GE FINANCIAL ASSURANCES HOLDINGS INC
10-K405, 2000-03-21
LIFE INSURANCE
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<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                               ________________

                                   FORM 10-K
                                ______________

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

                  For the fiscal year ended December 31, 1999

                                      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 0-23375
                               ________________

                     GE Financial Assurance Holdings, Inc.
            (Exact name of registrant as specified in its charter)

               Delaware                                   54-1829180
     (State or other jurisdiction of                   (I.R.S. Employer
    Incorporation or organization)                    Identification No.)

     6604 West Broad Street
       Richmond, Virginia                 23230         (804) 281-6000
(Address of principal executive         (Zip Code)   (Registrant's telephone
offices)                                              number, including area
                                                      code)

                               ________________

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

                                     None.

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

                                     None.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
                                       -

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

At March 21, 2000, 1,000 shares of voting common stock, which constitute all of
the outstanding common equity, with a par value of $1.00 per share were
outstanding.

Aggregate market value of the outstanding common equity held by nonaffiliates of
the registrant at March 21, 2000. None.

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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                         <C>
PART I

    Item 1.   Business.....................................................................   1
    Item 2.   Properties...................................................................  26
    Item 3.   Legal Proceedings............................................................  26
    Item 4.   Submission of Matters to a Vote of Security Holders..........................  27

PART II

    Item 5.   Market for the Registrant's Common Equity and Related Stockholder Matters....  27
    Item 6.   Selected Financial Data......................................................  27
    Item 7.   Management's Discussion and Analysis of Results of Operations................  28
    Item 7A.  Quantitative and Qualitative Disclosures about Market Risk...................  43
    Item 8.   Financial Statements and Supplementary Data..................................  46
    Item 9.   Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure.......................................................  86

PART III

    Item 10.  Directors and Executive Officers of the Registrant...........................  86
    Item 11.  Executive Compensation.......................................................  86
    Item 12.  Security Ownership of Certain Beneficial Owners and Management...............  86
    Item 13.  Certain Relationships and Related Transactions...............................  86

PART IV

    Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............  86
</TABLE>
<PAGE>

PART I

Item 1.  Business.

     GE Financial Assurance Holdings, Inc. (GE Financial Assurance, together
with its subsidiaries, the Company), through its direct and indirect
subsidiaries, is principally engaged in the life insurance, annuity, long-term
care insurance, mutual fund, retirement investment plan and property and
casualty insurance business primarily in North America and Asia. All the
outstanding common stock of GE Financial Assurance is owned by General
Electric Capital Corporation (GE Capital), a wholly owned subsidiary of
General Electric Capital Services, Inc. GE Financial Assurance's principal
executive offices are located at 6604 West Broad Street, Richmond, Virginia
23230 (telephone (804) 281-6000).

Ownership of the Company

     GE Capital operates in four financing industry segments and in a specialty
insurance industry segment. GE Capital's financing activities include a full
range of middle-market leasing and lending, equipment management sales and
services, specialized financing and consumer lending, savings and insurance
services. GE Capital's specialty insurance activities include providing
financial guaranty insurance, principally on municipal bonds and structured
finance issues, private mortgage insurance and creditor insurance covering
international customer loan repayments. The long-term debt obligations of GE
Capital are rated "AAA" by Standard & Poor's Corporation (S&P) and "Aaa" by
Moody's Investors Services, Inc. (Moody's).

General Description of Business

     GE Financial Assurance is a holding company that, through its subsidiaries,
provides consumers financial security solutions by selling a wide variety of
insurance, investment and retirement products and consumer club memberships
primarily in North America and Asia. The Company effectively began operations in
April 1993 with the acquisition of GNA Corporation. The Company has continued to
broaden its operations through a series of acquisitions consummated since 1993.
See "Business - Significant Acquisitions." The Company's product offerings are
divided along two major segments of consumer needs: (i) Wealth Accumulation and
Transfer and (ii) Lifestyle Protection and Enhancement.

     The Company's principal product lines under the Wealth Accumulation and
Transfer segment are (i) annuities (deferred and immediate; either fixed or
variable), (ii) life insurance (universal, term, ordinary and group), (iii)
guaranteed investment contracts (GICs) including funding agreements and (iv)
mutual funds. Wealth Accumulation and Transfer products are used by customers as
vehicles for accumulating wealth, often on a tax-deferred basis, transferring
wealth to beneficiaries, or providing a means to replace the insured's income in
the event of premature death. The Company's distribution of Wealth Accumulation
and Transfer products is currently accomplished through three primary
distribution methods: (i) intermediaries, (ii) dedicated sales forces and
financial advisors, and (iii) marketing through businesses.

                                       1
<PAGE>

     The Company's principal product lines under the Lifestyle Protection and
Enhancement segment are (i) long-term care insurance, (ii) supplemental accident
and health insurance, (iii) personal lines of automobile insurance and (iv)
consumer club memberships. Lifestyle Protection and Enhancement products
are used by customers as vehicles to protect their income and assets from the
adverse economic impacts of automobile accidents and related liabilities or
significant health care costs or other unanticipated events that cause temporary
or permanent loss of earnings capabilities. The Company also provides consumers
with club membership opportunities. The Company's distribution of Lifestyle
Protection and Enhancement products is currently accomplished through four
primary distribution methods: (i) intermediaries, (ii) dedicated sales forces
and financial advisors, (iii) marketing through businesses and (iv) direct and
affinity based marketing through electronic-commerce (e-commerce), telemarketing
and direct mail.

Recent Transactions

     Effective March 1, 2000, GE Edison Life Insurance Company (GE Edison)
acquired, by means of a comprehensive transfer in accordance with the Insurance
Business Law of Japan (IBL), the insurance policies and related assets of Toho
Mutual Life Insurance Company, a Japanese life insurer (Toho). GE Edison assumed
approximately $22.7 billion of policyholder liabilities and $20.5 billion of
cash and invested assets, the difference between such amounts being attributable
to the present value of future profits on the transferred insurance policies.
Toho, which continues to exist as a separate and independent entity, will
liquidate its remaining assets and liabilities following the comprehensive
transfer. Such liquidation will have no impact on the Company's financial
position or operations.

     GE Edison had previously acquired Toho's operating infrastructure in March
1998. See "Significant Acquisitions". In June 1999, the Financial Supervisory
Agency (FSA) of Japan determined that Toho's continued operation was not in the
best interests of its policyholders given its weak financial position. As a
result, the FSA issued a partial business suspension order to Toho on June 4,
1999. In connection with such suspension order, the FSA appointed two
independent individuals from the Japanese insurance industry and the Life
Insurance Association of Japan as administrators of Toho (collectively, the
Administrator).

     Under the IBL, the sole means for rehabilitating an insolvent insurer is
through a comprehensive transfer of the insurer's insurance policies and assets
to a rescuing company. On December 22, 1999, the Administrator entered into an
agreement with GE Edison, acting as the rescuing company, for the comprehensive
transfer of Toho's insurance policies. In conjunction with the comprehensive
transfer, the Administrator restructured Toho's in-force insurance contracts.
The restructured insurance contracts have surrender charges, reduced benefits
and lower policy guarantees. As an inducement for GE Edison to become the
rescuing company, Japan's Policyholder Protection Corporation contributed
approximately $3.6 billion as part of the assets supporting Toho's restructured
policies. In December 1999, in connection with the comprehensive transfer, the
Company acquired the common stock of GE Edison held by Toho. Consequently, the
Company now owns 100% of GE Edison through various subsidiaries. The Company
will account for the comprehensive transfer under the purchase method of
accounting in 2000.

     The Company expects to infuse approximately $600 million of capital into GE
Edison to support strong solvency margins and claims paying ratings. The Company
anticipates funding the capital infusion through the issuance of commercial
paper.

     In December 1999, the Company reached an agreement to acquire Phoenix
American Life Insurance Company, a subsidiary of Phoenix Home Life Mutual
Insurance Company, a small company insurance provider based in Hartford,
Connecticut for approximately $282 million. The Company believes that this
acquisition will enhance the ability of the Company to offer consumers a wide
array of financial products and services through small to medium size companies.
The acquisition is expected to be completed early in the second quarter of 2000.

                                       2
<PAGE>

     On July 30, 1999, in connection with Montgomery Ward Holding Corp.'s plan
of reorganization under chapter 11 of the federal bankruptcy laws, GE Capital
acquired The Signature Group (Signature) from Montgomery Ward & Co. Incorporated
for an aggregate purchase price of $885 million. The acquisition was completed
through a series of mergers involving various Signature companies and
subsidiaries of the Company with the Company's subsidiaries being the surviving
company in such mergers. The effect of the mergers was to cause Signature to
become a subsidiary of GE Financial Assurance. The Company believes that this
acquisition will provide strategic value through the enhancement of its affinity
group and direct marketing capabilities.

     On March 31, 1999, the Company acquired Professional Insurance Company from
Pacific Life and Accident Insurance Company, a subsidiary of PennCorp Financial
Group. Professional Insurance Company is a work-site insurance provider based in
Raleigh, N.C.  The Company believes that the acquisition of Professional
Insurance Company provides a strategic fit into its small company distribution
network.

     On January 1, 1999, the Company completed an internal restructuring which
included the mergers of Great Northern Insured Annuity Corporation into General
Electric Capital Assurance Company, The Harvest Life Insurance Company
(previously a subsidiary of Federal Home Life Insurance Company) into The Life
Insurance Company of Virginia and PHF Life Insurance Company (previously a
subsidiary of Federal Home Life Insurance Company) into Union Fidelity
Life Insurance Company. Simultaneously with the aforementioned mergers, The Life
Insurance Company of Virginia was renamed GE Life and Annuity Assurance Company.
The mergers and name change were approved by all applicable state insurance
regulatory departments.

Strategy

     The Company believes that changes in demographics such as the increased
number of baby boomers entering middle and late middle age, longer life
expectancies due to medical advances, the reduction in government- and employer-
sponsored benefit programs and the increased need for estate planning for the
most affluent group of retirees in history, have increased, and will continue to
increase, the demand for innovative products and services to solve individual
financial challenges. The Company's strategy is designed to take advantage of
these trends by offering a broad array of products and services through the
Company's four major channels of distribution. See "Marketing and Distribution."

     The Company's approach to this opportunity is to maintain a number of
businesses with unique product and distribution capabilities designed to deliver
innovative products and services associated with accumulating, transferring and
protecting the consumer's wealth and lifestyle. Most of the Company's products
are targeted at middle to upper income consumers and individuals employed by
small to mid-sized companies. To date, the Company has operated primarily in
North America and Asia.

     The Company's strategy is to be a consumer financial solutions provider
through (i) intense customer focus, (ii) generating core business line growth,
and (iii) competitive cost leadership. These elements are further supported by a
strong foundation of operating fundamentals. The Company's strategy consists of
the following four elements:

     .    Customer Focus: This is the fundamental foundation on which the
          ---------------
          Company is based. The core concept for the Company is to be customer
          needs driven and to simplify consumers' lives. In order to accomplish
          this, the Company has positioned itself to offer education advice and
          go beyond just offering products to developing personalized solutions
          that provide options and choices to consumers. By providing solutions
          the Company believes it will differentiate itself and create an
          affinity with customers that will translate into lifetime
          relationships.

                                       3
<PAGE>

     .    Growth. This element begins with on the Company's focus on
          -------
          leveraging the power of the Internet across its business lines and
          processes, acceleration of internal growth, building distribution
          capabilities, and expanding its international presence. The Company's
          business units focus on key customer groups and distribution channels
          which are well positioned to maximize marketplace penetration. The
          Company believes that its customers are becoming increasingly
          sophisticated in assessing their needs for savings, insurance and
          retirement. The Company's products and services are designed to meet
          needs based on input from customers and the distributors who service
          them. To enable the Company to obtain this input, it endeavors to
          create and maintain direct contact with its key customer groups, as
          well as the distributors who service them.

          The Company's distribution strategy is focused on penetrating its
          targeted markets through four types of distribution methods: (i)
          intermediaries, (ii) dedicated sales forces and financial advisors,
          (iii) marketing through businesses and (iv) direct and affinity based
          marketing through e-commerce, telemarketing and direct mail. In each
          distribution type, internal growth will be driven by strong product
          development, disciplined marketing and sales expansion of specific
          distribution relationships, and selective cross-marketing of products.
          Additionally, the Company's commitment to e-commerce has allowed it
          to capitalize on two fundamental opportunities to further accelerate
          its growth: (1) making the Company's existing businesses and ways of
          serving consumers more effective by being faster and more cost
          efficient, and (2) by creating entirely new product and service
          capabilities or processes to build new ways of reaching consumers and
          helping its distributors. In the Company's view the Internet
          represents not just a new distribution channel, but a new business and
          a new way of doing business. See -"Marketing and Distribution."

          The Company has acquired a number of organizations which offer a broad
          array of products and services designed to address the wealth
          accumulation and transfer and lifestyle protection and enhancement
          needs of consumers. While the Company's primary focus will be on
          increasing its sales of existing products by enhancing its marketing
          and sales, product development and service capabilities, the Company
          will continue to consider opportunities to enter new markets. Entry
          into these new markets will be accomplished through (1) development of
          new products for sale through existing channels, (2) development of
          new products to serve new channels, (3) creation of new distribution
          segments within established channels and (4) alliances with or
          acquisition of entities with an established presence in existing
          markets or distribution channels.

          The Company recognizes that demographic trends similar to those
          existing in the United States are also emerging in other developed
          countries. Additionally, other markets are in the process of
          developing financial services capabilities currently available in the
          United States. The Company continually monitors these developments and
          considers opportunities to participate in these markets. GE Financial
          Assurance believes that economic growth and expansion of the middle
          class in Asia and Latin America, as well as the consolidation of the
          financial services industry in Europe, will create opportunities for
          additional international expansion in the future.

                                       4
<PAGE>

     .    Leadership in Cost Competitiveness and Productivity. The Company
          ----------------------------------------------------
          recognizes that consolidation in the financial services industry will
          create fewer but larger competitors. The Company's ability to
          effectively compete will be dependent upon, among other things, its
          ability to reduce its expenses through the elimination of duplicate
          functions and the use of enhanced technology. The Company's continued
          commitment to bring together its recent acquisitions into integrated
          platforms with common information systems is designed to create a
          competitiv advantage in the marketplace. While the Company believes
          that the diversity of its distribution channels is a competitive
          advantage, it recognizes the need to coordinate its efforts to
          provide a unified face to its customers and distributors. The Company
          has worked, and will continue to work, to promptly integrate its
          recent acquisitions, many of which have enhanced existing
          distribution channels or added new ones. The Company is committed to
          service excellence through the implementation of quality initiatives
          and technology to provide timely and efficient response to all
          consumer inquiries, needs and requests.

     .    Strong Foundation of Operating Fundamentals. The Company's dedication
          --------------------------------------------
          to providing quality products to its customers, maintaining strong
          risk management and compliance focus and utilizing technology for
          competitive advantage all provide a solid foundation for the Company's
          successful execution of its business strategy. Risk management and
          compliance processes and practices have been a long-standing strength
          of GE Capital, and the Company has developed processes and practices
          appropriate for its operating businesses using GE Capital's practices
          and experience as a guide. The Company believes that its commitment to
          technology, as demonstrated by its upgrading of its life insurance
          administration and underwriting systems and its development of
          integrated computer systems which propose, issue and administer
          various types of complex contracts, will enable the Company and its
          distributors to be increasingly more productive and thus provide
          competitive advantages in the marketplace.

                                       5
<PAGE>

     Significant Acquisitions

     The Company effectively began operations in April 1993 with the acquisition
of GNA Corporation. The Company has continued to broaden its operations through
a series of acquisitions since 1993. The following table sets forth the primary
acquisitions that GE Financial Assurance has made over the last five years with
a brief description of the new products and principal distribution channels each
acquisition brought to GE Financial Assurance.

<TABLE>
<CAPTION>
                                                                                                              Principal
Acquisition                                        Date               Principal Products                 Distribution Channel
- -----------                                        ----               ------------------                 --------------------
<S>                                             <C>               <C>                                    <C>

AMEX Life Assurance Company (subsequently       October 1995      Long-term care                         Dedicated
 merged into General Electric Capital                                                                    sales force
 Assurance Company)

Union Fidelity Life Insurance Company           April 1996        Credit products and                    Direct marketing and
                                                                  supplemental accident and              marketing through
                                                                  health products                        businesses

The Life Insurance Company of Virginia          April 1996        Variable annuities, universal          Intermediaries, dedicated
 (subsequently renamed GE Life and Annuity                        life insurance and GICs                sales force and
 Assurance Company)                                                                                      financial advisors

First Colony Life Insurance Company             December 1996     Life insurance, retirement             Intermediaries
                                                                  annuities and structured
                                                                  settlements

Colonial Penn Insurance Company                 November 1997     Personal lines of automobile           Direct marketing
                                                                  insurance

GE Edison Life Insurance Company (former        March 1998        Life insurance, health and             Dedicated
 operating infrastructure of Toho Mutual                          annuity products                       sales force
 Life Insurance Co.)

The Signature Group                             July 1999         Consumer club memberships, life        Direct marketing
                                                                  insurance, accident and health
                                                                  and credit products
</TABLE>

                                       6
<PAGE>

Ratings

     GE Financial Assurance's principal subsidiaries are rated by A.M. Best
Company, an independent rating agency (A.M. Best), as follows:

Company                                                         Rating
- -------                                                         ------

First Colony Life Insurance Company...........................  A++ (superior)
American Mayflower Life Insurance Company of New York.........  A+ (superior)
Federal Home Life Insurance Company...........................  A+ (superior)
General Electric Capital Assurance Company....................  A+ (superior)
GE Life and Annuity Assurance Company.........................  A+ (superior)
GE Capital Life Assurance Company of New York.................  A+ (superior)
Union Fidelity Life Insurance Company.........................  A+ (superior)
Colonial Penn Insurance Company...............................  A- (excellent)
GE Edison Life Insurance Company..............................  Not Rated

     A.M. Best's ratings for insurance companies currently range from A++ to F,
and some companies are not rated. A.M. Best's ratings are based upon an
evaluation of a company's: (i) financial strength (leverage/capitalization,
capital structure/holding company, quality and appropriateness of reinsurance
program, adequacy of loss/policy reserves, quality and diversification of
assets, and liquidity); (ii) operating performance (profitability, revenue
composition, and management experience and objectives) and (iii) market profile
(market risk, competitive market position, spread of risk, and event risk).
"A++" and "A+" ratings are assigned to those companies that in A.M. Best's
opinion have, on balance, superior financial strength, operating performance and
market profile when compared to the standards established by A.M. Best and have
a very strong ability to meet their ongoing obligations to policyholders. "A"
and "A-" ratings are assigned to those companies that in A.M. Best's opinion
have, on balance, excellent financial strength, operating performance and market
profile when compared to the standards established by A.M. Best and have a
strong ability to meet their ongoing obligations to policyholders. A.M. Best's
ratings are based upon factors of concern to policyholders, agents and
intermediaries and are not directed toward the protection of investors.

                                       7
<PAGE>

Products

     Wealth Accumulation and Transfer Products

Annual Life Insurance

     The following table presents the aggregate amount of the Company's
annualized premiums of life insurance in force as of the dates indicated.

                Annualized Premiums of Life Insurance In Force

<TABLE>
<CAPTION>
                                                               As of December 31,
                                                               ------------------
                                                            1999      1998      1997
                                                            ----      ----      ----
                                                              (Dollars in Millions)
<S>                                                        <C>       <C>       <C>
Annualized Premiums of Life Insurance in Force:
   Term...............................................     $  577    $  503    $  503
   Permanent..........................................        580       528       503
                                                           --------------------------
   Total..............................................     $1,157    $1,031    $1,006
                                                           ==========================
 </TABLE>

     The following table presents first year sales of the Company's life
insurance products, by type, for the periods presented.

                Distribution of Life Insurance Policies by Type

<TABLE>
<CAPTION>
                                                            Years ended December 31,
                                                            ------------------------
                                                           1999      1998       1997
                                                           ----      ----       ----
                                                              (Dollars in Millions)
<S>                                                        <C>       <C>        <C>
First Year Sales of Life Insurance:
   Term..........................................          $185      $106       $100
   Permanent.....................................           195       327        194
                                                           -------------------------
   Total.........................................          $380      $433       $294
                                                           =========================
</TABLE>

Term Life Insurance.  Term life insurance provides life insurance protection for
a limited time: a death benefit is paid only if the insured dies during the
specified term. The Company's term life insurance products include competitively
priced graded premium whole life insurance products that offer low cost
insurance protection. These products generally have level premiums for initial
terms of 1, 5, 10, 15, 20 or 30 years and give the policyholder the contractual
right to continue coverage for life.  The Company's Japanese affiliate, GE
Edison Life Insurance Company, sells term insurance products primarily in the
form of riders to semi-participating whole life products.  These policies
generally have initial term of 10 and 15 years and policyholders are eligible to
receive dividend payments every five years.

                                       8
<PAGE>

Permanent Life Insurance.  Permanent life insurance provides life insurance
protection for the entire life of the insured and, unlike term life insurance,
has an investment component. The Company's permanent life insurance products
include a variety of guaranteed premium interest-sensitive whole life insurance,
universal life insurance, and employee plans/salary savings products.  The
Company's Japanese subsidiary, GE Edison Life Insurance Company, sells semi-
participating whole life insurance policies that provide permanent life
insurance protection.  These policyholders are eligible to receive dividend
payments every five years.  Benefits are paid in the event of death or severe
disability.

Impaired Risk Underwriting.  An insured who is an impaired risk has a shorter
life expectancy than one who is accepted on a standard or preferred basis; for
this reason the insured pays a higher premium for the same coverage. During
1999, approximately 3% of the Company's life insurance premiums and 4% of the
face amount of its new business was underwritten on an impaired risk basis. The
Company's impaired risk underwriting capability was acquired as part of GE Life
and Annuity Assurance Company and First Colony Life Insurance Company
acquisitions in 1996. Prior to that date, the amount of the Company's life
insurance premiums represented by impaired risk business was not material.

     The following table identifies those states that accounted for 5% or more
of the Company's annual life insurance premiums collected during 1999 (includes
a small amount of single premium life insurance).

                Annual Life Insurance Premiums Produced by State

                                                        Year Ended
   State                                             December 31, 1999
   -----                                             -----------------
                                                 (Percent of Total Premiums)

   California....................                           12%
   Florida.......................                            7%
   Virginia......................                            7%
   Pennsylvania..................                            5%
   Texas.........................                            5%

Single Premium Immediate Annuities

     The following table presents the aggregate amount of single premium
immediate annuities (SPIAs) in force measured by reserves as of the dates
indicated.

                  Single Premium Immediate Annuities In Force

<TABLE>
<CAPTION>
                                                            As of December 31,
                                                            ------------------
                                                      1999        1998        1997
                                                      ----        ----        ----
                                                          (Dollars in Millions)
<S>                                                  <C>         <C>         <C>
Single Premium Immediate Annuities:
   Structured Settlement.........................    $10,092     $ 9,102     $ 8,590
   Retirement....................................      3,216       2,746       2,663
                                                     -------------------------------
   Total.........................................    $13,308     $11,848     $11,253
                                                     ===============================
</TABLE>

                                       9
<PAGE>

     SPIAs provide long-term guaranteed benefit payments utilizing a fixed
interest rate assumption. SPIAs guarantee a series of payments beginning
immediately and continuing over a period of years and, in some cases, for the
life of the annuitants. The Company's SPIAs fall into two categories: structured
settlement and retirement.

     SPIAs differ from deferred annuities in that they generally provide for
payments to begin immediately, for the payments to be contractually guaranteed,
and that the policyholder may not borrow from or surrender the annuity. The
implicit interest rate on SPIAs is based on market conditions when the policy is
issued and is guaranteed for the term of the annuity. Since immediate annuities
are not subject to surrender or borrowing by the policyholder, they provide the
opportunity for an insurance company to match closely the underlying investment
of premium received to the cash benefits to be paid under a policy, thereby
providing an anticipated margin for expenses and profit, subject to mortality
risk. The Company is one of the few companies that offer medically underwritten
annuities. This allows retirees with medical conditions that could shorten their
life expectancies to purchase annuities at lower prices or higher payouts, which
reflect their individual life expectancies.

     The following table presents total sales of the Company's single premium
immediate annuity products for the periods presented. Premiums related to single
premium immediate annuity contracts without life contingencies are reported as
deposit liabilities under GAAP.

              Distribution of Single Premium Immediate Annuities

<TABLE>
<CAPTION>
                                                              Years ended December 31,
                                                              ------------------------
                                                              1999      1998      1997
                                                              ----      ----      ----
                                                               (Dollars in Millions)
<S>                                                          <C>       <C>        <C>
Single Premium Immediate Annuities:
   Structured Settlement................................     $  752    $  827     $ 676
   Retirement...........................................        565       360       213
                                                             --------------------------
   Total................................................     $1,317    $1,187     $ 889
                                                             ==========================
</TABLE>

Single Premium Immediate Annuities -- Structured Settlement.  Structured
settlements provide an alternative to a lump sum settlement in a personal injury
case and are generally purchased by property and casualty insurance companies
for the benefit of an injured claimant with benefits scheduled over a fixed
period and/or for the life of the claimant thereafter. Structured settlements
offer tax advantaged long-range financial security to the injured party and
facilitate claim settlement for the casualty insurance carrier. First Colony
Life Insurance Company (First Colony) was a pioneer in this business in the
late 1970's and early 1980's and has consistently been a significant provider
since the market's inception. GE Capital Assurance has been a significant
provider since 1993.

