UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

** 
**FORM 10-Q**
 
(mark one)**[ X ] **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended **September 28, 2002**
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 0-14804

**                                        **

**GENERAL ELECTRIC CAPITAL SERVICES,INC.**
(Exact name of registrant as specified in its charter)
**Delaware**06-1109503
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

  **260 Long Ridge Road, Stamford, Connecticut**06927
(Address of principal executive      offices)
(Zip Code)
(Registrant's telephone number,including area code) **(203) 357-4000**

**                                                                                               **

 

(Formername, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes  **X**  No     
At October 28, 2002, 1,012 shares of common stock with a par value of$1,000 were outstanding.
**REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONH(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THEREDUCED DISCLOSURE FORMAT.****TABLE OF CONTENTS

 

 
**Page**PART I - FINANCIAL INFORMATION
 
  
Item 1.       Financial Statements
1
Item 2.       Management's Discussion and Analysis of Results      of Operations
7
Item 4.       Controls and Procedures
19  **PART II - OTHER INFORMATION 
Item 6.  Exhibits and Reports on Form 8-K
20
Signatures
21
Certifications Pursuant to Section 302 of the            Sarbanes-Oxley Act of 2002
22            Exhibit 12.    Computation of Ratio of Earnings to            Fixed Charges and Computation****
 of Ratio of Earnings to Combined Fixed            Charges and Preferred Stock Dividends
24Exhibit 99.1       Certification Pursuant to 18 U.S.C.      Section 1350, As Adopted****
 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
25Exhibit 99.2       Certification Pursuant to 18 U.S.C.      Section 1350, As Adopted****
 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
26** 

 ****PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements****GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATEDAFFILIATES****Condensed Statement of Current and Retained Earnings**
(Unaudited)

 **Third quarter ended**
**Nine months ended
*(Dollars in millions)* **September       
28, 2002 **September       
      29, 2001  **September       
28, 2002 **September       
 29, 2001 **Revenues        
Revenues from services       $
 14,202 $
 12,520  $
 40,238 $
 39,614 
Sales of goods       
779 
778  
2,494 
2,806   
14,981 
13,298  
42,732 
42,420 **Expenses                  
Interest       
2,645 
2,503  
7,362 
8,072 
Operating and administrative       
4,101 
3,455  
11,509 
11,584 
Cost of goods sold       
673 
692  
2,237 
2,519 
Insurance losses and policyholder and annuity        
                 benefits 
4,227 
3,618  
11,465 
10,853 
Provision for losses on financing receivables       
640 
567  
2,087 
1,546 
Depreciation and amortization of buildings and        
                 equipment        and equipment on operating        
                 leases 
983 
924  
2,703 
2,514 
Minority interest in net earnings of        consolidated affiliates
 
39
27
113
126
 
 
13,308 
11,786  
37,476 
37,214 **Earnings          
Earnings before income taxes and accounting        
 changes       
1,673 
1,512  
5,256 
5,206 
Provision for income taxes 
(122
)
(211
) 
(721
)
(1,027
)**Earnings before accounting changes
1,551
1,301
4,535
4,179
Cumulative effect of accounting changes 
- 
-  
(1,015
)
(169
)**Net Earnings 
1,551 
1,301  
3,520 
4,010 
Dividends 
(550
)
(454
) 
(1,511
)
(1,460
)
Retained earnings at beginning of period 
25,686 
22,925  
24,678 
21,222 **Retained earnings at end of period$ 
26,687 $
 23,772  $
 26,687 $
 23,772 
See Notes to Condensed, Consolidated Financial Statements.

1

 
**GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATEDAFFILIATES****Condensed Statement of Financial Position***(Dollars in millions)**September

28, 2002
**December 

31, 2001 
(Unaudited)            **Assets
 
  
 
  
Cash and equivalents
$
9,295 
$
7,314 
Investment securities
 

114,846 
 

100,138 
Financing receivables:
 
  
 
  
Time sales and loans, net of deferred income
 

134,909 
 

122,686 
Investment in financing leases, net of deferred income
 

58,373 
 

56,147  
 

193,282 
 

178,833 
Allowance for losses on financing receivables
(5,065
)
(4,801
)
Financing receivables - net
 

188,217 
 

174,032 
Insurance receivables - net
 

29,528 
 

27,317 
Other receivables - net
 

14,383 
 

13,267 
Inventories
 

251 
 

270 
Equipment on operating leases (at cost), less accumulated

 amortization of $10,532 and $9,135

 

29,085 
 

27,320 
Intangible assets
 

22,527 
 

20,757 
Other assets
 

65,240 
 

55,069 **Total assets
$
473,372 
$
425,484  
 
  
 
  **Liabilities and share owners equity
 
  
 
  
Short-term borrowings
$
128,307 
$
160,844 
Long-term borrowings:
 
  
 
  
Senior
 

132,030 
 

77,920 
Subordinated
 

1,255 
 

1,171 
Insurance liabilities, reserves and annuity benefits
 

131,935 
 

114,223 
Other liabilities
 

33,615 
 

30,352 
Deferred income taxes
 

10,213 
 

8,117 
Total liabilities
 

437,355 
 

392,627  
 
  
 
  
Minority interest in equity of consolidated affiliates
 

4,435 
 

4,267 
Accumulated gains/(losses) - net
 
  
 
  
Investment securities
 

1,671 
 

(348
)
Currency translation adjustments
 

(742
)
 

(840
)
Derivatives qualifying as hedges
 

(2,006
)
 

(890
)
Accumulated non-owner changes in share owners' equity
 

(1,077
)
 

(2,078
)
Capital stock
 

11 
 

11 
Additional paid-in capital
 

5,961 
 

5,979 
Retained earnings
 

26,687 
 

24,678 
Total share owners' equity
 

31,582 
 

28,590 
**Total liabilities and share owners' equity**
$
473,372 
$
425,484 ****
See Notes to Condensed, Consolidated Financial Statements.

