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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

OR

Commission file number 0-23375

GE FINANCIAL ASSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in our charter)

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

None.

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

Common Stock, par value $1.00 per share.

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 7, 2003, 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 7, 2003. 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.

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PART I

Item 1. Business.

GE Financial Assurance Holdings, Inc. (“GE Financial Assurance”, together with its subsidiaries, the “Company”, “we”, “us” or “our” unless context otherwise requires), through its direct and indirect subsidiaries, is engaged in helping consumers accumulate wealth, receive dependable income streams, protect their lifestyles and assets, and transfer wealth. We do this through a family of regulated insurance subsidiaries that focuses on providing annuities, life insurance, retirement plans, investment contracts, long-term care insurance, supplementary health and accident coverage, mortgage insurance, consumer protection packages, and property and casualty insurance, almost entirely in North America and Japan.

Our financial information, including the information contained in this report filed on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to the above mentioned reports, may be viewed on the Internet at www.ge.com/en/company/investor/secfilings.htm. Alternatively, reports filed with the United State’s Securities and Exchange Commission (“SEC”) may be viewed or obtained at the SEC Public Reference Room in Washington, D.C., or at the SEC’s Internet site at www.sec.gov.

Ownership of the Company

At December 31, 2002, all of our outstanding common stock was 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”). Our principal executive offices are located at 6604 West Broad Street, Richmond, Virginia 23230 (telephone (804) 281-6000).

GE Capital provides a wide variety of financing, asset management, and insurance products and services which are organized into five operating segments. These segments are (1) GE Commercial Finance; (2) GE Consumer Finance; (3) GE Equipment Management; (4) GE Insurance; and (5) Other. The long-term debt obligations of GE Capital are rated “AAA” by Standard & Poor’s Rating Services (“S&P”) and “Aaa” by Moody’s Investors Services, Inc. (“Moody’s”). GE Financial Assurance’s segments operate within the GE Insurance and Other segments of GE Capital.

On March 5, 2003, GE Capital contributed all of our outstanding common stock to GEI, Inc., a newly formed holding company. GEI, Inc. is a wholly-owned subsidiary of GE Capital.

Strategy

We believe that changes in demographics such as the increased number of baby boomers entering middle and late middle age, longer life expectancies due to healthy lifestyles and medical advances, the reduction in government and employer-sponsored benefit programs, increased home ownership 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 financial needs and challenges. Our strategy is designed to take advantage of these trends by offering a broad array of insurance and investment products and services to serve key consumer financial needs at each stage of life. We do this through four primary channels of distribution. See sections related to Marketing and Distribution.

Our approach is to maintain a number of businesses with distinct product and distribution capabilities designed to deliver innovative products and services to help consumers invest, protect, and retire. Most of our financial services products are targeted at middle to upper income consumers, individuals employed by small to mid-sized companies and homebuyers.

Our strategy is to be a consumer retirement income and personal protection provider through (i) intense customer focus, (ii) core growth of product capabilities, distribution reach, and service content and (iii) cost and speed competitiveness. These elements are further supported by a strong foundation of operating fundamentals. Our strategy consists of the following elements:

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Strong Foundation of Operating Fundamentals. Our dedication to providing quality products to our customers rests on maintaining a strong risk management, compliance and controllership focus. This focus provides a solid foundation for our successful execution of our business strategy. Risk management, compliance and controllership processes have been a long-standing strength of and the Company, GE Capital and GE. We have developed processes and practices appropriate for our operating businesses leveraging the experience of the GE system. We maintain a dynamic system of internal controls designed to ensure accurate financial reporting, appropriate design of products and management of in-force blocks of business, sound investment management, adherence to compliance and regulatory practices, protection of physical and intellectual property, and efficient use of resources.

Acquisitions

Although we have made a number of significant acquisitions since our formation, our current acquisition strategy is to focus on making selective, small acquisitions. The following table sets forth the primary acquisitions and other transactions that we have completed over the last three years, with a brief description of the new products and principal distribution channels each has brought.

In April 2002, a wholly owned subsidiary, GE Edison Life Insurance Company (“GE Edison”), acquired Saison Life Insurance Company Limited (“Saison Life”) from Credit Saison Co., Ltd., Saison Group, Ltd. and its other shareholders for 7.8 billion yen, or approximately $61 million, representing a 12.8 billion yen payment to shareholders less 5.0 billion yen of contingent debt. Saison Life was subsequently merged with and into GE Edison.