     Structured settlement contracts are long-term in nature, guarantee a fixed
benefit stream and generally cannot be surrendered or borrowed against. Since
many structured settlement contracts generally provide for guaranteed payments
for a predetermined period that do not depend on the survival of the annuitant,
the mortality risk portion of the Company's liability with respect to such
policies is relatively small.

                                       10
<PAGE>

Single Premium Immediate Annuities -- Retirement.  SPIAs used for retirement
purposes are identical to those used to facilitate structured settlements in
that payments begin immediately, cannot be surrendered or borrowed against and
guarantee a fixed stream of benefits. Retirement annuities are typically sold to
older annuitants and therefore are somewhat shorter in average contract life
than structured settlement annuities.

Single Premium Life Insurance, Single Premium Deferred Annuities and GICs

     The following table presents Company's single premium life insurance,
single premium deferred annuities and GICs in force for the periods presented.
Premiums related to these products are reported as deposit liabilities under
GAAP.

                        Single Premium Life Insurance,
              Single Premium Deferred Annuities and GICs In Force

<TABLE>
<CAPTION>
                                                                  As of December 31,
                                                                  ------------------
                                                             1999        1998        1997
                                                             ----        ----        ----
                                                                 (Dollars in Millions)
<S>                                                        <C>         <C>         <C>
Single Premium Life Insurance.........................     $ 2,130     $ 2,631     $ 2,634
Single Premium Deferred Annuities
   Fixed..............................................      11,894      11,976      12,545
   Variable...........................................       9,744       5,895       4,590
GICs..................................................       4,196       2,425       1,606
Other.................................................         122         250         143
                                                           -------------------------------
   Total..............................................     $28,086     $23,177     $21,518
                                                           ===============================
</TABLE>


                Distribution of Single Premium Life Insurance,
                  Single Premium Deferred Annuities and GICs

<TABLE>
<CAPTION>
                                                              Years ended December 31,
                                                              ------------------------
                                                             1999       1998       1997
                                                             ----       ----       ----
                                                                 (Dollars in Millions)
<S>                                                         <C>        <C>        <C>
Single Premium Life Insurance......................         $   13     $   23     $   77
Single Premium Deferred Annuities
   Fixed...........................................          1,279        704        712
   Variable........................................          2,662        908      1,032
GICs...............................................          2,054      1,087        544
                                                            ----------------------------
   Total...........................................         $6,008     $2,722     $2,365
                                                            ============================
</TABLE>

                                       11
<PAGE>

     The following table identifies those states that accounted for 5% or more
of the Company's 1999 production of annuities.

                          Annuity Production by State

  State                                                  Year Ended
  -----                                               December 31, 1999
                                                      -----------------
                                                 (Percent of Total Premiums)

  California..................................               10%
  Florida.....................................               10%
  Virginia....................................               10%
  Washington..................................                9%
  New York....................................                8%
  Texas.......................................                8%
  Michigan....................................                5%

Single Premium Life Insurance

     The Company's single premium life insurance products are interest rate-
sensitive policies that, for a single payment, provide the insured with non-
participating life insurance with a guaranteed cash value and death benefit.
Current interest is credited to the policy's cash values based upon interest
rates that are revised periodically by the Company to reflect current economic
conditions. In most cases, this accrual of interest during the accumulation
period is on a tax-deferred basis to the insured. The Company guarantees that in
no event will the interest rate credited on cash values be less than the
guaranteed rate specified in the policy. The policy owner is permitted to take
loans and withdrawals against the cash value. Withdrawals in the early years of
the contract are subject to a significant surrender charge. In 1999, most
policies issued impose surrender charges of 8% of the policy's cash value for
the first six policy years and decrease to zero over the subsequent four-year
period. A policyholder may withdraw annually up to 10% of the policy's cash
value without penalty.

Single Premium Deferred Annuities

     Fixed Annuities.  A fixed single premium deferred annuity (a SPDA)
provides for a single premium payment at time of issue, an accumulation period
and an annuity payout period at some future date. During the accumulation
period, the insurance company credits the account value of the annuitant with
interest earnings at a current interest rate (the crediting rate) that is
guaranteed for a period of one to five years, at the annuitant's option, and,
thereafter, is subject to change based on prevailing market rates and product
profitability. Each contract also has a minimum guaranteed rate. This accrual of
interest during the accumulation period is on a tax-deferred basis to the policy
owner. After the number of years specified in the annuity contract, the owner
may elect to take the proceeds of the annuity as a single payment, a specified
income for life or a specified income for a fixed number of years. The policy
owner is permitted at any time during the accumulation period to withdraw all or
part of the single premium paid plus the amount credited to his account.
Withdrawals in the early years of the contract are subject to a significant
surrender charge. In 1999, policies issued impose surrender charges which vary
from 5% to 7% of the account value starting in the year of policy issue and
decrease to zero over a five to eight year period. After the first twelve months
that the contract is in-force, a policy owner may withdraw annually up to 10% of
the account value without penalty.

                                       12
<PAGE>

     At least once each month, the Company establishes an interest crediting
rate for its new fixed SPDA policies. In determining the Company's interest
crediting rate on new policies, management considers the competitive position of
the Company, prevailing market rates and the profitability of the annuity
product. After policy issue, the Company maintains the initial crediting rate
for a minimum period of one year. Thereafter, the Company may adjust the
crediting rate not more frequently than once per year for a given SPDA policy.
Interest rates credited on the Company's in-force SPDA policies ranged from 3.8%
to 7.2% at December 31, 1999. All of the Company's annuity products have minimum
guaranteed crediting rates ranging from 3.0% to 5.5% for the life of the policy.

     The Company offers an SPDA product that links the amount of interest
credited to the S&P 500 Index. This indexed annuity allows customers to
participate in the growth in the S&P 500 while providing protection of principal
and a guaranteed return on the substantial portion of the initial premium. The
guaranteed minimum crediting rate on the product is 3% per annum. The product
has a ten-year surrender charge period with surrender charges of up to 8%. The
Company earns an annual administrative fee on the product which is computed
based on the policy's accumulated value.

     Variable Annuities.  A variable annuity incorporates all the features of a
fixed SPDA, but also involves maintaining a portion of the policyholders'
premiums in a separate account maintained for variable annuities, distinct from
the Company's general assets and liabilities. Policyholders have discretion to
allocate their premiums among several available fund options (mutual funds and
other investment funds, including a fixed account, which is held by the
Company). The cash surrender value of a variable annuity policy depends on the
performance of these underlying funds, which the policyholder may reallocate
from time to time. There is no guaranteed minimum rate in the mutual fund
components of variable annuity policies. Similarly, during the variable
annuity's payout period, the payments distributed to the annuitant fluctuate
with the performance of the underlying funds selected by the annuitant. Variable
annuities provide the Company with fee based revenue in the form of management
and administrative fees charged to the policyholder's account.

GICs and Funding Agreements

     GICs are deposit-type products that provide a guaranteed return (on a fixed
or indexed basis) to the contract holder. GICs are purchased by Employee
Retirement Income Security Act (ERISA) qualified defined contribution plans,
including but not limited to, 401(k) plans where plan participants elect a
stable value option. Funding Agreements, which operate substantially similarly
to GICs, are purchased by institutional accredited investors for various kinds
of funds and accounts that are not ERISA qualified. Examples include money
market funds, bank common trust funds and other corporate and trust accounts.

     GICs typically credit interest at a fixed interest rate (determined by
market conditions) and have a fixed maturity ranging from two to six years. Both
rates and maturities are set at the time of sale. Substantially all GICs allow
for the payment of benefits at contract value to ERISA plan participants in the
event of death, disability, retirement or change in investment election. The
Company underwrites these risks before issuing a GIC to a plan. In addition, the
Company requires plans buying its GICs to have certain restrictions on
participant transfers to money market and similar funds in order to reduce
disintermediation risk. The Company's GICs can also be terminated prior to their
maturity by the contract holder, but only after an adjustment to the contract
value for changes in the level of interest rates and the application of a
significant penalty (net payment amount may not exceed contract value).

     Funding Agreements credit interest at a rate that is indexed to LIBOR
(London Interbank Offered Rate). These contracts are typically renewed
annually, however, either the Company or the contract holders can terminate
the Funding Agreement after giving notice within the contract's specified
notice period (generally a period of 7 to 90 days). The aggregate amount of
the Company's outstanding funding agreements with put option features
is approximately $1.4 billion. The Company has established a line of credit
with its parent in an

                                       13
<PAGE>

amount sufficient to provide liquidity in the event of an unusual level of early
terminations.

Mutual Funds

     The Company offers certain mutual funds to retail customers through its
bank and other distribution channels. These funds are managed by General
Electric Investment Management Incorporated (GEIM), a wholly owned subsidiary
of General Electric Company and an affiliate of the Company.

     In addition, the Company markets GE Investments Funds, Inc. (GEI Funds),
a family of mutual funds also managed by GEIM and offered exclusively as
investment vehicles for certain variable annuity contracts and variable life
insurance contracts issued by the Company or by other insurers, and for
qualified pension and retirement plans.

     Lifestyle Protection and Enhancement Products

     The Company's Lifestyle Protection and Enhancement product lines include
long-term care insurance, supplemental accident and health, Medicare supplement,
credit insurance, automobile insurance and consumer club memberships. In 1999,
the Company ceased offering Medicare supplement policies.

     The following table presents total sales of the Company's Lifestyle
Protection and Enhancement products for the periods presented.

         Distribution of Lifestyle Protection and Enhancement Products

<TABLE>
<CAPTION>
                                                                               Years ended December 31,
                                                                               ------------------------
                                                                              1999       1998        1997
                                                                              ----       ----        ----
                                                                                 (Dollars in Millions)
<S>                                                                           <C>        <C>         <C>
Long-Term Care..........................................................      $158       $112        $109
Supplemental Accident and Health (including Medicare Supplement)........       129         90         102
Automobile Insurance....................................................       130        106          17
Consumer Club Memberships...............................................        95          -           -
Credit Insurance........................................................        57         66          74
                                                                              ---------------------------
   Total................................................................      $569       $374        $302
                                                                              ===========================
</TABLE>

Long-Term Care Insurance

     The Company is one of two leading companies in the sale of individual long-
term care insurance policies when measured by first-year annualized premium and
policies in force. Such policies provide coverage within prescribed limits for
nursing home, community and in-home care. The long-term care insurance plans are
sold to senior citizens (primarily 60 years of age or older). Long-term care
insurance policies are expected to continue to grow because of the growing
demand for such products among senior citizens, especially in the area of home
health care.

     Current nursing home coverages in force include both expense incurred and
daily fixed dollar benefit policies. Currently, only expense incurred policies
are being sold, with an elimination period (which, similar to a deductible,
requires the insured to pay for a certain number of days of nursing home care
before the insurance coverage begins) and a maximum benefit period. Home health
care benefits also have an

                                       14
<PAGE>

elimination period, and pay covered charges, after Medicare coordination,
subject to a daily or weekly maximum dollar limit and an overall maximum. The
applicant may select from one of several available benefits levels.

     The Company's policies are guaranteed renewable and, consequently, the
Company has the right to change premiums by policy class, but not based on age
or health of any individual.

Supplemental Accident and Health

     The Company offers supplemental accident, health and disability products to
employer and employee groups, associations and other affinity groups and
residents of farm and rural communities. The Company markets supplemental
accident and health products because it believes that offering a broad range of
products is essential in order to be a preferred provider of benefits
effectively meeting the needs of employers and consumers. The Company's
supplemental accident and health products include a variety of coverages such as
specified disease policies, hospital indemnity coverages, accident policies and
disability income policies. These policies pay for the policyholder's medical
costs directly (after certain deductibles or co-payment arrangements have been
met), pay a lump sum upon the occurrence of a covered event, or in the case of
disability income, provide continuous payments to insureds during periods of
disability. Many of the Company's supplemental accident and health products have
defined benefit limits. The Company has a maximum retention of risk per any
single case or individual, which limits risk in the event that its claims
experience deviates from the assumptions used in setting premium rates.

Medicare Supplement

     Medicare supplement policies provide coverage for many of the medical
expenses which the Medicare program does not cover, such as the deductible and
coinsurance costs (in which the insured and Medicare share the costs of medical
expenses) and specified losses which exceed the federal program's maximum
benefits. In 1999, the Company ceased offering Medicare supplement policies. The
Company had historically concentrated on individuals who had just reached the
age of 65 and, thus, had become eligible for Medicare. The Company's Medicare
supplement plans automatically adjust coverages to reflect changes in Medicare
benefits. Premium increases on the Company's Medicare supplement policies must
be approved by the insurance departments of each state in which the Company
sells such products.

                                       15
<PAGE>

Automobile Insurance

     The Company primarily writes personal automobile insurance which covers the
legal liability of individuals arising out of the ownership or operation of an
automobile and also provides physical damage insurance on the automobile,
medical payments insurance and protection against uninsured motorists. All of
the Company's personal automobile insurance policies are written for a term of
one year. In many states, however, the Company offers a "guaranteed lifetime
protection" provision to certain qualifying policyholders that ensures their
policies will be renewed at rates then in effect for their classification.

Consumer Club Memberships

     The Company, through its acquisition of The Signature Group, is a leading
provider of membership-based products and services, including credit card
registration, auto, dental and legal services plans.  These products are
typically sold through affiliations with major bank, oil or retail credit cards.
The Company pays a portion of consumer membership fees to credit card issuers,
representing a commission for marketing rights.

Credit Insurance

   The Company's credit insurance operations consist of life and accident and
health insurance coverages offered to consumer debtors, chiefly through banks
and finance companies. Typically, this insurance will pay outstanding loan
obligations in the event of an insured loss. This coverage is issued on either
the single-premium or outstanding loan balance basis.

Product/Service Centers

     The Company has established six primary product/service centers for
creating and servicing its North American products for its businesses as
follows: (i) the fixed life and annuities business primarily operates in
Lynchburg, Virginia; (ii) the variable life and annuities business primarily
operates in Richmond, Virginia; (iii) the long-term care insurance business
primarily operates in San Rafael, California; (iv) the supplemental accident and
health insurance and credit insurance business primarily operates in Trevose,
Pennsylvania; (v) the automobile insurance business primarily operates in Valley
Forge, Pennsylvania; and (vi) the consumer club membership business primarily
operates in Schaumburg, Illinois. The Company's product/service centers for the
Asian market are located in Tokyo and Yokohoma, Japan. The Company is
in the process of combining the Trevose and Valley Forge, Pennsylvania sites
into a single site located in Fort Washington, Pennsylvania.

Marketing and Distribution

     The Company presently distributes its products through four primary
channels:

     .    Intermediaries, such as brokerage general agents (BGAs), banks,
          securities brokerage firms, specialized brokers and financial planning
          firms;

     .    Dedicated sales forces and financial advisors;

     .    Marketing through businesses; and

     .    Direct and affinity based marketing through e-commerce, telemarketing
          and direct mail.

     Intermediaries

BGAs.  The Company distributes many of its products (including fixed and
variable annuities, life products, long term care, universal and term life
insurance (including impaired risk underwriting), and immediate annuities)
through more than 200 independent insurance brokerage firms located throughout
the United States. These BGAs market the Company's products through
approximately 135,000 licensed insurance agents or brokers, who also represent
other companies. The Company believes its consistent commitment to

                                       16
<PAGE>

this system has helped earn it a reputation as a leading provider of life
insurance among BGAs. The Company endeavors to be placed at the top of the BGAs'
list of sources of insurance products and services in which the Company
specializes. To achieve this objective, the Company seeks to provide innovative
and competitive products and services for BGA and end-customer needs,
personalized quality service for the BGAs' agents and brokers and competitive
pricing. Service offered by the Company to the BGAs' agents and brokers includes
the opportunity to participate in the Company's First Colony University, which
offers an integrated insurance training curriculum. Agents and brokers also have
access to a computer-based data access system which gives them instant access to
data regarding their customers' policies and applications with the Company and
information systems to run their businesses.

     The Company's commitment to the independent general agency system has
allowed it to develop a loyal relationship with these general agencies. Of the
Company's 20 leading BGAs in 1999, on the basis of commissions earned, most were
among the leading general agents of the Company 10 years before. No individual
general agency accounted for more than 11% of premiums produced in 1999. The top
ten general agencies collectively produced nearly 41% of the Company's life
insurance premiums by BGAs. The Company believes the loss of any one BGA
relationship in any given year would not materially impact the Company's
financial results.

Banks and Securities Brokerages. Banks and securities brokerage firms are a
significant and growing distribution channel for the Company's fixed and
variable annuities, life insurance products and mutual funds. Over the last few
years distribution of the Company's products through securities brokerage firms
has substantially increased, primarily due to GE Life and Annuity Assurance
Company's distribution of variable annuity products through a large network of
securities brokerage firms. In addition, a significant percentage of the
Company's single premium immediate annuities are sold through major stock
brokerage firms and banks.

Financial Planners and Producer Groups. The Company sells some of its products
under the Wealth Accumulation and Transfer segment, such as fixed and variable
annuities and universal and term life insurance, through financial planners and
producer groups, whose emphasis is on providing investment and insurance
products to one of the Company's target customer groups. The Company believes
that financial planners and producer groups present an opportunity for growth
within the intermediary distribution channel.

Specialized Brokers and Other Distribution.  The Company's single premium
immediate annuities used to facilitate structured settlements are sold through a
network of specialized independent brokers. These brokers are skilled in claims
negotiation and experts in the creation of benefit plans tailored to the needs
of individual claimants and their families. As a pioneer in this industry, the
Company has the oldest and largest distribution system in this market. Its
products are sold through approximately 350 specialized brokers located
throughout the United States. The Company's relationship with many of these
specialized brokers dates back to the inception of this market. The Company
believes, due to its position in this market, new brokers could be added.

     The Company sells GICs through specialized GIC brokers, fund managers,
employee benefit investment advisors and directly to large employee benefit
plans. The Company sells Funding Agreements directly, as well as through
brokers, to institutional accredited investors and banks acting in a fiduciary
capacity.

                                       17
<PAGE>

Dedicated Sales Forces

     Dedicated sales forces consist primarily of non-employees who sell
products of the Company on an exclusive basis and to a lesser extent, a sales
force employed directly by the Company. All non-employee dedicated sales force
agents are affiliated with an insurance agency. Dedicated sales forces are
compensated by the Company primarily on a commission basis.

     The Company has a network of specialized agents who develop customized
solutions to customer's future financial requirements utilizing the Company's
annuity, mutual fund, life insurance, long-term care insurance and supplemental
accident and health insurance products. The Company offers customers free
financial profiles to assist their understanding and development of financial
objectives. Prospective customers are identified through direct mail
solicitation, educational seminars, policyholder referrals, and targeted
promotions linked to the Company's national advertising campaigns.

     Direct mail advertising campaigns target subscribers of certain
publications or those with demographic characteristics that indicate a possible
need for specific products and services. The Company contributes leads generated
through these advertising campaigns to agents. The Company believes that its
lead generation programs provide its sales forces opportunities to increase
their sales effectiveness.

Marketing Through Businesses

     The Company sells supplemental accident and health insurance and universal
life products through payroll deduction employer-sponsored programs. Under these
programs, the Company enters into a contractual arrangement with a corporate
customer permitting agents of the Company to market these products directly to
the corporate customers' employees on site. Employees are able to pay premiums
on products they purchase by means of automatic deductions from their paychecks.

Direct and Affinity Based Marketing through e-Commerce, Telemarketing and
Direct Mail

     Direct and affinity based marketing is a form of marketing in which a
company and a customer deal directly with each other, rather than through an
insurance agent. As a direct and affinity based marketer, the Company deals
directly with the public and endeavors to be the lowest cost provider in this
market. While the Company previously relied heavily on direct mail and
telemarketing, the Company has greatly expanded its use of the Internet to offer
products directly to consumers.

     Prior to 1999, the Company's direct marketing capabilities were limited to
personal automobile insurance, generating qualified leads for agents selling
other products offered by the Company and as an additional distribution channel
for the Company's credit-related products and supplemental accident and health
insurance products.

     During 1999, the Company's parent, GE Capital, acquired The Signature Group
and contributed it to the Company. The Company renamed Signature the Partnership
Marketing Group (PMG). PMG provides strategic value to the Company through
greatly enhanced direct and affinity marketing capabilities. PMG provides
service for consumer clubs and insurance products to customers of the most

                                       18
<PAGE>

recognized names in business. Products include auto club services, legal,
dental, accident, and life and health insurance plans. PMG's customers include
more than 130 client partners and over 14.5 million end users of PMG products.
The vast majority of PMG's sales are generated through direct response methods.
Each year PMG mails more than 230 million solicitations and makes over 70
million carefully scripted telemarketing presentations.

     Additionally, the Company greatly expanded its e-commerce activities
through, among other things, the recent launch of GE Financial Network, which is
the Company's center of its direct relationship with customers over the
Internet. The GE Financial Network is the only source for consumers to access
all of the consumer financial products and services that GE Capital and the
Company offer.

     As a further extension of brand relationship enhancement, the Company
also uses the Internet to educate consumers through the GE Center for Financial
Learning, which was launched in February of 2000. The site's goal is to provide
access to financial education and insight; it is not designed to sell products
directly. All of the Company's distribution channels benefit from the GE Center
for Financial Learning.

Competition

     The Company operates in a highly competitive environment. While the Company
believes it has assembled a unique collection of products and distribution
channels, there are competitors that have also assembled a similar array of
financial products and have similar strategic goals. The Company believes that
the principal competitive factors in the sale of insurance and investment
products are product features, commission structure, perceived stability of the
insurer, claims paying ability ratings, service, name recognition and price.
Many other companies are capable of competing for sales in the Company's target
markets. The Company's ability to compete is affected in part by its ability to
provide competitive products and quality service to the consumer, general
agents, licensed insurance agents and brokers. However, the Company believes
that it competes primarily on the basis of its high level of customer service,
its financial strength and its competitively priced products.

     The Company's competition from banks and other financial institutions is
likely to increase as a result of recent federal legislation. The Gramm-Leach-
Bliley Act (the Act), enacted on November 12, 1999, will allow bank holding
companies to acquire insurance companies, and insurance holding companies to
acquire banks. Although the effect of the Act on GE Financial Assurance and its
subsidiaries and their competitors is uncertain, the Company's ability to retain
its customers and to sell products could be materially impacted in the future.
However, the Company believes that it is well positioned to address these
challenges.

Risk Management and Compliance

     During the last few years, the Company has grown rapidly through
acquisitions. See "Business -- Significant Acquisitions". In an effort to
integrate each acquired business, the Company maintains a strong commitment to
risk management and compliance, availing itself of GE Capital's long-standing
strength and experience in risk management. For example, the Company's
commitment to risk management processes and compliance includes requiring
underwriting of all new products and reviews of all existing product
performance, both of which are reviewed by a team of risk managers and
actuaries. In addition, both internal and external periodic reviews of the
Company's products, internal processes and pricing strategy are conducted. The
Company also has obtained Insurance Marketplace Standards Association (IMSA)
certification and has instituted company-wide compliance initiatives such as
centralized complaint databases and agent tracking and licensing.

                                       19
<PAGE>

Underwriting

     Applications for most of the Company's underwritten insurance related
products are individually reviewed and analyzed by the Company's dedicated
underwriting staff based on standardized underwriting guidelines and procedures.
After initial processing, each file is reviewed and additional information (such
as medical examinations, attending physician's statements and special medical
tests, if applicable) is obtained to make an underwriting decision. The
independent sales agents and the Company's own sales staff do not retain any
underwriting authority.

Reserves

     In accordance with applicable insurance regulations, the Company
establishes and carries as liabilities actuarially determined reserves which are
calculated to meet the Company's future obligations. The reserves are based on
actuarially recognized methods using prescribed morbidity and mortality tables
in general use in the United States modified to reflect the Company's actual
experience when appropriate. These reserves are computed at amounts that, with
additions from premiums to be received and with interest on such reserves
compounded annually at certain assumed rates, are expected to be sufficient to
meet the Company's policy obligations at their maturities or in the event of an
insured's death. Reserves include unearned premiums, premium deposits, claims
reported but not yet paid, claims incurred but not reported and claims in the
process of settlement.

     For the Company's individual life policies, universal life and interest-
sensitive whole life policies, reserves are set according to premiums collected,
plus interest, less charges. Reserves for other fixed death benefit and
supplemental accident and health policies are based on assumed investment yield,
persistency, mortality and morbidity as per commonly used actuarial tables,
expenses, and margins for adverse deviations. For the Company's accident and
health policies, the level of reserves is based on a variety of factors
including particular diagnoses, termination rates and benefit payments.

     The stability of the Company's annuity and interest-sensitive life
insurance reserves is enhanced by policy restrictions on withdrawal of funds.
Withdrawals in excess of allowable penalty-free amounts are assessed a surrender
charge during a penalty period ranging from zero to twenty years. Such surrender
charge is initially a percentage of the accumulation value, which varies by
product, and generally decreases gradually during the penalty period. Surrender
charges are set at levels to protect the Company from loss on early terminations
and to reduce the likelihood of policyholders terminating their policies during
periods of increasing interest rates, thereby lengthening the effective duration
of policy liabilities and improving the Company's ability to maintain
profitability on such policies. The Company's reserves comply in all material
respects with state insurance department statutory requirements; however, in the
Consolidated Financial Statements, insurance reserves are determined in
accordance with generally accepted accounting principles (GAAP), which may
vary from statutory requirements.

