GENERAL ELECTRIC CO

(a) Included decreases of $2,795 million and $5,795 million, substantially all in Other capital related to our redemption of GE preferred stock in the three and nine months ended September 30, 2023.

(b)Included a $5,300 million decrease in Retained earnings reflecting a pro-rata distribution of approximately 80.1% of the shares of GE HealthCare on January 3, 2023. Included a $11,375 million decrease in Retained earnings reflecting a distribution of all the shares of GE Vernova on April 2, 2024.

(c)Included a reclassification of $1,007 million of noncontrolling interests attributable to GE Vernova to Retained earnings as a result of the separation on April 2, 2024.

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NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based on assumptions about current, and for some estimates, future, economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations, financial position and cash flows. Such changes could result in future impairments of goodwill, intangibles, long-lived assets, contract assets and investment securities, revisions to estimated profitability on long-term product service and other service agreements, incremental credit losses on receivables and debt securities, incremental losses related to our contingencies, a change in the carrying amount of our tax assets and liabilities, or a change in our insurance liabilities and pension obligations as of the time of a relevant measurement event.

In preparing our Statement of Cash Flows, we make certain adjustments to reflect cash flows that cannot otherwise be calculated by changes in our Statement of Financial Position. These adjustments may include, but are not limited to, the effects of currency exchange, acquisitions and dispositions of businesses, businesses classified as held for sale, the timing of settlements to suppliers for property, plant and equipment, non-cash gains/losses and other balance sheet reclassifications.

We have reclassified certain prior-year amounts to conform to the current-year’s presentation. Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts may not equal the total. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations. Certain of our operations have been presented as discontinued. We present businesses whose disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results as discontinued operations when the components meet the criteria for held for sale, are sold, or spun-off. On April 2, 2024, the Company completed the separation of its GE Vernova business into an independent publicly traded company, GE Vernova, Inc. (GE Vernova). See Note 2 for further information.

The accompanying consolidated financial statements and notes are unaudited. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These financial statements should be read in conjunction with the financial statements, notes and significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2023.

NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS. In the fourth quarter of 2022, we classified our captive industrial insurance subsidiary, Electric Insurance Company, domiciled in Massachusetts, into held for sale. In the second quarter of 2024, we completed the sale to Riverstone International Holdings Inc. for cash proceeds of $120 million.

In the second quarter of 2024, we classified our non-core licensing business into business held for sale. In the third quarter of 2024, we completed the sale to Dolby Laboratories, Inc. for cash proceeds of $441 million. GE Aerospace will retain intellectual property related to its core aerospace and defense technologies as well as the trademark portfolio for the GE brand.

DISCONTINUED OPERATIONS primarily comprise our former GE Vernova and GE HealthCare businesses, our mortgage portfolio in Poland (Bank BPH) and other trailing assets and liabilities associated with prior dispositions. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented and the notes to the financial statements have been adjusted on a retrospective basis.

GE Vernova. On April 2, 2024, we completed the previously announced separation of GE Vernova. The separation was structured as a tax-free spin-off and was achieved through the Company's pro-rata distribution of all the outstanding shares of GE Vernova to holders of the Company's common stock. In connection with the GE Vernova separation, the historical results of GE Vernova and certain assets and liabilities included in the separation are reported in GE Aerospace consolidated financial statements as discontinued operations. In addition, the Company contributed $515 million of cash to fund GE Vernova’s future operations such that GE Vernova’s cash balance on the date of separation was $4,242 million.

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We have continuing involvement with GE Vernova primarily through ongoing sales of products, a transition services agreement, through which GE Aerospace and GE Vernova continue to provide certain services to each other for a period of time following the separation, a separation and distribution agreement, including performance and financial guarantees, a tax matters agreement and a trademark licensing agreement. For the six months (post separation) ended September 30, 2024, we had direct and indirect sales of $146 million to GE Vernova, primarily related to engine sales and parts. We collected net cash of $746 million related to the transition services agreement and sales of engines and parts.

GE HealthCare. On January 3, 2023, we completed the previously announced separation of our HealthCare business, into a separate, independent, publicly traded company, GE HealthCare Technologies Inc. (GE HealthCare). The separation was structured as a tax-free spin-off and was achieved through the Company's pro-rata distribution of approximately 80.1% of the outstanding shares of GE HealthCare to holders of the Company's common stock. In connection with the separation, the historical results of GE HealthCare and certain assets and liabilities included in the separation are reported in GE Aerospace consolidated financial statements as discontinued operations.

We have continuing involvement with GE HealthCare primarily through a transition services agreement, through which GE Aerospace and GE HealthCare continue to provide certain services to each other for a period of time following the separation, a tax matters agreement and a trademark licensing agreement. For the nine months ended September 30, 2024, we collected net cash of $203 million related to these activities.

