10:32 AM, Jan 16, 2018 — General Electric (GE) is expecting to book a $6.2 billion charge in the fourth quarter as a result of a review and reserve testing for GE Capital’s run-off insurance portfolio, North American Life & Health (NALH).
The Boston-headquartered manufacturing conglomerate said on Tuesday that the review and reserve testing for GE Capital’s insurance portfolio North American Life & Health (NALH), which has been in run-off for more than a decade, would result in an after-tax GAAP charge of $6.2 billion for the fourth quarter of 2017 and that GE Capital expects to make statutory reserve contributions of approximately $15 billion over seven years.
The Kansas Insurance Department, NALH’s primary regulator, has approved a phased contribution of approximately $3 billion in the first quarter of 2018 and approximately $2 billion annually from 2019 through 2024, the company added.
Earlier in the year GE Capital initiated a review of its insurance reserves in a process which the company said had involved “complex factors and estimates relating primarily to long-term care policies written by primary insurance companies and reinsured by NALH.”
The company said that the required contributions to the statutory reserve would be made by GE Capital, which it said has sufficient liquidity to do so. It said that it had been taking actions to make GE Capital smaller and more focused while maintaining its capabilities to support financing for GE Industrial products.
“These actions will also help restore GE Capital ratios to appropriate levels,” John Flannery, chief executive of GE, said. “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”.
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