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(Bloomberg) – General Electric Co. is "very heavily" exposed to the long-term care insurance market and is worse than average in terms of the adequacy of reserves related to these contracts, according to Fitch Ratings.
Genworth Financial Inc., a spin-off from GE's 2004 split, and Unum are also below average, Fitch said Tuesday in a report analyzing asset buffers that fund future cash flows. long-term care activities. GE said its current reserves are "well supported" for its long-term care portfolio. Insurance policies that pay home health aides or nursing home stays have caused fires in recent years, at the expense of higher than expected costs and low interest rates. .
"Exposure to the long-term care market remains a scourge," Anthony Beato, director of insurance at Fitch Ratings, said in a statement. "It continues to be a risky product despite the adoption of more conservative booking philosophies that align more closely with its volatile liabilities."
According to Fitch, these policies are among the riskiest products of US life insurance companies because of their volatility, high capital requirements and sensitivity to interest rate risks. The rating company expects insurers to add more funds to support short-term policies.
GE has been facing problems with an old insurance contract portfolio, announcing a $ 6.2 billion charge in 2018 related to this portfolio. Harry Markopolos, the fraud auditor known for calling Bernie Madoff, released a report last week denouncing GE's insurance accounting and his holdings in oil services company Baker Hughes.
He added that GE should immediately increase its insurance reserves by $ 18.5 billion in cash and collect an additional $ 10.5 billion in non-cash charge when the new accounting rules come into effect. Chief Executive Larry Culp retorted that GE called the claims "market manipulation".
Declining stocks
Reserve issues have hammered GE shares, which have fallen 50% since the beginning of last year. Markopolos' claims made them lose 11% on Thursday, though they have since reversed some of that decline. The stock slid 3.2% to $ 8.39 at 9:55 am in New York.
GE seeks to reassure investors about its long-term care portfolio after Markopolos' allegations have triggered a fall in equities since last Thursday. The company said Monday in a message from Steve Winoker, vice president of investor communications, that its role as a reinsurer meant it would not be responsible for 100% of every disaster for every life.
"Our current reserves are well managed for the characteristics of our long-term care portfolio," GE said in a statement on Tuesday. "Our future liabilities depend on variables that are going to be played out over decades, not years, and are evaluated using rigorous annual testing processes, rigorous actuarial analysis, and analysis of how much money is spent. application of regulatory and accounting rules. "
(Updates with GE comments, shares starting in the second paragraph.)
– With the help of Richard Clough.
To contact the reporter about this story: Katherine Chiglinsky in New York at [email protected]
To contact the makers of this story: Michael J. Moore at [email protected], Daniel Taub
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