<PAGE>


Item 1.  Business - Property and Casualty  Reserves for Unpaid  Claims and Claim
Expenses,  set forth in the  Annual  Report on Form 10-K of GE Global  Insurance
Holding  Corporation  (S.E.C.  File No. 0-27394) for the year ended December 31,
1996 (Pages 5 through 10).

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.

     When a claim is reported to a ceding company,  the ceding  company's claims
personnel  establish a "case  reserve" for the estimated  amount of the ultimate
payment.  The estimate reflects the informed judgment of such personnel based on
general  insurance  reserving  practices and on the  experience and knowledge of
such personnel regarding the nature and value of the specific type of claim. The
Company, in turn,  typically  establishes a case reserve when it receives notice
of a claim from the ceding  company.  Such reserves are based on an  independent
evaluation  by the  Company's  claims  departments,  taking  into  consideration
coverage,  liability,  severity of injury or damage, jurisdiction, an assessment
of the ceding company's ability to evaluate and handle the claim, and the amount
of reserves  recommended  by the ceding  company.  Case  reserves  are  adjusted
periodically  by the  claims  departments  of the  Company  based on  subsequent
developments and audits of ceding companies.


<PAGE>


     In accordance with industry  practice,  the Company maintains  reserves for
claims  incurred but not reported  ("IBNR").  Such reserves are  established  to
provide for future case reserves and loss payments on incurred  claims that have
not yet been reported to an insurer or reinsurer.  In calculating IBNR reserves,
the Company uses generally  accepted  actuarial  reserving  techniques that take
into  account   quantitative   loss  experience   data,   together  with,  where
appropriate,  qualitative  factors.  IBNR reserves are based on claim experience
and are grouped both by class of business and by accident  year.  IBNR  reserves
are also  adjusted to take into  account  certain  additional  factors,  such as
changes  in the  volume of  business  written,  reinsurance  contract  terms and
conditions,  the mix of business,  claims processing and inflation,  that can be
expected to affect the Company's liability for claims over time.

     International.   The   Company's   international   property   and  casualty
reinsurance  operations  establish  their reserves using  analytical  techniques
similar  to those  utilized  by GE  Global's  domestic  subsidiaries.  They also
maintain  IBNR  reserves  using  actuarial  and  statistical  projections.   The
potential  for  adverse   development   of  the   Company's   reserves  for  its
international business, as compared to that of its domestic business, is reduced
because the international  operations have a relatively low proportion of longer
tail exposures.  As of December 31, 1996,  approximately 2% of the Company's net
international reserves ($78 million) related to business acquired by the Company
from Assurance Compagniet Baltica Aktiesellskab ("Baltica") in 1988. At the time
of the  acquisition,  the Company  obtained from Baltica a 90% loss  development
guarantee,  pursuant  to which  Baltica  is  obligated  to pay the  Company,  at
December 31, 1997, 90% of the amount of claim reserve development  (adjusted for
certain income and expenses) from 1988 to such date.

     Reserve Development. The table that follows presents the development of net
balance sheet  liabilities of ERC and  subsidiaries  for unpaid claims and claim
expenses for 1986 through 1996.

     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 1986 to 1996.
The liability includes both case and IBNR reserves as of each year-end date, net
of anticipated recoveries from other reinsurers.  The rows immediately following
the first row of data show  cumulative paid data at December 31, as of one year,
two years, etc., through up to 10 years of subsequent payments.

     Net Liability  Re-estimated.  The middle rows of data show the re-estimated
amount for previously  reported net liability  based on experience as of the end
of each subsequent  calendar  year's  results.  This estimate is changed as more
information  becomes known about the underlying claims for individual years. The
cumulative  redundancy  (deficiency)  shown in the  table is the  aggregate  net
change in estimates  over the period of years  subsequent  to the calendar  year
reflected at the top of the  respective  columns.  The amount in the line titled
"Redundancy  (Deficiency)  at December 31, 1996",  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, 1996, 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, 1996,  represents a
deficiency  in the  Company's  original  estimate  of  unpaid  claims  and claim
expenses for 1994 and prior years.

     The last seven  lines of data  present  the  development  of  reserves on a
"gross of reinsurance" basis, reconciled to the "net of reinsurance basis" shown
in the immediately preceding tables.