2
**GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATEDAFFILIATES****Condensed Statement of Cash Flows**
(Unaudited)
 **Nine months ended*(Dollars in millions)**September

28, 2002**September

29, 2001**Cash Flows from Operating Activities        
 
  
 
  
Net earnings      
$
3,520 
$
4,010 
Adjustments to reconcile net earnings to cash provided        from operating activities:      
 
  
 
  
Cumulative effect of accounting changes      
 

1,015 
 

169 
Provision for losses on financing receivables      
 

2,087 
 

1,546 
Depreciation and amortization of buildings and equipment        and        
 equipment on operating leases      
 

2,703 
 

2,514 
Other - net      
 

7,776 
 

5,926 
Cash from operating activities      
 

17,101 
 

14,165  
 
  
 
  **Cash Flows from Investing Activities        
 
  
 
  
Increase in loans to customers      
 

(138,317
)
 

(95,501
)
Principal collections from customers - loans      
 

131,666 
 

89,407 
Investment in equipment for financing leases      
 

(13,704
)
 

(11,654
)
Principal collections from customers - financing        leases      
 

11,518 
 

11,357 
Net change in credit card receivables      
 

(2,016
)
 

2,412 
Buildings and equipment and equipment on operating        leases:      
 
  
 
  
- additions      
 

(6,855
)
 

(9,505
)
- dispositions      
 

4,395 
 

5,663 
Payments for principal businesses purchased, net of cash        acquired      
 

(5,542
)
 

(6,100
)
Purchases of securities by insurance and annuity        businesses      
 

(47,756
)
 

(36,414
)
Dispositions and maturities of securities by insurance        and annuity        
 businesses      
 

40,176 
 

30,203 
Other - net      
 

(4,133
)
 

(212
)
Cash used for investing activities      
 

(30,568
)
 

(20,344
) 
 
  
 
  **Cash Flows from Financing Activities
 
  
 
  
Net change in borrowings (maturities 90 days or less)      
 

(39,128
)
 

(119
)
Newly issued debt:      
 
  
 
  
- short-term (maturities 91-365 days)      
 

2,115 
 

3,717 
- long-term (longer than one year)      
 

75,129 
 

13,347 
Proceeds - nonrecourse, leveraged lease debt      
 

788 
 

1,321 
Repayments and other reductions:      
 
  
 
  
- short-term (maturities 91-365 days)      
 

(21,139
)
 

(5,951
)
- long-term (longer than one year)      
 

(4,276
)
 

(4,222
)
Principal payments - nonrecourse, leveraged lease debt      
 

(286
)
 

(206
)
Proceeds from sales of investment contracts      
 

6,216 
 

5,534 
Cash received upon assumption of insurance liabilities      
 

2,813 
 

- 
Redemption of investment contracts      
 

(5,273
)
 

(5,304
)
Cash contributions from parent company      
 

- 
 

395 
Dividends paid      
 

(1,511
)
 

(1,460
)
Cash from financing activities      
 

15,448 
 

7,052  
 
  
 
  **Increase/(decrease) in Cash and Equivalents During the        Period        
 

1,981 
 

873 **Cash and Equivalents at Beginning of Period        
 

7,314 
 

6,052  
 
  
 
  **Cash and Equivalents at End of Period        
$
9,295 
$
6,925 
See Notes to Condensed, Consolidated Financial Statements.

3
**GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATEDAFFILIATES**
 
**Notes to Condensed, Consolidated Financial Statements

(Unaudited)**          1.    The accompanying condensed, consolidated quarterly financial statements    represent the consolidation of General Electric Capital Services, Inc. and    all majority-owned and controlled affiliates (collectively called "GECS").    All significant transactions among the parent and consolidated affiliates    have been eliminated. Certain prior period data have been reclassified to    conform to the current period presentation.    
           2.    The condensed, consolidated quarterly financial statements are unaudited.    These statements include all adjustments (consisting of normal recurring    accruals) considered necessary by management to present a fair statement of    the results of operations, financial position and cash flows. The results    reported in these condensed, consolidated quarterly financial statements    should not be regarded as necessarily indicative of results that may be    expected for the entire year.    
           3.    The Financial Accounting Standards Board's (FASB) Statement of Financial    Accounting Standards (SFAS) 142, *Goodwill and Other Intangible Assets,*generally    became effective on January 1, 2002. Under SFAS 142, goodwill is no longer    amortized but is tested for impairment using a fair value methodology.
       GECS ceased amortizing goodwill effective January 1, 2002.Simultaneously, to maintain a consistent basis for its measurement ofperformance, management revised previously-reported segment information tocorrespond to the earnings measurements by which businesses were to beevaluated. As required by SFAS 131, *Disclosures about Segments of an Enterpriseand Related Information*, previously reported segment results (presentedunder the heading Operating Segments on pages****8 and 13), have beenrestated to be consistent with 2002 reporting. Goodwill amortization expense forthe third quarter and nine months ended September 29, 2001, was $187 million ($146million after tax) and $533 million ($419 million after tax), respectively. Theeffect on earnings of excluding such goodwill amortization from the thirdquarter and first nine months of 2001 follow:

**Third quarter ended**Nine months ended        *(Dollars in millions)* **Septe**mber **

**28, 2002**
**September 

**29, 2001**

 **September **

**28, 2002**
**September 

29, 2001

Earnings before accounting changes $
1,551 $
1,301 
$
4,535 
$
4,179
Earnings before accounting changes,      
 excluding 2001 goodwill amortization $
1,551 $
1,447 
$
4,535 
$
4,598
Net earnings $
1,551 $
1,301 
$
3,520 
$
4,010
Net earnings, excluding 2001 goodwill      
 amortization
$
1,551

$
1,447 
 
$
3,520
 

 
$
4,429

        Under SFAS 142, GECS was required to test all existing goodwillfor impairment as of January 1, 2002, on a "reporting unit" basis. Areporting unit is the operating segment unless, at businesses one level belowthat operating segment (the "component" level), discrete financialinformation is prepared and regularly reviewed by management, in which case suchcomponent is the reporting unit.

        A fair value approach is used to test goodwill for impairment.An impairment charge is recognized for the amount, if any, by which the carryingamount of goodwill exceeds its fair value. Fair values were established usingdiscounted cash flows. When available and as appropriate, comparative marketmultiples were used to corroborate discounted cash flow results.

        The result of testing goodwill of GECS for impairment inaccordance with SFAS 142, as of January 1, 2002, was a non-cash charge of $1,204million ($1,015 million after tax), which is reported in the caption"Cumulative effect of accounting changes". Substantially all of thecharge relates to the IT Solutions business and the GE Auto and Home business, adirect subsidiary of GE Financial Assurance. The primary factors resulting inthe impairment charge were the difficult economic environment in the informationtechnology sector and heightened price competition in the auto insuranceindustry. No impairment charge was appropriate under the FASB's previousgoodwill impairment standard, which was based on undiscounted cash flows.

4
**At September 28, 2002**At December 31, 2001**Intangibles Subject to Amortization        **Gross      
 Carrying      
 Amount**Accumulated Amortization**Gross      
 Carrying      
 Amount**Accumulated Amortization
*(Dollars in millions)*
Present value of future profits (PVFP)      
$ 5,237
$ (2,722)

$ 4,744
$ (2,546)
Capitalized software

1,440

(572)

1,307

(406)

Servicing assets      
3,763
(3,191)

3,768
(2,629)
All other
834
(496)

1,092
(506)
Total      
$ 11,274
$ (6,981)

$ 10,911
$ (6,087)
        Amortization expense related to intangible assets, excludinggoodwill, for the third quarter of 2002 and 2001 was $515 million and $408million, respectively and for the first nine months of 2002 and 2001 was $1,236million and $1,029 million, respectively. The estimated percentage of theDecember 31, 2001 net PVFP balance to be amortized over each of the next fiveyears follows:

2002
13.0%
2003
10.5%
2004
8.9%
2005
7.6%
2006
6.3%
        Amortization expense for PVFP in future periods will be affectedby acquisitions, realized capital gains/losses or other factors affecting theultimate amount of gross profits realized from certain lines of business.Similarly, future amortization expense for other intangibles will depend onacquisition activity and other business transactions.

