                                          $   471        $   90       $   561
                                                                      =======        ======       =======

Total assets - December 31                                            $19,991        $5,622       $25,613
                                                                      =======        ======       =======
</TABLE>


                                       50


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


13.  Segment Information (continued)

The following table is a summary of the Company's  business by geographic  area.
Allocations  to the domestic  geographic  area include  business  related to the
United States and Canada, as well as business written in the United States where
the  reinsured is outside the United  States.  International  business  includes
business   written  by   subsidiaries   located   outside  the  United   States,
predominantly in Europe.

<TABLE>
<CAPTION>
                                                                             Geographic Area
                                                           ------------------------------------------------
(In millions)                                               Domestic         International    Consolidated
                                                           ------------------------------------------------
<S>                                                            <C>                  <C>              <C>    
1997:
   Revenues                                                 $ 2,943              $ 2,841          $ 5,784 
   Earnings before income taxes                                 566                  316              882
   Identifiable assets at December 31                        16,622               10,910           27,532

1996:
   Revenues                                                 $ 2,692              $ 3,059          $ 5,751
   Earnings before income taxes                                 442                  338              780
   Identifiable assets at December 31                        13,659               11,729           25,388

1995:
   Revenues                                                 $ 2,936              $ 1,862          $ 4,798
   Earnings before income taxes                                 399                  162              561
   Identifiable assets at December 31                        12,777               12,836           25,613
</TABLE>


14.   Unaudited Quarterly Financial Data

Summarized  quarterly  financial  results and other data were as follows in 1997
and 1996:

<TABLE>
<CAPTION>
                                                                     Year ended December 31, 1997
                                                           ------------------------------------------------
                                                             First        Second        Third      Fourth
(In millions)                                               Quarter       Quarter      Quarter     Quarter
                                                           ------------------------------------------------
<S>                                                           <C>           <C>          <C>          <C>    
Net premiums earned                                         $1,344        $1,214       $  996       $  913 
Net investment income                                          224           211          242          233
Total costs and expenses                                     1,443         1,322        1,143          994
Net earnings                                                   158           155          167          168
</TABLE>

<TABLE>
<CAPTION>
                                                                     Year ended December 31, 1996
                                                           ------------------------------------------------
                                                             First        Second        Third      Fourth
(In millions)                                               Quarter       Quarter      Quarter     Quarter
                                                           ------------------------------------------------
<S>                                                           <C>           <C>          <C>          <C>    
Net premiums earned                                         $1,236        $1,052       $1,075       $1,285 
Net investment income                                          203           211          206          217
Total costs and expenses                                     1,331         1,129        1,150        1,361
Net earnings                                                   136           134          146          151
</TABLE>


                                       51


<PAGE>
                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (continued)


15.   Subsequent Event

On  January 6, 1998,  the  Company  purchased  for $235  million  the assets and
assumed the renewal  rights of  Industrial  Risk Insurers  ("IRI"),  a leader in
providing highly protected risk property  insurance.  The business  underwritten
through IRI will be managed by a joint  venture  formed  between the Company and
The Hartford Steam Boiler Inspection and Insurance Company ("HSB") as stipulated
by a management  agreement.  IRI will write  business  utilizing  the  licensing
authority of HSB and the business underwritten will be subsequently allocated to
HSB and the Company in accordance with certain  reinsurance  agreements  between
HSB and the Company. In conjunction with this acquisition, the Company purchased
$300 million of 7% convertible capital securities from a Delaware business trust
formed by HSB's parent,  HSB Group,  Inc., to provide capital for HSB to support
the  anticipated  increase in gross  premiums  written  associated  with the IRI
business.


                                       52


<PAGE>
                          Financial Statement Schedules


                                       53


<PAGE>
<TABLE>
<CAPTION>
                                                                                                     Schedule II

                               GE GLOBAL INSURANCE HOLDING CORPORATION
                                          AND SUBSIDIARIES

                            Condensed Financial Information of Registrant
                                          (Parent Company)

                                        Statement of Earnings


                                                                            Year ended December 31,
                                                                        --------------------------------
(In millions)                                                            1997        1996          1995
                                                                        --------------------------------
<S>                                                                      <C>         <C>           <C>    
Revenues
Net investment income                                                    $  -        $  -          $  1 
Equity in undistributed earnings                                          387         472           384
Dividends from subsidiaries                                               298         123            63
                                                                         ----        ----          ----
Total revenues                                                            685         595           448
                                                                         ----        ----          ----

Costs and Expenses
Interest expense                                                           42          42            16
Other operating costs and expenses                                         15           1             -
                                                                         ----        ----          ----
Total costs and expenses                                                   57          43            16
                                                                         ----        ----          ----

Earnings before income taxes                                              628         552           432

Provision for income taxes                                                (20)        (15)           (5) 
                                                                         ----        ----          ----

Net earnings                                                             $648        $567          $437
                                                                         ====        ====          ====
</TABLE>


See Notes to Condensed Financial Information of Registrant.


