<PAGE>
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.


                                        
<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 Insurance'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, 1998,  approximately 2% of the Company's net international reserves
($69  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 90% of the amount of
claim reserve  development  (adjusted for certain income and expenses) from 1988
through  December 31, 1997. The Company is currently  negotiating the settlement
of this loss development guarantee with Baltica.

Reserve Development. The development of the Company's net balance sheet property
and casualty liabilities for unpaid claims and claim expenses for accident years
1988 through 1998 is summarized in the following table:

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 1988 to 1998.
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, ..., 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, 1998", 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, 1998, 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, 1998,  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 table.


<PAGE>
<TABLE>
<CAPTION>
                                              Changes in Historical Reserves for Unpaid Claims and Claim Expenses
                                                  For the Last Ten Years - GAAP Basis as of December 31, 1998

                                                                    Year ended December 31,                  
                            --------------------------------------------------------------------------------------------------------
(In millions)                1988     1989     1990     1991      1992      1993      1994      1995      1996      1997      1998
                            --------------------------------------------------------------------------------------------------------
<S>                           <C>      <C>      <C>      <C>       <C>       <C>       <C>       <C>      <C>      <C>       <C>
     
Net liability for unpaid  
   claims and claim
   expenses                 $3,087   $3,338   $3,579   $3,596   $ 3,991   $ 4,525   $ 5,071   $ 9,351   $ 9,458   $ 9,114   $12,495
Paid (cumulative) as of:  
One year later.........        681      706      747      665       802       949     1,115     1,964     1,949     2,176       ---
Two years later........      1,064    1,125    1,119    1,103     1,274     1,602     1,804     3,130     3,189       ---       ---
Three years later......      1,432    1,469    1,524    1,499     1,739     2,054     2,341     3,933       ---       ---       ---
Four years later.......      1,687    1,746    1,772    1,784     2,036     2,424     2,708       ---       ---       ---       ---
Five years later.......      1,919    1,929    1,989    2,008     2,293     2,690       ---       ---       ---       ---       ---
Six years later........      2,065    2,072    2,173    2,208     2,485       ---       ---       ---       ---       ---       ---
Seven years later......      2,221    2,229    2,348    2,362       ---       ---       ---       ---       ---       ---       ---
Eight years later......      2,347    2,380    2,482      ---       ---       ---       ---       ---       ---       ---       ---
Nine years later.......      2,478    2,495      ---      ---       ---       ---       ---       ---       ---       ---       ---
Ten years later........      2,581      ---      ---      ---       ---       ---       ---       ---       ---       ---       ---

Net liability
   re-estimated as of:
One year later.........     $3,134   $3,390   $3,616   $3,625   $ 3,919   $ 4,612   $ 5,173   $ 9,192   $ 9,229   $ 9,179       ---
Two years later........      3,220    3,482    3,583    3,587     4,066     4,656     5,313     8,959     9,127       ---       ---
Three years later......      3,346    3,462    3,564    3,701     4,095     4,793     5,256     8,907       ---       ---       ---
Four years later.......      3,360    3,472    3,654    3,687     4,238     4,747     5,155       ---       ---       ---       ---
Five years later.......      3,406    3,537    3,635    3,818     4,154     4,668       ---       ---       ---       ---       ---
Six years later........      3,470    3,521    3,758    3,771     4,075       ---       ---       ---       ---       ---       ---
Seven years later......      3,494    3,626    3,734    3,711       ---       ---       ---       ---       ---       ---       ---
Eight years later......      3,582    3,608    3,674      ---       ---       ---       ---       ---       ---       ---       ---
Nine years later.......      3,575    3,567      ---      ---       ---       ---       ---       ---       ---       ---       ---
Ten years later........      3,549      ---      ---      ---       ---       ---       ---       ---       ---       ---       ---
Redundancy (Deficiency)
   at December 31, 1998       (462)    (229)     (95)    (115)      (84)     (143)      (84)      444       331       (65)      ---
Effect of foreign
   exchange (1)                  7       16      (16)     (20)        4        26        11      (309)     (228)       81       ---
                            ------   ------   ------   ------   -------   -------   -------   -------   -------   -------   -------
Redundancy (Deficiency)
   at December 31, 1998,  
   excluding foreign
   exchange                 $ (455)  $ (213)  $ (111)  $ (135)  $   (80)  $  (117)  $   (73)  $   135   $   103   $    16   $   ---
                            ======   ======   ======   ======   =======   =======   =======   =======   =======   =======   =======
</TABLE>