<PAGE>


<TABLE>
<CAPTION>
                                         Changes in Historical Reserves for Unpaid Claims and Claim Expenses
                                             For the Last Ten Years - GAAP Basis as of December 31, 1996

                                                                Year ended December 31,
                        ----------------------------------------------------------------------------------------------------
(In millions)              1986     1987     1988     1989     1990     1991     1992     1993     1994     1995     1996
                        ----------------------------------------------------------------------------------------------------
<S>                       <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Net liability for
   unpaid claims and
   claim expenses         $2,083   $2,620   $3,087   $3,338   $3,579   $3,596   $3,991   $4,525   $5,071   $9,351  $ 9,458
Paid (cumulative) as of:
One year later.......        554      615      681      706      747      665      802      949    1,115    1,964
Two years later......        899    1,006    1,064    1,125    1,119    1,103    1,274    1,602    1,804      ---
Three years later....      1,202    1,314    1,432    1,469    1,524    1,499    1,739    2,054      ---      ---
Four years later.....      1,429    1,553    1,687    1,746    1,772    1,784    2,036      ---      ---      ---
Five years later.....      1,612    1,754    1,919    1,929    1,989    2,008      ---      ---      ---      ---
Six years later......      1,764    1,945    2,065    2,072    2,173      ---      ---      ---      ---      ---
Seven years later....      1,901    2,063    2,221    2,229      ---      ---      ---      ---      ---      ---
Eight years later....      1,998    2,181    2,347      ---      ---      ---      ---      ---      ---      ---
Nine years later.....      2,103    2,284      ---      ---      ---      ---      ---      ---      ---      ---
Ten years later......      2,194      ---      ---      ---      ---      ---      ---      ---      ---      ---

Net liability
   re-estimated as of:

One year later.......     $2,177   $2,746   $3,134   $3,390   $3,616   $3,625   $3,919   $4,612   $5,173   $9,192
Two years later......      2,385    2,861    3,220    3,482    3,583    3,587    4,066    4,656    5,313      ---
Three years later....      2,541    2,941    3,346    3,462    3,564    3,701    4,095    4,793     ----      ---
Four years later.....      2,672    3,057    3,360    3,472    3,654    3,687    4,238      ---     ----      ---
Five years later.....      2,807    3,094    3,406    3,537    3,635    3,818      ---      ---     ----      ---
Six years later......      2,848    3,151    3,470    3,521    3,758      ---      ---      ---     ----      ---
Seven years later....      2,916    3,210    3,494    3,626      ---      ---      ---      ---     ----      ---
Eight years later....      2,979    3,259    3,582      ---      ---      ---      ---      ---     ----      ---
Nine years later.....      3,036    3,324      ---      ---      ---      ---      ---      ---     ----      ---
Ten years later......      3,098      ---      ---      ---      ---      ---      ---      ---      ---      ---

Redundancy (Deficiency)
   at December 31, 1996   (1,015)    (704)    (495)    (288)    (179)    (222)    (247)    (268)    (242)     159
Effect of foreign
   exchange (1)                                 16       24      (17)     (20)               42       29     (196)
                          -------  -------  -------  -------  -------  -------   ------  -------- -------  -------

Redundancy (Deficiency)
   at December 31,
   1996, excluding
   foreign exchange      $(1,015) $  (704)  $ (479)  $ (264)  $ (196)  $ (242)  $ (247)  $ (226)  $ (213)   $ (37)
                         ======== ========  =======  =======  =======  =======  =======  =======  =======   ======
</TABLE>

