General Electric long-term care charge (2018)
In January 2018, General Electric took a $6.2 billion charge on a run-off long-term care reinsurance book and committed to put about $15 billion into it over seven years.
A run-off book writes no new business but keeps paying claims on old policies; in long-term care, that tail lasts for decades. Its reserves rest on assumptions about claim duration, policy persistency, and asset returns that meet reality only very late. When the insurer revises those assumptions, the entire future difference is discounted and charged at once, which explains how abrupt the shocks are. Under statutory accounting, which is more conservative, the requirement also exceeds the GAAP charge, and it is that figure that sets the capital to be contributed. The GE case showed that a conglomerate outside insurance could carry such a risk for years without the market gauging its true size.
On January 16, 2018, General Electric announced a $6.2 billion after-tax charge ($9.5 billion pretax) for the fourth quarter of 2017 on North American Life & Health, a reinsurance book written mostly between 1989 and 2006. The Kansas regulator approved statutory contributions of about $3 billion in the first quarter of 2018, then $2 billion a year from 2019 through 2024, close to $15 billion in total. The market had expected a charge of about $3 billion.
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