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

        GECS net earnings before accounting changes (discussed in notes 3 and 4 to the condensed, consolidated financial statements) for the third quarter of 2002 were $1,551 million, a $250 million (19%) increase from the third quarter of 2001. Excluding the effect of the prior-year goodwill amortization ($146 million after tax), net earnings before accounting changes increased 7%. This increase resulted from the lack of a current year counterpart to the losses arising from the events of September 11 at GE Insurance, higher asset gains primarily at GE Commercial Finance, origination growth primarily at GE Commercial Finance and GE Consumer Finance, the effects of acquisitions primarily at GE Commercial Finance as well as increased tax benefits from growth in low taxed earnings from international operations and a favorable tax settlement with the Internal Revenue Service regarding the treatment of certain reserves for obligations to policyholders on life insurance contracts at GE Insurance. These increases were partially offset by adverse development on prior-year losses at GE Insurance, lower securitization gains primarily at GE Commercial Finance, lower investment gains primarily at GE Insurance and increased losses on investments at GE Equity. Contributions from acquired companies to net earnings in the third quarter of 2002 and 2001 were approximately $83 million and $43 million, respectively. Acquisitions are integrated as quickly as possible; only earnings during the first 12 months following the quarter in which the acquisition is completed are considered to be related to acquired companies.

        Total revenues increased $1,683 million (13%) to $14,981 million for the third quarter of 2002, compared with $13,298 million for the third quarter of 2001. This increase resulted from the effects of acquisitions and origination growth primarily at GE Commercial Finance and GE Consumer Finance and the lack of a current year counterpart to the losses arising from the events of September 11 and higher premiums earned in the current year at GE Insurance, offset by lower securitization gains across all segments, and the absence of a current year counterpart to Americom which was divested in the fourth quarter of 2001.

        Interest expense on borrowings for the third quarter of 2002 was $2,645 million, 6% higher than for the third quarter of 2001. The increase reflected the effects of higher average borrowings used to finance acquisitions and asset growth partially offset by the effects of lower interest rates. The average composite interest rate on GECS' borrowings for the third quarter of 2002 was 4.18% compared with 4.89% in the third quarter of 2001.

        Operating and administrative expenses were $4,101 million for the third quarter of 2002, a 19% increase over the third quarter of 2001. The increase resulted from the effects of acquisitions at GE Commercial Finance and GE Consumer Finance, the 2001 reduction in insurance commissions as a result of the events of September 11 and increased commissions in the current year relating to volume increases at GE Insurance, partially offset by the absence of amortization expense related to goodwill, as in accordance with SFAS 142 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 for the third quarter of 2002, compared with $692 million for the third quarter of 2001. 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 of adverse development on loss reserves at GE Global Insurance Holdings (the principal subsidiary of which is Employers Reinsurance Corporation - ERC), increased premium volume and the effects of acquisitions at GE Financial Assurance.

        Provision for losses on financing receivables were $640 million for the third quarter of 2002 compared with $567 million for the third quarter of 2001. These provisions principally relate to consumer 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 below under Portfolio Quality. The increase in the provision primarily reflected higher credit losses as well as higher receivable balances. Future provisions for losses will depend primarily on the size of the portfolio, which is expected to continue to grow, and on associated business and economic conditions.

        Depreciation and amortization of buildings and equipment and equipment on operating leases increased to $983 million for the third quarter of 2002, compared with $924 million for the third quarter of 2001. The increase was principally the result of higher levels of equipment on operating leases at GE Commercial Finance, primarily reflecting origination growth and acquisitions, partially offset by the divestiture of Americom.

7

        Provision for income taxes was $122 million for the third quarter of 2002 (an effective tax rate of 7.3%), compared with $211 million for the third quarter of 2001 (an effective tax rate of 14.0%). The lower effective tax rate primarily reflected the effect of increased low taxed earnings from international operations and the benefits of a favorable settlement at GE Insurance with the Internal Revenue Service regarding the treatment of certain reserves for obligations to policyholders on life insurance contracts.

        Revenues and net earnings before accounting changes of GECS, by operating segment, for the third quarters ended September 28, 2002 and September 29, 2001 are summarized and discussed below. Third quarter 2002 and 2001 amounts have been reclassified to conform to the new business segments formed as a consequence of the reorganization of GECS' businesses as announced by its parent, General Electric Company ("GE") on July 26, 2002, and changes in the amortization of goodwill, effective as of January 1, 2002.

Consolidated

                Following is a discussion of revenues and net earnings from operating segments for the third quarter of 2002 and 2001.

8

            GE Commercial Finance

GE Insurance

        Revenues also benefited from recent increases in pricing and growth within certain niche markets at GE Global Insurance Holdings as well as acquisition and origination growth at GE Financial Assurance. These increases were partially offset by selective exits from certain lines of business and customer relationships as part of a portfolio review at GE Global Insurance Holdings. Investment gains were also lower in 2002.

