In the last quarter of the year the group made $3.1bn (£1.9bn), but that was a 21% fall compared with the previous year.

The profits were hit by the performance of Employers Reinsurance Corp (ERC) which wrote off $1.4bn because of higher payments than expected for asbestos claims and the World Trade Center attacks.

But GE said the over the full year its profits rose 7% to $15.1bn.

It accompanied the figures with a poor outlook for the start of this year.

Pension surplus falls

The company said profits in the first three months would be 5-10% lower than last time, mainly because of a decline in its power systems business which makes gas turbines.

GE also said that the surplus at its employee pension plans has dropped to $5bn from previous levels of $14bn because of stock market declines.

Chairman and chief executive Jeff Immelt told analysts during a conference call that the pension plan surplus could dwindle further this year.

"If the market performance is relatively flat, we'll have a couple billion dollars of surplus at the end of [2003] as well," he said.

The pension surplus also has declined because the company has increased benefit payments.

Many US companies have stepped up contributions to pension plans increasingly strained by a prolonged fall in the stock market.