                                       54


<PAGE>
<TABLE>
<CAPTION>
                                                                                                     Schedule II

                               GE GLOBAL INSURANCE HOLDING CORPORATION
                                          AND SUBSIDIARIES

                      Condensed Financial Information of Registrant (continued)
                                          (Parent Company)

                                   Statement of Financial Position


                                                                             December 31,
                                                                       ------------------------
(In millions)                                                            1997            1996
                                                                       ------------------------
<S>                                                                       <C>             <C>    
Assets
Investments in subsidiaries                                             $5,899          $5,314 
Short-term investments, at amortized cost                                   40               7
Other assets                                                                 7              22
                                                                        ------          ------

Total assets                                                            $5,946          $5,343
                                                                        ======          ======

Liabilities and equity
Other liabilities                                                       $   16          $   27
Long-term borrowings                                                       556             556
                                                                        ------          ------
   Total liabilities                                                       572             583
                                                                        ------          ------

Common stock, $5,000 par value; authorized,
   issued and outstanding - 1,000 shares                                     5               5
Preferred stock, $100,000 par value; authorized,
   issued and outstanding - 1,500 shares                                   150             150
Paid-in capital                                                            845             845
Unrealized gains on subsidiary's investments                               746             500
Foreign currency translation adjustments                                   (32)             15
Retained earnings                                                        3,660           3,245
                                                                        ------          ------
   Total stockholder's equity                                            5,374           4,760
                                                                        ------          ------

Total liabilities and equity                                            $5,946          $5,343
                                                                        ======          ======
</TABLE>


See Notes to Condensed Financial Information of Registrant.


                                       55


<PAGE>
<TABLE>
<CAPTION>
                                                                                                     Schedule II

                                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                               AND SUBSIDIARIES

                            Condensed Financial Information of Registrant (continued)
                                               (Parent Company)

                                            Statement of Cash Flows


                                                                        Year ended December 31,
                                                                      ----------------------------
(In millions)                                                          1997       1996       1995
                                                                      ----------------------------
<S>                                                                    <C>        <C>        <C>    
Cash Flows From Operating Activities
Net earnings                                                           $648       $567    $   437 
Adjustments to reconcile net earnings to cash
   from operating activities:
     Equity in undistributed earnings                                  (387)      (472)      (384) 
     Other, net                                                           5          -          4
                                                                       ----       ----    -------
   Cash from operating activities                                       266         95         57
                                                                       ----       ----    -------

Cash Flows From Investing Activities
Net (purchases) sales of short-term investments                         (33)        14        (21)
Investment in subsidiary                                                  -          -     (1,055)
                                                                       -----      ----    -------
   Cash from (used for) investing activities                            (33)        14     (1,076)
                                                                       -----      ----    -------

Cash Flows From Financing Activities
Proceeds from short-term borrowings                                       -          -        600
Principal payments on short-term borrowings                               -       (600)         -
Proceeds from long-term borrowings                                        -        556          -
Contribution to capital                                                   -          -        300
Proceeds from issuance of preferred stock                                 -          -        150
Dividends paid                                                         (233)       (65)       (31)
                                                                       ----       ----    -------
   Cash from (used for) financing activities                           (233)      (109)     1,019
                                                                       ----       ----    -------

Increase (decrease) in cash                                               -          -          -
Cash at beginning of year                                                 -          -          -
                                                                       ----       ----    -------
                                                                                                
Cash at end of year                                                    $  -       $  -    $     -
                                                                       ====       ====    =======
</TABLE>

                                                                                
See Notes to Condensed Financial Information of Registrant.


                                       56


<PAGE>
                                                                     Schedule II

                     GE GLOBAL INSURANCE HOLDING CORPORATION
                                AND SUBSIDIARIES

             Notes to Condensed Financial Information of Registrant
                                (Parent Company)


1.   Basis of Presentation

GE  Global  Insurance  Holding  Corporation  ("GE  Global")  is  a  wholly-owned
subsidiary of General Electric Capital Services,  Inc. ("GE Capital  Services"),
which is a wholly-owned subsidiary of General Electric Company.

GE Global's  primary asset is its 100%  investment in the common stock of ERC, a
Missouri-domiciled  property/casualty  reinsurance company. ERC owns 100% of the
common stock of various other  property/casualty  reinsurance,  life reinsurance
and reinsurance intermediary companies.