Reinsurance

     The Company follows the usual industry practice of reinsuring (ceding)
portions of its life insurance risks with other companies, a practice that
permits it to write policies in amounts larger than the risk it is willing to
retain on any one life, and also to continue writing a larger volume of new
business. The maximum amount of individual ordinary life insurance normally
retained by the Company on any one life policy is $1,000,000. Certain
supplemental accident and health and long-term care policies are reinsured on
either a quota share or excess of risk basis. The Company cedes insurance
primarily on a treaty basis, under which risks are ceded to a reinsurer on
specific blocks of business where the underlying risks meet certain
predetermined criteria, and, to a lesser extent, on a facultative basis, under
which the reinsurer's prior approval is required on each risk reinsured. Use of
reinsurance does not discharge an insurer from liability

                                       20
<PAGE>

on the insurance ceded. An insurer is required to pay the full amount of its
insurance obligations regardless of whether it is entitled or able to receive
payments from its reinsurer. The principal reinsuring companies (and their
corresponding A.M. Best ratings) at December 31, 1999 were: UNUM, rated A++;
Employers Reassurance Corporation, whose parent, GE Global Insurance Holding
Corporation, is an affiliate of the Company, rated A+; American United Life
Insurance Company, rated A+; IDS Life Insurance Company, rated A+; Swiss Re Life
Company of America, rated A+, Reinsurance Group of America, rated A+;
Transamerica Occidental Life Insurance Company, rated A+; The Lincoln National
Life Insurance Company, rated A; Phoenix Home Life Mutual Insurance Company,
rated A; and Combined Insurance Company of America, rated A.

Insurance Regulation

General Regulation at State Level

     The insurance business of the Company is subject to comprehensive state and
federal regulation and supervision throughout the United States. The laws of the
various jurisdictions establish supervisory agencies with broad administrative
powers with respect to, among other things, licensing to transact business,
licensing agents, admittance of assets, regulating premium rates, approving
policy forms, regulating unfair trade and claims practices, establishing reserve
requirements and solvency standards, fixing maximum interest rates on life
insurance policy loans and minimum rates for accumulation of surrender values,
restricting certain transactions between affiliates and regulating the type,
amounts and valuations of investments permitted.

     As a holding company with no significant business operations of its own,
the Company relies on dividends from its subsidiaries as the principal source of
cash to meet its obligations, including the payment of principal and interest on
any debt obligations. The Company's insurance subsidiaries are subject to
various state statutory and regulatory restrictions, applicable generally to
each insurance company in its state of domicile, which limit the amount of
dividends or distributions an insurance company may pay to its shareholders
without regulatory approval.

     The Company's principal domestic insurance subsidiaries are domiciled in
the states of Delaware, Illinois, Indiana, New York, Pennsylvania and Virginia.
Each of these states has laws and regulations which govern the parameters for
approval and payment of dividends.

     Generally, dividends may be paid out of earned surplus without approval
with thirty days prior written notice within certain limits. The limits are
generally based on 10% of the prior year surplus (net of adjustments in some
cases) and prior year statutory income (net gain from operations, net income
adjusted for realized capital gains, or net investment income). Dividends paid
or distributed within any twelve consecutive months in excess of the prescribed
limits or the company's earned surplus are deemed extraordinary and require
formal state insurance commission approval.

     Delaware (GE Capital Assurance), Indiana (Federal Home Life Insurance
Company), Illinois (Union Fidelity Life Insurance Company) and Pennsylvania
(Colonial Penn) allow companies to pay dividends up to the greater of 10% of
prior year surplus or 100% of prior year statutory net gain from operations to
the extent of their earned surplus. Virginia (GE Life and Annuity Assurance
Company, First Colony) allows companies to pay dividends up to the lesser of 10%
of prior year surplus or 100% of prior year statutory net gain from operations.
New York (GE Capital Life Assurance of New York, American Mayflower Life
Insurance Company of New York) requires regulatory approval for the payment of
any dividends.  Each insurance subsidiary's dividend capacity is calculated
separately; therefore, total dividend capacity for the Company is driven in part
by its legal structure.

                                       21
<PAGE>

     Insurance laws of the states in which the Company's insurance subsidiaries
are domiciled generally provide that no person may acquire control of the
Company, and thus indirect control of these insurance company subsidiaries,
without the prior approval of the appropriate insurance regulators. In general,
any person who acquires beneficial ownership of 10% or more of the voting
securities of the Company would be presumed to have acquired such control,
although the appropriate insurance regulators, upon application, may determine
otherwise.

     Each insurance company is required to file detailed annual reports with
supervisory departments in each of the jurisdictions in which it does business
and its operations and accounts are subject to examination by such departments
at regular intervals. Each of the Company's insurance subsidiaries prepare
statutory financial statements in accordance with accounting practices
prescribed or permitted by the insurance departments of their respective states
of domicile. Prescribed statutory accounting practices include publications of
the NAIC, as well as state laws, regulations and general administrative rules.

     Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) consisting of two components: (i) a "default component" which
provides for future credit-related losses on fixed maturity investments and (ii)
an "equity component" which provides for losses on all types of equity
investments, including real estate. The AVR required by the Company's insurance
subsidiaries totaled $500 million and $386 million at December 31, 1999 and
1998, respectively. The default component totaled $406 million and $334 million,
while the equity component totaled $94 million and $52 million at December 31,
1999 and 1998, respectively. Insurers are also required to establish an Interest
Maintenance Reserve (IMR) for fixed maturity net realized capital gains and
losses, net of tax, related to changes in interest rates. The IMR is required to
be amortized into statutory earnings on a basis reflecting the remaining period
to maturity of the fixed maturity securities sold. The IMR required by the
Company's insurance subsidiaries totaled $416 million and $355 million at
December 31, 1999 and 1998, respectively. This reserve is primarily the deferral
of gains from the sale of bonds in prior periods. These reserves are required by
state insurance regulatory authorities to be established as a liability on a
life insurer's statutory financial statements, but do not affect financial
statements of the Company prepared in accordance with GAAP. Although future
additions to AVR will reduce the future statutory surplus of the Company's
insurance subsidiaries, the Company does not believe that the impact under
current regulations of such reserve requirements will materially affect the
ability of its insurance subsidiaries to grow their statutory surplus and pay
dividends to the Company in the future.

     The NAIC's Insurance Regulatory Information System (IRIS) is a series of 12
ratios historically used as an early warning system to help regulators identify
insurance companies experiencing notable changes in its business operations and
financial conditions. Ratio results falling outside of the established upper or
lower limits are designated as unusual ratios. Although the ratios are
calculated and distributed to companies, their usefulness as a regulatory
surveillance tool has diminished in recent years with the calculation and
reporting of risk-based capital described below. Additionally, the IRIS ratios
have not been updated to reflect the changing insurance market, regulation, and
operations for many years.

     The NAIC uses risk-based capital (RBC) standards to determine the amount
of Total Adjusted Capital (as defined by the NAIC) that an insurance company
must have, taking into account the risk characteristics of such company's
investments and liabilities. The formula establishes a standard of capital
adequacy that is related to risk. The RBC formula establishes capital
requirements for four categories of risk: asset risk, insurance risk, interest
rate risk and business risk. For each category, the capital requirements are
determined by applying specified factors to various asset, premium, reserve and
other items, with the factor being higher for items with greater underlying risk
and lower for items with less risk. The formula is used by insurance regulators
as an early warning tool to identify deteriorating or weakly capitalized
companies for the purpose of initiating regulatory action.

                                       22
<PAGE>

     The NAIC's RBC requirements provide for four levels of regulatory attention
depending on the ratio of the company's Total Adjusted Capital to its Authorized
Control Level RBC (ACL) (as defined by the NAIC). If a company's Total
Adjusted Capital is less than 200% of its ACL but greater than or equal to 150%
of its ACL, or if a negative trend has occurred (as defined by the NAIC) and
Total Adjusted Capital is less than 250% of its ACL, the company must submit a
comprehensive plan to the regulatory authority which discusses proposed
corrective actions to improve its capital position. If a company's Total
Adjusted Capital is less than 150% of its ACL but greater than or equal to 100%
of its ACL, in addition to the above required actions, the regulatory authority
will perform a special examination of the company and issue an order specifying
corrective actions that must be followed. If a company's Total Adjusted Capital
is less than 100% of its ACL but greater than or equal to 70% of its ACL, in
addition to the above required actions, the regulatory authority may take any
action it deems necessary, including placing the company under its control. If a
company's Total Adjusted Capital is less than 70% of its ACL, the regulatory
authority is mandated to place the company under its control. The Total Adjusted
Capital for each of the Company's significant insurance subsidiaries is in
excess of 250% of their respective ACL.

     In addition, as part of their routine regulatory oversight process, state
insurance departments conduct detailed examinations periodically (generally once
every three to five years) of the books, records, accounts and market conduct of
insurance companies domiciled in their states. None of the recent regulatory
examinations have disclosed any findings that would have a material adverse
impact on the Company.

Regulatory Initiatives

     State insurance regulators and the NAIC are continually re-examining
existing laws and regulations, specifically focusing on insurance company
investments and solvency issues, risk-adjusted capital guidelines,
interpretations of existing laws, the development of new laws, the
implementation of non-statutory guidelines and the circumstances under which
dividends may be paid. These initiatives may be adopted by the various states in
which the Company's insurance subsidiaries are licensed, but the ultimate
content and timing of any statutes and regulations adopted by the states cannot
be determined at this time. It is impossible to predict the future impact of
changing state and federal regulations on the Company's operations, and there
can be no assurance that existing or future insurance-related laws and
regulations will not become more restrictive.

     Recently, state regulatory authorities, industry groups and rating agencies
have developed several initiatives regarding market conduct. For example, the
NAIC has adopted the NAIC Model Life Insurance Illustrations Regulation, which
applies to group and individual life insurance policies and certificates, and
the Market Conduct Examiners Handbook which sets out required parameters for
such examinations. State regulators have imposed significant fines on various
insurers for improper market conduct. The American Council of Life Insurers has
established the Insurance Market Place Standards Association, a self-regulatory
organization, to implement its Principles and Code of Ethical Life Insurance
Market Conduct, which includes a third-party assessment procedure. Market
conduct also has become one of the criteria used to establish the ratings of an
insurance company. For example, A.M. Best's ratings analysis now includes a
review of the insurer's compliance program. Management does not believe that
these market conduct initiatives will have a material adverse effect on its
business, financial condition or results of operations.

     The NAIC has also recently adopted model statutory accounting practices to
take effect in 2001.  Statutory accounting practices determine, among other
things, the statutory surplus of an insurance company and, therefore, the amount
of funds that can be paid as dividends to the Company by its insurance
subsidiaries.  The impact of the new accounting practices on the
Company is not expected to be material.  However, efforts are

                                       23
<PAGE>

continuing by insurance regulators, public accounting firms, and the insurance
industry to develop interpretations of the NAIC model.

     In addition, the NAIC has issued the Valuation of Life Insurance Policies
Model Regulation, which establishes new minimum reserve requirements for
individual life insurance policies written in the future. The majority of the
states have enacted the model regulation. The Company anticipates no material
impact as a result of the enactment of this regulation.

Assessments Against Insurers

     Under the insurance guaranty fund laws existing in each state, the District
of Columbia and Puerto Rico, licensed insurers can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these states do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's
solvency and further provide for annual limits on such assessments. A large part
of the assessments paid by the Company's insurance subsidiaries pursuant to
these laws may be used as credits for a portion of the Company's insurance
subsidiaries' premium taxes in future years. The Company's insurance
subsidiaries paid assessments of $2 million, $12 million and $14 million in
1999, 1998 and 1997, respectively. Since such assessments are typically not made
for several years after an insurer fails and depend upon the final outcome of
liquidation or rehabilitation proceedings, the Company cannot accurately
determine the ultimate amount or timing of any future assessment on the
Company's insurance subsidiaries. However, based on the best information
presently available, management believes the Company's accrued amounts are
sufficient.

     In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments. This SOP provides guidance on
accounting by insurance and other enterprises for guaranty-fund and certain
other insurance related assessments. The SOP requires enterprises to recognize
(1) a liability for assessments when (a) an assessment has been asserted or
information available prior to issuance of the financial statements indicates it
is probable that an assessment will be asserted, (b) the underlying cause of the
asserted or probable assessment has occurred on or before the date of the
financial statements, and (c) the amount of the loss can be reasonably estimated
and (2) an asset for an amount when it is probable that a paid or accrued
assessment will result in an amount that is recoverable from premium tax offsets
or policy surcharges from in-force policies.

     Effective January 1, 1999, the Company adopted SOP No. 97-3 and has
reported the effect of this adoption as a cumulative effect of a change in
accounting principle, which served to increase 1999 net income by $25 million
(net of income taxes of $14 million).

Regulation at Federal Level

     Although the federal government does not directly regulate the business of
insurance, federal legislation and administrative policies in several areas,
including financial services regulation, pension regulation and federal
taxation, can significantly and adversely affect the insurance industry and thus
the Company.  For example, the recently enacted Gramm-Leach-Bliley Act will
permit mergers that combine commercial banks, insurers and securities firms
under one holding company.  Prior to passage of the Gramm-Leach-Bliley Act, the
Bank Holding Company Act of 1956, as amended, had restricted banks from being
affiliated with insurance companies.  With the passage of the Gramm-Leach-Bliley
Act, bank holding companies may acquire insurers, and insurance holding
companies may acquire banks. Although the effect of the Gramm-Leach-Bliley Act
on the Company is uncertain, the ability of banks to affiliate

                                       24
<PAGE>

with insurance companies could materially and adversely affect sales of the
Company's products by substantially increasing the number and financial strength
of potential competitors.

     Furthermore, the federal government has from time to time considered other
legislative or regulatory changes that could affect the Company.  Examples
include legislation relating to the deferral of taxation on the accretion of
value within certain annuities and life insurance products, changes in ERISA
regulations, the alteration of the federal income tax structure and the
availability of Section 401(k) and individual retirement accounts.  Although the
effect of any such changes, if implemented, is uncertain, both the persistency
of the Company's existing products and the Company's ability to sell products
may be materially impacted in the future.

Regulation in Foreign Countries

     The Company's business in Japan, which is conducted through GE Edison Life
Insurance Company, is subject to regulation by the Japanese Financial
Supervisory Agency (FSA), which imposes (a) certain solvency standards that
represent a form of risk-based capital requirements and (b) filing of annual
reports and financial statements prepared in accordance with Japanese regulatory
accounting practices prescribed or permitted by the FSA.  These regulations and
solvency standards are similar to the regulation and supervision in
the United States as described under "General Regulation at State Level".

E-Commerce Regulation

     The Company has become extensively involved in e-commerce activities.
E-commerce is subject to a new and rapidly evolving regulatory environment.
Regulation occurs at the state and federal levels in the United States, as well
as internationally. The scope and interaction of these various levels of
regulation are unclear at this time, and many new regulations are being proposed
and adopted. It is difficult to predict precisely how this evolving area of
regulation may affect the Company's current and planned e-commerce activities.

Securities Laws

     Certain of the Company's subsidiaries and certain policies and contracts
offered by them are subject to regulation under the federal securities laws
administered by the Securities and Exchange Commission and certain state
insurance laws. Separate accounts of the Company's insurance subsidiaries are
registered as investment companies under the Investment Company Act of 1940, as
amended (the Investment Company Act). Separate accounts through which certain
variable annuity contracts and certain variable life insurance policies issued
by the Company's insurance subsidiaries are made available are also registered
under the Securities Act of 1933. Certain other subsidiaries of the Company are
registered as broker-dealers under the Securities Exchange Act of 1934 and are
members of, and subject to regulation by, the National Association of Securities
Dealers, Inc.

     Certain of the Company's subsidiaries are investment advisors registered
under the Investment Advisers Act of 1940, as amended. The investment companies
managed by such subsidiaries are registered with the Commission under the
Investment Company Act and the shares of certain of these entities are qualified
for sale in certain states in the United States and the District of Columbia.
Certain subsidiaries of the Company are also subject to the Commission's net
capital rules.

     All aspects of the Company's investment advisory activities are subject to
various federal and state laws and regulations. These laws and regulations are
primarily intended to benefit investment advisory clients and investment company
stockholders and generally grant supervisory agencies broad administrative

                                       25
<PAGE>

powers, including the power to limit or restrict the carrying on of business for
failure to comply with such laws and regulations. In such event, the possible
sanctions which may be imposed include the suspension of individual employees,
limitations on the activities in which the investment advisor may engage,
suspension or revocation of the investment advisor's registration as an advisor,
censure and fines.

ERISA Considerations

     Enacted into law on August 20, 1996, the Small Business Protection Job Act
(the SBPJA) offered insurers protection from potential litigation exposure
prompted by the 1993 U.S. Supreme Court decision in John Hancock Mutual Life
Insurance Company v. Harris Trust & Savings Bank (the "Harris Trust Decision")
in which the Court held that, with respect to a portion of the funds held under
certain general account group annuity contracts, an insurer is subject to the
fiduciary requirements of ERISA. The pertinent SBPJA provisions provide that
generally all persons are protected from liability under the fiduciary
responsibility provisions of ERISA and the prohibited transactions provisions of
the Code, on the basis of a claim that the assets of an insurer (other than Plan
assets held in separate accounts) constitute assets of the Plan, for conduct
which occurs before July 5, 2000, the effective date of recently enacted
Department of Labor regulations (the Effective Date). However, insurers remain
subject to federal criminal law and liable for actions brought by the Secretary
of Labor alleging breaches of fiduciary duties that also constitute a violation
of federal or state criminal law. The SBPJA also provides that, from and after
the Effective Date,  with respect to contracts issued from an insurer's general
account on or before December 31, 1998, that are not guaranteed benefit
policies, the insurer will be deemed to be in compliance with the provisions of
Sections 404, 406, and 407 of ERISA (relating to fiduciary duties, prohibited
transactions, and limitations relating to the acquisition and holding of
employer securities) if the insurer meets the requirements of the regulations of
the Department of Labor.  The SBPJA further provides that contracts issued from
an insurer's general account after December 31, 1998, that are not guaranteed
benefit policies, will continue to be subject to the applicable provisions of
ERISA. Although the Company does not believe that the Harris Trust Decision had
a material adverse effect on its business, financial condition or results of
operations, the Company supported and welcomed the enactment of the
aforementioned provisions of the SBPJA as a means to remove an area of potential
exposure for the insurance industry generally.

     With respect to employee welfare benefit plans subject to ERISA, Congress
periodically has considered amendments to the law's federal preemption
provision, which would expose the Company, and the insurance industry generally,
to state law causes of action, and accompanying extra-contractual (e.g.,
punitive) damages in lawsuits involving, for example, group life and group
disability claims. To date, all such amendments to ERISA have been defeated.

Item 2.  Properties.

     The Company and its subsidiaries conduct their businesses from various
facilities, most of which are leased. However, certain of the Company's
facilities, including its headquarters campus in Richmond, Virginia, two
facilities in Lynchburg, Virginia and a facility in Valley Forge, Pennsylvania
are owned by the Company.

Item 3.  Legal Proceedings.

     The Company and certain of its subsidiaries are defendants in various cases
of litigation considered to be in the normal course of business. The Company
believes that the outcome of such litigation will not have a material effect on
its financial position or results of operations.

                                       26

<PAGE>

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

     Information omitted in accordance with General Instruction I (2)(c).

PART II

Item 5.  Market Price of and Dividends on the Registrant's Common Equity and
         Related Stockholder Matters.

     All of GE Financial Assurance's Common Stock, its sole class of common
equity on the date hereof, is owned by GE Capital. Accordingly, there is no
public trading market for the Company's common equity.

Item 6.  Selected Financial Data.

     The following selected financial data should be read in conjunction with
the consolidated financial statements of GE Financial Assurance Holdings, Inc.
and subsidiaries and the related Notes to the Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                                                     December 31,(1)
                                                                     ---------------
                                                                  (Dollars in Millions)
                                                   1999        1998        1997        1996        1995
                                                   ----        ----        ----        ----        ----
<S>                                               <C>        <C>         <C>         <C>         <C>
At End of Year
Invested Assets...............................    $42,555    $42,287     $39,469     $35,810     $18,470
Total Assets..................................     64,606     56,727      51,092      45,361      21,820
Policyholder Liabilities(2)...................     42,993     39,505      37,380      35,493      19,094
Debt Outstanding..............................      1,741      2,028       1,337         278          12
Shareholder's Interest........................      7,156      7,455       6,958       5,721       2,319
For the Year Then Ended
Premiums......................................      3,542      3,207       2,314       1,386         485
Total Revenues................................      7,552      6,672       5,567       3,366       1,749
Income Before Cumulative Effect of
  Accounting Change(3)                                613        492         425         229         101
Net Income(3).................................        638        492         425         229         101
Investment Contract Proceeds..................      7,007      3,652       3,430       1,998       1,239
</TABLE>

_______________

(1)  Comparability of financial information is affected by acquisitions by the
     Company in the periods presented. See "Business -- Significant
     Acquisitions."

(2)  Includes future annuity and contract benefits, unearned premiums, liability
     for policy and contract claims, and other policyholder liabilities and
     excludes separate account liabilities.

(3)  Effective January 1, 1999, the Company adopted the American Institute of
     Certified Public Accountants' Statement of Position No. 97-3, Accounting by
     Insurance and Other Enterprises for Insurance-Related Assessments.  The
     Company has reported the effect of this adoption as a cumulative effect of
     a change in accounting principle, which served to increase 1999 net income
     by $25 million (net of income taxes of $14 million).

                                       27
<PAGE>

Item 7.  Management's Discussion and Analysis of Results of Operations.

     The following analysis of the consolidated financial condition and results
of operations of GE Financial Assurance should be read in conjunction with the
consolidated financial statements and the notes thereto included herein.

Operating Results for the Years Ended December 31, 1999, 1998 and 1997

     Background

     GE Financial Assurance is a holding company that, through its subsidiaries,
provides consumers financial security solutions by selling a wide variety of
insurance, investment and retirement products and consumer club membership
opportunities primarily in North America and Asia. The Company believes that
changes in demographics such as the increased number of baby boomers entering
middle and late middle age, longer life expectancies due to medical advances,
the reduction in government- and employer-sponsored benefit programs and the
increased need for estate planning for the most affluent group of retirees in
history, have and will continue to increase the demand for innovative products
and services to solve individual financial challenges. The Company's strategy is
designed to take advantage of these trends by offering a broad array of products
and services. The Company's product offerings are divided along two major
segments of consumer needs: (1) Wealth Accumulation and Transfer and (2)
Lifestyle Protection and Enhancement.

     The Company effectively began operations in 1993 with the acquisition of
GNA Corporation. The Company has continued to broaden its operations through a
series of acquisitions. Certain of these acquisitions have been significant to
the Company in terms of their impact on the Company's consolidated results of
operations.

     The following table sets forth the significant acquisitions made in 1997
and thereafter that impact the financial comparisons of operating results for
1999 as compared to 1998 and 1998 as compared to 1997.

<TABLE>
<CAPTION>
        Acquisition                      Date                      Principal Products
        -----------                      ----                      ------------------
<S>                                  <C>               <C>
Colonial Penn Insurance Company      November 1997     Personal lines of automobile insurance

GE Edison Life Insurance Company     March 1998        Life insurance, health and annuity products

Professional Insurance Company       March 1999        Supplemental accident and health products

The Signature Group                  July 1999         Consumer club memberships, life insurance,
                                                       and accident and health products
</TABLE>

     Due to the strategic nature of these acquisitions, the operations of the
acquired entities, other than GE Edison Life Insurance Company, are generally
being absorbed within the overall operations of the Company as opposed to being
operated on a stand-alone basis. For example, significant efforts have been made
to centralize responsibility for specific insurance products that were formerly
marketed and sold by more than one of the Company's subsidiaries.

                                       28
<PAGE>

     The table that follows summarizes the impact of these acquisitions on
operating results in 1999 and 1998. For purposes of this analysis, the column
"Amount Due to Acquisitions" for each year includes those acquisitions that
occurred during that particular year and the acquisitions that occurred in the
immediately preceding year (e.g., the "Amount Due to Acquisitions" column for
the year ended December 31, 1999 includes acquisitions that were completed
during 1999 and the increase in 1999 resulting from the inclusion of a full year
of operations with respect to acquisitions consummated in 1998 as compared with
the inclusion of a partial year of operations in 1998) and the column
"Consolidated Change" includes the total increase in the specified line item as
compared with the prior period.