Bank BPH. As previously reported, Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency indexed or denominated mortgage loans in various courts throughout Poland. As previously reported, a settlement program was adopted and we recorded a charge of $1,014 million in the quarter ended June 30, 2023. The estimate of total losses for borrower litigation at Bank BPH was $2,711 million and $2,669 million as of September 30, 2024 and December 31, 2023, respectively. In order to maintain appropriate regulatory capital levels, during the year ended December 31, 2023, we made the previously reported non-cash capital contributions in the form of intercompany loan forgiveness of $1,797 million; no incremental contributions from GE Aerospace were required during the nine months ended September 30, 2024. For further information about factors that are relevant to the estimate of total losses for borrower litigation at Bank BPH, see Note 22. Future changes or adverse developments could increase our estimate of total losses and potentially require future cash contributions to Bank BPH.

The Bank BPH financing receivable portfolio is recorded at the lower of cost or fair value, less cost to sell, which reflects market yields and estimates with respect to ongoing borrower litigation. At September 30, 2024, the total portfolio hadno carrying value, net of a valuation allowance. Earnings (loss) related to ongoing borrower litigation were zero in pre-tax charges for both the three and nine months ended September 30, 2024, andzero and $1,189 million in pre-tax charges for the three and nine months ended September 30, 2023, respectively.

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The tax benefit for the nine months ended September 30, 2023 for GE HealthCare relates to preparatory steps for the spin-off, which resulted in taxable gain offset by a deferred tax asset and the reversal of valuation allowances for capital loss carryovers utilized against a portion of the gain.

(a) Included $1,766 million and $1,963 million of valuation allowances against financing receivables held for sale, of which $1,684 million and $1,712 million related to estimated borrower litigation losses, and $1,027 million and $957 million in All other liabilities, related to estimated borrower litigation losses for Bank BPH’s foreign currency-denominated mortgage portfolio, as of September 30, 2024 and December 31, 2023, respectively. Accordingly, total estimated losses related to borrower litigation were $2,711 million and $2,669 million as of September 30, 2024 and December 31, 2023, respectively. As a result of the settlement program, the valuation allowance completely offsets the financing receivables balance as of September 30, 2024 and December 31, 2023.

(b) Included $107 million and $46,233 million of assets and $52 million and $38,021 million of liabilities for GE Vernova as of September 30, 2024 and December 31, 2023, respectively.

NOTE 3. INVESTMENT SECURITIES. The majority of our investment securities are held within our run-off insurance operations and are classified as non-current as they support the long-duration insurance liabilities and include debt securities all classified as available-for-sale, substantially all of which are investment-grade.

Our remaining equity shares in GE HealthCare comprised 13.3 million shares (approximately 2.9% ownership interest) at September 30, 2024 and are subject to a contractual lock-up restriction through October 27, 2024. Our senior note from AerCap, for which we have adopted the fair value option and matures in the fourth quarter of 2025, is still outstanding as of September 30, 2024.

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The amortized cost of debt securities excludes accrued interest of $499 million and $466 million at September 30, 2024, and December 31, 2023, respectively, which is reported in All other current assets.

The estimated fair value of investment securities at September 30, 2024 decreased since December 31, 2023, primarily due to share sales of our GE HealthCare equity interest, partially offset by new investments and higher investment values, due to lower market yields at Insurance and an increase in the mark to market effect on our equity interest in GE HealthCare, due to a higher stock price.

Total estimated fair value of debt securities in an unrealized loss position were $17,513 million and $18,730 million, of which $15,056 million and $17,146 million had gross unrealized losses of $(2,016) million and $(2,370) million and had been in a loss position for 12 months or more at September 30, 2024 and December 31, 2023, respectively. Gross unrealized losses at September 30, 2024 included $(123) million related to commercial mortgage-backed securities (CMBS) collateralized by pools of commercial mortgage loans on real estate, and $(61) million related to asset-backed securities. The majority of our CMBS and asset-backed securities in an unrealized loss position have received investment-grade credit ratings from the major rating agencies. The majority of our U.S. and Non-U.S. corporate securities' gross unrealized losses were in the consumer, electric, technology and insurance industries. For our securities in an unrealized loss position, the losses are not indicative of credit losses, we currently do not intend to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis.

Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at September 30, 2024 are as follows:

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

The majority of our equity securities are classified within Level 1 and the majority of our debt securities are classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $7,385 million and $6,841 million are classified within Level 3, as significant inputs to their valuation models are unobservable at September 30, 2024 and December 31, 2023, respectively. During the nine months ended September 30, 2024 and 2023 there were no significant transfers into or out of Level 3, respectively.

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In addition to the equity securities described above, we hold $1,311 million and $974 million of equity securities without RDFV including $1,285 million and $939 million at Insurance at September 30, 2024 and December 31, 2023, respectively, that are classified within non-current All other assets in our Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $37 million and $11 million, and $100 million and $45 million for the three and nine months ended September 30, 2024 and 2023, respectively. These are primarily limited partnership investments in private equity, infrastructure and real estate funds that are measured at net asset value per share (or equivalent) as a practical expedient to estimated fair value and are excluded from the fair value hierarchy.

NOTE 4. CURRENT AND LONG-TERM RECEIVABLES

(a) Revenue sharing and other partner receivables are primarily amounts due from revenue sharing partners who participate in engine programs by developing and supplying certain engine components through the life of the program or other partners who support our production or aftermarket activities. The revenue sharing partners share in program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.

(b) Allowance for credit losses increased primarily due to new provisions of $41 million.