**Goodwill**

Goodwill balances follow:
** ***(Dollars in millions)**GE Commercial Finance**GE Consumer Finance**GE Equipment Management**GE Insurance**All Other      **GECS**** 

Total
Balance,December 31, 2001
$
 6,235
$
3,826
$
 1,160
$
 3,372
$
 1,340
$
 15,933
Acquisitions/Purchase       
          Accounting Adjustments
1,293
1,137
13
535
-
2,978
Transition Impairment

           (Pre-Tax)

-
-
-
-
(1,204
)
(1,204)
All Other
49
180
45
255
(2
)
527
Balance, September 28, 2002

$
 7,577
$
5,143
$
 1,218
$
4,162
$
134
$
 18,234
          4.    At January 1, 2001, GECS adopted SFAS 133, *Accounting for Derivative    Instruments and Hedging Activities*, as amended. Under SFAS 133, all    derivative instruments are recognized in the statement of financial position    at their fair values. The cumulative effect of adopting this standard was a    one-time reduction of net earnings in the first quarter of 2001 of $49    million and comprised a portion of the effect of marking to market options    and currency contracts used for hedging. Also at January 1, 2001, GECS    adopted the consensus of the Emerging Issues Task Force of the FASB on    accounting for impairment of beneficial interests (EITF 99-20). Under this    consensus, impairment of certain beneficial interests in securitized assets    must be recognized when the asset's fair value is below its carrying value    and it is probable that there has been an adverse change in estimated cash    flows. The cumulative effect of adopting EITF 99-20 was a one-time reduction    of net earnings in the first quarter of 2001 of $120 million.  
5
           5.    A summary of increases/(decreases) in share owners' equity that do not    result directly from transactions with share owners, net of income taxes,    follows:
 

 
**Third quarter ended *(Dollars in millions)
 
**September

28, 2002
 
**September

29, 2001 
 

 

 

 

 
 
Net earnings
 

$
1,551
 

$
1,301 
Investment securities - net changes in value
 

 

1,441
 

 

432 
Currency translation adjustments      - net
 

 

187
 

 

(84
)
Derivatives qualifying as hedges - net changes in value
 

 

(673
)
 

(487
)
Total
 

$
2,506
 

$
1,162 

 

 
**Nine months ended
 
*(Dollars in millions)
 
**September

28, 2002
 
**September

29, 2001
 

 

 

 

 

 

 

Net earnings
 

$
3,520
 

$
4,010
 

Investment securities - net changes in value
 

 

2,019
 

 

366
 

Currency translation adjustments - net
 

 

98
 

 

74
 

Derivatives qualifying as hedges - net changes in value
 

 

(1,116
)
 

(565
)
Cumulative effect on share owners' equity of adopting      
 SFAS 133
 

 

-
 

 

(849
)
Total
 

$
4,521
 

$
3,036
 

           6.    Revenues and net earnings before accounting changes of GECS,by operating segment, for the third quarters and nine months ended September 28, 2002and September 29, 2001, can be found in the consolidated tables on pages 8 and13 of this report, respectively.
     
6**Item 2.     Management's Discussion and Analysis of Results ofOperations

A.     Results of Operations - Third quarter of 2002 compared withthird quarter of 2001

Overview**
        GECS net earnings before accounting changes (discussed in notes3 and 4 to the condensed, consolidated financial statements) for the thirdquarter of 2002 were $1,551 million, a $250 million (19%) increase from thethird quarter of 2001. Excluding the effect of the prior-year goodwillamortization ($146 million after tax), net earnings before accounting changesincreased 7%. This increase resulted from the lack of a current year counterpartto the losses arising from the events of September 11 at GE Insurance, higherasset gains primarily at GE Commercial Finance, origination growthprimarily at GE Commercial Finance and GE Consumer Finance, the effects ofacquisitions primarily at GE Commercial Finance as well as increased taxbenefits from growth in low taxed earnings from international operations and afavorable tax settlement with the Internal Revenue Service regarding thetreatment of certain reserves for obligations to policyholders on life insurancecontracts at GE Insurance. These increases were partially offset by adversedevelopment on prior-year losses at GE Insurance, lower securitization gainsprimarily at GE Commercial Finance, lower investment gains primarily at GEInsurance and increased losses on investments at GE Equity. Contributions from acquired companies to net earningsin the third quarter of 2002 and 2001 were approximately $83 million and $43million, respectively. Acquisitions are integrated as quickly as possible; onlyearnings during the first 12 months following the quarter in which theacquisition is completed are considered to be related to acquired companies.
**Operating Results
*        Total revenues increased $1,683 million (13%) to $14,981million for the third quarter of 2002, compared with $13,298 million for thethird quarter of 2001. This increase resulted from the effects of acquisitionsand origination growth primarily at GE Commercial Finance and GE ConsumerFinance and the lack of a current year counterpart to the losses arising fromthe events of September 11 and higher premiums earned in the current year at GEInsurance, offset by lower securitization gains across all segments, and theabsence of a current year counterpart to Americom which was divested in thefourth quarter of 2001.
***        Interest expense on borrowings for the third quarter of2002 was $2,645 million, 6% higher than for the third quarter of 2001. Theincrease reflected the effects of higher average borrowings used to financeacquisitions and asset growth partially offset by the effects of lower interestrates. The average composite interest rate on GECS' borrowings for the thirdquarter of 2002 was 4.18% compared with 4.89% in the third quarter of 2001.
***        Operating and administrative expenses were $4,101million for the third quarter of 2002, a 19% increase over the third quarter of2001. The increase resulted from the effects of acquisitions at GE CommercialFinance and GE Consumer Finance, the 2001 reduction in insurance commissions asa result of the events of September 11 and increased commissions in the currentyear relating to volume increases at GE Insurance, partially offset by theabsence of amortization expense related to goodwill, as in accordance with SFAS142 GECS ceased amortizing goodwill effective January 1, 2002.
***        Cost of goods sold is associated with activities of GECS'computer equipment distribution business. This cost amounted to $673 million forthe third quarter of 2002, compared with $692 million for the third quarter of2001. The decrease primarily reflected volume declines at IT Solutions.
***        Insurance losses and policyholder and annuity benefits**increased $609 million to $4,227 million for the third quarter of 2002,compared with the third quarter of 2001. The increase is primarily a result ofadverse development on loss reserves at GE Global Insurance Holdings (theprincipal subsidiary of which is Employers Reinsurance Corporation - ERC),increased premium volume and the effects of acquisitions at GE FinancialAssurance.
***        Provision for losses on financing receivables were $640million for the third quarter of 2002 compared with $567 million for the thirdquarter of 2001. These provisions principally relate to consumer receivables andleases (private-label credit cards, bank credit cards, personal loans and autoloans) as well as commercial receivables (commercial, industrial, and equipmentloans and leases), all of which are discussed below under Portfolio Quality. Theincrease in the provision primarily reflected higher credit losses as well ashigher receivable balances. Future provisions for losses will depend primarilyon the size of the portfolio, which is expected to continue to grow, and onassociated business and economic conditions.
***        Depreciation and amortization of buildings and equipment andequipment on operating leases increased to $983 million for the thirdquarter of 2002, compared with $924 million for the third quarter of 2001. Theincrease was principally the result of higher levels of equipment on operatingleases at GE Commercial Finance, primarily reflecting origination growth andacquisitions, partially offset by the divestiture of Americom.