<TABLE>
<CAPTION>
                                                                         (Dollars in Millions)
                                                   Year Ended December 31, 1999           Year Ended December 31, 1998
                                                  -------------------------------      ----------------------------------
                                                  Consolidated     Amount Due to       Consolidated        Amount Due to
                                                     Change       Acquisitions(1)         Change          Acquisitions(2)
                                                     ------       ---------------         ------          ---------------
<S>                                               <C>             <C>                  <C>                <C>
Revenues:
 Premiums.......................................     $ 335              $174              $  893                $650
 Net investment income..........................       227                25                 141                  66
 Net realized investment gains..................        49                 6                  39                   3
 Net commission income..........................        36               ---                  14                  25
 Other income...................................       233               189                  18                  44
                                                  -----------------------------------------------------------------------
 Total revenues.................................       880               394               1,105                 788
                                                  -----------------------------------------------------------------------
Benefits and expenses:
 Benefits and other changes in policy reserves..       293               126                 737                 528
 Interest credited..............................        38                 2                 (21)                  1
 Commission expenses............................       317                57                 (18)                 21
 General expenses...............................       434               190                 229                 230
 Amortization of intangibles, net...............        54                60                  10                  29
 Change in deferred acquisition costs, net......      (328)              (69)                (11)                (90)
 Interest expense...............................       ---                 2                  72                  72
                                                  -----------------------------------------------------------------------
 Total benefits and expenses....................       808               368                 998                 791
                                                  -----------------------------------------------------------------------
Income before income taxes, minority interest
 and cumulative effect of accounting change.....     $  72              $ 26              $  107                $ (3)
                                                  =======================================================================
</TABLE>

___________

(1)  Includes the acquisitions of Professional Insurance Company in March 1999
     and The Signature Group in July 1999, and inclusion of a full year of
     operating results in 1999 for GE Edison Life Insurance Company (which
     initiated operations in April 1998) versus nine months in 1998.

(2)  Primarily includes the initiation of operations of GE Edison Life Insurance
     Company in April 1998 and inclusion of a full year of operating results in
     1998 for Colonial Penn (acquired in November 1997) versus one and one-half
     months in 1997.

                                       29
<PAGE>

Premiums.  Premiums, which include premium revenues from traditional life,
health and automobile insurance and life contingent annuity contracts, increased
$335 million, or 10.4%, to $3,542 million in 1999 from $3,207 million in 1998.
This increase was a result of (i) a full year of operating results in 1999
relating to the operations of GE Edison Life Insurance Company, (ii) the
acquisition of The Signature Group in July 1999 and (iii) growth in certain of
the Company's life, auto, accident and health and structured settlement
products. Premiums increased $893 million, or 38.6%, to $3,207 million in 1998
from $2,314 million in 1997.  This increase was as a result of: (i) a full year
of operating results in 1998 relating to the 1997 acquisition of Colonial Penn,
(ii) the initial operations of GE Edison Life Insurance Company commencing in
April 1998 and (iii) growth in certain of the Company's life, accident and
health and structured settlement products.

Net Investment Income and Net Realized Investment Gains. Net investment income
increased $227 million, or 7.8%, to $3,123 million in 1999 from $2,896 million
in 1998. The increase was primarily due to the higher levels of average
invested assets ($42.7 billion in 1999 vs. $39.5 billion in 1998) resulting from
the acquisition of The Signature Group in July 1999 and growth in core invested
assets. Net investment income increased $141 million, or 5.1%, to $2,896
million in 1998 from $2,755 million in 1997. The increase was due to the
combination of higher levels of average invested assets ($39.5 billion in 1998
vs. $36.7 billion in 1997) resulting from the Colonial Penn acquisition, growth
in core invested assets and new investments relating to the Company's operations
in Japan commencing in April 1998, offset by a decrease in weighted average
yield from 7.8% in 1997 to 7.6% in 1998 due to a decline in prevailing interest
rates.

Net realized investment gains were $165 million in 1999, $116 million in
1998 and $77 million in 1997. These changes are related to the Company's
asset/liability risk management policies and associated ongoing review of its
investment portfolio positions which vary with market and economic conditions
and include gains as a result of securitization of certain financial assets.

Other Income.  Other income is principally comprised of surrender fees,
insurance charges made against universal life contracts, club membership
revenues and fees assessed against policyholder account values. Other income
increased $233 million, or 54.7%, to $659 million in 1999 from $426 million in
1998.  This increase was a result of (i) the acquisition of The Signature Group
in July 1999 (primarily club membership revenues) and (ii) a full year of
operating results in 1999 relating to GE Edison Life Insurance Company (which
initiated in April 1998).  Other income increased $18 million, or 4.4%, to $426
million in 1998 from $408 million in 1997. This increase was as a result of: (i)
a full year of operating results in 1998 relating to the 1997 acquisition of
Colonial Penn and  (ii) the initial operations of GE Edison Life Insurance
Company commencing in April 1998 partially offset by (iii) decreased asset-based
fee income due to a reduction in the balance of certain underlying reserve
balances.

Benefits and Other Changes in Policy Reserves.  Benefits and other changes in
policy reserves includes both activity related to future policy benefits on
long-duration life and health insurance products as well as claim costs incurred
during the year under such contracts. These amounts increased $293 million, or
9.1%, to $3,522 million in 1999 from $3,229 million in 1998.  This increase was
a result of (i) a full year of operating results in 1999 relating to the
April 1998 initiation of operations at GE Edison Life Insurance Company, (ii)
the acquisition of The Signature Group in July 1999 and (iii) growth in certain
of the Company's life, auto, accident and health and structured settlement
products.   Benefits and other changes in policy reserves increased $737
million, or 29.6%, to $3,229 million in 1998 from $2,492 million in 1997.  This
increase was as a result of: (i) a full year of operating results in 1998
relating to the 1997 acquisition of Colonial Penn, (ii) the initial operations
of GE Edison Life Insurance Company commencing in April 1998 and (iii) growth in
certain of the Company's life, accident and health and structured settlement
products.

                                       30
<PAGE>

Interest Credited.  Interest credited increased $38 million, or 3.0%, to $1,298
million in 1999 from $1,260 million in 1998.  This increase was a result of the
increase in underlying reserves arising from sales of guaranteed investment
contracts and single premium annuities. The increased sales resulted from higher
crediting rates that the Company implemented in response to changes in market
conditions and other factors. Interest credited decreased $21 million, or 1.6%,
in 1998 to $1,260 million from $1,281 million in 1997. This decrease was a
result of the reduction of the Company's crediting rates due to changes in
market conditions and other factors.

The Company's weighted average crediting rates for annuities increased to 6.51%
in 1999 from 6.27% in 1998, which had decreased from 6.46% in 1997.  Similarly,
the Company's weighted average crediting rates for interest-sensitive life
products increased to 5.63% in 1999 from 5.32% in 1998, which had decreased from
5.34% in 1997.  The increase in 1999 was driven by increases in the Company's
base crediting rates due to competitive pressures and changes in the interest
rate environment as noted above.  The decrease in 1998 was driven by reductions
in the Company's base crediting rates due to changes in market conditions. The
Company monitors market conditions closely and resets interest crediting rates
as deemed appropriate in accordance with the terms of the underlying contracts.

Commission Expenses.  Commission expense increased $317 million, or 58.6%, to
$858 million in 1999, from $541 million in 1998. This increase was primarily
due to higher production levels on certain of the Company's existing products,
the full year of operations of GE Edison Life Insurance Company and the
acquisition of The Signature Group in July 1999. Commission expense decreased
$18 million, or 3.2%, to $541 million in 1998, from $559 million in 1997. This
decrease was attributable to  (i) the November 1997 acquisition of LTC, Inc.
(previously an independent entity providing certain services to the Company for
which commissions were paid) and (ii) a change in the Company's commission based
product mix toward increased sales of certain products having lower commission
rates.  Commission expense in 1998 versus 1997 in relation to premiums revenue
decreased primarily due to the acquisition of Colonial Penn, a direct marketer
of personal lines of automobile insurance.

General Expenses.  General expenses increased $434 million, or 47.5%, to $1,348
million in 1999 from $914 million in 1998.  This increase was primarily a result
of the acquisition of The Signature Group in July 1999, a full year of GE Edison
operations and increases in certain compensation and sales and advertising
expenses in support of the Company's core growth initiatives.  General expenses
increased $229 million, or 33.4%, to $914 million in 1998 from $685 million in
1997. This increase was primarily a result of acquisitions, including Colonial
Penn and LTC, Inc., and expenses related to the Company's GE Edison operations.

Amortization of Intangibles, Net.  The Company's significant intangible assets
consist of three components which result from acquisition activities -- the
present value of future profits (PVFP), representing the estimated future
gross profits in acquired insurance and annuity contracts, value of consumer
club business acquired representing the estimated future gross profits of
acquired  club membership contracts, and goodwill, representing the excess of
purchase price over the fair value of identified net assets of the acquired
entities. Amortization of intangibles increased $54 million, or 18.9%, to $340
million in 1999 from $286 million in 1998.  Amortization of intangibles
increased $10 million, or 3.6%, to $286 million in 1998 from $276 million in
1997.

Amortization of intangibles due to acquisitions in 1999 and 1998 totaled $60
and $29 million, respectively. Amortization of intangibles for companies
acquired before 1997 declined by $6 million in 1999 and $19 million in 1998
and $39 million in 1997 due to lower amortization of PVFP. PVFP is amortized,
net of accreted interest, based on the incidence of gross profits for
interest-sensitive life and annuity policies and gross premiums on
non-interest-sensitive life and accident and health products.

                                       31
<PAGE>

Change in Deferred Acquisition Costs, Net.  Acquisition costs include costs and
expenses which vary with and are primarily related to the acquisition of
insurance and investment contracts, such as first year commissions in excess of
renewal commissions, direct advertising and printing costs, and certain support
costs such as underwriting and policy issue expenses. For accounting purposes,
these costs are deferred and recognized in relation to either the premiums or
gross profits from the underlying contracts. The change in net deferred
acquisition costs increased $328 million, or 73.5%, to $774 million in 1999 from
$446 million in 1998. This increase was related to an increase in deferral of
acquisition costs arising from the increased product sales noted above as well
as the operations of GE Edison (which commenced in April 1998) and the
acquisition of The Signature Group in July 1999, partially offset by
amortization of previously capitalized acquisition costs. The change in net
deferred acquisition costs increased $11 million, or 2.5%, to $446 million in
1998 from $435 million in 1997. This increase was primarily due to inclusion of
a full year of operating results in 1998 relating to the 1997 acquisition offset
by lower deferrable acquisition costs, primarily commissions, due to the
acquisition of LTC, Inc. in November, 1997 (previously an independent entity
providing certain services to the Company for which commissions were paid) and
lower production associated with certain of the Company's existing products.

Interest Expense.  Interest expense was $95 million in each of the years ended
December 31, 1999 and 1998. Interest expense increased $72 million to $95
million in 1998 from $23 million in 1997. This increase resulted from the
inclusion of a full year of interest costs in 1998 in connection with the 1997
acquisition of Colonial Penn and the commencement of GE Edison operations in
April 1998.

Provision for Income Taxes. The Company's provision for income taxes decreased
$53 million or 17.6% to $248 million in 1999 from $301 million in 1998. The
Company's effective tax rate of 28.7% in 1999 was 9.3 percentage points lower
than the effective tax rate of 38.0% in 1998 due primarily to the sale of a
minority interest in a subsidiary, giving rise to the realization of a deferred
tax asset not previously allowed to be recorded.

     Segment Operations

Wealth Accumulation and Transfer

     The Company's principal product lines under the Wealth Accumulation and
Transfer segment are (i) annuities (deferred, and immediate; either fixed or
variable), (ii) life insurance (universal, term, ordinary and group), (iii)
guaranteed investment contracts (GICs) and funding agreements and (iv) mutual
funds. Wealth Accumulation and Transfer products are used by customers as
vehicles for accumulating wealth, often on a tax-deferred basis, transferring
wealth to beneficiaries, or providing a means to replace the insured's income in
the event of premature death.

                                       32
<PAGE>

     The following table sets forth certain summarized financial data for GE
Financial Assurance's Wealth Accumulation and Transfer segment for the years
ended December 31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                          ------------------------
                                                                         1999       1998       1997
                                                                         ----       ----       ----
                                                                            (Dollars in Millions)
<S>                                                                     <C>        <C>        <C>
Revenues:
   Premiums........................................................     $1,658     $1,557     $1,192
   Net investment income...........................................      2,773      2,631      2,578
   Net realized investment gains...................................        149        116         77
   Other revenues..................................................        483        395        411
                                                                        ----------------------------
   Total revenues..................................................      5,063      4,699      4,258
                                                                        ----------------------------
Benefits and expenses:
   Interest credited...............................................      1,298      1,260      1,281
   Benefits and other changes in policy reserves...................      2,128      2,040      1,720
   Other expenses..................................................        860        730        668
                                                                        ----------------------------
   Total benefits and expenses.....................................      4,286      4,030      3,669
                                                                        ----------------------------
Income before income taxes, minority interest and cumulative
   effect of accounting change (operating income)..................     $  777     $  669     $  589
                                                                        ============================
</TABLE>

     Revenues in this segment have increased due to the full year impact in 1999
and the partial year impact in 1998 of the initiation of GE Edison operations in
April 1998. In addition to acquisition related growth, the Company benefited
from increased demand for certain annuity and guaranteed investment contract
products. Sales of deferred fixed annuities grew 81.7% in 1999 to $1,279 million
from $704 million in 1998. The higher sales in 1999 were primarily driven by
competitive yields offered to customers on fixed annuities as a result of
increasing interest rates and the introduction of new products. Sales of
deferred variable annuities increased 193.2% in 1999 to $2,662 million from $908
million in 1998.  Sales of guaranteed investment contracts increased 89.0% in
1999 to $2,054 million and 99.8% in 1998 to $1,087 million from $544 million in
1997. These increases were largely due to increased consumer demand for variable
annuities and other products which allow consumers to participate in the strong
capital markets, and the introduction of certain new products by the Company.

     Operating income from this segment represented 89.8%, 84.4% and 85.9% of
the Company's total operating income for the years ended December 31, 1999, 1998
and 1997, respectively. The shift in the percentage of operating income derived
from this segment in 1999 and 1998 was primarily driven by the higher percentage
increases in sales of products distributed (noted above) versus the lifestyle
protection and enhancement segment as a result of the acquisitions made in the
respective periods. The Company's operating income from the Wealth Accumulation
and Transfer segment increased 16.1% in 1999 to $777 million, and 13.6% in 1998
to $669 million, from $589 million in 1997. These increases were driven
primarily by higher levels of invested assets and life insurance policies in
force.

                                       33
<PAGE>

Lifestyle Protection and Enhancement

     The Company's principal product lines under the Lifestyle Protection and
Enhancement segment are (i) long-term care insurance, (ii) supplemental accident
and health insurance, (iii) personal lines of automobile insurance and (iv)
consumer club memberships. Lifestyle Protection and Enhancement products are
used by customers as vehicles to protect their income and assets from the
adverse economic impacts of automobile accidents and related liabilities or
significant health care costs or other unanticipated events that cause temporary
or permanent loss of earnings capabilities (including the ability to repay
certain indebtedness) and provide for consumer club membership opportunities.

     The following table sets forth certain summarized financial data for GE
Financial Assurance's Lifestyle Protection and Enhancement segment for the years
ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                          ------------------------
                                                                         1999       1998      1997
                                                                         ----       ----      ----
                                                                           (Dollars in Millions)
<S>                                                                     <C>        <C>       <C>
Revenues:
   Premiums........................................................     $1,884     $1,650    $1,122
   Net investment income...........................................        350        265       177
   Net realized investment gains...................................         16        ---       ---
   Other revenues..................................................        239         58        10
                                                                        ---------------------------
   Total revenues..................................................      2,489      1,973     1,309
                                                                        ---------------------------
Benefits and expenses:
   Benefits and other changes in policy reserves...................      1,394      1,189       772
   Other expenses..................................................      1,007        660       440
                                                                        ---------------------------
   Total benefits and expenses.....................................      2,401      1,849     1,212
                                                                        ---------------------------
Income before income taxes, minority interest and cumulative
   effect of accounting change (operating income)..................     $   88     $  124    $   97
                                                                        ===========================
</TABLE>

     Premiums and investment income increased in 1999 and 1998 due to the impact
of the acquisition of The Signature Group in 1999 and the full year impact in
1998 of the acquisition of Colonial Penn in November 1997. In addition to
acquisition related growth, the Company benefited from increased demand for its
long-term care and auto products. Sales of long-term care policies grew 41.1% in
1999 to $158 million and 2.8% in 1998 to $112 million, from $109 million in
1997. The higher sales were driven by an increase in the number of dedicated
agents selling the product and heightened market awareness of the need for this
type of insurance coverage. This market awareness was driven by the passage of
the Health Insurance Portability and Accountability Act of 1996 by Congress.
Automobile insurance sales increased 22.6% to $130 million in 1999 from $106
million in 1998.

     Operating income from this segment represented 10.2%, 15.6%, and 14.1%, of
the Company's total results for the years ended December 31, 1999, 1998 and
1997, respectively. The Company's operating income from the Lifestyle Protection
and Enhancement segment decreased 29.0% in 1999 to $88 million, and increased
27.8% to $124 million in 1998 from $97 million in 1997. The 1999 decrease is
primarily attributable to certain competitive factors currently existing within
the automobile insurance industry, partially offset by the impact from the
acquisition of The Signature Group in 1999. The 1998 increase is due to the full
year impact in 1998 of the acquisition of Colonial Penn in November 1997.

                                       34
<PAGE>

     Financial Condition

Total Assets.  Total assets increased $7.9 billion, or 13.9%, to $64.6 billion
at December 31, 1999 from  $56.7 billion at December 31, 1998. The increase
resulted primarily from the acquisition of The Signature Group in July 1999 and
growth in existing insurance and investment products. The majority of the
increase in total assets occurred in the deferred acquisition costs, intangible
assets, deferred tax assets, other assets and separate account asset categories
that are discussed in more detail below.

Total Investments.  Total investments increased $0.3 billion, or 0.6%, to $42.6
billion at December 31, 1999 from $42.3 billion at December 31, 1998.  The
slight increase in total investments primarily relates to the acquisition of The
Signature Group in July 1999, core investment growth and investment income of
$3.1 billion, offset by net unrealized losses on investment securities and cash
outflows for other investing activities.

Deferred Acquisition Costs.  Deferred acquisition costs increased $1.0 billion,
or 75.0%, to $2.3 billion at December 31, 1999 from $1.3 billion at December 31,
1998.  This increase was related to an increase in deferral of acquisition costs
arising from the increased product sales noted above as well as the operations
of The Signature Group acquired in July 1999 and the current year change in net
unrealized investment losses, partially offset by amortization of previously
capitalized acquisition costs.

Intangible Assets.  Intangible assets increased $1.1 billion, or 34.0%, to $4.3
billion at December 31, 1999 from $3.2 billion at December 31, 1998.  This
increase primarily relates to a $0.6 billion increase in goodwill, which
primarily results from the payment of contingent purchase price relating to the
acquisition of the infrastructure and initial capitalization of the GE Edison
Life Insurance Company operations (see minority interests below and Note 2 to
the Consolidated Financial Statements) and the acquisition of The Signature
Group in July1999, partially offset by 1999 goodwill amortization.  The
remaining $0.5 billion increase in intangible assets relates primarily to
increases in the present value of future profits and certain intangible assets
related to club memberships in force as a result of the acquisition of The
Signature Group in July 1999 and the effects of the current year change in net
unrealized investment losses, partially offset by amortization of previously
capitalized costs.

Deferred Taxes.  Deferred taxes increased $0.9 billion to a deferred tax asset
balance of $0.8 billion at December 31, 1999 from a deferred tax liability
balance of $0.1 at December 31, 1998, primarily due to the current year change
in net unrealized losses on the Company's investment portfolio.

Other Assets.  Other assets increased $0.8 billion, or 50.3%, to $2.5 billion at
December 31, 1999 from $1.7 billion at December 31, 1998 primarily as a result
of increased balances due from brokers relating to investment transactions.

Separate Account Assets. The separate account assets represent funds held for
the exclusive benefit of variable annuity and variable life contract holders. As
of December 31, 1999, the Company held $9.3 billion of separate account assets.
The increase in such balances of $3.7 billion from $5.6 billion at December 31,
1998 related to increased sales of variable insurance products and overall
increased market value of the underlying investment funds.

Total Liabilities.  Total liabilities increased $7.8 billion, or 15.9%, to $57.0
billion at December 31, 1999 from $49.1 billion at December 31, 1998. The
increase resulted primarily from the acquisition of The Signature Group in July
1999 and growth in existing insurance and investment products. The majority of
the overall increase in total liabilities occurred in the future annuity and
contract benefits, accounts payable and accrued expenses and separate account
liability categories, which are discussed in further detail below.

                                       35
<PAGE>

Future Annuity and Contract Benefits.  Future annuity and contract benefits
increased $3.3 billion, or 9.3%, to $39.6 billion at December 31, 1999 from
$36.3 billion at December 31, 1998. The increase resulted primarily from the
significant increase in investment contracts issued in 1999.

Accounts Payable and Accrued Expenses.  Accounts payable and accrued expenses
increased $0.9 billion, or 47.3%, to $2.9 billion at December 31, 1999 from $2.0
billion at December 31, 1998. This increase is due primarily to the acquisition
of The Signature Group in July 1999, the timing of net payments and receipts
related to the investment portfolio and normal business activity associated with
growth in certain existing insurance and investment products.

Separate Account Liabilities.  The separate account liabilities represent the
liability associated with the separate account assets. As discussed above, the
$3.7 billion increase in such balances to $9.3 billion at December 31, 1999
related to increased sales of variable insurance products and overall increased
market value of the underlying investment funds.

Minority Interest.  Minority interest increased $352 million at December 31,
1999 to $475 million from $123 million at December 31, 1998, primarily as a
result of the issuance of preferred stock in one of the Company's subsidiaries
as contingent purchase price in accordance with the acquisition of the
infrastructure and capitalization of the GE Edison operations.

Liquidity and Capital Resources

     The principal liquidity requirements for GE Financial Assurance's insurance
operations are its contractual obligations to policyholders and annuitants.
Contractual obligations include payments of surrender benefits, contract
withdrawals, claims under outstanding insurance policies and annuities, and
policy loans. The primary sources for meeting these contractual requirements are
investment income, scheduled principal repayments from its investment portfolio,
and a portion of its premium income. To provide for additional liquidity to meet
normal variations in contract obligations, GE Financial Assurance maintains cash
and short-term investments. GE Financial Assurance has placed commercial paper
in the U.S. market as a vehicle to fund certain of the Company's acquisitions.
The Company anticipates increasing the size of its commercial paper program in
order to facilitate its expected cash infusion into GE Edison Life Insurance
Company to support strong solvency margins and claims paying ratings in
connection with the comprehensive transfer of the insurance policies and related
assets of Toho Mutual Life Insurance Company to GE Edison Life Insurance
Company, as noted in "Recent Transactions".

     The Company maintains committed back-up credit lines with third-party banks
to support its commercial paper program and maintains committed credit lines
with GE Capital to provide interim funding for the Company's acquisition
activity and to provide liquidity to meet normal variation in contract
obligations.

     Historically, GE Financial Assurance has, through its operating companies,
generated positive cash flows from operating and certain financing activities
(including net cash provided by operating activities and cash provided by or
used by the net of redemptions and benefit payments on investment contracts, and
proceeds from issuance of investment contracts). For the years ended December
31, 1999, 1998, and 1997 cash flows from operating and certain financing
activities were $3,134 million, $2,117 million and $1,028 million,
respectively. These amounts include net cash provided by (used in) financing
activities relating to investment contract issues and redemptions of $2,708
million, $(703) million and $(923) million for the years ended December 31,
1999, 1998 and 1997, respectively.

     The nature and quality of the various types of investments purchased by a
U.S. life insurance

                                       36
<PAGE>

company must comply with the statutes and regulations imposed by the various
states in which those entities are licensed to market and sell insurance and
investment products. The Company primarily purchases investment-grade (BBB-/Baa3
or above) bonds. At December 31, 1999, $32.3 billion, or 87.6%, of the fixed
maturity securities held by the Company were bonds rated by a rating agency (S&P
or Moody's), or were government/agency bonds. The remaining $4.6 billion, or
12.4%, was comprised primarily of private placement bonds not rated by either
rating agency. At December 31, 1999, the Company held $2.1 billion of bonds
rated below investment grade (excluding split-rated bonds). In addition, the
Company held $0.3 billion of "not-rated" bonds which the Company believes are
below investment grade. Below investment grade bonds include those bonds
originally purchased as investment grade but subsequently downgraded in rating,
as well as bonds purchased as below investment grade. The Company holds this
small percentage of below investment grade bonds in order to enhance the yield
on its investment portfolio.

     Certain of the Company's products contain provisions for penalty charges
for surrender of the policy. These charges range from 5% to 8% at policy
origination and grade to zero over predetermined periods ranging from five to
twenty years. At December 31, 1999, approximately 81% of the Company's annuity
contracts were subject to surrender penalties or contained non-surrender
provisions. Certain of the Company's funding agreements may be terminated early
by the contractholders. The Company has established a line of credit with its
parent in an amount sufficient to provide liquidity in the event of an unusual
level of early terminations.

     GE Financial Assurance's ability to pay dividends to its shareholder and
meet its obligations, including debt service and operating expenses, primarily
depends on receiving sufficient funds from its insurance subsidiaries. Insurance
companies are restricted by states as to the aggregate amount of dividends they
may pay to their parent in any consecutive twelve-month period without
regulatory approval. Generally, dividends may be paid out of earned surplus
without approval with thirty days prior written notice within certain limits.
The limits are generally based on 10% of the prior year surplus (net of
adjustments in some cases) and prior year statutory income (net gain from
operations, net income adjusted for realized capital gains, or net investment
income). Dividends in excess of the prescribed limits or the Company's earned
surplus are deemed extraordinary and require formal state insurance department
approval. Based on statutory results as of December 31, 1999, GE Financial
Assurance is able to receive $248 million in dividends in 2000 from its
subsidiaries without obtaining regulatory approval. See "Insurance Regulation --
General Regulation at State Level."