In December 2001, we acquired Centurion Capital Group, subsequently renamed GE Private Asset Management (“GEPAM”), for approximately $90 million. GEPAM is a West Coast based asset management company.

In July 2000, we acquired 90% of the long-term care insurance portfolio of Citigroup’s Travelers Life and Annuity unit and certain assets related thereto for $411 million (“the Travelers Transaction”). In addition, we have entered into agreements with certain Citigroup companies to underwrite and distribute long-term care insurance through a long-term strategic alliance. Under these agreements, we will market to the distribution channels of Citigroup, including Travelers.

In April 2000, we acquired Phoenix American Life Insurance Company, a subsidiary of Phoenix Home Mutual Life Insurance Company, and certain related companies for approximately $284 million. Phoenix American Life Insurance Company, subsequently renamed GE Group Life Assurance Company, provides insurance and administrative services to small and mid-size companies.

Effective March 2000, we acquired, by means of a comprehensive transfer (“the Toho Transfer”) in accordance with the Insurance Business Law of Japan, the restructured insurance policies and selected assets of Toho Mutual Life Insurance Company, a Japanese life insurer (“Toho”). Toho’s operations had been suspended by the Japanese Financial Services Agency in June 1999. In connection with this transaction, GE Edison (i) assumed approximately $21.9 billion of restructured policyholder liabilities (new surrender charges, reduced benefits and lower policy guarantees) and other obligations, (ii) received $20.3 billion of cash (including $3.6 billion from Japan’s Policyholder Protection Corporation) and certain invested assets, (iii) acquired the common stock of GE Edison held by Toho, and (iv) terminated its reinsurance arrangements with Toho. The difference between the policyholder liabilities assumed and the cash and invested assets received is attributable to the present value of future profits on the transferred insurance policies. GE Edison had previously acquired Toho’s operating infrastructure in March 1998.

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We accounted for the above referenced acquisitions under the purchase method of accounting and, accordingly, the results of operations of the restructured insurance contracts and related assets have been included in our Consolidated Financial Statements since the respective effective dates of the acquisitions.

Operating Segments

Our product offerings are divided along four segments of consumer needs: (i) Wealth Accumulation and Transfer, (ii) Mortgage Insurance, (iii) Lifestyle Protection and Enhancement and (iv) Auto and Home Insurance. These operating segments, including their principal products and methods of distribution are discussed below.

Wealth Accumulation and Transfer Segment

Our Wealth Accumulation and Transfer segment is designed to provide customers with insurance and investment vehicles to accumulate wealth (generally on a tax-deferred basis), receive dependable income streams, and transfer wealth to beneficiaries or replace the insured’s income in the event of premature death. Our principal product lines under this segment are (i) annuities, (ii) guaranteed investment contacts (“GICs”) and funding agreements, (iii) life insurance, and (iv) mutual funds.

Principal Products

Annuities

Single and Flexible Premium Deferred Annuities—North America

Premiums related to single and flexible premium deferred annuities are reported as deposit liabilities in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fixed Annuities. A fixed single premium deferred annuity (“SPDA”) provides for a single premium payment at time of issue, an accumulation period and an annuity payout period at some future date. A flexible premium deferred annuity (“FPDA”) provides the same features but allows the owner to make additional payments into the contract. During the accumulation period, the insurance company credits the account value of the annuity with interest earned at the current interest rate (the crediting rate) that is guaranteed for a period of one to five years, at the owner’s option, and thereafter is subject to change based on prevailing market rates and product profitability. Each contract also has a minimum guaranteed rate. Accrual of interest during the accumulation period is generally on a tax-deferred basis to the owner. The majority of our annuity contract holders retain their policies for 5 to 10 years. 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 annuity income for life, a specified annuity income for a fixed number of years or a specified income for a fixed number of years and for life thereafter. 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 the contract holder’s account subject to contract provisions such as surrender charges that vary from product to product.

