GE wants to step away from the long term care insurance that is now costing it far too much.
General Electric Co. is currently seeking to unload its troubled insurance business. The American multinational conglomerate has been working with investment bankers to identify opportunities.
The company’s insurance branch took on a wealth of expenses following shareholder lawsuits.
GE’s insurance business was required to cover extensive charges at the same time it faced lawsuits from its shareholders. The company was also the subject of an investigation by United States regulators, according to a Reuters report.
This new strategy to leave the long term care insurance industry follows closely on the heels of an announcement GE made earlier this year. At that time, it stated that it would be taking a $6.2 billion after-tax charge. It also stated that it would be placing an additional $15 billion in reserves. The purpose of those actions was to help cover liabilities regarding its GE Capital unit insurance operation. It primarily had to do with the long term care insurance policies it sold.
Many providers in the LTC insurance business have underestimated the speed of increasing costs.
GE was among those LTC insurance companies that predicted a far slower rise in healthcare costs. However, health care costs have skyrocketed over the last few decades. Furthermore, life expectancies have been growing ever longer. As a result the cost associated with covering long term care insurance claims is significantly greater than insurers predicted when they entered the industry.
At the same time that GE’s insurance units have ceased driving new business, their existing policies have managed to maturity through run-off – a process that has become exceptionally financially burdensome for General Electric and many other insurers.
The company is now working with investment firms specializing in the acquisition of run-off insurance businesses. The goals is to have them purchase some of the assets, according to the Reuters report. At the same time, GE hopes to step out of the long term care insurance business altogether. It wants to move ahead in other areas of insurance assets, including life, disability products and other forms of structured settlements.