Proposed Reporting Changes

     The NAIC has also recently adopted model statutory accounting practices to
take effect in 2001.  Statutory accounting practices determine, among other
things, the statutory surplus of an insurance company and, therefore, the amount
of funds that can be paid as dividends to the Company by its insurance
subsidiaries.  Each state must adopt the NAIC model before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated in
that state.  At this time, the impact of the new accounting practices on the
Company is not expected to be material.  However, efforts are continuing by
insurance regulators, public accounting firms, and the insurance industry to
develop interpretations of the NAIC model.

                                       37
<PAGE>

Interest Rate Changes

     Interest rate changes may have temporary effects on the sale and
profitability of the annuity, universal life, and other investment products
offered by GE Financial Assurance's insurance subsidiaries. For example, if
interest rates rise, competing investments (such as annuities or life insurance
offered by GE Financial Assurance's competitors, certificates of deposit, mutual
funds, and similar instruments) may become more attractive to potential
purchasers of GE Financial Assurance's products. Also, the Company's insurance
subsidiaries may be forced to raise certain crediting rates on its line of
products in order to meet competitive pressures. GE Financial Assurance
constantly monitors interest earnings on existing assets and yields available on
new investments and sells policies and annuities that permit flexible responses
to interest rate changes as part of its management of interest spreads.

Investments

     The Company manages its investment portfolio to meet the diversification,
credit quality, yield and liquidity requirements of its policy liabilities by
investing primarily in fixed maturity instruments, including government and
corporate bonds, mortgage-backed securities, and mortgage loans on real estate.
At December 31, 1999, the Company held $40.3 billion, or 94.8% of its investment
portfolio, in fixed maturity instruments and mortgage loans. The Company's
investment philosophy focuses on purchasing assets the durations of which
approximate policyholder obligations. To match some of its longer term policy
liabilities, the Company has followed a strategy of buying bonds with adequate
call protection. The Company also invests in preferred stock, policy loans,
short-term securities and other investments, which comprised the remaining 5.2%
of its investment portfolio at December 31, 1999.

     The Company primarily purchases investment-grade (BBB-/Baa3 or above)
bonds. At December 31, 1999, $32.3 billion, or 87.6%, of the fixed maturity
securities held by the Company were bonds rated by a rating agency (S&P or
Moody's), or were government/agency bonds. The remaining $4.6 billion, or 12.4%,
was comprised primarily of private placement bonds not rated by either rating
agency. At December 31, 1999, the Company held $2.1 billion of bonds rated below
investment grade (excluding split-rated bonds). In addition, the Company held
$0.3 billion of "not-rated" bonds which the Company believes are below
investment grade. Below investment grade bonds include those bonds originally
purchased as investment grade but subsequently downgraded in rating, as well as
bonds purchased as below investment grade. The Company holds this small
percentage of below investment grade bonds in order to enhance the yield on its
investment portfolio.

     Investments in mortgage-backed securities include $7.0 billion in
collateralized mortgage obligations (CMOs) and asset-backed securities and $0.9
billion of pass-through securities. These securities are secured primarily by
pools of residential mortgages and generally carry high credit ratings.
Approximately 37% of the mortgage-backed securities are backed by securities
issued by Government National Mortgage Association, Federal Home Loan Mortgage
Corporation, or Federal National Mortgage Association. In the aggregate, the
mortgage-backed securities had an average rating of AAA/Aaa at December 31,
1999. Most CMO and pass-through securities are subject to prepayment and
extension risk (i.e., principal can be received earlier or later than
anticipated, based on the rate of mortgage prepayments in the underlying
residential mortgage pools).

                                       38
<PAGE>

     At December 31, 1999, the Company's investments in equity securities
totaled $0.3 billion, of which $0.2 billion was preferred stock and $0.1 billion
was common stock. The investments in preferred stock generally pay dividends on
a quarterly basis at yields comparable to bonds.

     The Company has classified all of its fixed maturity and equity securities
as available-for-sale. Therefore, these securities are carried on the balance
sheet at fair values and marked to market. Changes in market value, net
of the effect on present value of future profits, deferred policy acquisition
costs and deferred income taxes, are recorded as unrealized appreciation or
depreciation directly in shareholder's interest and, accordingly, have no effect
on net income, but is shown as a separate component of accumulated non-owner
changes in equity. At December 31, 1999, the amortized cost basis of the
Company's fixed maturity securities was $38.8 billion, representing net
unrealized losses of $1.9 billion, while the cost basis of equity securities
was $336 million, representing net unrealized gains of $9 million.

     The Company's mortgage loan portfolio consisted of 2,065 loans at December
31, 1999. The loans, which are originated through a network of mortgage bankers,
are made only on completed, leased properties and generally have a maximum loan-
to-value ratio of 75% at the date of origination. Commercial loans comprise the
majority of the portfolio, with 40.5%, 22.4% and 20.4% attributable to the
retail, office and industrial sectors, respectively. The remainder of the loans,
16.7%, are attributable to the residential and other miscellaneous sectors. The
mortgage loans are secured by property throughout the U.S., with concentrations
in the Pacific region (31.4%) and the South Atlantic region (23.4%).

     Certain policies issued by the Company allow the policyholders to borrow
against the policy. These loans are classified in the asset side of the balance
sheet as Policy Loans. At December 31, 1999, the outstanding loans of $0.9
billion bore interest at an average rate of 8.8%, which is determined by the
terms of the policy.

     Other invested assets of $0.7 billion at December 31, 1999 were comprised
of several types of assets. The Company has made investments in mutual funds
offered by the Company's mutual fund and variable annuity distribution channels
of ($0.3 billion) in order to provide seed money for these funds. Pursuant to a
periodic review of its asset allocation strategy, the Company has also made
investments in limited partnerships ($0.2 billion) and real estate and other
properties ($22 million) in order to achieve higher investment returns on an
incremental portion of the portfolio.

                                       39
<PAGE>

                             Investment Portfolio

<TABLE>
<CAPTION>
                                                                      December 31, 1999
                                                                      -----------------
                                                                  Fair            Percentage
                                                                 Value             of Total
                                                                 -----             --------
                                                                   (Dollars in Millions)
<S>                                                             <C>               <C>
Fixed Maturity Securities - Available-For-Sale(1)
   U.S. Government and Agencies.......................          $ 1,362               3.2%
   State and Municipal................................              577               1.4
   Foreign Government.................................              188               0.4
   Foreign Corporate..................................            3,122               7.3
   U.S. Corporate.....................................           23,785              55.9
   Mortgage and Asset-Backed(2).......................            7,898              18.6
                                                              -------------------------------
   Total Fixed Maturity Securities....................           36,932              86.8
                                                              -------------------------------
Equity Securities -- Available-For-Sale(3)
   Common Stock.......................................              130                .3
   Preferred Stock, Non-Redeemable....................              215                .5
                                                              -------------------------------
   Total Equity Securities............................              345                .8
                                                              -------------------------------
Mortgage Loans on Real Estate, Net....................            3,414               8.0
Policy Loans..........................................              945               2.2
Short Term Investments................................              267                .7
Other Invested Assets
   Mutual Funds.......................................              272                .7
   Limited Partnerships...............................              218                .5
   European Style Call Options........................               97                .2
   Interest Rate Swaps and Floors.....................               43                .1
   Real Estate Owned..................................                6                 -
   Other..............................................               16                 -
                                                              -------------------------------
   Total Other Invested Assets........................              652               1.5
                                                              -------------------------------
Total Investments.....................................          $42,555             100.0%
                                                              ===============================
</TABLE>

_____________
(1)  Fixed maturity securities available-for-sale are stated at fair
     values. Amortized cost of fixed maturity securities available-for-sale at
     December 31, 1999 was $38,843 million, representing net unrealized  losses
     of $1,911 million. Changes in fair value, net of the effect on
     present value of future profits, deferred acquisition costs and deferred
     federal income taxes, are reflected as unrealized appreciation or
     depreciation directly in shareholder's interest and, accordingly, have no
     effect on net income, but is shown as a separate component of accumulated
     non-owner changes in equity.

(2)  Mortgage and asset-backed securities are comprised of CMOs ($4,161
     million), asset-backed securities ($2,847 million) and pass-through
     securities ($890 million).

(3)  Equity securities available-for-sale are stated at fair market values. The
     cost basis of equity securities available-for-sale at December 31, 1999 was
     $336 million, representing net unrealized gains of $9 million. Changes in
     market value, net of the effect on present value of future profits,
     deferred policy acquisition costs and deferred federal income taxes, are
     reflected as unrealized appreciation or depreciation directly in
     shareholder's interest and, accordingly, have no effect on net income, but
     is shown as a separate component of accumulated non-owner changes in
     equity.

                                       40
<PAGE>

The following table summarizes the Company's investment results for the periods
indicated.

                              Investment Results

<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                          ------------------------
                                                       1999         1998         1997
                                                       ----         ----         ----
                                                            (Dollars in Millions)
<S>                                                  <C>          <C>          <C>
Total Average Invested Assets (1)...............     $42,691      $39,544      $36,641
Net Investment Income (2).......................     $ 3,123      $ 2,896      $ 2,755
Effective Yield (3).............................         7.6%         7.6%         7.8%
Net Realized Investment Gains (4)...............     $   165      $   116      $    77
</TABLE>

___________

(1)  Average of cash and total invested assets on an amortized cost basis,
     adjusted for impact of timing on acquired companies.

(2)  Net investment income is net of investment expenses and excludes capital
     gains or losses or provision for income taxes.

(3)  Net investment income divided by the sum of the (i) average cash and total
     invested assets minus (ii) one-half of net investment income.

(4)  Excludes provision for income taxes.

     The credit quality of the Company's bond portfolio as stated below is based
upon the higher of the ratings published by S&P or Moody's.

                           Portfolio Credit Quality

<TABLE>
<CAPTION>
                                                             December 31, 1999
                                                             -----------------
                                                           Fair         Percentage
                                                          Value          of Total
                                                          -----          --------
                                                           (Dollars in Millions)
<S>                                                    <C>               <C>
Agencies and Treasuries............................      $ 3,458            9.4%
AAA/Aaa............................................        5,937           16.1
AA/Aa..............................................        3,032            8.2
A/A................................................        9,078           24.6
BBB/Baa............................................        8,678           23.5
BB/Ba..............................................        1,337            3.6
B/B................................................          802            2.2
CCC/Caa............................................            9              -
Not Rated..........................................        4,601           12.4
                                                       ---------------------------
   Total...........................................      $36,932          100.0%
                                                       ===========================
</TABLE>

                                       41
<PAGE>

     As of December 31, 1999, the Company's bond portfolio had an average rating
of A+/A1. According to S&P and Moody's, bonds which are rated "A" possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. S&P applies "+" and "-" modifiers in each generic rating
classification from AA to CCC. Moody's applies numerical modifiers "1", "2" and
"3" in each generic rating classification from Aa to B. Modifier "1" indicates a
bond in the higher end of a generic rating classification.

     Fixed maturity securities with ratings ranging from AAA/Aaa to BBB-/Baa3
are generally regarded as investment grade. Some agencies and treasuries (that
is, those securities issued by the U.S. Government or an agency thereof) are not
rated, but are considered to be investment grade securities. Finally, some
securities, such as private placements, have not been assigned a rating by any
rating service and are therefore categorized as "not rated". This has neither
positive nor negative implications regarding the credit quality of the security.

     At December 31, 1999 and 1998 , there were fixed maturity securities in
default with a fair value of $10 million and $11 million, respectively.

     The following table sets forth scheduled maturities for the Company's
investments in fixed maturities at December 31, 1999.

                             Scheduled Maturities

<TABLE>
<CAPTION>
                                                             December 31, 1999
                                                             -----------------
                                                           Fair         Percentage
                                                          Value          of Total
                                                          -----          --------
                                                           (Dollars in Millions)
<S>                                                    <C>               <C>
Due in one year or less..........................        $   979            2.6%
Due after one year through five years............          6,116           16.6
Due after five years through 10 years............          6,324           17.1
Due after 10 years...............................         15,615           42.3
Mortgage and Asset-backed securities.............          7,898           21.4
                                                       ---------------------------
   Total.........................................        $36,932          100.0%
                                                       ===========================
</TABLE>

     Expected maturities may differ from scheduled maturities because issuers of
securities may have the right to call or prepay obligations with or without call
or prepayment penalties. At December 31, 1999, $7,006 million of the Company's
investments (excluding mortgage and asset-backed securities) were subject to
certain call provisions.

                                       42
<PAGE>

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate and Currency Risk Management

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

     The Company uses various financial instruments, particularly interest rate
and currency swaps, but also futures, options and currency forwards, to manage
risks.  The Company is exclusively an end user of these instruments, which are
commonly referred to as derivatives.  The Company does not engage in any
derivatives trading, market-making or other speculative activities in the
derivative markets.  More detailed information regarding these financial
instruments, as well as the strategies and policies for their use, is contained
in notes 1, 9 and 14 to the Consolidated Financial Statements.

     The Company manages its exposure to changes in interest rates, in part, by
funding its assets with an appropriate mix of fixed and variable rate debt and
its exposure to currency fluctuations principally by funding local currency
denominated assets with debt denominated in those same currencies.

     The Company is exposed to prepayment risk in certain of its business
activities, such as in its investment portfolio, mortgage and annuities
activities.  In order to hedge those exposures, the Company uses swaps, futures,
and option-based financial instruments.  These instruments generally behave
based on limits ("caps", "floors" or "collars") on interest rate movement.
These swaps, futures and option-based instruments are governed by the credit
risk policies described below and are transacted in either exchange-traded or
over-the-counter markets.

     Established practices require that derivative financial instruments relate
to specific asset, liability or equity transactions or to currency exposures.
Substantially all treasury actions are centrally executed by the Company's
Treasury Department, which maintains controls on all exposures, adheres to
stringent counterparty credit standards and actively monitors marketplace
exposures.

     As a result of the Company's use of swaps, purchased options and forwards,
the principal risk is credit risk - risk that counterparties will be financially
unable to make payments in accordance with the agreements.  Associated market
risk is meaningful only as it relates to how changes in the market value affect
credit exposure to individual counterparties.  Except as noted above for
positions that are integrated into financings, all swaps, purchased options and
forwards are carried out within the following credit policy constraints.

                                       43
<PAGE>

     Once a counterparty reaches a credit exposure limit (see table below), no
additional transactions are permitted until the exposure with that counterparty
is reduced to an amount that is within the established limit.  Open contracts
remain in force.


<TABLE>
<CAPTION>
     Counterparty credit criteria                             Credit rating
                                                       ---------------------------
                                                                       Standard &
                                                         Moody's         Poor's
                                                       -----------    ------------
     <S>                                               <C>            <C>
     Term of transaction
       Between one and five years................          Aa3            AA-
       Greater than five years...................          Aaa            AAA
     Credit exposure limits
       Up to $50 million.........................          Aa3            AA-
       Up to $75 million.........................          Aaa            AAA
</TABLE>

     All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require assignment or
termination in the event either party is downgraded below A3 or A-.

     More credit latitude is permitted for transactions having original
maturities shorter than one year because of their lower risk.

     The conversion of interest rate and currency risk into credit risk results
in a need to monitor counterparty credit risk actively.  At December 31, 1999
and 1998, the notional amount of long-term derivatives for which the
counterparty was rated below Aa3/AA- was $23 million and $10 million,
respectively.  These amounts are the result of (1) counterparty downgrades, (2)
transactions executed prior to the adoption of the Company's current
counterparty credit standards, and (3) transactions relating to acquired assets
or businesses.

     Following is an analysis of credit risk exposures as of December 31:

   Percentage of Notional Derivative Exposure by Counterparty Credit Rating
- -----------------------------------------------------------------------------
Moody's/Standard & Poor's                      1999        1998        1997
- -------------------------                    --------    --------    --------

Aaa/AAA...................................      89%         90%         47%
Aa/AA.....................................      11%         10%         53%
A/A and below.............................      --%         --%         --%

                                       44
<PAGE>

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

 .  One means of assessing exposure to interest rate changes is a duration-based
   analysis that measures the potential loss in net earnings resulting from a
   hypothetical increase in interest rates of 100 basis points across all
   maturities (sometimes referred to as a "parallel shift in the yield curve").
   Under this model, it is estimated that, all else constant, such an increase,
   including repricing effects in the securities portfolio, would reduce the
   2000 net earnings of the Company based on year-end 1999 positions by
   approximately $20 million.

 .  One means of assessing exposure to changes in currency exchange rates is to
   model effects on reported earnings using a sensitivity analysis. Year-end
   1999 consolidated currency exposures, including financial instruments
   designated and effective as hedges, were analyzed to identify Company assets
   and liabilities denominated in other than their relevant functional currency.
   Net unhedged exposures in each currency were then remeasured assuming a 10%
   decrease in currency exchange rates compared with the U.S. dollar. Under this
   model, it is estimated that, all else constant, such a decrease would reduce
   the 2000 net earnings of the Company based on year-end 1999 positions by an
   insignificant amount.

                                       45
<PAGE>

                                    Item 8
                  Financial Statements and Supplementary Data
                                   Contents

            GE Financial Assurance Holdings, Inc. and Subsidiaries
                       Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Independent Auditors' Report.........................................     47
Consolidated Balance Sheets..........................................     48
Consolidated Statements of Income....................................     49
Consolidated Statements of Shareholder's Interest....................     50
Consolidated Statements of Cash Flows................................     51
Notes to Consolidated Financial Statements...........................     52
Independent Auditors' Report on Financial Statement Schedules........     80
Schedule II, Condensed Financial Information (Parent Company)........     81
Schedule III, Supplemental Insurance Information.....................     85
</TABLE>

                                       46
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



The Board of Directors
GE Financial Assurance Holdings, Inc.:

     We have audited the accompanying consolidated balance sheets of GE
Financial Assurance Holdings, Inc. and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholder's interest,
and cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of GE Financial
Assurance Holdings, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999 in conformity with generally
accepted accounting principles.

     As discussed in note 12 to the consolidated financial statements, the
Company changed its method of accounting for insurance-related assessments in
1999.

                                   /s/ KPMG LLP

Richmond, Virginia
January 21, 2000,
except for note 18 which is dated March 1, 2000

                                       47
<PAGE>

             GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

            (Dollar amounts in millions, except per share amounts)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                      -------------------------
Assets                                                                  1999             1998
                                                                      --------         --------
<S>                                                                   <C>              <C>
Investments:
   Fixed maturities available-for-sale, at fair value                 $ 36,932         $ 36,898
   Equity securities available-for-sale, at fair value:
     Common stocks                                                         130               47
     Preferred stocks, non-redeemable                                      215              314
   Mortgage loans, net of valuation allowance of $71 and $65
     at December 31, 1999 and 1998, respectively                         3,414            2,960
   Policy loans                                                            945            1,156
   Short-term investments                                                  267              164
   Other invested assets                                                   652              748
                                                                      --------         --------
           Total investments                                            42,555           42,287
                                                                      --------         --------
Cash                                                                       265              214
Accrued investment income                                                  961              789
Deferred acquisition costs                                               2,307            1,318
Intangible assets                                                        4,345            3,243
Reinsurance recoverable                                                  1,537            1,634
Deferred tax assets                                                        813                -
Other assets                                                             2,515            1,673
Separate account assets                                                  9,308            5,569
                                                                      --------         --------
           Total assets                                               $ 64,606         $ 56,727
                                                                      ========         ========

Liabilities and Shareholder's Interest

Liabilities:
   Future annuity and contract benefits                               $ 39,639         $ 36,272
   Unearned premiums                                                       842              966
   Liability for policy and contract claims                              1,886            1,697
   Other policyholder liabilities                                          626              570
   Accounts payable and accrued expenses                                 2,933            1,992
   Deferred tax liabilities                                                  -               55
   Short-term borrowings                                                 1,036            1,330
   Separate account liabilities                                          9,308            5,569
   Long-term debt                                                          705              698
                                                                      --------         --------
           Total liabilities                                            56,975           49,149
                                                                      --------         --------
Commitments and contingent liabilities

Minority interest                                                          475              123

Shareholder's interest:
   Net unrealized investment gains (losses)                             (1,079)             713
   Foreign currency translation adjustments                                220               73
                                                                      --------         --------
   Accumulated non-owner changes in equity                                (859)             786
   Common stock ($1 par value, 1,000 shares authorized,
     issued and outstanding)                                               -                -
   Additional paid-in capital                                            6,320            5,435
   Retained earnings                                                     1,695            1,234
                                                                      --------         --------
           Total shareholder's interest                                  7,156            7,455
                                                                      --------         --------
           Total liabilities and shareholder's interest               $ 64,606         $ 56,727
                                                                      ========         ========
</TABLE>
         See accompanying notes to consolidated financial statements.

                                       48
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                       Consolidated Statements of Income

                         (Dollar amounts in millions)

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                             ------------------------
                                                                      1999             1998             1997
                                                                     ------           ------           ------
<S>                                                                  <C>              <C>              <C>
Revenues:
   Premiums                                                          $3,542           $3,207           $2,314
   Net investment income                                              3,123            2,896            2,755
   Net realized investment gains                                        165              116               77
   Net commission income                                                 63               27               13
   Other income                                                         659              426              408
                                                                     ------           ------           ------
             Total revenues                                           7,552            6,672            5,567
                                                                     ------           ------           ------

Benefits and expenses:
   Benefits and other changes in policy reserves                      3,522            3,229            2,492
   Interest credited                                                  1,298            1,260            1,281
   Commissions                                                          858              541              559
   General expenses                                                   1,348              914              685
   Amortization of intangibles, net                                     340              286              276
   Change in deferred acquisition costs, net                          (774)            (446)            (435)
   Interest expense                                                      95               95               23
                                                                     ------           ------           ------
        Total benefits and expenses                                   6,687            5,879            4,881
                                                                     ------           ------           ------
        Income before income taxes, minority interest
          and cumulative effect of accounting change                    865              793              686

Provision for income taxes                                              248              301              261
                                                                     ------           ------           ------
        Income before minority interest and cumulative
          effect of accounting change                                   617              492              425

Minority interest                                                         4                -                -
                                                                     ------           ------           ------
        Income before cumulative effect of
          accounting change                                             613              492              425

Cumulative effect of accounting change, net of tax                       25                -                -
                                                                     ------           ------           ------
        Net income                                                   $  638           $  492           $  425
                                                                     ======           ======           ======
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       49
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

               Consolidated Statements of Shareholder's Interest

              (Dollar amounts in millions, except share amounts)

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                               Additional    Non-owner                   Total
                                                              Common Stock       Paid-In      Changes     Retained   Shareholder's
                                                           -----------------
                                                            Shares   Amount      Capital     In Equity    Earnings      Interest
                                                           -------- --------  ------------ ------------- ---------- ---------------
<S>                                                        <C>      <C>       <C>          <C>           <C>        <C>
Balances at January 1, 1997                                  1,000   $    -      $ 5,435      $  (151)     $  437       $  5,721

Changes other than transactions with shareholder:
   Net income                                                  -          -          -            -           425            425
   Net unrealized gains on investment securities (a)           -          -          -            812         -              812
                                                                                                                        --------
     Total changes other than transactions with
       shareholder                                                                                                         1,237
                                                             -----   ------      -------      -------      ------       --------
Balances at December 31, 1997                                1,000        -        5,435          661         862          6,958

Changes other than transactions with shareholder:
   Net income                                                  -          -          -            -           492            492
   Net unrealized gains on investment securities (a)           -          -          -             52         -               52
   Foreign currency translation adjustments                    -          -          -             73         -               73
                                                                                                                        --------
     Total changes other than transactions with
       shareholder                                                                                                           617
                                                                                                                        --------
Dividends declared                                             -          -          -            -          (120)          (120)
                                                             -----   ------      -------      -------      ------       --------
Balances at December 31, 1998                                1,000        -        5,435          786       1,234          7,455

Changes other than transactions with shareholder:
   Net income                                                  -          -          -                        638            638
   Net unrealized losses on investment securities (a)          -          -          -         (1,792)        -           (1,792)
   Foreign currency translation adjustments                    -          -          -            147         -              147
                                                                                                                        --------
     Total changes other than transactions with
       shareholder                                                                                                        (1,007)
                                                                                                                        --------
Contribution of The Signature Group                            -          -          885          -           -              885
Dividends declared                                             -          -          -            -          (177)          (177)
                                                             -----   ------      -------      -------      ------       --------
Balances at December 31, 1999                                1,000   $    -      $ 6,320      $  (859)    $ 1,695       $  7,156
                                                             =====   ======      =======      =======      ======       ========
</TABLE>

(a)  Presented net of deferred taxes of $970, $(26), and $(439) in 1999, 1998,
     and 1997, respectively.


         See accompanying notes to consolidated financial statements.

