Boring, safe, reliable General Electric Company (NYSE:GE) became a bit less boring on Tuesday morning after announcing a US$4.2bn write-down of its insurance business.
After a comprehensive review and reserve testing for GE Capital’s run-off insurance portfolio, North American Life & Health (NALH), General Electric (GE) said it would take an after-tax of US$6.2bn (on a generally accepted accounting principles, or GAAP, basis) for the fourth quarter of 2017.
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GE Capital expects to make statutory reserve contributions of around US$15bn over seven years, the company said.
The Kansas Insurance Department, which is NALH’s primary regulator, approved a phased contribution of roughly US$3bn in the first quarter of this year, after which NALH would chip in with around US$2bn a year through to 2024.
“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,” said John Flannery, the chairman and chief executive officer of GE.
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“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,” he added.
The market agreed, marking the shares down 4.2% to US$17.98 in pre-market trading.