7
***        Provision for*income taxes***was $122million for the third quarter of 2002 (an effective tax rate of 7.3%), comparedwith $211 million for the third quarter of 2001 (an effective tax rate of14.0%). The lower effective tax rate primarily reflected the effect of increasedlow taxed earnings from international operations and the benefits of a favorablesettlement at GE Insurance with the Internal Revenue Service regarding thetreatment of certain reserves for obligations to policyholders on life insurancecontracts.
**Operating Segments**
        Revenues and net earnings before accounting changes of GECS, byoperating segment, for the third quarters ended September 28, 2002 and September29, 2001 are summarized and discussed below. Third quarter 2002 and 2001 amountshave been reclassified to conform to the new business segments formed as aconsequence of the reorganization of GECS' businesses as announced by itsparent, General Electric Company ("GE") on July 26, 2002, and changesin the amortization of goodwill, effective as of January 1, 2002.
**Consolidated** **Third quarter ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Commercial Finance
$
4,145  
$
3,489 
GE Consumer Finance 
2,701   
2,343 
GE Equipment Management 
1,073   
1,159 
GE Insurance 
6,197   
5,186 
All Other GECS 
865   
1,121 
Total revenues
$
14,981  
$
13,298         **Net earnings       
GE Commercial Finance
$
881  
$
751 
GE Consumer Finance 
501   
453 
GE Equipment Management 
82   
108 
GE Insurance 
211   
112 
All Other GECS
(124
)
23
Net earnings 
1,551   
1,447 
Amortization of goodwill 
-   
(146
)
Net Earnings - as reported
$
1,551  
$
1,301 
               Following is a discussion of revenues and net earnings fromoperating segments for the third quarter of 2002 and 2001.

8

**           GE Commercial Finance**
 **Third quarter ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
Commercial Equipment Financing
$
1,278  
$
1,240 
Real Estate 
552   
471 
Aviation Services (GECAS) 
741   
497 
Structured Finance Group 
323   
275 
Commercial Finance 
615   
473 
Vendor Financial Services 
569   
533 
Other GE Commercial Finance 
67   
-       
Total revenues
$
4,145  
$
3,489       **Net earnings       
Commercial Equipment Financing
$
184  
$
186 
Real Estate 
182   
170 
Aviation Services (GECAS) 
129   
88 
Structured Finance Group 
122   
113 
Commercial Finance 
205   
115 
Vendor Financial Services 
91   
80 
Other GE Commercial Finance 
(32
)  
(1
)      
Net earnings
$
881  
$
751 *        GE Commercial Finance revenues and netearnings increased 19% and 17%, respectively, in the third quarter of 2002compared with the third quarter of 2001. The increase in revenues principallyreflected acquisitions across all businesses, origination growth, and higher asset sales at GECAS, partially offset by lower securitization gains. Theincrease in net earnings reflected higher asset gains at GECAS, originationgrowth and the effects of acquisitions across all businesses, partially offsetby lower securitization gains. Other GE Commercial Finance principally includes  2002 revenues of $66 million and net earnings of $17 million of the Healthcare  Financial Services business acquired in October 2001.**GE Consumer Finance** **Third quarter ended*(Dollars in millions)
**9/28/02** **9/29/01**Revenues  
Global Consumer Finance
$
1,787  
$
1,376 
GE Card Services 
912   
967 
Other GE Consumer Finance 
2   
-   
Total revenues
$
2,701  
$
2,343   **Net earnings       
Global Consumer Finance
$
354  
$
271 
GE Card Services 
149   
184 
Other GE Consumer Finance 
(2
)  
(2
) 
Net earnings
$
501  
$
453 *        GE Consumer Finance revenues and netearnings increased 15% and 11%, respectively, compared with the third quarter of2001. Higher segment revenues and net earnings resulted primarily fromacquisitions and international origination growth, partially offset by lowersecuritization gains at GE Card Services.

9**GE Equipment Management** **Third quarter ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Equipment Management revenues
$
1,073  
$
1,159       **Net earnings       
GE Equipment Management net earnings
$
82  
$
108 *        GE Equipment Management revenues andnet earnings decreased 7% and 24%, respectively, compared with the third quarterof 2001. The decrease in revenues was attributable to lower asset utilization.The decrease in net earnings was principally attributable to the lack of acurrent-year counterpart to prior-year tax benefits from a restructuring atPenske and decreased utilization.**GE Insurance** **Third quarter ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Financial Assurance
$
3,209  
$
3,084 
Mortgage Insurance 
265   
247 
GE Global Insurance Holdings 
2,585   
1,684 
Other GE Insurance 
138   
171       
Total revenues
$
6,197  
$
5,186       **Net earnings       
GE Financial Assurance
$
182  
$
169 
Mortgage Insurance 
124   
114 
GE Global Insurance Holdings 
(156
)  
(229
)
Other GE Insurance 
61   
58       
Net earnings
$
211  
$
112 *        *GE Insurance*revenues and net earnings increased 19% and 88%, respectively, in the thirdquarter of 2002 reflecting approximately $575 million ($386 million after tax)insurance losses arising from the events of September 11, 2001, at GE GlobalInsurance Holdings. Ordinarily, insurance losses are recorded on thecorresponding line in the Statement of Earnings. In this case, however, thelosses were recoverable under retrocession coverage, sothat no net losses were recorded.  However, the retrocession policiesrequired a premium payment of $821 million (reported as a reduction ofrevenues), on which the business retained a ceding commission of $246 million(reported as a reduction of insurance acquisition costs).
        Revenues also benefited from recent increases in pricing andgrowth within certain niche markets at GE Global Insurance Holdings as well asacquisition and origination growth at GE Financial Assurance. These increaseswere partially offset by selective exits from certain lines of business andcustomer relationships as part of a portfolio review at GE Global InsuranceHoldings. Investment gains were also lower in 2002.

        Net earnings also benefitedby $75 million from the recognition of a favorabletax settlement with the Internal Revenue Service regarding the treatment ofcertain reserves for obligations to policyholders on life insurance contractsand productivity benefits at GE Financial Assurance, partially offset by adversedevelopment and adjustments to estimates of prior-year loss events at GE GlobalInsurance Holdings and lower investment gains.