Sales of customer receivables. From time to time, the Company sells current or long-term receivables to third parties in response to customer-sponsored requests or programs, to facilitate sales, or for risk mitigation purposes. The Company sold current customer receivables to third parties and subsequently collected $437 million and $491 million in the nine months ended September 30, 2024 and 2023, respectively, related primarily to our participation in customer-sponsored supply chain finance programs. Within these programs, primarily in the Commercial Engines & Services business, the Company has no continuing involvement; fees associated with the transferred receivables are covered by the customer and cash is received at the original invoice due date.

NOTE 5. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS

(a) Represents deferred labor and overhead costs on time and material service contracts and other costs of products and services for which the criteria for revenue recognition has not yet been met.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT AND OPERATING LEASES

Operating Lease Liabilities. Our current operating lease liabilities, included in All other current liabilities in our Statement of Financial Position were $293 million and $308 million as of September 30, 2024 and December 31, 2023, respectively. Our non-current operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $842 million and $931 million as of September 30, 2024 and December 31, 2023, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $120 million and $122 million for the three months ended September 30, 2024 and 2023, respectively, and $360 million and $367 million for the nine months ended September 30, 2024 and 2023, respectively.

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NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

In conjunction with the GE Vernova separation, we changed our segment reporting structure. As a result, all prior period balances for those segments were updated to reflect this change.

(a) Goodwill adjustments are primarily related to foreign currency exchange.

Also in conjunction with the GE Vernova separation, the composition of our reporting units for evaluation of goodwill impairment has changed. As a result, we allocated goodwill among new and realigned reporting units using a relative fair value approach and performed assessments for the new reporting units. We assess the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates. We performed an interim impairment test at our Colibrium Additive reporting unit within our Defense & Propulsion Technologies segment given declines in the additive manufacturing industry due to slower adoption of technology, which incorporated a combination of income and market valuation approaches. The results of the analysis indicated that the carrying value of the reporting unit was in excess of fair value and therefore we recorded a non-cash impairment loss of $251 million in Goodwill impairments in our Statement of Earnings (Loss). After the impairment charges there is no remaining goodwill in the reporting unit. Colibrium Additive is a critical business for current and future technology at GE Aerospace as we continue to focus on where it can create the most value.

Substantially all other intangible assets are subject to amortization. Intangible assets decreased $271 million during the nine months ended September 30, 2024, primarily as a result of amortization and the sale of our non-core licensing business to Dolby Laboratories, Inc. (see Note 2). Consolidated amortization expense was $89 million and $94 million in the three months ended, and $261 million and $278 million in the nine months ended,September 30, 2024 and 2023, respectively.

NOTE 8. CONTRACT AND OTHER DEFERRED ASSETS, CONTRACT LIABILITIES AND DEFERRED INCOME & PROGRESS COLLECTIONS

Contract assets (liabilities) and other deferred assets (income), on a net basis, increased the net liability position by $674 million for the nine months ended September 30, 2024, primarily due to an increase in long-term service agreements liabilities of $842 million, and a decrease in long-term service agreement assets of $120 million, partially offset by an increase in equipment and other service agreements of $129 million and a decrease in current deferred income of $118 million. In aggregate, the net liability for long-term service agreements increased primarily due to billings of $6,445 million and net unfavorable changes in estimated profitability of $141 million, primarily in Commercial Engines & Services, partially offset by revenues recognized of $5,716 million. Revenues recognized for contracts included in a liability position at the beginning of the year were $5,063 million and $4,552 million for the nine months ended September 30, 2024 and 2023, respectively.

(a) Included costs incurred prior to production (such as requisition engineering) for equipment production contracts, primarily within our Defense & Propulsion Technologies segment, which are amortized ratably over each unit produced. We assess the recoverability of these costs and if we determine the costs are no longer probable of recovery, the asset is impaired.

(b) Included amounts due from customers within our Commercial Engines & Services segment for the sales of engines, spare parts and services, which we collect through fixed or usage-based billings from the sale of spare parts and servicing of equipment under long-term service agreements.

Progress collections increased $301 million in the nine months ended September 30, 2024 primarily due to collections received in excess of settlements at Commercial Engines & Services.

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NOTE 9. ALL OTHER ASSETS. All other current assets and All other assets primarily include equity method investments, Insurance cash and cash equivalents, receivables and other investments in our run-off insurance operations, pension surplus and prepaid taxes and other deferred charges. All other non-current assets increased $2,141 million in the nine months ended September 30, 2024, primarily due to an increase in equity method and other investments of $695 million, an increase in Insurance cash and cash equivalents of $596 million, an increase in indemnity assets of $502 million, primarily related to GE Vernova, and an increase in prepaid taxes and deferred charges of $189 million. Insurance cash and cash equivalents was $1,380 million and $784 million at September 30, 2024 and December 31, 2023, respectively.

NOTE 10. BORROWINGS

See Note 20 for further information about borrowings and associated hedges.

