GE seeking to shed troubled insurance business: Reuters

General Electric (GE) is working with investment bankers to find ways to shed its insurance business, Reuters reported on May 22 citing “people familiar with the matter”.

The insurance business has caused GE to book hefty charges while sparking shareholder lawsuits and an investigation by US regulators.

In January 2018 GE took an after-tax GAAP charge of $6.2 billion for the fourth quarter of 2017 on its legacy insurance portfolio.

GE also decided to set aside a further $15 billion in reserves to help cover liabilities in insurance operations held by its GE Capital unit, mainly concerning long-term care (LTC) policies.

Many providers of LTC insurance, including GE, underestimated the cost of servicing policies, meaning premiums have been unable to cover the spiralling costs of healthcare and longer life expectancy.

While GE’s insurance operations have stopped generating new business, existing contracts managed to maturity in a process known as run-off have become a major financial burden for the US industrial conglomerate.

GE is hoping investment firms which specialize in acquiring run-off insurance businesses could buy some of the assets, sources told Reuters. While GE is focused on shedding its troubled LTC business, it is open to divesting other insurance assets, including structured settlements and other life and disability products, the sources added.

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