In 2002, issued policies imposed surrender charges that varied from 5.0% to 8.0% of the account value starting in the year of policy issue and decreasing to zero over a six to nine year period. After the contract is in-force, an owner may withdraw annually up to 10% of the account value without penalty. At least once each month, we establish an interest crediting rate for our new fixed SPDA and FPDA policies. In determining our interest crediting rate on new policies, we consider the competitive position, prevailing market rates and the profitability of the annuity product. After policy issue, we maintain the initial crediting rate for a minimum period of one year or the guarantee period whichever is longer. Thereafter, we may adjust the crediting rate no more frequently than once per year for a given SPDA or FPDA policy. All of our fixed annuity products have minimum guaranteed crediting rates ranging from 2.0% to 5.5% for the life of the contract.

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Modified Guarantee Annuity. A modified guarantee annuity provides for a single premium payment at the time of issue, an accumulation period, and a payout period without penalty. The main difference from a single premium deferred annuity is that it includes a market value adjustment that may vary based on interest rates and may be positive or negative and may be applied to the amount payable on surrender, withdrawal or transfer. The crediting rate may be guaranteed for periods from 1 to 20 years and may be renewed on currently available terms. Surrender charges may apply for the period of the guarantee. The minimum guaranteed credited rate is 3.0%.

Variable Annuities. A variable annuity has an accumulation period and a payout period. The main difference from a fixed SPDA or FPDA is that the contract holder can place a portion of their premiums in a separate account maintained for variable annuities, distinct from our general account assets and liabilities.

Contract holders have the discretion to allocate their premiums among several available subaccounts (which invest in portfolios of mutual funds), as well as a fixed account, which is part of the general account assets. The cash surrender value of a variable annuity policy depends on how long payments have been in the policy and the performance of the underlying funds in which the contract holder has allocated assets. There is not guaranteed minimum rate of return in the subaccounts. Similarly, during the variable annuity’s payout period, the payments distributed may fluctuate with the performance of the underlying subaccounts selected (a fixed annuity payout may also be available depending upon the individual contract provisions). Variable annuities provide us with fee-based revenue in the form of mortality and expense charges, as well as administrative fees charged to assets allocated to the separate account.

Some of our variable products include guaranteed minimum death benefit (“GMDB”) features. As of December 31, 2002, the account value of these products was approximately $8.7 billion, with related death benefit exposure of approximately $2.7 billion. Approximately 73% of this in-force exposure is reinsured. At December 31, 2002 policies with GMDB features not covered by reinsurance had an account value of $2.4 billion and a related death benefit exposure of $409 million. In addition to reinsurance, we establish reserves equal to the accumulated value of the charges for the benefit less any death benefit claims. These reserves are then tested stochastically, using historical return and volatility parameters, to ensure that they are adequate. We evaluate our pricing of the GMDB features and seek price increase when appropriate. Due to reinsurers withdrawing from the market place and revising their quoting processes, we do not anticipate reinsurance to be a viable method of transferring risks for new business in the future.

We have not offered, and do not anticipate offering, variable annuity products with guaranteed minimum income benefits that (i) allow the customer an option whether to exercise the guarantee after the contract has been issued, (ii) allow the customer to allocate assets among multiple subaccounts and (iii) allow the customer to time the market with lump sum investments. These types of products are sometime referred to as Guaranteed Minimum Income Benefit (“GMIB”) products. In addition, we have not offered variable annuity products with guaranteed minimum accumulation benefits, which are sometimes referred to as Guaranteed Minimum Accumulation Benefits (“GMAB”) products.

One of our variable annuities, the GE Retirement Answer (“GERA”) annuity, does guarantee a minimum income stream at the end of the accumulation period. However, GERA does not have the other features of a GMIB product described above. GERA is a variable deferred annuity that has a minimum 10-year scheduled purchase payment period. The customer must select the annuitization date at the time of application. The purchase payments are systematically allocated to a single underlying balanced investment portfolio managed by an affiliate. If a contract holder makes the required scheduled payments, they are guaranteed a minimum income stream at the end of the accumulation period. This payment stream may be higher than the minimum based upon the performance of the underlying separate accounts of the product. GERA was a new product launched in 2002 and our deposits received were $60.7 million. GERA has a different risk profile than the GMIB products discussed above. Purchase payments are invested in a single, balanced portfolio, avoiding the potential concentration of investment risk in less diversified sub-accounts. The scheduled purchase payments automatically “dollar cost average” the investments during the accumulation period. This dollar cost averaging provides some protection against significant losses during periods of market volatility. GERA also has a ten-year minimum accumulation period and a minimum ten-year payout period, providing further protection against short term market volatility.