        Net earnings also benefited by $75 million from the recognition of a favorable tax settlement with the Internal Revenue Service regarding the treatment of certain reserves for obligations to policyholders on life insurance contracts and productivity benefits at GE Financial Assurance, partially offset by adverse development and adjustments to estimates of prior-year loss events at GE Global Insurance Holdings and lower investment gains.

10

        Two factors explain these results:

11

        GECS net earnings before accounting changes (discussed in notes 3 and 4 to the condensed, consolidated financial statements) for the first nine months of 2002 were $4,535 million, a $356 million (9%) increase from the first nine months of 2001. Excluding the effect of the prior-year goodwill amortization ($419 million after tax), net earnings before accounting changes decreased 1%. This decrease resulted from adverse development and adjustments to estimates of prior-year loss events and lower investment gains at GE Insurance, lower securitization gains across all segments and the lack of a current year counterpart to the divestiture of Americom. These decreases were offset by lack of a current year counterpart to the losses arising from the events of September 11 at GE Insurance, acquisitions predominantly at GE Commercial Finance, origination growth primarily at GE Consumer Finance and GE Commercial Finance, as well as increased tax benefits from growth in low taxed earnings from international operations and favorable tax settlements with the Internal Revenue Service. Contributions from acquired companies to net earnings in the first nine months of 2002 and 2001 were approximately $400 million and $80 million, respectively. Acquisitions are integrated as quickly as possible; only earnings during the first 12 months following the quarter in which the acquisition is completed are considered to be related to acquired companies.

        Total revenues increased $312 million (1%) to $42,732 million for the first nine months of 2002, compared with $42,420 million for the first nine months of 2001. This increase resulted from acquisitions primarily at GE Commercial Finance and GE Consumer Finance, lack of a current year counterpart to the losses arising from the events of September 11 at GE Insurance and origination growth, partially offset by reduced market interest rates primarily at GE Commercial Finance, lower investment gains across all segments, increased estimates of prior-year loss events at GE Insurance, the absence of revenues from Americom which was divested in the fourth quarter of 2001, volume decreases at IT Solutions, and lower securitization gains across all segments.

        Interest expense on borrowings for the first nine months of 2002 was $7,362 million, 9% lower than for the first nine months of 2001. The decrease reflected the effects of lower interest rates, partially offset by the effects of higher average borrowings used to finance acquisitions and asset growth. The average composite interest rate on GECS' borrowings for the first nine months of 2002 was 4.08% compared with 5.39% in the first nine months of 2001.

        Operating and administrative expenses were $11,509 million for the first nine months of 2002, a 1% decrease compared with the first nine months of 2001. The decrease reflected productivity gains and the absence of amortization expense related to goodwill, as in accordance with SFAS 142 GECS ceased amortizing goodwill effective January 1, 2002. These decreases were partially offset by operating and administrative expenses associated with recent acquisitions, the 2001 reduction in insurance commissions as a result of the events of September 11 and increased commissions in the current year relating to volume increase at GE Insurance.

        Cost of goods sold is associated with activities of GECS' computer equipment distribution business. This cost amounted to $2,237 million for the first nine months of 2002, compared with $2,519 million for the first nine months of 2001. The decrease primarily reflected volume declines at IT Solutions.

        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 result of adverse development on loss reserves at GE Global Insurance Holdings (the principal subsidiary of which is Employers Reinsurance Corporation - ERC) and the effects of acquisitions at GE Financial Assurance, offset by favorable development 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 million for the first nine months of 2001. These provisions principally relate to consumer 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 below under Portfolio Quality. The increase in the provision primarily reflected higher credit losses as well as higher receivable balances. Future provisions for losses will depend primarily on the size of the portfolio, which is expected to continue to grow, and on associated business and economic conditions.

12

        Depreciation and amortization of buildings and equipment and equipment on operating leases increased to $2,703 million for the first nine months of 2002, compared with $2,514 million for the first nine months of 2001. The increase was principally the result of higher levels of equipment on operating leases at GE Commercial Finance, primarily reflecting origination growth 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 tax rate of 19.7%). The lower effective tax rate primarily reflected the effect of increased low taxed earnings from international operations and favorable tax settlements with the Internal Revenue Service.

        Revenues and net earnings before accounting changes of GECS, by operating segment, for the first nine months of 2002 and 2001 are summarized and discussed below. The first nine months of 2002 and 2001 amounts have been reclassified to conform to the new business segments formed as a consequence of the reorganization of GECS' businesses as announced by its parent, General Electric Company ("GE") on July 26, 2002, and changes in the amortization of goodwill, effective as of January 1, 2002.

        Following is a discussion of revenues and net earnings from operating segments for the nine months ended September 28, 2002 and September 29, 2001.

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

13

GE Consumer Finance

        14

GE Insurance