                                       50
<PAGE>

<TABLE>
<CAPTION>
                             GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                                      Consolidated Statements of Cash Flows

                                            (Dollar amounts in millions)

                                                                     Years Ended December 31,
                                                                     ------------------------
                                                                  1999         1998          1997
                                                                  ----         ----          ----
<S> <C>
Cash flows from operating activities:
   Net income                                                     $ 638        $ 492         $ 425
                                                                -------     --------      --------
   Adjustments to reconcile net income to net cash
     provided by operating activities:
      Increase in future policy benefits                            626        2,601         2,195
      Charges assessed to policyholders                            (208)        (282)         (289)
      Net realized investment gains                                (165)        (116)          (77)
      Amortization of investment premiums and discounts            (112)         (50)           (6)
      Amortization of intangibles, net                              340          286           276
      Deferred income tax expense                                   128           53             7
      Change in certain assets and liabilities:
        Increase in:
         Accrued investment income                                 (168)         (38)          (75)
         Deferred acquisition costs                                (774)        (446)         (435)
         Other assets, net                                         (726)        (555)         (355)
        Increase in:
         Other policy-related balances                              160           91           236
         Accounts payable and accrued expenses                      733          784            49
                                                                -------     --------      --------
                Total adjustments                                  (166)       2,328         1,526
                                                                -------     --------      --------
                Net cash provided by operating activities           472        2,820         1,951
                                                                -------     --------      --------
Cash flows from investing activities:
   Proceeds from sales and maturities of investment securities
     and other invested assets                                    8,332        8,320         5,049
   Principal collected on mortgage and policy loans                 424          471           284
   Purchase of investment securities and other invested assets  (10,844)     (10,542)       (5,815)
   Mortgage and policy loan originations                           (644)        (859)         (631)
   Purchase of Professional Insurance Company                       (46)           -             -
   Purchase of Colonial Penn, net of cash acquired                    -            -          (869)
   Purchase of LTC, Inc., net of cash acquired                        -            -           (59)
   Purchase of GE Edison Life Insurance Company, net of
          cash acquired                                               -         (572)            -
                                                                -------     --------      --------
                Net cash used in investing activities            (2,778)      (3,182)       (2,041)
                                                                -------     --------      --------
Cash flows from financing activities:
   Proceeds from issuance of investment contracts                 7,007        3,652         3,430
   Redemption and benefit payments on investment contracts       (4,299)      (4,355)       (4,353)
   Proceeds from short-term borrowings                            2,639        3,303         2,763
   Payments on short-term borrowings                             (2,916)      (3,703)       (2,141)
   Proceeds from long-term debt                                       -          515             -
   Net commercial paper borrowings (repayments)                     (17)         568           436
   Borrowings from minority interest holder                           -          556             -
   Cash received upon acquisition of The Signature Group            129            -             -
   Dividend paid to shareholder                                    (155)        (120)            -
                                                                -------     --------      --------
                Net cash provided by financing activities         2,388          416           135
                                                                -------     --------      --------
Effect of exchange rate changes on cash                              72           (6)            -

                Net increase in cash and cash equivalents           154           48            45
Cash and cash equivalents at beginning of year                      378          330           285
                                                                -------     --------      --------
Cash and cash equivalents at end of year                          $ 532        $ 378         $ 330
                                                                =======     ========      ========

</TABLE>

          See accompanying notes to consolidated financial statements.


                                       51
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(1) Summary of Significant Accounting Policies

       (a) Principles of Consolidation

       The accompanying consolidated financial statements include the historical
operations and accounts of GE Financial Assurance Holdings, Inc. and its
subsidiaries (collectively the Company). Significant operating subsidiaries of
the Company include General Electric Capital Assurance Company, GE Capital Life
Assurance Company of New York, Federal Home Life Insurance Company, GE Life and
Annuity Assurance Company, First Colony Life Insurance Company and subsidiaries,
Union Fidelity Life Insurance Company, GE Edison Life Insurance Company,
Colonial Penn Insurance Company and The Signature Group.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

       All of the outstanding common stock of GE Financial Assurance Holdings,
Inc. (GE Financial Assurance) is owned by General Electric Capital Corporation
(GE Capital), a wholly-owned subsidiary of General Electric Capital Services,
Inc. (GE Capital Services), which in turn is wholly-owned, directly or
indirectly, by General Electric Company.

       (b) Basis of Presentation

       These consolidated financial statements have been prepared on the basis
of generally accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts and related disclosures. Actual
results could differ from those estimates. Certain prior year amounts have been
reclassified to conform to the current year presentation.

       (c) Products

       GE Financial Assurance is an insurance holding company that, through its
subsidiaries, sells a variety of insurance and investment-related products
primarily in North America and Asia. The Company's operations are in two
business segments: Wealth Accumulation and Transfer, and Lifestyle Protection
and Enhancement.

       Wealth Accumulation and Transfer products are investment vehicles and
insurance contracts intended to increase the policyholder's wealth, transfer
wealth to beneficiaries or provide a means for replacing the income of the
insured in the event of premature death. The Company's principal product lines
under the Wealth Accumulation and Transfer segment are deferred annuities (fixed
and variable), immediate annuities (structured settlements and retirement), life
insurance (universal, term, ordinary and group), guaranteed investment contracts
(GICs), floating rate funding agreements and mutual funds.

       Lifestyle Protection and Enhancement products are products intended to
protect accumulated wealth and income from the financial drain of unforeseen
events and provide consumer club membership opportunities. The Company's
principal product lines under the Lifestyle Protection and Enhancement segment
are long-term care, supplementary accident and health insurance, personal lines
of automobile insurance and consumer club products.

                                       52
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The Company distributes its products through four primary channels:
intermediaries (such as brokerage general agents (BGAs), financial planners,
banks, securities brokerage firms and financial planning firms); dedicated
agents, who distribute certain of the Company's products on an exclusive basis,
some of whom are not employees of the Company; marketing through businesses; and
direct and affinity based marketing through e-commerce, telemarketing and direct
mails.

     Certain of the Company's subsidiaries and certain policies and contracts
offered by them are subject to regulation under the federal securities laws
administered by the Securities and Exchange Commission and certain state
securities laws. Certain of these products offer customers a guaranteed interest
rate for a predetermined time period and subject customers to a market value
adjustment on early withdrawals. Other products offer customers numerous
investment options, including, but not limited to, purchases of shares of
various mutual funds.

     (d) Revenues

     Investment income is recorded when earned. Realized investment gains and
losses are calculated on the basis of specific identification. Premiums on
short-duration insurance contracts are reported as revenue over the terms of the
related insurance policies. In general, earned premiums are calculated on a pro-
rata basis or are recognized in proportion to expected claims. Premiums on long-
duration insurance products are recognized as earned when due or, in the case of
life contingent immediate annuities, when the contracts are issued. Premiums
received under annuity contracts without significant mortality risk and premiums
received on universal life products are not reported as revenues but as
liabilities for future annuity and contract benefits. Other income consists
primarily of surrender charges on certain policies, consumer club membership
revenues and charges to policyholder account values for universal life, variable
life and variable annuity policies. Surrender charges are recognized as income
when the policy is surrendered. Consumer club membership dues are recognized as
income when earned. Charges to policyholder accounts for universal life cost of
insurance is recognized as revenue when due.  Variable product fees are charged
to variable annuity and variable life policyholders based upon the daily net
assets of the policyholder's account values, and are recognized as revenue when
charged.

     (e) Cash Equivalents

     Certificates and other time deposits are classified as short-term
investments on the Consolidated Balance Sheets and considered cash equivalents
in the Consolidated Statements of Cash Flows.

     (f) Investments

     The Company has designated its fixed maturities (bonds, notes, and
redeemable preferred stock) and its equity securities (common and non-redeemable
preferred stock) as available-for-sale. The fair value for fixed maturities and
equity securities is based on quoted market prices, where available. For fixed
maturities not actively traded, fair values are estimated using values obtained
from independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current market rate
applicable to the credit quality, call features and maturity of the investments,
as applicable.

                                       53
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     Changes in the market values of investments available-for-sale, net of the
effect on deferred acquisition costs, present value of future profits and
deferred federal income taxes are reflected as unrealized investment gains or
losses in a separate component of shareholder's interest and, accordingly, have
no effect on net income, but are shown as a component of accumulated non-owner
changes in equity.  Unrealized losses that are considered other than temporary
are recognized in earnings through an adjustment to the amortized cost basis of
the underlying securities.  The Company engages in certain securities lending
transactions, which require the borrower to provide collateral, primarily
consisting of cash and government securities, on a daily basis, in amounts equal
to or exceeding 102% of the market value of the applicable securities loaned.

     Investment income on mortgage-backed securities is initially based upon
yield, cash flow and prepayment assumptions at the date of purchase. Subsequent
revisions in those assumptions are recorded using the retrospective method,
whereby the amortized cost of the securities is adjusted to the amount that
would have existed had the revised assumptions been in place at the date of
purchase. The adjustments to amortized cost are recorded as a charge or credit
to investment income.

     Mortgage and policy loans are stated at the unpaid principal balance of
such loans, net of allowances for estimated uncollectable amounts.

     (g) Deferred Acquisition Costs

     Acquisition costs include costs and expenses that vary with and are
primarily related to the acquisition of insurance and investment contracts and
consumer club memberships. Such costs are deferred and amortized as follows:

     Long-duration contracts -- Acquisition costs include first-year commissions
in excess of recurring renewal commissions, certain solicitation and printing
costs, and certain support costs such as underwriting and policy issue expenses.
For investment and universal life type contracts, amortization is based on the
present value of anticipated gross profits from investments, interest credited,
surrender and other policy charges, and mortality and maintenance expenses.
Amortization is adjusted retroactively when current or estimates of future gross
profits to be realized are revised. For other long-duration insurance contracts,
the acquisition costs are amortized in relation to the estimated benefit
payments or the present value of expected future premiums.

     Short-duration contracts -- Acquisition costs consist primarily of
commissions and premium taxes and are amortized ratably over the terms of the
underlying policies. Direct response marketing costs are amortized on an
accelerated basis over the expected life of the respective customer
relationship.

     Consumer club memberships - Acquisition costs consist primarily of
marketing costs and are amortized in proportion to the anticipated revenue to be
recognized from club memberships.

     Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income, and, if not
considered recoverable, are charged to expense.

                                       54
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     (h) Intangible Assets

     Present Value of Future Profits -- In conjunction with the acquisitions of
life insurance subsidiaries, a portion of the purchase price is assigned to the
right to receive future gross profits arising from existing insurance and
investment contracts. This intangible asset, called the present value of future
profits (PVFP), represents the actuarially determined present value of the
projected future cash flows from the acquired policies.

     Goodwill -- Goodwill is amortized over its estimated period of benefit on
the straight-line method. No amortization period exceeds 40 years. Goodwill in
excess of associated expected operating cash flows is considered to be impaired
and is written down to fair value.

     (i) Federal Income Taxes

     The Company's non-life insurance subsidiaries are included in the
consolidated federal income tax return of General Electric Company. These
subsidiaries are subject to a tax-sharing agreement with GE Capital which
allocates tax on a separate company basis, but provides benefit for current
utilization of losses and credits. The Company's life insurance subsidiaries
file a consolidated life insurance federal income tax return and are also
subject to a separate tax-sharing agreement, as approved by state insurance
regulators, the provisions of which are substantially the same as the tax-
sharing agreement with GE Capital.

     Deferred taxes are allocated to individual subsidiaries by applying the
asset and liability method of accounting for deferred income taxes. Intercompany
balances are settled annually.

     (j) Reinsurance

     Premium revenue, benefits, underwriting, acquisition and insurance expenses
are reported net of the amounts relating to reinsurance ceded to other
companies. Amounts due from reinsurers for incurred and estimated future claims
are reflected in the reinsurance recoverable asset. The cost of reinsurance is
accounted for over the terms of the related treaties using assumptions
consistent with those used to account for the underlying reinsured policies.

     (k) Future Annuity and Contract Benefits

     Future annuity and contract benefits consist of the liability for
investment contracts, insurance contracts and accident and health contracts.
Investment contract liabilities are generally equal to the policyholder's
current account value. The liability for insurance and accident and health
contracts is calculated based upon actuarial assumptions as to mortality,
morbidity, interest, expense and withdrawals, with experience adjustments for
adverse deviation where appropriate.

                                       55
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     (l) Liability for Policy and Contract Claims

     The liability for policy and contract claims represents the amount needed
to provide for the estimated ultimate cost of settling claims relating to
insured events that have occurred on or before the end of the respective
reporting period. The estimated liability includes requirements for future
payments of (a) claims that have been reported to the insurer, (b) claims
related to insured events that have occurred but that have not been reported to
the insurer as of the date the liability is estimated, and (c) claim adjustment
expenses. Claim adjustment expenses include costs incurred in the claim
settlement process such as legal fees and costs to record, process, and adjust
claims.

     (m) Separate Accounts

     The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners and variable life
policyholders. The Company receives mortality risk fees and administration
charges from the variable mutual fund portfolios. The separate account assets
are carried at fair value and are equal to the liabilities that represent the
policyholders' equity in those assets.

     (n) Minority Interest

     Minority interest primarily relates to a certain ownership interest in GE
Edison Life Insurance Company and GE Life and Annuity Assurance Company.  See
Note 18 - Subsequent Event.

     (o) Interest Rate and Currency Risk Management

     As a matter of policy, the Company does not engage in derivative trading,
market-making or other speculative activities.

     The Company uses swaps primarily to optimize funding costs. Interest rate
and currency swaps that modify borrowings or designated assets, including swaps
associated with forecasted commercial paper renewals, are accounted for on an
accrual basis. The Company requires all other swaps, as well as futures,
interest rate floors, swap options, options and currency forwards, to be
designated and accounted for as hedges of specific assets, liabilities or
committed transactions; resulting payments and receipts are recognized
contemporaneously with effects of hedged transactions. A payment or receipt
arising from early termination of an effective hedge is accounted for as an
adjustment to the basis of the hedged transaction.

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

                                       56
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


       (p) Accounting Pronouncement Not Yet Adopted

       The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (Statement 133), effective for the Company on January 1,
2001 (as amended by Statement of Financial Accounting Standards No. 137,
Deferral of the Effective Date of Statement No. 133).  Upon adoption, all
derivative instruments (including certain derivative instruments embedded in
other contracts) will be recognized in the balance sheet at fair value, and
changes in such fair values must be recognized immediately in earnings unless
specific hedging criteria are met. Changes in the values of derivatives meeting
these hedging criteria will ultimately offset related earnings effects of the
hedged items; effects of qualifying changes in fair value are to be recorded in
equity pending recognition in earnings. Certain significant refinements and
interpretations of Statement 133 are being deliberated by the FASB, and the
effects on accounting for the Company's financial instruments will depend to
some degree on the results of such deliberations. Management has not determined
the total probable effects of adopting Statement 133, and does not believe that
an estimate of such effects would be meaningful at this time.

(2) Acquisitions

     In July 1999, in connection with Montgomery Ward Holding Corp.'s plan of
reorganization under chapter 11 of the federal bankruptcy laws, GE Capital
acquired The Signature Group (Signature) from Montgomery Ward & Co. Incorporated
for an aggregate purchase price of $885. The acquisition was completed through a
series of mergers involving various Signature companies and subsidiaries of the
Company with the Company's subsidiaries being the surviving company in such
mergers. The effect of the mergers was to cause Signature to become a subsidiary
of GE Financial Assurance. The aggregate purchase price of $885 has been
allocated to Signature assets acquired, including present value of future
profits and value of consumer club business acquired of $122 and $297,
respectively, and to liabilities assumed, including liability for policy and
contract claims of $144, based upon their respective fair values at the date of
the acquisition, and a corresponding amount has been recorded as an increase to
additional paid in capital, reflecting the mergers of the Signature companies
into subsidiaries of the Company.

     In March 1999, the Company acquired Professional Insurance Company from
Pacific Life and Accident Insurance Company, a subsidiary of PennCorp Financial
Group. The purchase price of $46 has been allocated to the assets acquired and
liabilities assumed based upon their respective fair values at the date of the
acquisition.

     In March 1998, the Company and Toho Mutual Life Insurance Company (Toho), a
Japanese insurer jointly capitalized a new insurance company, GE Edison Life
Insurance Company (GE Edison), that sells life, health and annuity products in
the Japanese market. In connection with this agreement, the Company paid Toho
$547 in exchange for the operating infrastructure and $13 in exchange for
certain tangible assets. GE Edison originates and underwrites all of the new
business activity. Existing Toho business remains with Toho with the exception
of certain term life insurance business ceded to GE Edison as described below.
The Company's investment in GE Edison includes 100% of the entity's voting
interest following the Company's acquisition in December 1999 of the 10% voting
interest previously held by Toho. (see Note 18 - Subsequent Event).
Additionally, the Company paid Toho a ceding commission of $400 in exchange for
Toho transferring 50% of certain term life insurance reserves and certain other
liquid assets approximating $391. GE Edison also entered into an agreement with
Toho, which contains certain modified coinsurance arrangements. These blocks of
existing term life insurance provided an initial operations base for GE Edison.

                                       57
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)




       In conjunction with the acquisition of the infrastructure and
capitalization of GE Edison, a subsidiary of the Company agreed to issue certain
subsidiary preferred stock to the sellers in an amount up to (Yen)56.0 billion
through 2004, contingent upon certain performance measurements. In accordance
with such agreement, the Company issued certain subsidiary preferred stock to
the sellers in an amount of $19 in 1999. The subsidiary preferred stock issued
during 1999 has been accounted for as additional purchase consideration and the
additional goodwill is being amortized over the remaining goodwill life. See
Note 18 -Subsequent Event.

       Effective November 1997, the Company completed the acquisition of 100% of
the capital stock of Colonial Penn Insurance Company (Colonial Penn) and LTC
Inc. (LTC) for purchase prices of $1,015 and $59, respectively. In conjunction
with the acquisition of LTC, the Company agreed to pay the sellers up to $33
over a five-year period, contingent upon satisfaction of certain performance
measurements. The contingent consideration is being accounted for as additional
purchase price, which will result in amortization over the remaining goodwill
life. During 1999 and 1998, approximately $7 in each year was paid to the
sellers relating to this agreement.

       Each of the above referenced acquisitions has been accounted for using
the purchase method of accounting and, accordingly, the accompanying
consolidated financial statements reflect the corresponding results of
operations from the respective dates of acquisition.

(3) Investments

       (a) General

       For the years ended December 31, the sources of investment income of the
Company were as follows:

<TABLE>
<CAPTION>
                                              1999        1998        1997
                                              ----        ----        ----
<S>                                        <C>           <C>         <C>
Fixed maturities                             $2,758      $2,527      $2,429
Equity securities                                --          24          30
Mortgage loans                                  260         234         214
Policy loans                                    102          96          88
Other                                             9          23          13
                                           ----------------------------------
Gross investment income                       3,129       2,904       2,774
Investment expenses                              (6)         (8)        (19)
                                           ----------------------------------
Net investment income                        $3,123      $2,896      $2,755
                                           ==================================
</TABLE>

                                       58
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     For the years ended December 31, sales proceeds and gross realized
investment gains and losses resulting from the sales of investment securities
available-for-sale were as follows:

<TABLE>
<CAPTION>
                                                1999        1998        1997
                                                ----        ----        ----
<S>                                         <C>            <C>         <C>
Sales proceeds                                 $3,675      $4,668      $2,680
                                            ===================================

Gross realized investment:
  Gains                                        $  251      $  211      $  114
  Losses                                          (86)        (95)        (37)
                                            -----------------------------------
Net realized investment gains                  $  165      $  116      $   77
                                            ===================================
</TABLE>

     The additional proceeds from investments presented in the consolidated
statements of cash flows result from principal collected on mortgage and asset-
backed securities, maturities, calls and sinking fund payments.

     Net unrealized gains and losses on investment securities classified as
available-for-sale are reduced by deferred income taxes and adjustments to the
present value of future profits and deferred acquisition costs that would have
resulted had such gains and losses been realized. Net unrealized gains and
losses on available-for-sale investment securities reflected as a separate
component of shareholder's interest at December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                      1999          1998       1997
                                                                                      ----          ----       ----
<S>                                                                                <C>            <C>         <C>
Net unrealized gains (losses) on available-for-sale investment
  securities before adjustments:
   Fixed maturities                                                                  $(1,911)     $1,330      $1,274
   Equity securities                                                                       9          21          30
   Other invested assets                                                                   1           5           9
                                                                                   -----------------------------------
     Subtotal                                                                         (1,901)      1,356       1,313
Adjustments to the present value of future profits and deferred
  acquisition costs                                                                      234        (261)       (296)
Deferred income taxes                                                                    588        (382)       (356)
                                                                                   -----------------------------------
  Net unrealized gains (losses) on available-for-sale investment securities          $(1,079)     $  713      $  661
                                                                                   ===================================
</TABLE>

                                       59
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     At December 31, the amortized cost, gross unrealized gains and losses, and
fair value of the Company's fixed maturities and equity securities available-
for-sale were as follows:

<TABLE>
<CAPTION>
                                                                               Gross            Gross
                                                              Amortized      Unrealized      Unrealized      Fair
                                                                Cost           Gains           Losses       Value
                                                                ----           -----           ------       -----
<S>                                                           <C>            <C>             <C>            <C>
1999
- ----
Fixed maturities:
   U.S. government and agencies                                $ 1,500         $    3         $  (141)      $ 1,362
   State and municipal                                             652              1             (76)          577
   Foreign government                                              194              2              (8)          188
   Foreign corporate                                             3,248             28            (154)        3,122
   U.S. corporate                                               25,248            105          (1,568)       23,785
   Mortgage and asset-backed                                     8,001             58            (161)        7,898
                                                            ---------------------------------------------------------
     Total fixed maturities                                     38,843            197          (2,108)       36,932
Common and non-redeemable preferred stock                          336             30             (21)          345
                                                            ---------------------------------------------------------
     Total available-for-sale securities                       $39,179         $  227         $(2,129)      $37,277
                                                            =========================================================

1998
- ----
Fixed maturities:
   U.S. government and agencies                                $ 1,426         $  182         $    (5)      $ 1,603
   State and municipal                                             651             13              (2)          662
   Foreign government                                              178              9              (8)          179
   Foreign corporate                                             2,173            109             (62)        2,220
   U.S. corporate                                               23,476          1,124            (269)       24,331
   Mortgage and asset-backed                                     7,664            278             (39)        7,903
                                                            ---------------------------------------------------------
     Total fixed maturities                                     35,568          1,715            (385)       36,898
Common and non-redeemable preferred stock                          340             32             (11)          361
                                                            ---------------------------------------------------------
     Total available-for-sale securities                       $35,908         $1,747         $  (396)      $37,259
                                                            =========================================================
</TABLE>

                                       60
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The scheduled maturity distribution of the fixed maturity portfolio at
December 31, 1999 follows. Expected maturities may differ from scheduled
contractual maturities because issuers of securities may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                       Amortized        Fair
                                                         Cost          Value
                                                         ----          -----
<S>                                                    <C>            <C>
Due in one year or less                                 $   993       $   979
Due one year through five years                           6,261         6,116
Due five years through ten years                          6,660         6,324
Due after ten years                                      16,928        15,615
                                                     --------------------------
   Subtotal                                              30,842        29,034
Mortgage and asset-backed securities                      8,001         7,898
                                                     --------------------------
   Totals                                               $38,843       $36,932
                                                     ==========================
</TABLE>

     At December 31, 1999, $7,006 of the Company's investments (excluding
mortgage and asset-backed securities) were subject to certain call provisions.

     As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders of $106
and $80 at December 31, 1999 and 1998, respectively.

     At December 31, 1999, approximately 27.9%, 13.7% and 12.3% of the Company's
investment portfolio is comprised of securities issued by the manufacturing,
utility and financial industries, respectively, the vast majority of which are
rated investment grade, and which are senior secured bonds. No other industry
group comprises more than 10% of the Company's investment portfolio. This
portfolio is widely diversified among various geographic regions in the United
States, and is not dependent on the economic stability of one particular region.

     At December 31, 1999, the Company did not hold any fixed maturity
securities, other than securities issued or guaranteed by the U.S. government,
which exceeded 10% of shareholder's interest.

                                       61
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The credit quality of the fixed maturity portfolio at December 31 follows.
The categories are based on the higher of the ratings published by Standard &
Poors or Moody's.

<TABLE>
<CAPTION>
                                                  1999                          1999
                                                  ----                          ----
                                        Fair Value      Percent       Fair Value      Percent
                                        ----------      -------       ----------      -------
<S>                                   <C>               <C>           <C>             <C>
Agencies and treasuries                   $ 3,458          9.4%         $ 4,953          13.4%
AAA/Aaa                                     5,937         16.1            5,003          13.6
AA/Aa                                       3,032          8.2            2,541           6.9
A/A                                         9,078         24.6            9,586          26.0
BBB/Baa                                     8,678         23.5            8,700          23.6
BB/Ba                                       1,337          3.6            1,294           3.5
B/B                                           802          2.2              565           1.5
CCC/Caa                                         9          ---                2           ---
Not rated                                   4,601         12.4            4,254          11.5
                                      -----------------------------------------------------------
Totals                                    $36,932        100.0%         $36,898         100.0%
                                      ===========================================================
</TABLE>

     Bonds with ratings ranging from AAA/Aaa to BBB-/Baa3 are generally regarded
as investment grade securities. Some agencies and treasuries (that is, those
securities issued by the United States government or an agency thereof) are not
rated, but all are considered to be investment grade securities. Finally, some
securities, such as private placements, have not been assigned a rating by any
rating service and are therefore categorized as "not rated." This has neither
positive nor negative implications regarding the value of the security.

     At December 31, 1999 and 1998, there were fixed maturities in default with
a fair value of $10 and $11, respectively.