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Fixed Single Premium Deferred Annuities—Japan

We offer SPDAs in Japan, with certain variations from those offered in North America. Initially, the applicant must select either a yen or dollar-denominated policy. The policyholder assumes the risk associated with any currency fluctuations. During the accumulation period, we credit the account value of the annuity with interest earnings at a guaranteed interest rate. This accrual of interest during the accumulation period is generally on a tax-deferred basis to the policyholder. After the number of years specified in the annuity contract, the policyholder may elect to take the proceeds of the annuity as a single payment or a specified income payment for a fixed number of years. The policyholder is permitted at any time during the accumulation period to withdraw the single premium paid plus the interest credited to his account. Policies issued impose surrender charges that vary from 6.5% to 10.5% of the account value starting in the year of policy issue and decrease to zero over a 5 to 8 year period.

On a monthly basis, we establish a guaranteed interest rate for our new fixed SPDA policies. Our interest crediting rates on new policies are determined based on the previous month’s U.S. Corporate Bond Rate and the Japanese Government Bond Rate.

Single Premium Immediate Annuities—North America

A single premium immediate annuity (“SPIA”) provides for a single premium at the time of issue and guarantees a series of payments beginning immediately and continuing over a period of years and, in some cases, for the life of the annuitants. SPIAs provide long-term guaranteed benefit payments utilizing a fixed interest rate assumption. Our SPIAs fall into two categories, retirement annuities and structured settlements.

SPIAs differ from deferred annuities in that they generally provide for the payments to begin immediately, for the payments to be contractually guaranteed, and that the policyholder may not borrow from or surrender the annuity. The benefit payments on SPIAs are based on market conditions when the policy is issued and are guaranteed for the term of the annuity. Since SPIAs 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 credit, reinstatement and, in some cases, mortality risk.

Retirement Annuities. SPIAs used for dependable retirement income 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 annuitants approaching retirement and, therefore, are somewhat shorter in average contract life than structured settlement annuities. We anticipate higher sales of retirement annuities to coincide with the demographic shift towards more people reaching retirement age and focusing on their need for dependable retirement income.

Structured Settlements. 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. General Electric Capital Assurance Company (“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. Some structured settlement contracts provide for guaranteed payments for a predetermined period only and do not depend on the survival of the annuitant. Such contracts have no mortality risk element. Other structured settlement contracts provide for payments dependent on the survival of the annuitant. The mortality risk portion of our liability with respect to such policies is included in future annuity and contract benefit liabilities. On structured settlement contracts, we maintain pricing disciplines to earn acceptable returns, which for 2002 made our pricing less competitive resulting in lower sales of these issued contracts. We will continue to monitor pricing levels in the structured settlement market and will pursue new business selectively.

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GICs and Funding Agreements—North America

GICs and Funding Agreements are deposit-type products that provide a guaranteed return to the contract holder. GICs are purchased by Employee Retirement Income Security Act (“ERISA”) qualified 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 of purchasers include money market funds, bank common trust funds and other corporate and trust accounts.

GICs typically credit interest at a fixed interest rate and have a fixed maturity typically ranging from two to six years. A small percentage of GICs (based on dollar amount) use an index instead of a fixed rate. 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. We underwrite these risks before issuing a GIC to a plan. We rarely incur losses under these options. In addition, we require plans buying our GICs to have certain restrictions on participant transfers to money market and similar funds in order to reduce disintermediation risk. Our 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.

Funding Agreements credit interest at a rate that is indexed to U.S. Dollar LIBOR (London Interbank Offered Rate) or that is fixed at time of purchase. Indexed Funding Agreements are typically renewed annually; however, a majority of these contracts contain a “put” provision through which either we or the contract holders can terminate the Funding Agreement after giving notice within the contract’s specified notice period (generally a period of 90 days or less). As of December 31, 2002, the aggregate amount of Funding Agreements with put options containing notice periods of 30 days or less was $750 million. As of December 31, 2002 and December 31, 2001, the aggregate amount of our outstanding Funding Agreements with put option features was approximately $3.2 billion and $3.0 billion, respectively. We have established a line of credit with GE Capital to provide liquidity in the event of an unusual level of early terminations. We have an aggregate amount outstanding of $3.1 billion of Funding Agreements that contain no early termination provision.