NOTE 11. ACCOUNTS PAYABLE

We facilitate voluntary supply chain finance programs with third parties, which provide participating suppliers the opportunity to sell their GE Aerospace receivables to third parties at the sole discretion of both the suppliers and the third parties. Total supplier invoices paid through these third-party programs were $2,709 million and $2,342 million for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 12. INSURANCE LIABILITIES AND ANNUITY BENEFITS. Insurance liabilities and annuity benefits comprise substantially all obligations to annuitants and insureds in our run-off insurance operations. Our insurance operations (net of eliminations) generated revenues of $899 million and $842 million, profit was $171 million and $99 million and net earnings was $135 million and $77 million for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, revenues were $2,649 million and $2,480 million, profit was $541 million and $233 million and net earnings was $427 million and $181 million, respectively. These operations were primarily supported by investment securities of $39,103 million and $37,592 million, limited partnerships of $4,030 million and $3,300 million, and a diversified commercial mortgage loan portfolio substantially all collateralized by first liens on U.S. commercial real estate properties of $1,883 million and $1,947 million (net of allowance for credit losses of $45 million and $48 million), as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the commercial mortgage loan portfolio hadtwo delinquent loans, one non-accrual loan and about one-third of the portfolio was held in the office sector, which had a weighted average loan-to-value ratio of 69%, debt service coverage of 1.8, and no scheduled maturities through 2025. A summary of our insurance liabilities and annuity benefits is presented below.

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The following tables summarize balances of and changes in future policy benefits reserves.

(a) Determined using the current discount rate as of September 30, 2024 and 2023.

As of September 30, 2024 and 2023, policyholders account balances totaled $1,612 million and $1,838 million, respectively. As our insurance operations are in run-off, changes in policyholder account balances for the nine months ended September 30, 2024 and 2023 are primarily attributed to surrenders, withdrawals, and benefit payments of $323 million and $318 million, partially offset by net additions from separate accounts and interest credited of $206 million and $188 million, respectively. Interest on policyholder account balances is generally credited at minimum guaranteed rates, primarily between 3.0% and 6.0% at both September 30, 2024 and 2023.

Our 2024 and 2023 annual reviews of future policy benefit reserves cash flow assumptions resulted in immaterial charges to net earnings, indicating claims experience continues to develop consistently with our models.

Included in Insurance losses and annuity benefits in our Statement of Earnings (Loss) for the nine months ended September 30, 2024 and 2023 are unfavorable pre-tax adjustments of $54 million and $90 million, respectively, from updating the net premium ratio (i.e., the percentage of projected gross premiums required to cover expected policy benefits and related expenses) after updating for actual historical experience each quarter and updating of future cash flow assumptions. Included in these amounts for the nine months ended September 30, 2024 and 2023, are unfavorable adjustments of $107 million and $298 million, respectively, due to insufficient gross premiums (i.e., net premium ratio exceeded 100%), related to certain cohorts in our long-term care and life insurance portfolios. These adjustments are primarily attributable to increases in the net premium ratio as a result of updating future cash flow assumptions on cohorts where the beginning of the period net premium ratio exceeded 100%.

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Following approval of a statutory permitted accounting practice in 2018 by our primary regulator, the Kansas Insurance Department, we have since provided a total of $15,035 million of capital contributions to our run-off insurance subsidiaries, including the final contribution of $1,820 million in the first quarter of 2024.

In June 2024, we signed an agreement to exit a block of our life and health insurance business via an assumption reinsurance transaction, pending regulatory approvals and other closing conditions.

See Notes 3 and 9 for further information related to our run-off insurance operations.

NOTE 13. POSTRETIREMENT BENEFIT PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we present inthree categories; principal pension plans, other pension plans and principal retiree benefit plans. Please refer to Note 13 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2023 for further information.

The components of benefit plans cost other than the service cost are included in the caption Non-operating benefit costs in our Statement of Earnings (Loss).

Principal retiree benefit plans income was $22 million and $37 million for the three months ended September 30, 2024 and 2023, respectively, and $79 million and $109 million for the nine months ended September 30, 2024 and 2023, respectively. Principal retiree benefit plans income from continuing operations was $22 million and $65 million for the three and nine months ended September 30, 2024, respectively, and $22 million and $66 million for the three and nine months ended September 30, 2023, respectively.

Other pension plans income was $3 million and $32 million for the three months ended September 30, 2024 and 2023, respectively, and $15 million and $91 million for the nine months ended September 30, 2024 and 2023, respectively. Other pension plans income from continuing operations was $3 million and $3 million for the three and nine months ended September 30, 2024, respectively, and $11 million and $31 million for the three and nine months ended September 30, 2023, respectively.

We have a defined contribution plan for eligible U.S. employees that provides employer contributions, which were $47 million and $73 million for the three months ended September 30, 2024 and 2023, respectively, and $210 million and $253 million for the nine months ended September 30, 2024 and 2023, respectively. Employer contributions from continuing operations was $47 million and $175 million for the three and nine months ended September 30, 2024, respectively, and $46 million and $156 million for the three and nine months ended September 30, 2023, respectively.

We also have deferred incentive compensation plans and deferred salary plans for eligible employees with expenses of $13 million and $15 million for the three months ended September 30, 2024 and 2023, and $34 million and $50 million for the nine months ended September 30, 2024 and 2023, respectively. Deferred compensation expense from continuing operations was $13 million and $27 million for the three and nine months ended September 30, 2024, respectively, and $13 million and $42 million for the three and nine months ended September 30, 2023, respectively.