10
**All Other GECS** **Third quarter ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
IT Solutions
$
878  
$
905 
GE Equity 
(206
)  
(83
)
Americom 
-   
131 
Other 
193   
168       
Total revenues
$
865  
$
1,121       **Net earnings       
IT Solutions
$
(6
) 
$
(3
)
GE Equity 
(167
)  
(98
)
Americom 
-   
109 
Other 
49   
15       
Net earnings
$
(124
) 
$
23 *        All Other GECS includes, pursuant toSFAS 131, GECS activities and businesses that management does not measure within one of the four GECS segments.
        Two factors explain these results:
**GE Equity -- GE Equity manages equity investments in early-stage, earlygrowth, pre-IPO companies. GE Equity revenues include income, gains and losseson such investments. Revenues and net earnings during the third quarter of 2002reflected increased losses on investments including losses in thetelecommunications and software industries.During thethird quarter of 2002 and 2001, losses on GE Equity's investments exceededgains and other investment income, resulting in negative revenues and earnings.*Other -- Other includes GECS corporate function expenses, liquidatingbusinesses and other non-segment aligned operations, the most significant ofwhich were Auto Financial Services, Mortgage Services, and GE Auto andHome. The increase in net earnings reflects tax benefits from growth in lowtaxed earnings from international operations, partially offset by the effects ofproduct line exits.
11
**B.     Results of Operations - First nine months of 2002 comparedwith first nine months of 2001

Overview**
        GECS net earnings before accounting changes (discussed in notes3 and 4 to the condensed, consolidated financial statements) for the first ninemonths of 2002 were $4,535 million, a $356 million (9%) increase from the firstnine months of 2001. Excluding the effect of the prior-year goodwillamortization ($419 million after tax), net earnings before accounting changesdecreased 1%. This decrease resulted from adverse development and adjustments to estimates ofprior-year loss events and lower investment gains at GE Insurance, lowersecuritization gains across all segments and the lack of a currentyear counterpart to the divestiture of Americom. These decreases were offset bylack of a current year counterpart to the losses arising from the events ofSeptember 11 at GE Insurance, acquisitionspredominantly at GE Commercial Finance, origination growth primarily at GEConsumer Finance and GE Commercial Finance, as well as increased tax benefitsfrom growth in low taxed earnings from international operations and favorabletax settlements with the Internal Revenue Service. Contributions from acquiredcompanies to net earnings in the first nine months of 2002 and 2001 wereapproximately $400 million and $80 million, respectively. Acquisitions areintegrated as quickly as possible; only earnings during the first 12 monthsfollowing the quarter in which the acquisition is completed are considered to berelated to acquired companies.
**Operating Results
*        Total revenues increased $312 million (1%) to $42,732million for the first nine months of 2002, compared with $42,420 million for thefirst nine months of 2001. This increase resulted from acquisitions primarily atGE Commercial Finance and GE Consumer Finance, lack of a current yearcounterpart to the losses arising from the events of September 11 at GEInsurance and origination growth, partially offset by reduced market interestrates primarily at GE Commercial Finance, lower investment gains across allsegments, increased estimates of prior-year loss events at GE Insurance,the absence of revenues from Americom which was divested in the fourth quarterof 2001, volume decreases at IT Solutions, and lower securitization gains acrossall segments.
***        Interest expense on borrowings for the first nine monthsof 2002 was $7,362 million, 9% lower than for the first nine months of 2001. Thedecrease reflected the effects of lower interest rates, partially offset by theeffects of higher average borrowings used to finance acquisitions and assetgrowth. The average composite interest rate on GECS' borrowings for the firstnine months of 2002 was 4.08% compared with 5.39% in the first nine months of2001.
***        Operating and administrative expenses were $11,509million for the first nine months of 2002, a 1% decrease compared with the first ninemonths of 2001. The decrease reflected productivity gains and the absence ofamortization expense related to goodwill, as in accordance with SFAS 142 GECSceased amortizing goodwill effective January 1, 2002. These decreases werepartially offset by operating and administrative expenses associated with recentacquisitions, the 2001 reduction in insurance commissions as a result of theevents of September 11 and increased commissions in the current year relating tovolume increase at GE Insurance.
***        Cost of goods sold is associated with activities of GECS'computer equipment distribution business. This cost amounted to $2,237 millionfor the first nine months of 2002, compared with $2,519 million for the firstnine months of 2001. The decrease primarily reflected volume declines at ITSolutions.
***        Insurance losses and policyholder and annuity benefits**increased $612 million to $11,465 million for the first nine months of 2002,compared with the first nine months of 2001. The increase is primarily a resultof adverse development on loss reserves at GE Global Insurance Holdings (theprincipal subsidiary of which is Employers Reinsurance Corporation - ERC) andthe effects of acquisitions at GE Financial Assurance, offset by favorabledevelopment on prior-year loss reserves at Mortgage Insurance.
***        Provision for losses on financing receivables were$2,087 million for the first nine months of 2002 compared with $1,546 millionfor the first nine months of 2001. These provisions principally relate toconsumer receivables and leases (private-label credit cards, bank credit cards,personal loans and auto loans) as well as commercial receivables (commercial,industrial, and equipment loans and leases), all of which are discussed belowunder Portfolio Quality. The increase in the provision primarily reflectedhigher credit losses as well as higher receivable balances. Future provisionsfor losses will depend primarily on the size of the portfolio, which is expectedto continue to grow, and on associated business and economic conditions.

12
***        Depreciation and amortization of buildings and equipment andequipment on operating leases increased to $2,703 million for the firstnine months of 2002, compared with $2,514 million for the first nine months of2001. The increase was principally the result of higher levels of equipment onoperating leases at GE Commercial Finance, primarily reflecting originationgrowth and acquisitions, partially offset by the divestiture of Americom.
***        Provision for*****income taxes*****was$721 million for the first nine months of 2002 (an effective tax rate of 13.7%),compared with $1,027 million for the first nine months of 2001 (an effective taxrate of 19.7%). The lower effective tax rate primarily reflected the effect ofincreased low taxed earnings from international operations and favorable taxsettlements with the Internal Revenue Service.
**Operating Segments**
        Revenues and net earnings before accounting changes of GECS, byoperating segment, for the first nine months of 2002 and 2001 are summarized anddiscussed below. The first nine months of 2002 and 2001 amounts have beenreclassified to conform to the new business segments formed as a consequence ofthe reorganization of GECS' businesses as announced by its parent, GeneralElectric Company ("GE") on July 26, 2002, and changes in theamortization of goodwill, effective as of January 1, 2002.
**Consolidated**
 **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Commercial Finance
$
11,623  
$
10,111 
GE Consumer Finance 
7,536   
7,110 
GE Equipment Management 
3,154   
3,312 
GE Insurance 
17,228   
17,353 
All Other GECS 
3,191   
4,534       
Total revenues
$
42,732  
$
42,420         **Net earnings       
GE Commercial Finance
$
2,330  
$
2,064 
GE Consumer Finance 
1,529   
1,354 
GE Equipment Management 
222   
364 
GE Insurance 
621   
969 
All Other GECS 
(167
)  
(153
)      
Total earnings before accounting changes 
4,535   
4,598 
Cumulative effect of accounting changes 
(1,015
)  
(169
)        
Net earnings
3,520
4,429
Amortization of goodwill 
-   
(419
)
Net Earnings - as reported
$
3,520  
$
4,010 
        Following is a discussion of revenues and net earnings fromoperating segments for the nine months ended September 28, 2002 and September29, 2001.