The risk management process for Funding Agreements requires controls on both the liabilities and the assets supporting this product. The liabilities have limits on exposure to a customer, on “put” exposure to individual customers and on the overall portfolio put exposure. Further, we have established limits for exposure to asset types, maturity terms, index mismatch and quality ratings. Collectively, we believe these risk management approaches provide for sound product line liquidity.

Life Insurance—North America

Term Life Insurance. Term life insurance provides life insurance protection for a limited time during which a death benefit is paid if the insured dies during the specified term. Our term life insurance products offer competitively priced graded premium 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. We also offer term life insurance coverage to employers for the benefit of their employee. These policies pay predetermined benefits upon the death of an employee and also provide continuation of coverage in the event of permanent and total disability.

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. Our permanent life insurance products include a variety of guaranteed premium interest-sensitive whole life, universal life and variable universal life insurance, and employee plans/salary savings products.

Life Insurance—Japan

Term Life Insurance. The term life insurance policies that we offer in Japan generally have initial terms of 10 or 15 years and are only sold as non-participating (non-profit sharing) policies. Attached riders provide coverage including, but not limited to, accident and health insurance.

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Whole Life Insurance. Whole life insurance provides life insurance protection for the entire life of the insured and has an investment component. Benefits are paid in the event of death or severe disability. Attached riders provide coverage including, but not limited to, hospitalization, accident and health insurance, and certain diseases.

Endowment Insurance. Endowment insurance provides life insurance protection for a limited time and a maturity benefit. Attached riders provide coverage including, but not limited to, term insurance and accident and health insurance.

Mutual Funds—North America

Through our subsidiary, GE Investment Distributors, Inc., we offer certain mutual funds to retail and institutional customers through various distribution channels. These funds are managed by our affiliate, GE Asset Management Incorporated (“GEAM”), a wholly owned subsidiary of GE.

In addition, we market GE Investments Funds, Inc. (“GEI Funds”), a family of mutual funds also managed by GEAM and offered exclusively as investment vehicles for certain variable annuity contracts and variable life insurance policies issued by us or by other affiliated insurers.

Methods of Distribution

Our 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) worksite brokers. See sections related to Marketing and Distribution.

Competition

In the Wealth Accumulation and Transfer segment we compete with other large and highly rated insurance companies as well as certain banks, securities brokerage firms, investment advisors and other financial intermediaries that offer annuities, mutual funds and other retirement income products. There are approximately 1,200 life insurers operating in the United States and 45 operating in Japan. We believe that the principal competitive factors in the sale of insurance and investment products are product features, distribution strength, commission structure, perceived stability of the insurer, insurer financial strength ratings, service, name recognition, price and cost efficiency. Many other companies are capable of competing for sales in our target markets. Our ability to compete is affected in part by our ability to provide competitive products and quality service to consumers, general agents, licensed insurance agents and brokers. We believe that we compete primarily on the basis of our high level of customer focus, brand, financial strength and competitively priced products.

Mortgage Insurance Segment

We sell mortgage insurance products to expand home ownership opportunities by providing coverage on residential first mortgages when individuals purchase homes with less than a 20% down payment. Our mortgage insurance products are marketed in the United States and are designed to protect mortgage lenders and secondary market participants against loss in the event of default on first lien residential loans. Mortgage insurance also facilitates the sale of mortgage loans in the secondary mortgage market, principally to Fannie Mae and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), providing increased liquidity to mortgage originators. If the homeowner defaults, mortgage insurance reduces and in some instances, eliminates the loss to the insured institution.

A significant risk faced by the Mortgage Insurance segment is losses resulting from general or regional economic down-turns. As the number of borrowers who default on their loans increases, and/or housing values decline, mortgage insurers, including our mortgage insurance subsidiaries, could experience significant losses. In order to mitigate this risk we establish underwriting criteria that ensures that we insure mortgage loans that have a lower risk of defaulting in an economic down-turn. To protect against concentration and other risks, we also monitor our portfolio characteristics including loan-to-value ratio, loan type (fixed rate, adjustable rate, balloon, other), loan term, property type (single family vs. 2-4 family), condominium, co-op, other), and occupancy (owner-occupied, 2^nd home, investor property). We also monitor geographic dispersion of the insurance portfolio and take steps to avoid geographic concentration as a mitigant to this risk. No one state had a concentration greater than 10% and no one Metropolitan Statistical Area had a concentration greater than 5%.