NOTE 14. SALES DISCOUNTS AND ALLOWANCES & ALL OTHER CURRENT AND NON-CURRENT LIABILITIES.

Sales discounts and allowances increased $331 million in the nine months ended September 30, 2024, primarily due to higher spare parts shipments in Commercial Engines & Services outpacing payments to customers.

All other current liabilities and All other liabilities primarily includes employee compensation and benefits, equipment project and commercial liabilities, income taxes payable and uncertain tax positions, environmental, health and safety remediations, operating lease liabilities (see Note 6) and product warranties (see Note 22). All other current liabilities increased $126 million in the nine months ended September 30, 2024, primarily due to an accrual for shareholder litigation of $363 million and an increase in dividends payable of $214 million, partially offset by a decrease in employee compensation and benefits of $518 million. All other liabilities increased $939 million in the nine months ended September 30, 2024, primarily due to increases in uncertain and other income taxes and related liabilities of $674 million, Environmental, health and safety liabilities of $212 million and indemnity liabilities of $159 million, primarily related to GE Vernova.

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NOTE 15. INCOME TAXES. Our effective income tax rate was 10.6% and 5.6% for the nine months ended September 30, 2024 and 2023, respectively. The tax rate for 2024 was reduced compared to the U.S. statutory rate of 21% primarily due to separation income tax benefit associated with an increase in net state deferred tax assets that are likely to be utilized after the spin of GE Vernova, U.S. business tax credit benefits, and gains associated with our retained and sold ownership interests, which we expect to recover without tax. The low tax rate for 2023 was reduced compared to the U.S. statutory rate of 21% primarily due to gains associated with our retained and sold ownership interests, which we expect to recover without tax, U.S. business credits, and net tax benefit related to separation income tax effects including losses on separation-related entity restructuring.

The OECD (Organisation for Economic Co-operation and Development) has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, we still are evaluating the potential consequences of Pillar 2 on our longer-term financial position. During 2024, we have incurred insignificant tax expenses in connection with Pillar 2.

The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2016-2020.

The following table presents our net deferred tax assets and net deferred tax liabilities attributable to different tax jurisdictions or different tax paying components.

NOTE 16. SHAREHOLDERS’ EQUITY

(a)Includes reclassifications from AOCI related to the separations of GE Vernova and GE HealthCare. In the second quarter of 2024, reclassifications of $1,590 million, net of taxes, included currency translation of $2,174 million and benefit plans of $(584) million, related to GE Vernova. In the first quarter of 2023, reclassifications of $195 million, net of taxes, included currency translation of $2,234 million and benefit plans of $(2,030) million, related to GE HealthCare.

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Preferred stock. In September 2023, we redeemed the remaining outstanding shares of GE preferred stock.

Common stock. GE Aerospace common stock shares outstanding were 1,082,294,004 and 1,088,415,995 at September 30, 2024 and December 31, 2023, respectively. We repurchased 7.9 million shares for $1,311 million and 22.9 million shares for $3,744 million during the three and nine months ended September 30, 2024, respectively. The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased in the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.

NOTE 17. EARNINGS PER SHARE INFORMATION

(a) For the three and nine months ended September 30, 2023, included $(28) million and $(58) million, respectively, related to excise tax on preferred share redemptions.

(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.

Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and historically have been included in the calculation pursuant to the two-class method. For the three and nine months ended September 30, 2024, such participating securities had an insignificant effect. Effective the second quarter of 2024, the Company calculates earnings per share using the treasury stock method. For the three and nine months ended September 30, 2023, application of two-class method treatment had an insignificant effect.

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NOTE 18. OTHER INCOME (LOSS)

(a) Included a pre-tax gain of $341 million related to the sale of our non-core licensing business in Corporate in the three months ended September 30, 2024.

Our investment in GE HealthCare comprises 13.3 million shares (approximately 2.9% ownership interest) at September 30, 2024. During the nine months ended September 30, 2024, we received total proceeds of $4,071 million from the disposition of 48.3 million shares of GE HealthCare.

NOTE 19. RESTRUCTURING CHARGES AND SEPARATION COSTS

RESTRUCTURING AND OTHER CHARGES. This table is inclusive of all restructuring charges in our segments and at Corporate & Other. Separately, in our reported segment results, significant, higher-cost restructuring programs are excluded from measurement of segment operating performance for internal and external purposes; those excluded amounts are reported in Restructuring and other charges for Corporate & Other.

(a) Primarily related to employee severance payments.

The restructuring liability as of September 30, 2024 and December 31, 2023 was $258 million and $311 million, respectively.

Restructuring and other charges for new and ongoing programs primarily included exit activities announced in the fourth quarter of 2022 reflecting lower Corporate & Other shared-service and footprint needs as a result of the GE HealthCare and GE Vernova spin-offs. Additionally, for the three and nine months ended September 30, 2024, restructuring and other charges included costs of $328 million and $363 million, respectively, for the settlement of the Sjunde AP-Fonden shareholder lawsuit. See Note 22 for additional information.