        For purposes of this discussion, earnings before accountingchanges are referred to as "net earnings."

13
**GE Commercial Finance** **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
Commercial Equipment Financing
$
3,529  
$
3,193 
Real Estate 
1,570   
1,530 
Aviation Services (GECAS) 
1,992   
1,602 
Structured Finance Group 
915   
862 
Commercial Finance 
1,779   
1,433 
Vendor Financial Services 
1,658   
1,491 
Other GE Commercial Finance 
180   
-       
Total revenues
$
11,623  
$
10,111       **Net earnings       
Commercial Equipment Financing
$
517  
$
425 
Real Estate 
477   
425 
Aviation Services (GECAS) 
341   
373 
Structured Finance Group 
376   
325 
Commercial Finance 
450   
320 
Vendor Financial Services 
232   
199 
Other GE Commercial Finance 
(63
)  
(3
)      
Net earnings
$
2,330  
$
2,064 *        GE Commercial Finance revenues and netearnings increased 15% and 13%, respectively, in the first nine months of 2002compared with the first nine months of 2001. The increase in revenuesprincipally reflected acquisitions across all businesses, origination growthand increased asset sales at GECAS, partially offset by reduced market interestrates and lower securitization gains. The increase in net earnings resulted fromacquisitions across all businesses, origination growth and increased assetsales at GECAS, partially offset by increased credit losses in 2002 and lowersecuritization gains. Other GE Commercial Finance principally includes 2002 revenues      of $179 million and net earnings of $48 million of the Healthcare      Financial Services business acquired in October 2001.**GE Consumer Finance** **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
Global Consumer Finance
$
4,758  
$
4,064 
GE Card Services 
2,777   
3,045 
Other GE Consumer Finance 
1   
1       
Total revenues
$
7,536  
$
7,110       **Net earnings       
Global Consumer Finance
$
997  
$
810 
GE Card Services 
536   
548 
Other GE Consumer Finance 
(4
)  
(4
)      
Net earnings
$
1,529  
$
1,354 *        14
*        GE Consumer Finance net earningsincreased 13% on revenues that were 6% higher compared with the first ninemonths of 2001. Revenues increased primarily as a result of acquisitions andincreased international originations, partially offset by lowersecuritization gains at GE Card Services and reduced revenues related to exitedbusinesses. The increase in net earnings resulted from international originationgrowth, productivity benefits and acquisitions, partially offset by lowersecuritization gains at GE Card Services.**GE Equipment Management** **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Equipment Management revenues
$
3,154  
$
3,312       **Net earnings       
GE Equipment Management net earnings
$
222  
$
364 *        GE Equipment Management revenuesdecreased 5% and net earnings decreased 39% in the first nine months of 2002.The decrease in revenues and net earnings reflected decreased utilization. Netearnings also reflected the lack of a current-year counterpart to prior-year taxbenefits from a restructuring at Penske.**GE Insurance** **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
GE Financial Assurance
$
9,009  
$
9,382 
Mortgage Insurance 
801   
826 
GE Global Insurance Holdings 
7,068   
6,746 
Other GE Insurance 
350   
399       
Total revenues
$
17,228  
$
17,353       **Net earnings       
GE Financial Assurance
$
408  
$
477 
Mortgage Insurance 
357   
331 
GE Global Insurance Holdings 
(312
)  
57 
Other GE Insurance 
168   
104       
Net earnings
$
621  
$
969 *        GE Insurance revenues decreased 1% inthe first nine months of 2002 primarily as a result of increased estimates ofprior-year loss events at GE Global Insurance Holdings, insurance policyholder      redemptions associated with the Toho Mutual Life Insurance Company      acquisition and lower investment gains at GE Financial Assurance, including a $167 million pretaximpairment on WorldCom, Inc. bonds. Partial offsets were 2002 acquisitions andinsurance losses arising from the events of September 11, 2001, at GE GlobalInsurance Holdings -- approximately $575 million ($386 million after-tax). Ordinarily, insurance losses are recorded on the corresponding line in theStatement of Earnings. In this case, however, the losses wererecoverable under retrocession coverage, so that no net losses wererecorded.  However, the retrocession policies required a premium payment of$821 million (reported as a reduction of revenues), on which the businessretained a ceding commission of $246 million (reported as a reduction ofinsurance acquisition costs).

15
        Net earnings decreased 36% in the first nine months of 2002resulting from adverse development and adjustments to estimates of prior-yearloss events at GE Global Insurance Holdings, as well as lower investment gainsprimarily at GE Financial Assurance, including a $110 million after-taximpairment on WorldCom Inc. bonds. These decreases were partially offset by theevents of September 11, 2001, discussed above, increases in productivity and the$75 million benefit from the recognition of a favorable tax settlement with the InternalRevenue Service regarding the treatment of certain reserves for obligations topolicyholders on life insurance contracts at GE Financial Assurance.
**All Other GECS** **Nine months ended *(Dollars in millions)**9/28/02  **9/29/01 **Revenues       
IT Solutions
$
2,788  
$
3,216 
GE Equity 
(348
)  
(193
)
Americom 
-   
486 
Other 
751   
1,025       
Total revenues
$
3,191  
$
4,534       **Net earnings       
IT Solutions
$
(1
) 
$
(10
)
GE Equity 
(322
)  
(279
)
Americom 
-   
234 
Other 
156   
(98
)      
Net earnings
$
(167
) 
$
(153
)*        All Other GECS includes, pursuant toSFAS 131, GECS activities and businesses that management does not measure within one of the four GECS segments.
        Two factors explain these results:
GE Equity
 -- Revenues and net earnings during the first nine months of  2002 reflected increased losses on investments including losses in the  telecommunications and software industries.
During the  first nine months 2002 and 2001, losses on GE Equity's investments exceeded  gains and other investment income, resulting in negative revenues and  earnings.*Other - Revenues decreased primarily because of Auto Financial  Services, which stopped accepting new business in 2000. Net earnings increased  primarily because of favorable tax settlement with the Internal Revenue  Service regarding the deductibility of previously realized losses associated  with the disposition of Kidder Peabody and tax benefits from growth in low taxed  earnings from international operations. Productivity was also favorable in  2002.
16
**Portfolio Quality
*        Financing Receivables is the largest category ofassets for GECS and represents one of its primary sources of revenues. Theportfolio of financing receivables, before allowance for losses, increased to$193.3 billion at September 28, 2002, from $178.8 billion at the end of 2001, asdiscussed in the following paragraphs. The related allowance for losses atSeptember 28, 2002, amounted to $5.1 billion ($4.8 billion at the end of 2001),representing management's best estimate of probable losses inherent in theportfolio. 

