GE to take $6.2B charge in Q4 on insurance operations
GE announced that the comprehensive review and reserve testing for GE Capital's run-off insurance portfolio, North American Life & Health, will result in an after-tax GAAP charge of $6.2B for the fourth quarter of 2017, and GE Capital expects to make statutory reserve contributions of ~$15B over seven years. The Kansas Insurance Department, NALH's primary regulator, approved a phased contribution of ~$3B in 1Q'18 and ~$2B annually from 2019 through 2024. "As we disclosed during the company's second- and third-quarter earnings calls and further discussed during our November 13, 2017, investor presentation, earlier this year GE Capital initiated a comprehensive review of our insurance reserves with the assistance of leading outside experts," said John Flannery, chairman and CEO of GE. "This was a rigorous process involving complex factors and estimates relating primarily to long-term care policies written by primary insurance companies and reinsured by NALH." Flannery added, "The required contributions to the statutory reserve will be made by GE Capital, which has sufficient liquidity to do so. We have been taking ongoing actions to make GE Capital smaller and more focused while maintaining its key capabilities to support financing for GE Industrial products. These actions will also help restore GE Capital ratios to appropriate levels. At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in run-off for more than a decade is deeply disappointing."