SEPARATION COSTS. In November 2021, the Company announced its plan to form three industry-leading, global public companies focused on the growth sectors of aerospace, healthcare and energy. As discussed in Note 2, we completed this plan with the spin of GE Vernova in the second quarter of 2024. Post-separation, we expect to continue to incur operational and transition costs related to ongoing separation activities.

For the three and nine months ended September 30, 2024, we incurred pre-tax separation expense of $74 million and $408 million, and paid $144 million and $716 million in cash, respectively, primarily related to employee costs, professional fees, costs to establish certain stand-alone functions and information technology systems, and other transformation and transaction costs to transition to a stand-alone public company. These costs are presented as separation costs in our Statement of Earnings (Loss). In addition, we recognized $61 million of net tax benefit for the three months ended September 30, 2024, including the tax benefit of losses on separation related entity restructuring and $311 million of net tax benefit for the nine months ended September 30, 2024, including deferred tax benefits associated with state tax attributes and the tax benefit of losses on separation-related entity restructuring.

For the three and nine months ended September 30, 2023, we incurred pre-tax separation costs of $147 million and $474 million, recognized $247 million and $244 million of net tax benefit, and paid $127 million and $617 million in cash, respectively, related to separation activities.

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The pre-tax separation costs specifically identifiable to GE HealthCare and GE Vernova are now reflected in discontinued operations. For the three and nine months ended September 30, 2024, we recognized zero and $10 million in pre-tax income, zero and $2 million of net tax expense, and spent $2 million and $11 million in cash, respectively, related to GE HealthCare. In addition, for the three and nine months ended September 30, 2024, we recognized pre-tax separation costs of $2 million and $99 million, incurred zero and $21 million of net tax benefit and spent $66 million and $187 million in cash, respectively, related to GE Vernova.

For the three and nine months ended September 30, 2023, we incurred $2 million and $21 million in pre-tax costs, recognized zero and $5 million of net tax benefits and spent $27 million and $168 million in cash, respectively, related to GE HealthCare. For the three and nine months ended September 30, 2023, we incurred $80 million and $184 million pre-tax separation costs, recognized $32 million and $15 million of net tax benefit and spent $48 million and $135 million in cash, respectively, related to GE Vernova.

NOTE 20. FINANCIAL INSTRUMENTS. The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.

Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and cash equivalents, investment securities and derivative financial instruments.

DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. We use derivatives to manage currency risks related to foreign exchange, interest rate and currency risk between financial assets and liabilities, and certain equity investments and commodity prices.

We use cash flow hedges primarily to reduce or eliminate the effects of foreign exchange rate changes, net investment hedges to hedge investments in foreign operations as well as fair value hedges to hedge the effects of interest rate and currency changes on debt we issued. We also use derivatives not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same economic purpose as other hedging arrangements. We use economic hedges when we have exposures to currency exchange risk for which we are unable to meet the requirements for hedge accounting or when changes in the carrying amount of the hedged item are already recorded in earnings in the same period as the derivative making hedge accounting unnecessary. Even though the derivative is an effective economic hedge, there may be a net effect on earnings in each period due to differences in the timing of earnings recognition between the derivative and the hedged item.

(a) Gains and (losses) included in our Statement of earnings (loss) are $175 million and $(179) million for the three months and $237 and $(1) million for the nine months ended September 30, 2024 and 2023, respectively, primarily in SG&A, driven by hedges of foreign exchange fluctuation and deferred incentive compensation. These amounts are offset by the remeasurement of the underlying exposure through earnings.

FAIR VALUE HEDGES. All the fair value hedges were terminated in 2022 due to exposure management actions. The cumulative net gains related to hedging adjustments of $1,102 million and $1,162 million on discontinued hedges were included primarily inlong-term borrowings of $8,761 and $9,253 million as of September 30, 2024 and December 31, 2023, respectively, and will continue to amortize into interest expense until the borrowings mature.

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CASH FLOW HEDGES AND NET INVESTMENT HEDGES

(a) Primarily currency exchange contracts, and recognized in Costs of Equipment or Services Sold in the Statement of Earnings (Loss). We expect to reclassify a $22 million gain from AOCI to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions.

(b) The carrying value of foreign currency debt designated as net investment hedges was $5,601 million and $4,726 million at September 30, 2024 and December 31, 2023, respectively.

COUNTERPARTY CREDIT RISK. Our exposures to counterparties (including accrued interest) was $334 million and $241 million at September 30, 2024 and December 31, 2023, respectively. Counterparties' exposures to our derivative liability (including accrued interest), was $16 million and $53 million at September 30, 2024 and December 31, 2023, respectively.

NOTE 21. VARIABLE INTEREST ENTITIES. In our Statement of Financial Position, we have assets of $138 million and $115 million and liabilities of $129 million and $140 million at September 30, 2024 and December 31, 2023, respectively, in consolidated Variable Interest Entities (VIEs). These VIEs are primarily associated with a legacy business in Corporate & Other and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities.

Our investments in unconsolidated VIEs were $7,586 million and $6,577 million at September 30, 2024 and December 31, 2023, respectively. Of these investments, $1,158 million and $1,205 million were owned for U.S. Tax Equity, comprising equity method investments primarily related to renewable energy projects, at September 30, 2024 and December 31, 2023, respectively. In addition, $6,244 million and $5,145 million were owned by our run-off insurance operations, primarily comprising of equity method investments at September 30, 2024 and December 31, 2023, respectively. The increase in investments in unconsolidated VIEs in our run-off insurance operations reflects strategic initiatives to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our commitments to make additional investments in these entities described in Note 22.