The  accompanying  financial  statements  have  been  prepared  on the  basis of
generally accepted accounting principles ("GAAP").  The preparation of financial
statements in conformity  with GAAP  requires  management to make  estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates.


                                       57


<PAGE>
<TABLE>
<CAPTION>
                                                                                                     Schedule III

                                             GE GLOBAL INSURANCE HOLDING CORPORATION
                                                        AND SUBSIDIARIES
 
                                              Supplementary Insurance Information
     

    Column A                Column B         Column C             Column D      Column E        Column F
-----------------------------------------------------------------------------------------------------------
                            Deferred
                           Insurance     Claims and Claim                      Accumulated          Net
                          Acquisition   Expenses and Future       Unearned       Contract         Premiums 
(In millions)                Costs        Policy Benefits         Premiums        Values           Earned
                         ----------------------------------------------------------------------------------
<S>                           <C>                <C>                 <C>            <C>               <C>   
December 31, 1997:
   Property/Casualty          $266            $10,936              $1,126         $    -            $3,523 
   Life                        578              1,629                 118          2,305               944
                              ----            -------              ------         ------            ------
   Total                      $844            $12,565              $1,244         $2,305            $4,467
                              ====            =======              ======         ======            ======

December 31, 1996:
   Property/Casualty          $244            $10,869              $1,161         $    -            $4,015
   Life                        251                831                   9          1,643               633
                              ----            -------              ------         ------            ------
   Total                      $495            $11,700              $1,170         $1,643            $4,648
                              ====            =======              ======         ======            ======

December 31, 1995:
   Property/Casualty          $303            $11,145              $1,322         $    -            $3,446
   Life                        171                719                   6          1,809               440
                              ----            -------              ------         ------            ------
   Total                      $474            $11,864              $1,328         $1,809            $3,886
                              ====            =======              ======         ======            ======
</TABLE>

<TABLE>
<CAPTION>
                            Column G         Column H             Column I       Column J         Column K
                          ----------------------------------------------------------------------------------

                                                                Amortization             Other
                              Net          Claims, Claim         of Deferred           Operating       
                           Investment   Expenses and Policy       Insurance              Costs        Net
(In millions)                Income           Benefits           Acquisition              and      Premiums 
                                                                    Costs               Expenses    Written
                          ----------------------------------------------------------------------------------
<S>                           <C>                <C>                 <C>                   <C>         <C>    
December 31, 1997:
   Property/Casualty          $681            $ 2,481              $  883                $  407      $3,493 
   Life                        229                779                 190                   162
                              ----            -------              ------                ------
   Total                      $910            $ 3,260              $1,073                $  569
                              ====            =======              ======                ======

December 31, 1996:
   Property/Casualty          $656            $ 2,869              $  989                $  350      $3,937
   Life                        181                504                 117                   142
                              ----            -------              ------                -------
   Total                      $837            $ 3,373              $1,106                $  492
                              ====            =======              ======                ======

December 31, 1995:
   Property/Casualty          $519            $ 2,649              $  761                $  261      $3,123
   Life                        157                345                  86                   135
                              ----            -------              ------                ------
   Total                      $676            $ 2,994              $  847                $  396
                              ====            =======              ======                ======
</TABLE>


                                       58


<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.


<TABLE>
<CAPTION>
                                                       GE GLOBAL INSURANCE HOLDING CORPORATION

March 25, 1998                                         By:                /s/ Robert J. Dellinger
                                                          -------------------------------------------------------            
                                                                            Robert J. Dellinger
                                                             Senior Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the date
indicated.

              <S>                                                   <C>                                    <C>
              Signatures                                           Title                                   Date
              ----------                                           -----                                   ----

            /s/ KAJ AHLMANN             President, Chief Executive Officer and Director               March 25, 1998
---------------------------------------
              Kaj Ahlmann               (Principal Executive Officer)

        /s/ ROBERT J. DELLINGER         Senior Vice President, Chief Financial Officer and Director   March 25, 1998
---------------------------------------
          Robert J. Dellinger           (Principal Financial and Accounting Officer)

           /s/ GARY C. WENDT            Chairman                                                      March 25, 1998
---------------------------------------
             Gary C. Wendt

          /s/ JAMES A. PARKE            Director                                                      March 25, 1998
---------------------------------------
            James A. Parke

         /s/ JOHN M. CONNELLY           Senior Vice President, General Counsel and Director           March 25, 1998
---------------------------------------
           John M. Connelly
</TABLE>


                                       59