<TABLE>
<CAPTION>

(In millions)                                                                    1992     1993     1994     1995     1996
                                                                                ------------------------------------------
<S>                                                                             <C>      <C>      <C>      <C>     <C>
Gross liability-end of year...................................................  $4,815   $5,312   $6,020  $11,145  $10,869
Reinsurance recoverables on unpaid claims and claim expenses..................     824      787      949    1,794    1,411
                                                                                ------   ------   ------  -------  -------
Net liability-end of year.....................................................   3,991    4,525    5,071    9,351    9,458
                                                                                ------   ------   ------  -------  =======
Gross re-estimated liability-latest...........................................   5,253    5,813    6,424   11,081
Re-estimated reinsurance recoverables on latest unpaid claims
   and claim expenses.........................................................   1,015    1,020    1,111    1,889
                                                                                ------   ------   ------  -------
Net re-estimated liability-latest.............................................   4,238    4,793    5,313    9,192
                                                                                ------   ------   ------  -------
Gross cumulative redundancy (deficiency)......................................  $ (438)  $ (501)  $ (404) $    64
                                                                                ======   ======   ======  =======
<FN>
(1)  The foreign currency translation impact on the cumulative redundancy
     (deficiency) arises from the difference between the net liability for
     unpaid claims and claim expenses translated at the exchange rates at the
     end of the year in which the liabilities were originally estimated, and
     the exchange rates during the years in which such liabilities were paid
     or at the end of the year in which the liabilities were re-estimated.
</FN>
</TABLE>
Note:  For a description of the purpose of the above table and the various table
sections, please refer to the immediately preceding sections 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 expenses reserve
deficiencies  developed  to December 31,  1996,  as  reflected in the  preceding
table, included reserve deficiencies of approximately $367 million in 1986, $257
million in 1987,  $181 million in 1988,  $130 million in 1989 and $98 million in
1990 related to the general  liability  business on the books of Puritan  Excess
and Surplus Lines Insurance Company ("PESLIC") before the Company's  acquisition
of PESLIC in 1994. Prior to 1994, PESLIC was owned by GE Capital.  Additionally,
beginning in 1985 the Company strengthened the reserves for its excess liability
and workers' compensation business for qualified self-insured employers.  Claims
and claim expenses  reserve  development  in the mid 1980's in these  businesses
reflected the inadequate  premium rates which resulted from intense  competition
in the market during that period.

     In the late 1980's,  the reinsurance  market generally  reacted to the rate
deficiencies and the resulting claims and claim expenses reserve  development by
increasing rates and strengthening  claims and claim expenses reserves.  This is
reflected,  with respect to the Company,  in the  significant  reductions in the
reserve deficiencies in recent years.

     To a lesser degree,  development of asbestos and  environmental  claims has
affected  the  Company's  results.  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. Also affecting the reserve
structure  has been an  increase  in both  frequency  and  severity  of  claims.
Partially offsetting the above factors is favorable  development in recent years
in medical professional liability and facultative casualty businesses as well as
an increase in net retentions by ceding companies.

     The  reconciliation  of reserves for unpaid claims and claim  expenses on a
GAAP basis for each of the years indicated is shown below.
<TABLE>
<CAPTION>
                                             Year ended December 31,
                                         -----------------------------
 (In millions)                             1996       1995       1994
                                         -----------------------------
<S>                                      <C>       <C>          <C>
Reserves at beginning of year..........  $11,145    $ 6,020     $5,312
Reinsurance recoverables on unpaid
   claims and claim expenses...........    1,794        949        787
                                         -------    -------     ------
Net reserves at beginning of year......    9,351      5,071      4,525
                                         -------    -------     ------
Net incurred related to:
   Current year........................    2,763      2,638      1,657
   Prior years.........................      106        104         87
                                         -------    -------     ------
Total net incurred.....................    2,869      2,742      1,744
                                         -------    -------     ------
Net payments related to:
   Current year........................      485        295        374
   Prior years.........................    1,990      1,426        949
                                         -------    -------     ------
Total net payments.....................    2,475      1,721      1,323
                                         -------    -------     ------

Foreign exchange and other.............     (287)       (54)       125
                                         -------    -------     ------
Net reserves at end of year............    9,458      6,038      5,071
Reinsurance recoverables on unpaid
   claims and claim expenses...........
                                           1,411      1,794        949
Acquired businesses unpaid claims
   and claim expenses..................        -      3,313          -
                                         -------    -------     ------
Reserves at end of year................  $10,869    $11,145     $6,020
                                         =======    =======     ======
</TABLE>

<PAGE>

     The  liabilities  for  claims and claim  expenses  in the  preceding  table
include  long-term  disability  claims that are  discounted  at a 6% rate.  As a
result of discounting the Company's  long-term  disability claims, the Company's
total  liabilities  for  claims  and  claim  expenses  have been  reduced  by an
estimated  3% at December  31, 1996 and 1995.  The  amortization  of discount is
included in current  operating  results as part of the development of prior year
liabilities.  For the years ended  December 31, 1996,  1995 and 1994,  long-term
disability  discounts  accrued as a  percentage  of claims,  claim  expenses and
policy benefits were  approximately 5%, 5% and 8%,  respectively,  and discounts
amortized were approximately 2% in 1996 and 1% in 1995 and 1994.