<TABLE>
<CAPTION>
(In millions)                                                     1992      1993      1994      1995      1996      1997      1998
                                                                --------------------------------------------------------------------
<S>                                                                <C>       <C>       <C>       <C>       <C>       <C>       <C>

Balance at December 31 - gross...............................   $ 4,815   $ 5,312   $ 6,020   $11,145   $10,869   $10,936   $15,342
Less reinsurance recoverables................................      (824)     (787)     (949)   (1,794)   (1,411)   (1,822)   (2,847)
                                                                -------   -------   -------   -------   -------   -------   -------
Balance at December 31 - net.................................     3,991     4,525     5,071     9,351     9,458     9,114    12,495
                                                                -------   -------   -------   -------   -------   -------   -------
Latest re-estimated liability - gross........................     5,179     5,726     6,298    10,630    10,797    11,065       ---
Latest re-estimated reinsurance recoverables.................    (1,104)   (1,058)   (1,143)   (1,723)   (1,670)   (1,886)      ---
                                                                -------   -------   -------   -------   -------   -------   -------
Latest re-estimated liability - net..........................     4,075     4,668     5,155     8,907     9,127     9,179       ---
                                                                -------   -------   -------   -------   -------   -------   -------
Gross redundancy (deficiency)................................      (364)     (414)     (278)      515        72      (129)      ---
Effect of foreign exchange (1)...............................         4        27        11      (377)     (271)      101       ---
                                                                -------   -------   -------   -------   -------   -------   -------
Gross redundancy (deficiency), excluding foreign exchange....   $  (360)  $  (387)  $  (267)  $   138   $  (199)  $   (28)  $   ---
                                                                =======   =======   =======   =======   =======   =======   =======
</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.   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."


<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 expense reserve
deficiencies  developed  to December 31,  1998,  as  reflected in the  preceding
table,  included reserve deficiencies of approximately $130 million in 1988, $79
million  in 1989,  $48  million in 1990 and $23  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  Corporation.  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 expense  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 expense reserve  development by
increasing rates and strengthening  claims and claim expense  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 Company's  reconciliation  of its beginning and ending property and casualty
reserves for unpaid  claims and claim  expenses on a GAAP basis is summarized as
follows:

<TABLE>
<CAPTION>
                                                      Year ended December 31,       
                                                 ----------------------------------
(In millions)                                      1998         1997         1996
                                                 ----------------------------------
<S>                                                 <C>          <C>          <C>
    
Balance at January 1 - gross.................... $10,936      $10,869      $11,145 
Less reinsurance recoverables...................  (1,822)      (1,411)      (1,794)
                                                 -------      -------      -------
Balance at January 1 - net......................   9,114        9,458        9,351
                                                 -------      -------      -------

Claims and expenses incurred:
   Current year.................................   3,286        2,438        2,763
   Prior years..................................    (126)          71          106
                                                 -------      -------      -------
                                                   3,160        2,509        2,869
                                                 -------      -------      -------

Claims and expenses paid:
   Current year.................................  (1,074)        (612)        (485)
   Prior years..................................  (2,176)      (1,949)      (1,990)
                                                 -------      -------      -------
                                                  (3,250)      (2,561)      (2,475)
                                                 -------      -------      -------

Claim reserves related to acquired companies....   3,470            -            -

Foreign exchange and other......................       1         (292)        (287)
                                                 -------      -------      -------
Balance at December 31 - net....................  12,495        9,114        9,458
Add reinsurance recoverables....................   2,847        1,822        1,411
                                                 -------      -------      -------
Balance at December 31 - gross.................. $15,342      $10,936      $10,869
                                                 =======      =======      =======
</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  2% and 3% at
December  31,  1998 and 1997,  respectively.  The  amortization  of  discount is
included in current  operating  results as part of the development of prior year
liabilities.


