GE Agrees to End $2.5B Long-Term Care Insurance Reinsurance Contract

What You Need to Know

GE put much of its life, annuity and long-term care insurance business in the hands of a separate company, Genworth Financial, in 2004, but kept Employers Re.
The end of the reinsurance arrangement means that the company will face less worry about whether it can collect on reinsurance claims.
GE will also have $2.5 billion in extra cash to reinvest.

General Electric has agreed to end a long-term care insurance reinsurance relationship backed by $2.5 billion in assets.

The Boston-based company said Tuesday that it hopes to get the assets back by the end of the year.

Carolina Dybeck Happe, GE’s chief financial officer, talked about the end of the reinsurance arrangement during a conference call the company held to go over results for the third quarter with securities analysts.

What It Means

For GE, the end of the reinsurance arrangement means that the company will face less worry about whether it can collect on reinsurance claims.

“This reduces counterparty risk,” Happe said.

GE will also have $2.5 billion in extra cash to reinvest.

For clients with long-term care insurance coverage backed by GE Employers Re, the recapture deal could mean better service.

One goal of the transaction is to establish “administration service standards intended to enhance claim administration and innovation efforts,” the company said in a quarterly report filed with the SEC.

Employers Re built up the obligations by “reinsuring,” or providing insurance for, long-term care insurance businesses written by other insurers.

GE noted that the recapture will have no effect on its long-term care insurance benefits obligations, because it has had, and continues to have, an obligation to make good on the reinsurance promises it made to the direct writers.

The Background

GE is a manufacturer and financial services company that was co-founded in 1892 by Thomas Edison, Charles Coffin and J.P. Morgan.

It built up large insurance operations over the years. It put much of its life, annuity and long-term care insurance business in the hands of a separate company, Genworth Financial, in 2004, but it kept Employers Re.