     (b) Mortgage Loans

     At December 31, 1999 and 1998, the Company's mortgage loan portfolio
consisted of first mortgage loans on commercial real estate properties of 2,065
and 1,878, respectively. The loans, which are originated by the Company through
a network of mortgage bankers, are made only on completed, leased properties and
generally have a maximum loan-to-value ratio of 75% at the date of origination.

     At December 31, 1999 and 1998, respectively, the Company held $854 and $773
in mortgages secured by real estate in California, comprising 25% and 26% of the
respective total mortgage portfolio. For the years ended December 31, 1999, 1998
and 1997, respectively, the Company originated $201, $222 and $160 of mortgages
secured by real estate in California, which represent 23%, 29% and 29% of the
respective total originations for those years.

                                       62
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     As of December 31, 1999 and 1998, the Company was committed to fund $156
and $408, respectively, in mortgage loans.

     "Impaired" loans are defined under generally accepted accounting principles
as loans for which it is probable that the lender will be unable to collect all
amounts due according to the original contractual terms of the loan agreement.
That definition excludes, among other things, leases, or large groups of
smaller-balance homogeneous loans, and therefore applies principally to the
Company's commercial loans.

     Under these principles, the Company has two types of "impaired" loans:
loans requiring allowances for losses (none as of December 31, 1999 and 1998)
and loans expected to be fully recoverable because the carrying amount has been
reduced previously through charge-offs or deferral of income recognition ($19
and $21, as of December 31, 1999 and 1998, respectively). The Company had no
allowance for losses on these loans as of December 31, 1999 and 1998. Average
investment in impaired loans during 1999, 1998 and 1997 was $15, $26 and $29,
respectively and interest income earned on these loans while they were
considered impaired was $3, $2 and $3, respectively.

     The following table presents the activity in the allowance for losses
during the years ended December 31:

<TABLE>
<CAPTION>
                                                    1999       1998      1997
                                                    ----       ----      ----
<S>                                              <C>           <C>       <C>
Balance at January 1                                $ 65       $ 57      $ 58
Provision charged to operations                        7          6         5
Amounts written off, net of recoveries                (1)         2        (6)
                                                 -------------------------------
Balance at December 31                              $ 71       $ 65      $ 57
                                                 ===============================
</TABLE>

                                       63
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(4) Deferred Acquisition Costs

       Activity impacting deferred acquisition costs for the years ended
December 31, was as follows:

<TABLE>
<CAPTION>
                                                                            1999       1998       1997
                                                                            ----       ----       ----
<S>                                                                      <C>          <C>        <C>
Unamortized balance at January 1                                           $1,400     $  945     $ 498
Acquisition of Colonial Penn                                                  ---        ---        12
Impact of foreign currency translation                                         28          9       ---
Costs deferred                                                              1,078        637       549
Amortization, net                                                            (304)      (191)     (114)
                                                                         --------------------------------
Unamortized balance at December 31                                          2,202      1,400       945
Cumulative effect of net unrealized investment (gains) losses                 105        (82)      (82)
                                                                         --------------------------------
Balance at December 31                                                     $2,307     $1,318     $ 863
                                                                         ================================
</TABLE>

(5) Intangible Assets

       Present Value of Future Profits (PVFP)

       The method used by the Company to value PVFP in connection with
acquisitions of life insurance entities is summarized as follows: (1) identify
the future gross profits attributable to certain lines of business, (2) identify
the risks inherent in realizing those gross profits, and (3) discount those
gross profits at the rate of return that the Company must earn in order to
accept the inherent risks.

       PVFP is amortized, net of accreted interest, in a manner similar to the
amortization of deferred acquisition costs. Interest accretes at rates credited
to policyholders on underlying contracts.

       Recoverability of PVFP is evaluated periodically by comparing the current
estimate of expected future gross profits to the unamortized asset balance. If
such comparison indicates that the expected gross profits will not be sufficient
to recover PVFP, the difference is charged to expense.

                                       64
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The following table presents the activity in PVFP for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                              1999        1998        1997
                                                                              ----        ----        ----
<S>                                                                        <C>         <C>         <C>
Unamortized balance at January 1                                             $1,608      $1,824      $2,292
Acquisitions                                                                    134         ---         ---
Purchase accounting adjustments                                                 ---         ---        (236)
Interest accreted at 4.9% in 1999, 4.8% in 1998 and 5.0% in 1997                 78          87         101
Amortization                                                                   (302)       (303)       (333)
                                                                           -----------------------------------
Unamortized balance at December 31                                            1,518       1,608       1,824
Cumulative effect of net unrealized investment (gains) losses                   129        (179)       (214)
                                                                           -----------------------------------
Balance at December 31                                                       $1,647      $1,429      $1,610
                                                                           ===================================
</TABLE>

     The estimated percentage of the December 31, 1999 balance, before the
effect of unrealized investment gains or losses, to be amortized over each of
the next five years is as follows:

          2000                                              12.4%
          2001                                              10.5
          2002                                               8.9
          2003                                               7.6
          2004                                               6.6

Goodwill

     At December 31, 1999 and 1998, total unamortized goodwill was $2,422 and
$1,803, respectively, which is presented net of accumulated amortization of $249
and $162, respectively. Goodwill amortization was $84, $68 and $44 for the years
ended December 31, 1999, 1998 and 1997, respectively. Goodwill in excess of
associated expected operating cash flows is considered to be impaired and is
written down to fair value (no such write-downs have been made).

                                       65
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(6) Reinsurance

       In order to limit the amount of loss retention, certain policy risks are
reinsured with other insurance companies. The maximum amount of individual
ordinary life insurance normally retained by the Company on any one life policy
is $1. Reinsurance contracts do not relieve the Company from its obligations to
policyholders. In the event that the reinsurers would be unable to meet their
obligations, the Company is liable for the reinsured claims. The Company
monitors both the financial condition of individual reinsurers and risk
concentrations arising from similar geographic regions, activities and economic
characteristics of reinsurers to lessen the risk of default by such reinsurers.
The Company does not have significant reinsurance contracts with any one
reinsurer that could have a material impact on its results of operations.

       Net life insurance in force as of December 31 is summarized as follows:

<TABLE>
<CAPTION>
                                                       1999            1998            1997
                                                       ----            ----            ----
<S>                                               <C>                <C>              <C>
Direct life insurance in force                      $ 337,892        $306,566         $292,825
Amounts ceded to other companies                     (111,193)        (96,931)         (79,656)
Amounts assumed from other companies                   28,345          40,290           38,301
                                                  ----------------------------------------------
Net life insurance in force                         $ 255,044        $249,925         $251,470
                                                  ==============================================
Percentage of amount assumed to net                        11%             16%              15%
                                                  ==============================================
</TABLE>

       The effects of reinsurance on premiums written and earned for the years
ended December 31 were as follows:

<TABLE>
<CAPTION>
                                                      Written                       Earned
                                                      -------                       ------
                                             1999      1998      1997      1999      1998      1997
                                             ----      ----      ----      ----      ----      ----
<S>                                        <C>        <C>       <C>       <C>       <C>       <C>
Direct                                      $3,636    $3,217    $2,275    $3,603    $3,218    $2,245
Assumed                                        407       489       480       414       477       474
Ceded                                         (443)     (464)     (421)     (475)     (488)     (405)
                                           ----------------------------------------------------------
Net premiums                                $3,600    $3,242    $2,334    $3,542    $3,207    $2,314
                                           ==========================================================
Percentage of amount assumed to net                                           12%      15%      21%
                                                                         ============================
</TABLE>


       Reinsurance recoveries recognized as a reduction of benefits amounted to
$300, $336 and $263 during 1999, 1998 and 1997, respectively. These recoveries
were partially offset by certain changes in benefits and other policy reserves.

                                       66
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(7) Future Annuity and Contract Benefits

Investment Contracts

       Investment contracts are broadly defined to include contracts without
significant mortality or morbidity risk. Payments received from sales of
investment contracts are recognized by providing a liability equal to the
current account value of the policyholder's contracts. Interest rates credited
to investment contracts are guaranteed for the initial policy term with renewal
rates determined as necessary by management.

Traditional Life Insurance Contracts

     Insurance contracts are broadly defined to include contracts with
significant mortality and/or morbidity risk. The liability for future benefits
of insurance contracts is the present value of such benefits less the present
value of future net premiums based on mortality, morbidity, and other
assumptions which were appropriate at the time the policies were issued or
acquired. These assumptions are periodically evaluated for potential premium
deficiencies. Reserves for cancelable accident and health insurance are based
upon unearned premiums, claims incurred but not reported, and claims in the
process of settlement. This estimate is based on the experience of the insurance
industry and the Company, adjusted for current trends. Any changes in the
estimated liability are reflected in income as the estimates are revised.

                                       67
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The following chart summarizes the major assumptions underlying the
Company's recorded liabilities for future annuity and contract benefits:

<TABLE>
<CAPTION>
                                                             Mortality/
                                             Withdrawal       Morbidity      Interest Rate           December 31,
                                                                                                     ------------
                                             Assumption      Assumption       Assumption          1999         1998
                                             ----------      ----------       ----------          ----         ----
<S>                                          <C>             <C>            <C>                  <C>         <C>
Investment contracts                            N/A              N/A             N/A             $21,250     $19,256

Limited-payment contracts                       None             (a)          3.3% -11.3%          9,643       8,981

Traditional life insurance                    Company
  contracts                                  experience          (b)          5.5%-7.5%            1,896       1,764


Universal life-type contracts                   N/A              N/A             N/A               4,485       4,386

Accident and health                           Company                       7.5% grading to
                                             experience          (c)             5.5%                131          90

Long-term care                                Company
                                             experience          (d)          4.5%-7.0%            2,234       1,795
                                                                                                ---------------------
Total future annuity and
  contract benefits                                                                              $39,639     $36,272
                                                                                                =====================
</TABLE>

_____________

(a)  Either the United States Population Table, 1983 Group Annuitant Mortality
     Table or 1983 Individual Annuitant Mortality Table.

(b)  Principally modifications of the 1965-70 or 1975-80 Select and Ultimate
     Tables or 1958 and 1980 Commissioner's Standard Ordinary Tables.

(c)  The 1958 and 1980 Commissioner's Standard Ordinary Tables, 1964 modified
     and 1987 Commissioner's Disability Tables and Company experience.

(d)  The 1983 Individual Annuitant Mortality Table or 1980 Commissioner's
     Standard Ordinary Table and the 1985 National Nursing Home Study and
     Company experience.

                                       68
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)



(8) Liability for Policy and Contract Claims

       Changes in the liability for policy and contract claims for the years
ended December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                         1999          1998          1997
                                                         ----          ----          ----
<S>                                                    <C>            <C>           <C>
Balance at January 1                                    $ 1,697       $ 1,521       $   879
Less reinsurance recoverables                              (221)         (130)          (73)
                                                       -------------------------------------
   Net balance at January 1                               1,476         1,391           806
                                                       -------------------------------------

Balances from Acquisitions                                  154           ---           523

Incurred related to insured events of:
 Current year                                             1,932         1,731         1,173
 Prior years                                                (27)          (51)           57
                                                       -------------------------------------
   Total incurred                                         1,905         1,680         1,230
                                                       -------------------------------------
Paid related to insured events of:
 Current year                                            (1,049)         (947)         (750)
 Prior years                                               (829)         (651)         (418)
                                                       -------------------------------------
   Total paid                                            (1,878)       (1,598)       (1,168)
                                                       -------------------------------------
Foreign currency translation                                  6             3           ---
                                                       -------------------------------------
Net balance at December 31                                1,663         1,476         1,391
Add reinsurance recoverables                                223           221           130
                                                       -------------------------------------
   Balance at December 31                               $ 1,886       $ 1,697       $ 1,521
                                                       =====================================
</TABLE>

(9) Borrowings

       (a) Long-Term Debt

       The Company has an unsecured senior long-term note outstanding in the
amount of $175, at 6.625%, due August 2003. The senior note indenture contains
certain covenants that, among other things, limit the Company's ability to
dispose of, or allow liens to be placed against, the capital stock of First
Colony. Interest expense in each of the years ended December 31, 1999, 1998 and
1997 was $12.

                                       69

<PAGE>

           GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)

     In connection with GE Edison's March 1998 transaction with Toho (see
Note 2--Acquisitions), a subsidiary of the Company entered into certain long-
term note agreements in the amount of (Yen)6.5 billion ($63 and $56 at December
31, 1999 and 1998, respectively), at 2.25%, due April 2008. In addition, a
subsidiary of the Company entered into similar long-term note agreements, having
the same interest rate and maturity, in the amount of (Yen)3.5 billion ($27 at
December 31, 1999 and 1998), with certain affiliates of the Company. A guarantee
fee of 0.50%, relating to the above long-term notes, is being paid annually to
GE Capital as guarantor.

    Additional financing for the March 1998 GE Edison transaction was obtained
by the issuance of a long-term note of the Company to GE Capital. The long-term
note in the amount of (Yen)57.25 billion ($440 at December 31, 1999 and 1998),
matures in March 2008 and bears interest at a floating rate based on a spread
above the three month Japanese Yen London Inter-Bank Offered Rate (JPY LIBOR),
or a total of 0.89% and 0.93% at December 31, 1999 and 1998, respectively.

     (b) Short-Term Borrowings

     Short-term borrowings includes commercial paper issued of $987 and $1,004,
net of discount of $10 and $8 at December 31, 1999 and 1998, respectively, with
an average interest rate of 5.91% at December 31, 1999.

     The Company has a line of credit with GE Capital that has an aggregate
borrowing line of $1,436, of which a maximum of $497 and $446 was used during
the years 1999 and 1998, respectively. At December 31, 1999 and 1998, the
balance outstanding was $49 and $326, respectively.

     In connection with the acquisition of Colonial Penn in 1997, the Company
entered into an additional line of credit with GE Capital, with an aggregate
borrowing line of $1,015. A maximum of $580 was used during 1998.  This line of
credit was cancelled upon repayment in 1998.

     Interest rates are managed by the Company in light of the anticipated
behavior, including prepayment behavior, of assets in which debt proceeds are
invested. Interest rate swaps are employed to achieve management's interest rate
objectives. Effective interest rates are lower under these "synthetic" positions
than could have been achieved by issuing debt directly.

     At December 31, 1999, interest rate swaps maturities with a notional amount
of $1,194 ranged from 2002 to 2012, and average interest rates for these
"synthetic" fixed-rate borrowings were 4.80% (4.92% at December 31, 1998). These
swaps were employed to achieve a synthetic fixed rate on certain floating rate
borrowings in connection with the acquisition of Colonial Penn and initiation of
operations at GE Edison, including commercial paper, and the long term note with
GE Capital. The average floating interest rate for these borrowings was 3.90% as
of December 31, 1999 (3.61% at December 31, 1998).

                                       70
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


       The following table shows the Company's borrowing positions at December
31 considering the effects of swaps.

<TABLE>
<CAPTION>
Effective borrowings (including swaps)                        1999     1998
                                                              ----     ----
<S>                                                          <C>      <C>
Short-term                                                   $  328   $  622
Long-term (including current portion) - fixed rate (a)        1,413    1,406
</TABLE>

____________
(a)    Includes the notional amount of long-term interest rate swaps that
       effectively convert the floating-rate nature of short-term borrowings to
       fixed rates of interest.

(10) Income Taxes

       The total provision for income taxes for the years ended December 31
consisted of the following components:

<TABLE>
<CAPTION>
                                                               1999        1998       1997
                                                               ----        ----       ----
<S>                                                           <C>         <C>        <C>
Current federal income tax provision                           $ 130      $ 245       $ 250
Deferred federal income tax provision                            127         53           8
                                                              ------------------------------
   Subtotal -- federal provision                                 257        298         258
                                                              ------------------------------
Current state income tax provision (benefit)                     (10)         5           4
Deferred state income tax provision (benefit)                      1        ---          (1)
                                                              ------------------------------
   Subtotal -- state provision (benefit)                          (9)         5           3
                                                              ------------------------------
Foreign income tax benefit                                       ---         (2)        ---
                                                              ------------------------------
   Total income tax provision                                  $ 248      $ 301       $ 261
                                                              ==============================
</TABLE>

       The reconciliation of the federal statutory tax rate to the effective
income tax rate is as follows:

<TABLE>
<CAPTION>
                                                               1999      1998       1997
                                                               ---       ----       ----
<S>                                                          <C>         <C>        <C>
Statutory U.S. federal income tax rate                         35.0%     35.0%      35.0%
State income tax, net of federal income tax effect             (0.7)      0.4        0.3
Non-deductible goodwill amortization                            1.5       1.6        1.9
Sale of minority interest                                      (6.1)      ---        ---
Other, net                                                     (1.0)      1.0        0.8
                                                             -----------------------------
   Effective rate                                              28.7%     38.0%      38.0%
                                                             =============================
</TABLE>

                                       71
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


  The components of the net deferred income tax asset (liability) at December 31
are as follows:

<TABLE>
<CAPTION>
                                                                  1999           1998
                                                                  ----           ----
<S>                                                             <C>           <C>
Assets:
Net unrealized losses on investment securities                   $  588        $   ---
Future annuity and contract benefits                                977          1,129
Guaranty association assessments                                      7             43
Net operating loss carryforwards                                    208             36
Other                                                                12             58
                                                                ------------------------
   Total deferred income tax assets                               1,792          1,266
                                                                ------------------------

Liabilities:
Net unrealized gains on investment securities                       ---           (382)
Investments                                                        (201)          (262)
Present value of future profits                                    (349)          (421)
Deferred acquisition costs                                         (429)          (224)
Other                                                               ---            (32)
                                                                ------------------------
   Total deferred income tax liabilities                           (979)        (1,321)
                                                                ------------------------
   Net deferred income tax asset (liability)                     $  813        $   (55)
                                                                ========================
</TABLE>

       Based on an analysis of the Company's tax position, management believes
it is more likely than not that the results of future operations and
implementation of tax planning strategies will generate sufficient taxable
income enabling the Company to realize remaining deferred tax assets.
Accordingly, no valuation allowance for deferred tax assets is deemed necessary.

       The Company paid $371, $188 and $270, for federal and state income taxes
during the years 1999, 1998 and 1997, respectively.

(11) Related Party Transactions

       At December 31, 1999 and 1998, fixed maturities included a note
receivable from GE Capital with a balance of $175. This note bears interest at
6.625% and matures in August 2003.

       The Company also invests in certain short-term notes issued by GE
Capital. These investments yield market rates. Interest earned on these notes
was $1, $3 and $2 for the years ended December 31, 1999, 1998 and 1997,
respectively. Short-term investments include $63 and $15 of these securities at
December 31, 1999 and 1998, respectively.

       During 1999, 1998 and 1997, the Company paid $23, $15 and $14,
respectively, to GE Capital for certain computer services fees.

                                       72
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(12) Guaranty Association Assessments

       The Company's insurance subsidiaries are required by law to participate
in the guaranty associations of the various states in which they do business.
The state guaranty associations ensure payment of guaranteed benefits, with
certain restrictions, to policyholders of impaired or insolvent insurance
companies by assessing all other companies involved in similar lines of
business.

       There are currently several unrelated insurance companies which had
substantial amounts of annuity and insurance business in the process of
liquidation or rehabilitation. The Company's insurance subsidiaries paid
assessments of $2, $12 and $14 to various state guaranty associations during the
years 1999, 1998 and 1997, respectively.

       The American Institute of Certified Public Accountants has issued
Statement of Position (SOP) No. 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments. This SOP provides guidance on
accounting by insurance and other enterprises for guaranty-fund and certain
other insurance related assessments. The SOP requires enterprises to recognize
(1) a liability for assessments when (a) an assessment has been asserted or
information available prior to issuance of the financial statements indicates it
is probable that an assessment will be asserted, (b) the underlying cause of the
asserted or probable assessment has occurred on or before the date of the
financial statements, and (c) the amount of the loss can be reasonably estimated
and (2) an asset for an amount when it is probable that a paid or accrued
assessment will result in an amount that is recoverable from premium tax offsets
or policy surcharges from in-force policies.

       Effective January 1, 1999, the Company adopted SOP No. 97-3 and has
reported the effect of this adoption as a cumulative effect of a change in
accounting principle, which served to increase 1999 net income by $25 (net of
income taxes of $14).

(13) Litigation

       The Company and certain of its subsidiaries are defendants in various
cases of litigation considered to be in the normal course of business. The
Company believes that the outcome of such litigation will not have a material
effect on its financial position or results of operations.

(14) Fair Value of Financial Instruments

       The Company's derivative financial instruments at December 31, 1999,
consisted of mortgage loan commitments of $156, European style call options of
$97, interest rate floors of $37 and various swap options of $6. The notional
value of the European style call options at December 31, 1999 was $299 and the
options expire from January 2000 to April 2009. The options are used to hedge
market risk associated with the Company's S&P 500 indexed annuity product. The
notional value of the interest rate floors at December 31, 1999 was $6,100 and
the floors have expiration dates from September 2002 to October 2003. The
notional value of the swap options at December 31, 1999 was $1,600 and they
expire in December 2008.

                                       73
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


     The fair values of financial instruments presented in the applicable notes
to the Company's consolidated financial statements are estimates of the fair
values at a specific point in time using available market information and
valuation methodologies considered appropriate by management. These estimates
are subjective in nature and involve uncertainties and significant judgment in
the interpretation of current market data. Therefore, the fair values presented
are not necessarily indicative of amounts the Company could realize or settle
currently. The Company does not necessarily intend to dispose of or liquidate
such instruments prior to maturity.

     Financial instruments that, as a matter of accounting policy, are reflected
in the accompanying consolidated financial statements at fair value are not
included in the following disclosures. Such items include fixed maturities,
equity securities and certain other invested assets. The carrying value of
policy loans, short-term investments, certain other invested assets, short-term
borrowings and long-term debt approximates fair value at December 31, 1999 and
1998, respectively.

     At December 31, the carrying amounts and fair values of the Company's
financial instruments were as follows:

<TABLE>
<CAPTION>
                                                 1999                     1998
                                                 ----                     ----
                                        Carrying      Fair       Carrying      Fair
Financial Instruments                    Amount      Value        Amount      Value
- ---------------------                    ------      -----        ------      -----
<S>                                     <C>          <C>         <C>          <C>
Mortgage loans                           $ 3,414     $ 3,309      $ 2,960     $ 3,172
Investment contracts                      21,250      20,746       19,256      19,176
European style call options                   97          97           71          71
Interest rate floors                          37           3           46          46
Swap options                                   6          26           12           4
</TABLE>

     The fair value of mortgage loans is estimated by discounting the estimated
future cash flows using interest rates applicable to current loan originations,
adjusted for credit risks.

     The estimated fair value of investment contracts is the amount payable on
demand (cash surrender value) for deferred annuities and the net present value
based on interest rates currently offered on similar contracts for non-life
contingent immediate annuities. Fair value disclosures are not required for
insurance contracts.

                                       74
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(15) Restrictions on Dividends

      Insurance companies are restricted by states as to the aggregate amount
of dividends they may pay to their parent in any consecutive twelve-month period
without regulatory approval. Generally, dividends may be paid out of earned
surplus without approval with thirty days prior written notice within certain
limits. The limits are generally based on 10% of the prior year surplus (net of
adjustments in some cases) and prior year statutory income (net gain from
operations, net income adjusted for realized capital gains, or net investment
income). Dividends in excess of the prescribed limits or the Company's earned
surplus require formal state insurance commission approval. Based on statutory
results as of December 31, 1999, the Company is able to receive $248 in
dividends in 2000 without obtaining regulatory approval.

      The Company received $259 and $120 of cash dividends from its subsidiaries
during 1999 and 1998, respectively. The Company paid $155 and $120 of cash
dividends to its parent, GE Capital, during 1999 and 1998, respectively.

(16) Supplementary Financial Data

      The Company's insurance subsidiaries file financial statements with state
insurance regulatory authorities and the National Association of Insurance
Commissioners (NAIC) that are prepared on an accounting basis prescribed or
permitted by such authorities (statutory basis). Statutory accounting practices
differ from GAAP in several respects, causing differences in reported net income
and shareholder's interest. Permitted statutory accounting practices encompass
all accounting practices not so prescribed but that have been specifically
allowed by state insurance authorities. The Company's insurance subsidiaries
have no significant permitted accounting practices.

      Combined statutory net income for the Company's U.S. domiciled insurance
subsidiaries for the years ended December 31, 1999, 1998 and 1997 was $291, $431
and $412, respectively. The combined statutory capital and surplus as of
December 31, 1999 and 1998 was $3,179 and $3,268, respectively.

      The NAIC has adopted Risk-Based Capital (RBC) requirements to evaluate the
adequacy of statutory capital and surplus in relation to risks associated with:
(i) asset risk, (ii) insurance risk, (iii) interest rate risk, and (iv) business
risk . The RBC formula is designated as an early warning tool for the states to
identify possible under-capitalized companies for the purpose of initiating
regulatory action. In the course of operations, the Company periodically
monitors the RBC level of each of its insurance subsidiaries. At December 31,
1999 and 1998, each of the Company's insurance subsidiaries exceeded the minimum
required RBC levels.

                                       75
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(17) Operating and Geographic Segments

       (a) Operating Segment Information

       The Company conducts its operations through two business segments: (1)
Wealth Accumulation and Transfer, comprised of products intended to increase the
policyholder's wealth, transfer wealth to beneficiaries or provide a means for
replacing the income of the insured in the event of premature death, and (2)
Lifestyle Protection and Enhancement, comprised of products intended to protect
accumulated wealth and income from the financial drain of unforeseen events and
provide consumer club membership opportunities. See Note (1)(c) for further
discussion of the Company's principal product lines within these two segments.

