GE to Take $6.2 Billion Charge After Being Burned by Insurance

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General Electric Co. will take a charge of $6.2 billion tied to a legacy insurance portfolio, a new setback for a company already struggling with weak sales in some of its industrial markets.

 The company’s finance unit will pay $15 billion over seven years to fill a shortfall in reserves in the North American Life & Health portfolio, GE said Tuesday in a statement. The actions follow a multimonth review of GE Capital’s obligations in long-term care insurance and other areas.
 “The $15 billion of additional capital ultimately being required was far in excess of our adverse case expectations,” Tom Gallagher, an analyst at Evercore, said in a note to clients.

The lingering problems — from a business GE long ago left behind — underscore the high hurdles facing Chief Executive Officer John Flannery as he seeks to overcome flagging demand for the company’s gas turbines, oilfield equipment and locomotives. Flannery, who took over for Jeffrey Immelt in August, is cutting costs and selling assets after GE posted last year’s biggest drop on the Dow Jones Industrial Average.

 “At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in runoff for more than a decade is deeply disappointing,” Flannery said in the statement.

GE fell 3 percent to $18.20 ahead of regular trading in New York. The dip threatened to undermine a modest rebound in early 2018 after GE had gained 7.5 percent this year through Friday.

source: bloomberg