        A discussion of the quality of certain elements of the financingreceivables portfolio follows. "Nonearning" receivables are those thatare 90 days or more delinquent (or for which collection has otherwise becomedoubtful) and "reduced-earning" receivables are commercial receivableswhose terms have been restructured to a below-market yield.
***        Consumer financing receivables, primarily credit cardand personal loans and auto loans and leases, were $64.2 billion at September28, 2002, an increase of $11.9 billion from year-end 2001. Credit card andpersonal receivables increased $12.7 billion, primarily from increasedoriginations, acquisition growth and the net effects of foreign currencytranslation partially offset by sales and securitizations. Auto receivablesdecreased $0.8 billion, primarily as a result of the run-off of the liquidatingAuto Financial Services portfolio. Nonearning consumer receivables at September28, 2002, were $1.6 billion, about 2.4% of outstandings, compared with $1.5billion, about 2.9% of outstandings at year-end 2001. Write-offs of consumerreceivables were $1.3 billion for the first nine months of 2002 and 2001.
***        Commercial financing receivables, which totaled $129.1billion at September 28, 2002 ($126.5 billion at December 31, 2001), consistedof a diversified commercial, industrial and equipment loan and lease portfolio.Related nonearning and reduced-earning receivables were $2.3 billion atSeptember 28, 2002, about 1.7% of outstandings, compared with $1.7 billion,about 1.4% of outstandings at year-end 2001. The increase reflected primarilynonearning and reduced-earning receivables associated with Heller Financial Inc.ofapproximately $509 million; at December 31, 2001, $408 million of such loanswere earning but classified as impaired. The increase also reflected severalbankruptcies and deal restructurings, involving primarily middle-marketcustomers, including $349 million related to the telecommunications industry. Thesereceivables are generally backed by assets. There is a broad spread of risk inthe portfolio, but there is also a concentration of risk in commercial aircraft,including loans and leases of $25.0 billion and $21.5 billion at September28, 2002, and December 31, 2001, respectively.
***        Investment securities comprise principally investmentgrade debt securities held by the GE Insurance businesses and were $114.8billion, including gross unrealized gains and losses of $5.3 billion and $2.4billion, respectively, at September 28, 2002 ($100.1 billion, including grossunrealized gains and losses of $2.1 billion and $2.7 billion, respectively, asof December 31, 2001). Investment securities are regularly reviewed forimpairment based on criteria that include the extent to which cost exceedsmarket value, the duration of that market decline and the financial health andspecific prospects for the issuer. Of those securities whose carrying amountexceeds fair value at September 28, 2002, approximately $800 million is at risk of being charged to earnings in the next twelvemonths. Impairment losses recognized for the first nine months of 2002 were $679million, including $343 million ($223 million after-tax) from thetelecommunications and cable industries, of which $167 million ($110 millionafter-tax) was recognized in the second quarter of 2002 following the eventsrelating to WorldCom, Inc.

17
**Liquidity**
        The major debt-rating agencies evaluate the financial conditionof GE Capital Corporation (GE Capital), the major public borrowing entity ofGECS. Factors that are important to the ratings of GECS include the following:cash generating ability - including cash generated from operating activities;earnings quality - including revenue growth and the breadth and diversity ofsources of income; leverage ratios - such as debt tototal capital and interest coverage; and asset utilization, including return onassets and asset turnover ratios. Considering those factors, as well as othercriteria appropriate to GECS, those major rating agencies continue to give thehighest ratings to debt of GE Capital (long-term credit rating AAA/Aaa;short-term credit rating A-1+/P-1).

        Global commercial paper markets are also a significant source ofcash for GECS. GE Capital is the most widely-held name in those markets. Thefollowing table shows GECS' debt composition as of September 28, 2002 and December 31,2001:
**At September 28, 2002**At December 31, 2001***(Dollars in billions)***
**Total Debt**
**Percent of Debt      Outstanding**
**Total      Debt**
**Percent of Debt      Outstanding**
Long Term Debt$
 133
50%$
79
33%
Commercial Paper
80
31
117
49
Other - principally current      
 portion of long term      debt
49
19
  
44
18
 
Total$
 262
100
%
$
240
100
%

GECS targets a ratio for commercial paper of 25% to 35% percentof outstanding debt.

        As of September 28, 2002, GECS held approximately $54 billion ofcontractually committed lending agreements with highly-rated global banks andinvestment banks an increase of $21 billion since December 31, 2001. Whenconsidering the contractually committed lending agreements as well as othersources of liquidity, including medium and long-term funding, monetization,asset securitization, cash receipts from GECS lending and leasing activities,short-term secured funding on global assets, and potential asset sales,management believes it could achieve an orderly transition from commercial paperin the unlikely event of impaired access to the commercial paper market.

        During the first nine months of 2002, GECS issued approximately$75 billion of long-term debt in U.S. and international markets. These fundswere used primarily to reduce the amount of commercial paper outstanding and to fundacquisitions and new asset growth. GECS anticipates issuing approximately $10billion of additional long-term debt using both U.S. and international marketsduring the remainder of 2002. The proceeds from such issuances will be used tofund maturing long-term debt, additional acquisitions and asset growth. Theultimate amount of debt issuances will depend on the growth in assets,acquisition activity, availability of markets and movements in interest rates.

        GECS uses special purpose entities as described in the December31, 2001, Annual Report on Form 10-K. Receivables held by special purposeentities as of September 28, 2002 and December 31, 2001, were $42.6 billion and$43.0 billion, respectively, and the maximum amount of liquidity support forcommercial paper outstanding was constant at approximately $43.0 billion. The maximum recourseprovided under credit support agreements increased from $14.5 billion atDecember 31, 2001, to $15.0 billion at September 28, 2002.
**Additional Considerations**
        Two of GECS major airline customers, US Airways and UnitedAirlines, are experiencing significant financial difficulties, as both havedisclosed publicly. On August 11, 2002, US Airways filed for reorganization inbankruptcy. United Airlines has indicated it is considering such a filing. GECSexposure to both airlines amounted to $3.7 billion, including secured loans,financing leases, operating leases and enhanced equipment trust certificates("EETCs"). Individual aircraft or a pool of aircraft and aircraftengines secure the leases and loans. EETC investments are secured by aircraftand are accompanied by liquidity facilities that guarantee certain interestpayments. GECS has been in discussions with both airlines and has made fullprovision for probable losses.