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We also monitor borrower credit quality. The credit quality of portfolios can be analyzed using several factors; however, a “FICO” score is generally used as an indicator of the portfolio quality The Fair Isaac and Company (“FICO”) credit scoring model calculates a score based on a borrower’s credit history. This credit score is used to predict the future performance of a loan with a higher credit score indicating a lower likelihood that a borrower will default on a loan. FICO credit scores range up to 850 with a score above 620 generally viewed as a prime quality loan. Our portfolio has a relatively high average FICO score of 702, reflecting the fact that we principally participate in the prime market.

Mortgage Insurance is also significantly impacted by lapse rates, which are in turn influenced by changes in interest rates and home values. Declining interest rates and a rise in home values increase the number of loans refinancing thereby increasing the lapse rate of our mortgage insurance policies. Often, refinanced loans (in contrast to purchase money loans) require no mortgage insurance because homes have appreciated, reducing the loan-to-value to 80% or below. In addition, we incur higher origination costs in our efforts to replace these lapsed policies. These factors were particularly present in recent years. Falling interest rates, coupled with strong appreciation of housing values resulted in relatively high lapse rates of 42% and 36% in 2002 and 2001, respectively. However, during this period we were able to write high volumes of new mortgage insurance to partially offset these high lapse rates. Our new mortgage insurance written was 95% and 82% higher in 2002 and 2001, respectively, than new business written in 2000.

Lender concentration is another source of potential risk. Ten lenders accounted for 48% of the new insurance we wrote in 2002 (51% in 2001). Lender consolidation and concentration has increased significantly in the last several years. In addition, approximately 80% of loans insured by us are sold to either Freddie Mac or Fannie Mae, further concentrating our customer base. Accordingly, we carefully monitor these business relationships. Both large lenders and Freddie Mac/Fannie Mae possess the market power that allows them to wield significant influence over the activities of all mortgage insurers, including products offered, risk sharing agreements, services provided, and other business activities.

We, either directly or through an affiliate, perform contract underwriting services for lenders in which a determination is made whether a mortgage loan application files comply with the lender’s loan underwriting and investment guidelines. We also provide an interface to submit such data to the automated underwriting systems of Fannie Mae and Freddie Mac, which independently judge the data. Such services are provided for loans that require private mortgage insurance as well as loans that do not require private mortgage insurance.

Principal Products—North America

The majority of mortgage insurance policies issued provide coverage on a monthly basis, insuring only a portion (normally 15%–30%) of the mortgage loan balance. Mortgage insurance policies are non-cancelable by the insurer, except for non-payment of premium. These policies remain renewable at the option of the insured at the renewal rate determined when the loan was initially insured.

We primarily issue mortgage insurance policies for individual loans at the time the loan is originated, which is generally referred to as “flow” insurance. However, we occasionally enter into “bulk” transactions with lenders, under which a portfolio of loans will be insured for a negotiated price. Default loss protection in the bulk channel is provided on an individual loan basis, but usually with an aggregate limit on our exposure on the entire portfolio. Bulk insurance constituted less than 10% of our new insurance written in 2002 based upon dollars of loans insured. In both flow and bulk mortgage insurance there are coverage limits on individual loans. If the homeowner defaults, mortgage insurance reduces and in some instances, eliminates the loss to the insured institution.

In addition to flow and bulk mortgage insurance business, mortgage insurance is also written on a pool basis. Under pool insurance the mortgage insurer provides coverage on a group of specified loans, typically for 100% of all losses, subject to an agreed aggregate loss limit. In recent years we have not written traditional pool insurance, due to pricing that is inadequate for us to earn acceptable returns, difficulty in achieving acceptable geographic dispersion, and historical loss severity associated with 100% loan-level coverage.

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Methods of Distribution

Our distribution of Mortgage Insurance is accomplished through a dedicated sales force that markets to financial institutions and mortgage originators. See sections related to Marketing and Distribution.

