GE says its reserves are enough, seeking premium increases
NEW YORK (Reuters) - General Electric Co said on Thursday its current reserves for long-term care insurance policies were sufficient and it was looking to increase premiums to cover their rising cost.
In a presentation that repeated information GE supplied in its annual report last week, the Boston-based conglomerate said it has achieved about $500 million worth of premium increases and is pressing for $1.2 billion in further increases to help stem losses on some 300,000 long-term care insurance policies, which cover such costs as in-home or nursing-home care.
GE shocked investors when it took a surprise $6.2 billion after-tax charge last year and began setting aside $15 billion - one of the largest such amounts ever - to cover the policies, which were underwritten more than a decade ago when actuaries did not yet know how costly the claims would become.
GE’s insurance losses are among a host of problems the 127-year-old company is facing as it attempts a historic breakup under new Chief Executive Larry Culp in an effort to restore profit and buoy its stock, which has tumbled to less than a third of its value in mid-2016.
The company’s massive power-plant business is hemorrhaging cash and contending with falling sales and technical problems, while the company is selling assets to pay down its outsized debt.
Since last year, GE has reduced the total amount of insurance reserves it plans to set aside to $14.5 billion by 2024 after completing an analysis of the policies.
But some analysts have said GE may need to nearly double that amount because the assumptions GE used to calculate the exposure are optimistic.
As a reinsurer, GE cannot seek premium increases directly; it must rely on about 30 companies that underwrote the policies it holds to seek increases from regulators in the numerous U.S. states where the policies were sold.
GE also said it was putting more of its insurance assets into investments with higher yields. It said it currently invests about 2 percent of assets that way, compared with 12 percent for other insurers. It aims to lift that to 8 percent by 2024, it said.
GE’s target for new reserves amounts to about $55,000 per policy, in line with those of other long-term care insurers, according to an analysis for Reuters by Audit Analytics, an independent research company based in Massachusetts.
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For comparison, Humana Inc has set aside $77,282 per policy, while Unum Group has set aside $10,614, Audit Analytics said.
Reporting by Alwyn Scott in New York and Ankit Ajmera in Bengaluru; Editing by Bill Rigby, Saumyadeb Chakrabarty
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