       Financial servicesinvestments in and commitments to customers in the telecommunication and cableindustries approximated $12.0 billion as of September 28, 2002, primarilyfinancing receivables and investment securities. Like all financial servicespositions, these receivables and investments have been entered into subject tostrict risk and underwriting criteria, are diversified, and financingreceivables are generally secured. Recently, during declines in the values ofthese portfolios, the positions have been routinely reviewed for credit andimpairment losses, and actions have been taken to mitigate exposures. GECS hasmade provision for probable losses. Futurelosses will depend upon business and economic developments as well as thesuccess of risk mitigation actions.

        There is a high degree of uncertainty inherent in estimates ofloss reserves, particularly estimates of liabilities for unpaid claims andclaims expenses of GE Global Insurance Holdings (GIH). One reason that leads tothis uncertainty is the extended period, often many years, that transpiresbetween a loss event, receipt of related claims data from primary insurers andultimate settlement of the claim. Management continually updates loss estimatesusing both quantitative information from reserving actuaries and qualitativeinformation from other sources. Based on the best information available at thetime, management makes its best estimates of loss reserves and related incurredlosses. The level of reported claims activity related to prior year loss events,particularly for the 1997 through 2000 underwriting years, has continued toaccelerate at a rate higher than anticipated, and has caused management toincrease its estimate of ultimate losses, a change that has been reflected inthe accompanying financial information. The potential for further adverse lossdevelopments in these areas is highly uncertain.

18

        During the quarter ended September 28, 2002, certain externalcredit rating agencies announced negative actions with respect to GIH andsubsidiaries. Those rating agencies made similar announcements with regard toother property and casualty insurance and reinsurance entities at about the sametime. A.M. Best lowered its financial strength group rating for GIH from A++(superior) to A+ (superior) and also lowered its rating on GIH senior unsecureddebt from aa- (very strong) to a (strong). Standard & Poor's RatingServices placed GIH debt on "credit watch negative." Moody'sInvestors Service announced that its ratings of GIH and its outstanding debt areunder review for possible downgrade. Management does not believe these actionswill materially affect GIH liquidity or capital resources or the ability to writefuture business.
**Forward Looking Statements**
        This document includes certain "forward-lookingstatements" within the meaning of the Private Securities Litigation ReformAct of 1995. These statements are based on management's current expectationsand are subject to uncertainty and changes in circumstances. Actual results maydiffer materially from these expectations due to changes in global political,economic, business, competitive, market and regulatory factors.
**Item 4.     Controls and Procedures**
        GECS management, including the Chairman of the Board (serving asthe principal executive officer) and Chief Financial Officer, have conducted anevaluation of the effectiveness of disclosure controls and procedures pursuantto Exchange Act Rule 13a-14. Based on that evaluation, the Chairman of the Boardand the Chief Financial Officer concluded that the disclosure controls andprocedures are effective in ensuring that all material information required tobe filed in this quarterly report has been made known to them in a timelyfashion. There have been no significant changes in internal controls or in otherfactors that could significantly affect internal controls, subsequent to the datethe Chairman of the Board and Chief Financial Officer completed theirevaluation.

19
**PART II - OTHER INFORMATION****Item 6.     Exhibits and Reports on Form 8-K*.*
***a.         Exhibits.***
Exhibit 12  
            Computation of ratio of earnings to            fixed charges and computation of ratio of earnings to combined fixed            charges and preferred stock dividends.
Exhibit 99.1  Certification Pursuant To 18 U.S.C.            Section 1350, As Adopted Pursuant to Section 906 of the            Sarbanes-Oxley Act Of 2002Exhibit 99.2 Certification Pursuant To 18 U.S.C.            Section 1350, As Adopted Pursuant to Section 906 of the            Sarbanes-Oxley Act Of 2002***b.        Reports on Form 8-K.  
A current report on Form 8-K was filed on September 17,  2002, under Item 5 setting forth GE's organizational changes resulting in GE  Capital becoming four separate GE financial services businesses.

20
**SIGNATURES**
Pursuant to the requirements of the Securities Exchange Actof 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

 

 **GENERAL ELECTRIC CAPITAL SERVICES, INC.**

 (Registrant)

Date: October      29, 2002
By: 
/s/ J.A. Parke

J.A. Parke,
Vice Chairman and Chief Financial Officer

(Principal Financial Officer)

Date: October      29, 2002
By: 
/s/ J.C. Amble

J.C. Amble,

VicePresident and Controller

(Principal Accounting Officer)

 

 

 

21

 

 
**GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATEDAFFILIATES**
 

CERTIFICATIONS PURSUANT TO

SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002

 **CERTIFICATION**
I, Dennis D. Dammerman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GeneralElectric Capital Services, Inc.;

2. Based on my knowledge, this quarterly report does not containany untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under whichsuch statements were made, not misleading with respect to the period covered bythis quarterly report;

3. Based on my knowledge, the financial statements, and otherfinancial information included in this quarterly report, fairly present in allmaterial respects the financial condition, results of operations and cash flowsof the registrant as of, and for, the periods presented in this quarterlyreport;

4. The registrant's other certifying officers and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure  that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this quarterly report is  being prepared;

b) evaluated the effectiveness of the registrant's disclosure  controls and procedures as of a date within 90 days prior to the filing date  of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about  the effectiveness of the disclosure controls and procedures based on our  evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant's auditors andthe audit committee of registrant's board of directors (or persons performingthe equivalent function):

a) all significant deficiencies in the design or operation of  internal controls which could adversely affect the registrant's ability to  record, process, summarize and report financial data and have identified for  the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant's  internal controls; and

6. The registrant's other certifying officers and I haveindicated in this quarterly report whether or not there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

Date: October 29, 2002

 

/s/ Dennis D.Dammerman                            

Dennis D. Dammerman******
Chairman of the Board
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******CERTIFICATION**
I, James A. Parke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GeneralElectric Capital Services, Inc.;

2. Based on my knowledge, this quarterly report does not containany untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under whichsuch statements were made, not misleading with respect to the period covered bythis quarterly report;

3. Based on my knowledge, the financial statements, and otherfinancial information included in this quarterly report, fairly present in allmaterial respects the financial condition, results of operations and cash flowsof the registrant as of, and for, the periods presented in this quarterlyreport;

4. The registrant's other certifying officers and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure  that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this quarterly report is  being prepared;

b) evaluated the effectiveness of the registrant's disclosure  controls and procedures as of a date within 90 days prior to the filing date  of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about  the effectiveness of the disclosure controls and procedures based on our  evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant's auditors andthe audit committee of registrant's board of directors (or persons performingthe equivalent function):

a) all significant deficiencies in the design or operation of  internal controls which could adversely affect the registrant's ability to  record, process, summarize and report financial data and have identified for  the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant's  internal controls; and

6. The registrant's other certifying officers and I haveindicated in this quarterly report whether or not there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

Date: October 29, 2002

 

 

/s/ James A. Parke                                        

James A. Parke******
Vice Chairman and Chief Financial Officer

 

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