NOTE 22. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES

COMMITMENTS. As of September 30, 2024, we had total investment commitments of $3,686 million, of which $3,530 million are related to investments by our run-off insurance operations in investment securities and other assets. Included within these commitments are obligations to make investments in unconsolidated VIEs of $3,459 million. We also have unfunded lending commitments, primarily for U.S. Tax Equity, of $656 million. Additionally, we have committed to provide financing assistance of $2,676 million for future customer acquisitions of aircraft equipped with our engines. See Note 21 for further information regarding VIEs.

GUARANTEES. Credit support and indemnification agreements - Continuing Operations. Following the separation of GE Vernova, we have remaining performance and bank guarantees on behalf of GE Vernova. To support GE Vernova in selling products and services globally, we often entered into contracts on behalf of GE Vernova or issued parent company guarantees or trade finance instruments supporting the performance of what were subsidiary legal entities transacting directly with customers, in addition to providing similar credit support for non-customer related activities of GE Vernova (collectively, "GE Aerospace credit support"). Under the Separation and Distribution Agreement (SDA), GE Vernova is obligated to use reasonable best efforts to replace us as the guarantor on or terminate all such credit support instruments. Until such termination or replacement, in the event of non-fulfillment of contractual obligations by the relevant obligor(s), we could be obligated to make payments under the applicable instruments. Under the SDA, GE Vernova is obligated to reimburse and indemnify us for any such payments. Beginning in 2025, GE Vernova will pay us a quarterly fee based on amounts related to the GE Aerospace credit support. We have recorded a reserve of $162 million for our stand ready to perform obligation. Our maximum aggregate exposure under the GE Aerospace credit support cannot be reasonably estimated given the breadth of the portfolio across each of the GE Vernova businesses except for certain financial guarantees and trade finance instruments with a maximum exposure of approximately $851 million, which are not expected to exceed a year beyond separation. The underlying obligations are predominantly customer contracts that GE Vernova performs in the normal course of its business. We have no known instances historically where payments or performance were required by us under parent company guarantees relating to GE Vernova customer contracts. In connection with the spin-off of GE Vernova, under terms of the SDA, Transition Service Agreement (TSA) and Tax Matters Agreement (TMA), we have an obligation to indemnify GE Vernova for certain of its severance costs, environmental matters and tax matters of $145 million, of which $129 million is reserved.

We also have remaining obligations under the TMA with GE HealthCare to indemnify them for certain tax costs and other indemnifications of $25 million which are fully reserved.

In addition, we have $188 million of other indemnification commitments, including representations and warranties in sales of business assets, for which we recorded a liability of $63 million.

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Credit support and indemnification agreements- Discontinued Operations. Following the separation of GE Vernova, we also have performance obligations related to GE Vernova's supply chain finance program and an environmental matter with a maximum aggregate exposure of $842 million. Also, under the SDA, TSA, and TMA agreements we have obligations to indemnify GE Vernova for certain of its technology costs, separation for certain facilities, environmental matters and tax matters of $34 million costs, which are fully reserved.

GE Aerospace also has obligations under the TSA and TMA to indemnify GE HealthCare for certain technology and tax costs of $62 million which are fully reserved.

We also have provided specific indemnities to other buyers of assets of our business that, in the aggregate, represent a maximum potential claim of $480 million with related reserves of $57 million.

PRODUCT WARRANTIES. We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information, mostly historical claims experience, claims costs may differ from amounts provided. The liability for product warranties was $597 million at September 30, 2024 and $639 million at December 31, 2023.

LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 24 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023, Note 23 to the consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and Note 22 to the consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024; refer to those discussions for information about previously reported legal matters that are not updated below. In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the significant matters described below that could have a material impact on our results of operations. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss, and accruals for legal matters are not recorded until a loss for a particular matter is considered probable and reasonably estimable. Given the nature of legal matters and the complexities involved, it is often difficult to predict and determine a meaningful estimate of loss or range of loss until we know, among other factors, the particular claims involved, the likelihood of success of our defenses to those claims, the damages or other relief sought, how discovery or other procedural considerations will affect the outcome, the settlement posture of other parties and other factors that may have a material effect on the outcome. For these matters, unless otherwise specified, we do not believe it is possible to provide a meaningful estimate of loss at this time. Moreover, it is not uncommon for legal matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated.