Competition

The private mortgage insurance industry in the United States currently consists of seven active mortgage insurers. The mortgage insurance industry also competes directly with federal and state governmental and quasi-governmental agencies (primarily the Federal Housing Administration and the Veterans Administration) that provide government subsidized alternatives to mortgage insurance. Fannie Mae and Freddie Mac may also be seen as competitors, in that they are compensated for assuming risk that otherwise could have been insured by mortgage insurance. We also compete with loans that are structured as a loan with a first and second mortgage combined to avoid mortgage insurance. Lenders originate a first mortgage that has a loan to value ratio below the level at which investors require mortgage insurance and then issue second mortgage for the remainder of the required loan amount.

We believe that the principal competitive factors in the sale of mortgage insurance are product features, perceived stability of the insurer, insurer financial strength ratings, related services, price and cost efficiency. We compete through the provision of complementary products and services, maintaining and expanding existing customer relationships, and effectively using technology in the delivery and servicing of our products.

Lifestyle Protection and Enhancement Segment

We sell a variety of products primarily in North America including (i) long-term care insurance, (ii) consumer protection packages and (iii) supplemental health and accident insurance. Lifestyle Protection and Enhancement products are used by customers to protect their income and assets from the adverse economic impacts of significant healthcare costs and unanticipated events that cause temporary or permanent loss of earnings capabilities. We also provide consumers with club membership opportunities that are primarily consumer protection packages allowing coverage of or discounts on certain personal expenses (auto towing, dental care, etc.). We are among the leading companies in the sale of individual long-term care insurance policies when measured by first-year annualized premiums and policies in-force.

Principal Products—North America

Long-Term Care Insurance

Long-term care insurance policies provide coverage within prescribed limits for nursing facilities, community and in-home care. The demand for long-term care insurance policies is expected to increase due to heightened awareness of such products among senior citizens and the rapid growth of the senior population. Since these policies are long duration policies, future experience may be different than expected. We will continue to closely monitor trends and developments that may impact the risk, pricing and operating results for this product.

Coverages in-force for nursing facilities include both expense incurred (subject to limitations) and daily fixed dollar benefit policies. Currently, only expense incurred policies subject to a monthly maximum are being sold, with an elimination period (which, similar to a deductible, requires the insured to pay for a certain number of days of the nursing facility stay before the insurance coverage begins) and a maximum benefit amount. Home healthcare benefits pay covered charges, after Medicare coordination, and are also subject to a monthly maximum dollar limit and an overall maximum benefit amount. The applicant may select from one of several available benefits levels. Our policies are guaranteed renewable and, consequently, we reserve the right to raise future premiums for all policyholders by state and class. Premiums will not increase due to changes in an individual’s health status or age but may increase depending on the performance of a relevant group of policies.

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Accident and Health

We offer accident, health and disability products to employers, associations, affinity groups and individuals. We believe that offering a broad range of products is essential to being a preferred financial services provider of benefits and effectively meeting the needs of employers and consumers. Our products include a variety of coverages such as dental, disability, medical stop loss, fully insured medical and accidental death policies. These policies pay benefits upon the occurrence of a covered event, or in the case of disability income, provide continuous payments to an insured during periods of disability. Medical stop loss policies allow employers to self-fund medical programs providing improved cash flows and plan administration services. Medical stop loss and fully insured policies pay covered medical claims when they are incurred and approved. To mitigate risks in our accident and health products, defined benefit limits are generally incorporated in product design.

Consumer Protection Packages

We are a provider of membership-based products and services, including auto clubs, discount dental and legal service plans and other membership-related clubs. These products are typically sold through affiliations with major banks, retailers, oil companies, communications companies, credit card issuers and associations. We pay a portion of consumer membership fees to the affiliated organizations, representing compensation for marketing rights.

Principal Products—Japan

Medical Insurance. Medical insurance provides supplemental medical protection (benefits paid in addition to any other coverage the policyholder may have, including the national healthcare system) for a fixed period or for a lifetime. In the case of hospitalization, a certain, fixed amount is paid daily based on the length of hospitalization up to a maximum number of days per stay and up to a cumulative maximum number of days per policy.

Methods of Distribution

Our 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) worksite brokers and (iv) direct and affinity based marketing. See sections related to Marketing and Distribution.