       The following is a summary of industry segment activity for 1999, 1998
and 1997:

1999 -- Segment Data
- --------------------

<TABLE>
<CAPTION>
                                                                         Wealth         Lifestyle
                                                                     Accumulation &    Protection &
                                                                        Transfer        Enhancement   Consolidated
                                                                        --------        -----------   ------------
<S>                                                                 <C>                <C>            <C>
Net investment income                                                    $ 2,773           $  350        $ 3,123
Net realized investment gains                                                149               16            165
Premiums                                                                   1,658            1,884          3,542
Other revenues                                                               483              239            722
                                                                    ---------------------------------------------
     Total revenues                                                        5,063            2,489          7,552
                                                                    ---------------------------------------------
Interest credited, benefits, and other changes
   in policy reserves                                                      3,426            1,394          4,820
Commissions                                                                  506              352            858
Amortization of intangibles                                                  212              128            340
Other operating costs and expenses, net                                      142              527            669
                                                                    ---------------------------------------------
     Total benefits and expenses                                           4,286            2,401          6,687
                                                                    ---------------------------------------------
     Income before income taxes, minority interest and
           cumulative effect of accounting change                        $   777           $   88        $   865
                                                                    =============================================
Total assets                                                             $57,302           $7,304        $64,606
                                                                    =============================================
</TABLE>

                                       76
<PAGE>

             GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


1998 -- Segment Data
- --------------------

<TABLE>
<CAPTION>
                                                                         Wealth         Lifestyle
                                                                     Accumulation &    Protection &
                                                                        Transfer        Enhancement   Consolidated
                                                                        --------        -----------   ------------
<S>                                                                 <C>                <C>            <C>
Net investment income                                                   $ 2,631            $  265         $ 2,896
Net realized investment gains                                               116               ---             116
Premiums                                                                  1,557             1,650           3,207
Other revenues                                                              395                58             453
                                                                    ----------------------------------------------
     Total revenues                                                       4,699             1,973           6,672
                                                                    ----------------------------------------------
Interest credited, benefits, and other changes
   in policy reserves                                                     3,300             1,189           4,489
Commissions                                                                 283               258             541
Amortization of intangibles                                                 205                81             286
Other operating costs and expenses, net                                     242               321             563
                                                                    ----------------------------------------------
     Total benefits and expenses                                          4,030             1,849           5,879
                                                                    ----------------------------------------------
     Income before income taxes, minority interest and
           cumulative effect of accounting change                       $   669            $  124         $   793
                                                                    ==============================================
Total assets                                                            $50,269            $6,458         $56,727
                                                                    ==============================================
</TABLE>


1997 -- Segment Data
- --------------------

<TABLE>
<CAPTION>
                                                                         Wealth         Lifestyle
                                                                     Accumulation &    Protection &
                                                                        Transfer        Enhancement   Consolidated
                                                                        --------        -----------   ------------
<S>                                                                 <C>                <C>            <C>
Net investment income                                                   $ 2,578           $  177         $ 2,755
Net realized investment gains                                                77              ---              77
Premiums                                                                  1,192            1,122           2,314
Other revenues                                                              411               10             421
                                                                    ----------------------------------------------
     Total revenues                                                       4,258            1,309           5,567
                                                                    ----------------------------------------------
Interest credited, benefits and other changes
   in policy reserves                                                     3,001              772           3,773
Commissions                                                                 305              254             559
Amortization of intangibles                                                 213               63             276
Other operating costs and expenses, net                                     150              123             273
                                                                    ----------------------------------------------
     Total benefits and expenses                                          3,669            1,212           4,881
                                                                    ----------------------------------------------
     Income before income taxes, minority interest and
           cumulative effect of accounting change                       $   589           $   97         $   686
                                                                    ==============================================
Total assets                                                            $44,891           $6,201         $51,092
                                                                    ==============================================
</TABLE>
                                       77
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)



     (b)  Geographic Segment Information

     The Company conducts its operations primarily in two geographic regions:
(1) North America and (2) Asia. See Note (1)(c) for further discussion of the
Company's principal product lines distributed in these two segments.

     The following is a summary of geographic region activity for 1999 and 1998.

<TABLE>
<CAPTION>
1999                                                        North America       Asia      Consolidated
- ----                                                        -------------       ----      ------------
<S>                                                         <C>                <C>        <C>
Total revenues                                                  $ 7,139        $  413        $ 7,552
Income (loss) before income taxes, minority interest
  and cumulative effect of accounting change                        874            (9)           865
Total assets                                                     61,506         3,100         64,606

1998                                                        North America       Asia      Consolidated
- ----                                                        -------------       ----      ------------

Total revenues                                                  $ 6,437        $  235        $ 6,672
Income (loss) before income taxes, minority interest
  and cumulative effect of accounting change                        802            (9)           793
Total assets                                                     54,776         1,951         56,727
</TABLE>

     Prior to 1998, the Company's operations were entirely within the North
American geographic region.

                                       78
<PAGE>

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

                 Years Ended December 31, 1999, 1998 and 1997
                         (Dollars amounts in millions)


(18) Subsequent Event

       Effective March 1, 2000, GE Edison acquired, by means of a comprehensive
transfer in accordance with the Insurance Business Law of Japan (IBL), the
insurance policies and related assets of Toho. GE Edison assumed approximately
$22,700 of policyholder liabilities and $20,500 of cash and invested assets, the
difference between such amounts being attributable to the present value of
future profits on the transferred insurance policies. Toho, which continues to
exist as a separate and independent entity, will liquidate its remaining assets
and liabilities following the comprehensive transfer. Such liquidation will have
no impact on the Company's financial position or operations.

       GE Edison had previously acquired Toho's operating infrastructure in
March 1998. See Note 2 - Acquisitions. In June 1999, the Financial Supervisory
Agency (FSA) of Japan determined that Toho's continued operation was not in the
best interests of its policyholders given its weak financial position. As a
result, the FSA issued a partial business suspension order to Toho on June 4,
1999. In connection with such suspension order, the FSA appointed two
independent individuals from the Japanese insurance industry and the Life
Insurance Association of Japan as administrators of Toho (collectively, the
Administrator).

        Under the IBL, the sole means for rehabilitating an insolvent insurer is
through a comprehensive transfer of the insurer's insurance policies and assets
to a rescuing company. On December 22, 1999, the Administrator entered into an
agreement with GE Edison, acting as the rescuing company, for the comprehensive
transfer of Toho's insurance policies. In conjunction with the comprehensive
transfer, the Administrator restructured Toho's in-force insurance contracts.
The restructured insurance contracts have surrender charges, reduced benefits
and lower policy guarantees. As an inducement for GE Edison to become the
rescuing company, Japan's Policyholder Protection Corporation contributed
approximately $3,600 as part of the assets supporting Toho's restructured
policies. In December 1999, in connection with the comprehensive transfer, the
Company acquired the common stock of GE Edison held by Toho. Consequently, GE
Edison has become an indirect wholly-owned subsidiary of the Company. In
addition, the Company's remaining contingent obligations relating to the March
1998 purchase of Toho's operating infrastructure (see Note 2 - Acquisitions)
have been terminated in connection with the comprehensive transfer and the
preferred stock previously issued to Toho by a subsidiary of the Company was
transferred to GE Edison.

        The Company will account for the comprehensive transfer under the
purchase method of accounting in 2000.

                                       79
<PAGE>

                         Independent Auditors' Report
                         ----------------------------



The Board of Directors
GE Financial Assurance Holdings, Inc.:

     Under date of January 21, 2000, except for note 18 which is as of March 1,
2000, we reported on the consolidated balance sheets of GE Financial Assurance
Holdings, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, shareholder's interest, and cash
flows for each of the years in the three-year period ended December 31, 1999,
which are included herein. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules included herein. These financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statement schedules based on our
audits.

     In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

     As discussed in Note 12 to the consolidated financial statements, the
Company changed its method of accounting for insurance-related assessments in
1999.

                                 /s/ KPMG LLP



Richmond, Virginia
January 21, 2000, except for note 18 which is
  as of March 1, 2000

                                       80
<PAGE>

                                                                     Schedule II

                     GE FINANCIAL ASSURANCE HOLDINGS, INC.

                 Condensed Financial Information of Registrant

                               (Parent Company)

                                Balance Sheets

            (Dollar amounts in millions, except per share amounts)

<TABLE>
<CAPTION>
                                                                          December 31,
Assets:                                                              1999             1998
                                                                   --------         --------
<S>                                                                <C>              <C>
   Investment in subsidiaries                                      $  8,316         $  8,705
   Cash and cash equivalents                                            211                -
   Other assets                                                         137              472
                                                                   --------         --------
           Total assets                                            $  8,664         $  9,177
                                                                   ========         ========

Liabilities and Shareholder's Interest:

Liabilities:

   Short-term borrowings                                           $  1,036         $  1,330
   Accounts payable and accrued expenses                                472              392
                                                                   --------         --------
           Total liabilities                                          1,508            1,722
                                                                   --------         --------
Shareholder's interest:

   Net unrealized investment gains (losses)                          (1,079)             713
   Foreign currency translation adjustments                             220               73
                                                                   --------         --------
   Accumulated non-owner changes in equity                             (859)             786
   Common stock ($1 par value, 1,000 authorized,
     1,000 shares issued and outstanding)                                 -                -
   Additional paid-in capital                                         6,320            5,435
   Retained earnings                                                  1,695            1,234
                                                                   --------         --------
           Total shareholder's interest                               7,156            7,455
                                                                   --------         --------
           Total liabilities and shareholder's interest            $  8,664         $  9,177
                                                                   ========         ========
</TABLE>


    See accompanying note to condensed financial information of registrant.

                                       81
<PAGE>

                                                                     Schedule II

                     GE FINANCIAL ASSURANCE HOLDINGS, INC.

           Condensed Financial Information of Registrant (continued)

                               (Parent Company)

                             Statements of Income

                         (Dollar amounts in millions)

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                      ------------------------
                                                               1999             1998             1997
                                                             --------         --------         --------
<S>                                                          <C>              <C>              <C>
Revenues:

   Equity in undistributed earnings of subsidiaries          $    362         $    429         $    448
   Net investment income                                          316              133                2
                                                             --------         --------         --------
       Total revenues                                             678              562              450
                                                             --------         --------         --------

Benefits and expenses:

   General expenses                                                93               39               29
   Interest expense                                                62               63               11
                                                             --------         --------         --------
       Total benefits and expenses                                155              102               40
                                                             --------         --------         --------

       Income before income taxes                                 523              460              410

Income tax benefit                                                115               32               15
                                                             --------         --------         --------
       Net income                                            $    638         $    492         $    425
                                                             ========         ========         ========
</TABLE>


    See accompanying note to condensed financial information of registrant.

                                       82
<PAGE>


                                                                     Schedule II
                      GE FINANCIAL ASSURANCE HOLDINGS, INC.

           Condensed Financial Information of Registrant (continued)

                                (Parent Company)

                            Statements of Cash Flows

                          (Dollar amounts in millions)
<TABLE>
<CAPTION>

                                                                        Years Ended December 31,
                                                                        ------------------------
                                                                   1999          1998          1997
                                                                   ----          ----          ----
<S> <C>
Cash flows from operating activities:
   Net income                                                     $  638        $  492        $  425
                                                                  ------        ------        ------
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
      Equity in undistributed earnings of subsidiaries              (362)         (429)         (448)
      Decrease (increase) in other assets                            335          (356)         (116)
      Increase (decrease) in accounts payable and accrued
         expenses                                                     80           340           (21)
                                                                  ------        ------        ------
                Total adjustments                                     53          (445)         (585)
                                                                  ------        ------        ------
                Net cash provided by (used in) operating
                  activities                                         691            47          (160)
                                                                  ------        ------        ------
Cash flows from investing activities:
   Acquisitions, net of cash acquired                                (31)          (95)       (1,074)
                                                                  ------        ------        ------
                Net cash used in investing
                    activities                                       (31)          (95)       (1,074)
                                                                  ------        ------        ------
Cash flows from financing activities:
   Net commercial paper borrowings (repayments)                      (17)          568           436
   Proceeds from short-term borrowings                             2,639         3,303         1,968
   Payments on short-term borrowings                              (2,916)       (3,703)       (1,242)
   Dividend paid to shareholder                                     (155)         (120)            -
                                                                  ------        ------        ------
                Net cash provided by (used in) financing
                    activities                                      (449)           48         1,162
                                                                  ------        ------        ------
                Net increase (decrease) in cash and
                    cash equivalents                                 211             -           (72)
Cash and cash equivalents at beginning of year                         -             -            72
                                                                  ------        ------        ------
Cash and cash equivalents at end of year                          $  211        $    -        $    -
                                                                  ======        ======        ======

</TABLE>


See accompanying note to condensed financial information of registrant.

                                       83
<PAGE>

                                                                     Schedule II

                     GE FINANCIAL ASSURANCE HOLDINGS, INC.

             Note to Condensed Financial Information of Registrant
                               (Parent Company)


(1) Basis of Presentation

      All of the outstanding common stock of GE Financial Assurance Holdings,
Inc. (GE Financial Assurance) is owned by General Electric Capital Corporation
(GE Capital), a wholly-owned subsidiary of General Electric Capital Services,
Inc., which in turn is wholly-owned, directly or indirectly, by General
Electric Company.

      GE Financial Assurance's primary asset is its 100% investment in the
common stock of GNA Corporation. GNA Corporation owns 100% of the common stock
of various other life and non-life insurance companies.

      The notes to the GE Financial Assurance Holdings, Inc. and subsidiaries
consolidated financial statements are an integral part of this schedule.




































                                       84

<PAGE>

                                                                    Schedule III

            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

                      Supplemental Insurance Information

                         (Dollar amounts in millions)
<TABLE>
<CAPTION>
                                                               Future Annuity
                                                                and Contract
                                             Deferred      Benefits and Liability                     Other
                                            Acquisition        for Policy and        Unearned     Policyholder    Premium
Segment                                        Costs          Contract Claims        Premiums      Liabilities    Revenue
- -------                                     -----------    ----------------------    --------     ------------    -------
<S>                                         <C>            <C>                       <C>          <C>             <C>
December 31, 1999:

  Wealth Accumulation and Transfer             $ 1,630             $ 37,534           $   191         $  578      $ 1,658
  Lifestyle Protection and Enhancement             677                3,991               651             48        1,884
                                               -------             --------           -------         ------      -------
         Total                                 $ 2,307             $ 41,525           $   842         $  626      $ 3,542
                                               =======             ========           =======         ======      =======

December 31, 1998:

  Wealth Accumulation and Transfer             $   874             $ 34,723           $   212         $  542      $ 1,557
  Lifestyle Protection and Enhancement             444                3,246               754             28        1,650
                                               -------             --------           -------         ------      -------
         Total                                 $ 1,318             $ 37,969           $   966         $  570      $ 3,207
                                               =======             ========           =======         ======      =======

December 31, 1997:

  Wealth Accumulation and Transfer             $   547             $ 32,801           $    38         $  450      $ 1,192
  Lifestyle Protection and Enhancement             316                2,978             1,083             30        1,122
                                               -------             --------           -------         ------      -------
         Total                                 $   863             $ 35,779           $ 1,121         $  480      $ 2,314
                                               =======             ========           =======         ======      =======
</TABLE>
<TABLE>
<CAPTION>
                                                                                     Change in
                                                Net             Benefits and         Deferred         Other
                                            Investment        Other Changes in      Acquisition     Operating     Premiums
Segment                                       Income          Policy Reserves        Costs, Net     Expenses      Written
- -------                                     -----------    ----------------------   ------------  ------------    -------
<S>                                         <C>            <C>                      <C>           <C>             <C>
December 31, 1999:

  Wealth Accumulation and Transfer             $ 2,773             $  2,128            $  (536)      $  1,394     $  1,658
  Lifestyle Protection and Enhancement             350                1,394               (238)         1,247        1,942
                                               -------             --------            -------       --------     --------
         Total                                 $ 3,123             $  3,522            $  (774)      $  2,641     $  3,600
                                               =======             ========            =======       ========     ========

December 31, 1998:

  Wealth Accumulation and Transfer             $ 2,631             $  2,040            $  (303)      $  1,033     $  1,557
  Lifestyle Protection and Enhancement             265                1,189               (143)           803        1,685
                                               -------             --------            -------       --------     --------
         Total                                 $ 2,896             $  3,229            $  (446)      $  1,836     $  3,242
                                               =======             ========            =======       ========     ========

December 31, 1997:

  Wealth Accumulation and Transfer             $ 2,578             $  1,720            $  (306)       $   974     $  1,192
  Lifestyle Protection and Enhancement             177                  772               (129)           569        1,142
                                               -------             --------            -------       --------     --------
         Total                                 $ 2,755             $  2,492            $  (435)      $  1,543     $  2,334
                                               =======             ========            =======       ========     ========
</TABLE>

                                       85
<PAGE>

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

     None

PART III


Item 10. Directors and Executive Officers of the Registrant.

     Information omitted in accordance with General Instruction I (2)(c).


Item 11. Executive Compensation.

     Information omitted in accordance with General Instruction I (2)(c).


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

     Information omitted in accordance with General Instruction I (2)(c).


Item 13. Certain Relationships and Related Transactions.

     Information omitted in accordance with General Instruction I (2)(c).


                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)  1.   Financial Statements

          Included in Part II of this report:
            Independent Auditors' Report
            Consolidated Balance Sheets at December 31, 1999 and 1998
            Consolidated Statements of Income for each of the years in the
              three-year period ended December 31, 1999
            Consolidated Statements of Shareholder's Interest for each of
              the years in the three-year period ended December 31, 1999
            Consolidated Statements of Cash Flows for each of the years in
              the three-year period ended December 31, 1999
            Notes to Consolidated Financial Statements

(a)  2.   Financial Statement Schedules

          Independent Auditors' Report
          Schedule II.   Condensed Financial Information of Registrant.
          Schedule III.  Supplemental Insurance Information

                                       86
<PAGE>

          All other schedules are omitted because of the absence of conditions
          under which they are required or because the required information is
          shown in the financial statements or notes thereto.

(a)  3.   Exhibit Index

          The exhibits listed below, as part of Form 10-K, are numbered in
          conformity with the numbering used in Item 601 of Regulation S-K of
          the Securities and Exchange Commission.

Exhibit
Number                             Description
- ------                             -----------

 2.1      AGREEMENT ON THE TRANSFER OF INSURANCE CONTRACTS, ETC.

          (English translation of the agreement executed on December 22, 1999 by
          and between Toho Mutual Life Insurance Company and GE Edison Life
          Insurance Company).

          Incorporated by reference to the Company's Current Report on Form 8-K
          filed March 16, 2000 (Commission File No. 0-23375).

          The Registrant agrees to furnish supplementally to the Securities and
          Exchange Commission, upon request, copies of any schedules and
          exhibits to the foregoing exhibits that are not filed herewith in
          accordance with Item 601(b)(2) of Regulation S-K.

 3.1      Articles of Incorporation of the Company, and all amendments thereto.

          Incorporated by reference to the Company's Form 10 filed November 13,
          1997 (Commission File No. 0-23375).

 3.2      By-Laws of the Company, as amended and currently in effect.

          Incorporated by reference to the Company's Form 10 filed November 13,
          1997 (Commission File No. 0-23375).

 12.1     Computation of ratio of earnings to fixed charges.

 21.1     Subsidiaries of the Company.

          Information omitted in accordance with General Instruction I (2)(b).

 23.1     Consent of KPMG LLP.

 27.1     Financial Data Schedule (filed electronically herewith).

(b)  Reports on Form 8-K

          The Company filed a Current Report on Form 8-K, dated March 16, 2000,
          reporting (under Item 2 thereof) the comprehensive transfer of the
          insurance policies and related assets of Toho Mutual Life Insurance
          Company to GE Edison Life Insurance Company.

                                       87
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   GE Financial Assurance Holdings, Inc.


March 21, 2000                     By   /s/ Richard G. Fucci
                                        --------------------
                                        Richard G. Fucci
                                        Vice President and Controller


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

          Signature                     Title                        Date
          ---------                     -----                        ----

/s/ Michael D. Fraizer         Chairman, President and           March 21, 2000
- --------------------------
    (Michael D. Fraizer)       Chief Executive Officer
                               (Principal Executive Officer)


/s/ Thomas W. Casey            Senior Vice President and         March 21, 2000
- --------------------------
    (Thomas W. Casey)          Chief Financial Officer
                               (Principal Financial Officer)


/s/ Richard G. Fucci           Vice President and Controller     March 21, 2000
- --------------------------
    (Richard G. Fucci)         (Principal Accounting Officer)


/s/ Leon E. Roday              Director, Senior Vice President   March 21, 2000
- --------------------------
     (Leon E. Roday)           General Counsel and Secretary


/s/ Geoffrey S. Stiff          Director and Senior Vice          March 21, 2000
- --------------------------     President
  (Geoffrey S. Stiff)
























                                       88

<PAGE>

                                                                   Exhibit 12.1


            GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

               Computation of Ratio of Earnings to Fixed Charges

                         (Dollar amounts in millions)

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                                  ------------------------
                                                        1999      1998      1997      1996      1995
                                                       ------    ------    ------    ------    ------
<S>                                                    <C>       <C>       <C>       <C>       <C>
Net earnings                                           $  638    $  492    $  425    $  229    $  101
Provision for income taxes                                248       301       261       140        67
Minority interest                                           4         -         -         1         -
Cumulative effect of accounting change                    (25)        -         -         -         -
                                                       ------    ------    ------    ------    ------
Earnings before income taxes, minority
  interest and cumulative effect of
  accounting change                                       865       793       686       370       168

Fixed charges:
  Interest                                                 95        95        23         1         -
  Interest portion of net rentals                          21        15         9         5         3
                                                       ------    ------    ------    ------    ------
Total fixed charges                                       116       110        32         6         3

Less interest capitalized, net of amortization              -         -         -         -         -
                                                       ------    ------    ------    ------    ------
Earnings before income taxes, minority
  interest and cumulative effect of
  accounting change plus fixed charges                 $  981    $  903    $  718    $  376    $  171
                                                       ======    ======    ======    ======    ======
Ratio of earnings to fixed charges                        8.5       8.2      22.4      62.7      57.0
                                                       ======    ======    ======    ======    ======
</TABLE>

For purposes of computing the ratios, fixed charges consist of interest on all
indebtedness and one-third of rentals, which management believes is a reasonable
approximation of the interest factor of such rentals.




























                                       1

<PAGE>

                                                                    Exhibit 23.1



                        Consent of Independent Auditors


The Board of Directors
GE Financial Assurance Holdings, Inc.:

We consent to incorporation by reference in the registration statement (No. 333-
40159) on Form S-3 of GE Financial Assurance Holdings, Inc. of our reports dated
January 21, 2000, except for note 18 which is dated March 1, 2000, relating to
the consolidated balance sheets of GE Financial Assurance Holdings, Inc. and
subsidiaries as of December 31, 1999, and 1998, and the related consolidated
statements of earnings, shareholder's interest, and cash flows for each of the
years in the three-year period ended December 31, 1999, and all related
schedules, which reports appear in the December 31, 1999, annual report on Form
10-K of GE Financial Assurance Holdings, Inc. Our reports refer to a change in
the Company's method of accounting for insurance-related assessments in 1999.


                                 /s/ KPMG LLP


Richmond, Virginia
March 20, 2000



























                                       1

<TABLE> <S> <C>

<PAGE>

<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001049537
<NAME> GE FINANCIAL ASSURANCE HOLDINGS, INC.
<MULTIPLIER> 1,000,000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<DEBT-HELD-FOR-SALE>                            36,932
<DEBT-CARRYING-VALUE>                                0
<DEBT-MARKET-VALUE>                                  0
<EQUITIES>                                         345
<MORTGAGE>                                       3,414
<REAL-ESTATE>                                        0
<TOTAL-INVEST>                                  42,555
<CASH>                                             265
<RECOVER-REINSURE>                               1,537
<DEFERRED-ACQUISITION>                           2,307
<TOTAL-ASSETS>                                  64,606
<POLICY-LOSSES>                                 39,639
<UNEARNED-PREMIUMS>                                842
<POLICY-OTHER>                                   1,886
<POLICY-HOLDER-FUNDS>                              626
<NOTES-PAYABLE>                                    705
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                       7,156
<TOTAL-LIABILITY-AND-EQUITY>                    64,606
                                       3,542
<INVESTMENT-INCOME>                              3,123
<INVESTMENT-GAINS>                                 165
<OTHER-INCOME>                                     722
<BENEFITS>                                       4,820
<UNDERWRITING-AMORTIZATION>                        304
<UNDERWRITING-OTHER>                                84
<INCOME-PRETAX>                                    865
<INCOME-TAX>                                       248
<INCOME-CONTINUING>                                613
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                           25
<NET-INCOME>                                       638
<EPS-BASIC>                                          0
<EPS-DILUTED>                                        0
<RESERVE-OPEN>                                       0
<PROVISION-CURRENT>                                  0
<PROVISION-PRIOR>                                    0
<PAYMENTS-CURRENT>                                   0
<PAYMENTS-PRIOR>                                     0
<RESERVE-CLOSE>                                      0
<CUMULATIVE-DEFICIENCY>                              0


</TABLE>


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