Shareholder and related lawsuits. Since November 2017, several putative shareholder class actions under the federal securities laws were filed against GE and certain affiliated individuals and consolidated into a single action currently pending in the U.S. District Court for the Southern District of New York (the Hachem case, also referred to as the Sjunde AP-Fonden case). The complaint against defendants GE and current and former GE executive officers alleged violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 related to insurance reserves and accounting for long-term service agreements and seeks damages on behalf of shareholders who acquired GE stock between February 27, 2013 and January 23, 2018. GE filed a motion to dismiss in December 2019. In January 2021, the court granted the motion to dismiss as to the majority of the claims. Specifically, the court dismissed all claims related to insurance reserves, as well as all claims related to accounting for long-term service agreements, with the exception of certain claims about historic disclosures related to factoring in the Power business that survive as to GE and its former CFO Jeffrey S. Bornstein. All other individual defendants have been dismissed from the case. In April 2022, the court granted the plaintiffs' motion for class certification for shareholders who acquired stock between February 26, 2016 and January 23, 2018. In September 2022, GE filed a motion for summary judgment on the plaintiffs' remaining claims, which the court denied in September 2023, except as to claims arising from disclosures made between November 2017 and January 2018. In April 2024, the court scheduled a trial date for November 2024. In October 2024, we reached an agreement in principle with the plaintiffs to settle the matter for $362.5 million. Final settlement of the matter is subject to court approval.

Since February 2018, multiple shareholder derivative lawsuits were filed against current and former GE executive officers and members of GE’s Board of Directors and GE (as nominal defendant). These lawsuits have alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. Two shareholder derivative lawsuits are currently pending: the Lindsey and Priest/Tola cases, which were filed in New York state court. The allegations in thesetwo cases relate to substantially the same facts as those underlying the Sjunde AP-Fonden case. The plaintiffs seek unspecified damages and improvements in GE’s corporate governance and internal procedures. The Lindsey case has been stayed by agreement of the parties, and GE filed a motion to dismiss the Priest/Tola complaint in March 2021. In August 2024, the plaintiffs in the Priest/Tola case filed an amended consolidated complaint asserting substantially the same claims as in the prior derivative actions, and the Company plans to file a motion to dismiss this amended complaint.

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Bank BPH. As previously reported, Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency indexed or denominated mortgage loans in various courts throughout Poland. For a number of years, we have observed an increase in the total number of lawsuits being brought against Bank BPH and other banks in Poland by current and former borrowers, and we expect this to continue in future reporting periods. As previously reported, GE and Bank BPH approved the adoption of a settlement program and recorded an additional charge of $1,014 million in the quarter ended June 30, 2023. The estimate of total losses for borrower litigation at Bank BPH was $2,711 million and $2,669 million as of September 30, 2024 and December 31, 2023, respectively. The estimate accounts for the costs of payments to borrowers who we estimate will participate in the settlement program, as well as estimates for the results of litigation with other borrowers, which in either case can exceed the value of the current loan balance, and represents our best estimate of the total losses we expect to incur over time informed by experience since adopting the program. However, there are a number of factors that could affect the estimate in the future; refer to the disclosure about Bank BPH in our Annual Report on Form 10-K for the year ended December 31, 2023.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Our operations involve or have involved the use, disposal and cleanup of substances regulated under environmental protection laws, including activities for a variety of matters related to GE businesses that have been discontinued or exited. We record reserves for obligations for ongoing and future environmental remediation activities, such as the Housatonic River cleanup, and for additional liabilities we expect to incur in connection with previously remediated sites, such as natural resource damages for the Hudson River where GE completed dredging in 2019. Additionally, like many other industrial companies, we and our subsidiaries are defendants in various lawsuits related to alleged exposure by workers and others to asbestos or other hazardous materials. Liabilities for environmental remediation and worker exposure claims exclude possible insurance recoveries. It is reasonably possible that our exposure will exceed amounts accrued. However, due to uncertainties about the status of laws, regulations, technology and information related to individual sites and lawsuits, such amounts are not reasonably estimable. Total reserves related to environmental remediation and worker exposure claims were $1,925 million and $1,819 million at September 30, 2024 and December 31, 2023, respectively.

NOTE 23. SEGMENT INFORMATION. On April 2, 2024, and in conjunction with the GE Vernova separation, we implemented an organizational change to align our reportable segments more closely with our business structure. In connection with our segment reporting change, we have recast previously reported amounts across all reportable segments to conform to current segment presentation.

We havetwo reportable segments andthree operating segments. Operating segments are aggregated into a reportable segment if the operating segments have similar quantitative economic characteristics and if the operating segments are similar in the following qualitative characteristics: (i) nature of products and services; (ii) nature of production processes; (iii) type or class of customer for their products and services; (iv) methods used to distribute the products or provide services; and (v) if applicable, the nature of the regulatory environment. We have aggregated Defense & Systems and Propulsion & Additive Technology into one reportable segment, Defense & Propulsion Technologies, based on similarity in economic characteristics, other qualitative factors and the objectives and principals of ASC 280, Segment Reporting. This is consistent with how our chief operating decision maker (CODM) allocates resources and makes decisions. Refer to our quarterly report on form 10-Q for the period ended June 30, 2024 for a description of our segments. Refer to our Annual Report on Form 10-K for the year ended December 31, 2023, for further information regarding our determination of segment profit for continuing operations, and for our allocations of corporate costs to our segments.

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REMAINING PERFORMANCE OBLIGATION. As of September 30, 2024, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $166,089 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $19,210 million, of which 28%,43% and 71% is expected to be satisfied within 1,2 and 5 years, respectively; and (2) services-related remaining performance obligation of $146,879 million, of which 10%,41%,68% and 84% is expected to be recognized within 1,5,10 and 15 years, respectively, and the remaining thereafter.