<PAGE>
Long-term disability discounts accrued as a percentage of claims, claim expenses
and policy  benefits  were less than 1%,  approximately  1% and 5% for the years
ended December 31, 1998, 1997 and 1996,  respectively.  Discounts amortized as a
percentage  of claims,  claim  expenses and policy  benefits  were less than 1%,
approximately  1% and 2% for the years ended  December 31, 1998,  1997 and 1996,
respectively.

The Company's  reconciliation  of its property and casualty  reserves for unpaid
claims and claim expenses  between  statutory basis and GAAP basis is summarized
as follows:

<TABLE>
<CAPTION>
                                                                December 31,                  
                                                      ---------------------------------
(In millions)                                          1998         1997         1996
                                                      ---------------------------------
<S>                                                      <C>         <C>          <C>
    
Statutory basis reserves for U.S. companies - net.... $ 7,679     $ 5,527      $ 5,875
Adjustments to GAAP basis (1)........................     667        (118)        (435)
                                                      -------     -------      -------
GAAP basis reserves for U.S. companies - net.........   8,346       5,409        5,440
GAAP basis reserves for non-U.S. companies - net.....   4,149       3,705        4,018
                                                      -------     -------      -------
Total GAAP basis reserves - net......................  12,495       9,114        9,458
Add reinsurance recoverables.........................   2,847       1,822        1,411
                                                      -------     -------      -------
GAAP basis reserves - gross.......................... $15,342     $10,936      $10,869
                                                      =======     =======      =======
</TABLE>

(1)  Statutory  basis  reserve  offsets and  reserves  reclassified  to contract
     deposit assets or 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.  During 1997,  the  Company's  international  operations  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 three-year  development of claims and claim expense reserves associated with
the  Company's  asbestos  and  environmental  claims,  including  case  and IBNR
reserves, is summarized as follows:

<TABLE>
<CAPTION>
                                                     Year ended December 31,         
                                                 -------------------------------
(In millions)                                     1998       1997          1996
                                                 -------------------------------
<S>                                               <C>        <C>           <C>
    
Balance at January 1 - gross.................... $ 462      $ 368         $ 436 
Less reinsurance recoverables...................  (193)      (174)         (240)
                                                 -----      -----         -----
Balance at January 1 - net......................   269        194           196

Claims and expenses incurred....................    35         54            19
Claim identification and IBNR allocation........     -         43 (1)         -
Claims and expenses paid........................   (39)       (22)          (21)
Claim reserves related to acquired companies....   524          -             - 
                                                 -----      -----         -----

Balance at December 31 - net....................   789        269           194
Add reinsurance recoverables....................   206        193           174
                                                 -----      -----         -----
Balance at December 31 - gross.................. $ 995      $ 462         $ 368
                                                 =====      =====         =====
</TABLE>

(1)  Prior to 1997,  the  Company's  international  operations  were  unable  to
     identify and segregate 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. Beginning in 1997, the Company
     began  identifying and segregating  the asbestos and  environmental  claims
     related to its international operations.

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.


<PAGE>
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,
financial position or cash flows.

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 has evaluated the possibility of experiencing an
increase in property and casualty  insurance  and  reinsurance  claims and claim
expenses  arising  as a result of Year  2000-related  exposures.  Management  is
unable to reasonably  estimate the amount or range of loss that may occur due to
the uncertainty  surrounding the likelihood of computer system failures and what
portion, if any, will be deemed to be insured losses.  Accordingly,  the Company
is unable to  determine  whether  such losses may have an adverse  effect on its
results of  operations,  financial  position or cash flows.  The Company's  loss
mitigation strategy includes adding Year 2000 considerations to its underwriting
guidelines,  as well as its decisions to purchase  retrocessional  coverage.  In
addition,  the Company employs an active claims  management  strategy which will
include the coordinated handling of any Year 2000-related claims.