John Flannery, General Electric Co.’s (GE) new Chief Executive Officer, renewed a discussion considering a potential breakup after he disclosed an upcoming $6.2 billion charge resulting from an old failing portfolio of long-term care insurance. Tuesday, while on a conference call with analysts, he said that he was, “looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses.” Long-term care insurance has become a growing issue for companies that have been active in the market in recent decades. The polices, which took form in the 1980s, were designed to cover healthcare costs not paid for by standard health insurance or Medicare. These products were fatally undermined by faulty assumptions regarding potential expenses for care and the longevity of those purchasing the policies. Joseph Belth, professor emeritus of insurance at Indiana University, commented that the market really started struggling in the 2000s, when companies found that they “had to raise rates frequently and substantially, and everybody was unhappy.” GE, once the largest issuer of these policies, has been attempting for years to limit the volatility associated with the insurance industry.
See Rick Clough, GE CEO Renews Pledge to Study Breakup After $6.2 Billion Stumble, Bloomberg, January 16, 2018.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