Competition

In the Lifestyle Protection and Enhancement segment we compete with other large and highly rated insurance companies as well as small to mid-size niche companies that target certain lines of business. We believe that the principal competitive factors in the sale of insurance products are product features, distribution strength, commission structure, perceived stability of the insurer, insurer financial strength ratings, service, name recognition, price and cost efficiency. The principal competitive factors in the sale of consumer protection packages are product features, price and affinity relationships. Many other companies are capable of competing for sales in our target markets. Our ability to compete is affected in part by our ability to provide competitive products and quality service to consumers, general agents, licensed insurance agents and brokers. We believe that we compete primarily on the basis of our high level of customer focus, our brand and financial strength and our competitively priced products.

Auto and Home Insurance Segment

We sell the following products in North America: (i) private passenger automobile insurance; (ii) homeowners insurance; and (iii) personal excess liability insurance. Auto and Home Insurance products are used by customers to protect their assets from damage to property or injury to the insured or other third parties. At December 31, 2002 approximately 94% of reserves in this segment related to private passenger auto insurance.

The GE Auto Insurance Program draws on more than 30 years of direct-to-consumer marketing and risk management experience to carefully target prospective customers. This strategy focuses primarily on targeting the mature market segment, leveraging proprietary models to identify safe drivers with above average risk profiles. Streamlined direct marketing campaign design and execution, an integrated sale platform and real time underwriting all focus on the pursuit of cost efficient, profitable new business.

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Principal Products—North America

Our primary product in the Auto and Home Insurance segment is private passenger 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 our private passenger automobile insurance policies are written for a term of one year. We write homeowners and personal excess insurance on an accommodation basis for our private passenger automobile policyholders.

Methods of Distribution

Our distribution of Auto and Home Insurance products is currently accomplished through direct and affinity based marketing through direct mail, telemarketing and the Internet. See sections related to Marketing and Distribution.

Competition

The private passenger auto and homeowners insurance businesses are highly competitive. We believe that the principal competitive features in the sale of these products are price, customer acquisition cost effectiveness, consumer recognition, customer service, loss and claim management and financial stability. Vigorous competition is provided by large, well-capitalized national companies, some of which have broad distribution networks of employed or captive agents, and by smaller regional insurers. We have remained competitive by closely managing expenses and achieving operating efficiencies, and by refining our risk measurement and price segmentation skills.

Additional information related to our operating segments is included in Note 16 to the Consolidated Financial Statements and Financial Statement Schedule III.

Ratings

Ratings with respect to financial strength have become an important factor in establishing the competitive position of insurance companies. Ratings are important to maintaining public confidence in us and our ability to market our products. Rating organizations review the financial performance and condition of most insurers. The following ratings reflect each rating agency’s opinion of our financial strength, operating performance and ability to meet our obligations to policyholders.

Our principal insurance subsidiaries are rated by A.M. Best Company (“A.M. Best”), S&P, and Moody’s independent rating agencies, as follows:

Marketing and Distribution—North America

We presently distribute our products through four primary channels:

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Further, we provide Internet based access for our distribution partners and for customer service. The GE Financial Pro portal improves productivity for financial intermediaries and agents by enabling business submissions, account tracking and status updates through the Internet. Additionally, we have developed GEFinancialService.com for our intermediaries and consumers. GE Financial Service provides similar life simplification services for these consumers, giving them the ability to change information ranging from addresses to investment accounts online.

Intermediaries

BGAs. We distribute many of our products, including life products (term, variable, universal, whole and survivorship), annuities (fixed, variable and immediate), long term care and accident and health insurance, through approximately 300 independent insurance brokerage firms located throughout the United States. These BGAs market our products through approximately 135,000 appointed brokers, who also represent other companies. We believe our consistent commitment to this system has helped us earn a reputation as a leading provider of insurance products among BGAs. We endeavor to be placed at the top of the BGAs’ list of sources of insurance products and services in which we specialize. Of our 300 leading BGAs in 2002, the largest (a public company that consists of 19 individual firms) accounted for 31% of our total BGA premium. We believe the loss of any one firm in any given year would not materially impact our consolidated financial results.

Banks and Securities Brokerages. Banks and securities brokerage firms are a significant distribution channel for our fixed and variable annuities and life insurance products. They also have begun offering our long term care insurance. Of our leading banks and securities brokerage firms in 2002, no individual bank or securities brokerage firm accounted for more than 12% of combined bank and securities brokerage firm premiums. We believe the loss of any one bank or securities brokerage firm relationship in any given year would not materially impact our consolidated financial results.

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