General Electric Co ranks among the riskiest backers of long-term care insurance...
) ranks among the riskiest backers of long-term care insurance, suffering from both high exposure to claims and a relatively small cash pile to pay them, Fitch Ratings said in a report on Tuesday that sent GE’s shares tumbling.
The Fitch report, which the credit rating agency produces annually, echoed concerns raised last week by financial investigator Harry Markopolos, who estimated that GE has under-reserved by $29 billion for its long-term care policies.On Tuesday, the U.S. conglomerate reiterated comments it made on Monday in response to the Markopolos report. “Our current reserves are well-supported for our long-term care portfolio characteristics,” GE said.
Goldman Sachs said on Monday that its analysis showed GE’s reserves were likely adequate. “We continue to view GE’s block as having high reserves on a relative basis to peers,” Goldman wrote. In March, Reuters similarly found GE’s reserves were in line with comparable insurers. Fitch said its analysis found GE and many other insurers still have not set aside enough money to cover losses expected on long-term care policies, which are unusually risky because the costs are volatile and vulnerable to interest rate changes. Even insurers that have taken a more conservative stance and set aside more money than GE have not avoided losses, Fitch said.
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