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

<TABLE>
<CAPTION>
                                                  Year ended December 31,
                                              -------------------------------
 (In millions)                                  1996        1995        1994
                                              -------------------------------
<S>                                          <C>         <C>           <C>
Statutory basis U.S. reserves.............    $ 5,875     $ 5,758      $4,966
Adjustments to GAAP basis (1).............       (435)       (413)       (383)
                                              -------     -------      ------
Net GAAP reserves for U.S. companies......      5,440       5,345       4,583
Net GAAP reserves for non-U.S. companies..      4,018       4,006         488
                                              -------     -------      ------
Net GAAP reserves.........................      9,458       9,351       5,071
Reinsurance recoverables..................      1,411       1,794         949
                                              -------     -------      ------
Gross reserves on a GAAP basis............    $10,869     $11,145      $6,020
                                              =======     =======      ======

<FN>
(1) Statutory basis reserves reclassified to other liabilities based on
risk transfer provisions of FAS No. 113.
-----------------------------------------------------------------------------
</FN>
</TABLE>
     Environmental  and  Asbestos  Exposure.  Prior to 1986,  the Company  wrote
domestic property and casualty reinsurance principally for small to medium-sized
primary  insurers  that  did  not  generally  have  environmental  and  asbestos
exposures.  Although  the  Company  has in the  last  few  years  increased  its
marketing  efforts with medium to  larger-sized  primary  insurers,  since 1986,
primary policies have tended to explicitly  exclude  environmental  and asbestos
risks  from  coverage.   The  Company's   international  property  and  casualty
reinsurance  operations are currently  being reviewed to identify  environmental
and asbestos exposures.  No estimates of these exposures are currently available
although  management does not believe the findings will have a material  adverse
effect on the  financial  position,  results of  operations or cash flows of the
Company.

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

<TABLE>
<CAPTION>
                                                 Year ended December 31,
                                           ----------------------------------
 (In millions)                                1996        1995        1994
                                           ----------------------------------
Gross Basis:
<S>                                           <C>         <C>         <C>
   Reserve balance at January 1.........      $436        $317        $309
   Incurred claims and claim expenses...       (32)         61          25
   IBNR allocation (1)..................         -          99           -
   Claims and claim expenses paid.......        36          41          17
                                              ----        ----        ----
   Reserve balance at December 31.......      $368        $436        $317
                                              ====        ====        ====

Net Basis:
   Reserve balance at January 1.........      $196        $139        $138
   Incurred claims and claim expenses...        19          23           9
   IBNR allocation (1)..................         -          51           -
   Claims and claim expenses paid.......        21          17           8
                                              ----        ----        ----
   Reserve balance at December 31.......      $194        $196        $139
                                              ====        ====        ====

--------
<FN>
(1)  Prior to 1995, the Company's  allocation of asbestos and environmental IBNR
     reserves associated with PESLIC was primarily made on a non-specific basis.
     As of December 31, 1995,  PESLIC  specifically  allocated  IBNR reserves to
     asbestos  and  environmental  liabilities  from  a  portion  of  previously
     established IBNR reserves.
</FN>
</TABLE>
<PAGE>


     These amounts are management's best estimate,  based on currently available
information,  of claims  and claim  expense  payments  and  recoveries  that are
expected to develop in future years.  The increase in claim payments in 1996 and
1995 and  negative  incurred  claims in 1996 is  principally  due to the Company
aggressively  settling its claims and executing contract commutation  provisions
so that possible  future  adverse claim  development  is mitigated.  The Company
monitors evolving case law and its effect on asbestos-related  illness and toxic
waste cleanup claims.  Changing domestic and foreign government  regulations and
legislation,   including  continuing  congressional   consideration  of  federal
Superfund law, newly reported  claims,  new contract  interpretations  and other
factors could significantly  affect future claim development.  While the Company
has recorded its best estimate of its liabilities for  asbestos-related  illness
and toxic waste cleanup claims based on currently available  information,  it is
possible that additional liabilities may arise in the future. It is not possible
to estimate with any  certainty  the amount of  additional  net claims and claim
expenses,  or the  range of net  claims  and  claim  expenses,  if any,  that is
reasonably possible; therefore there can be no assurance that future liabilities
will not materially affect the Company's  results of operations,  cash flows and
financial position.

     Breast  Implant  Exposure.  The Company  has  minimal  exposure to products
liability  claims involving  silicone breast  implants.  The Company has, in the
past,   generally   avoided  the  products   liability   reinsurance   business,
specifically pharmaceutical and chemical exposures.