GE slumps after saying it will take a $6.2 billion hit on its insurance business

  • Shares of General Electric are down 4% ahead of Tuesday’s opening bell after the company said it will take a $US6.2 billion charge to its legacy long-term care insurance business.
  • GE Capital, the company’s finance unit, will inject $US15 billion over seven years into the North American Life & Health business in order to maintain healthy funding levels, GE said.
  • “At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in run-off for more than a decade is deeply disappointing,” CEO John Flannery said in a press release.
  • The company outlined a turnaround plan in November, saying it would focus on power, aviation and healthcare equipment, while exiting legacy business like lighting and locomotives. It will also trim the size of its board and revamp the firm’s compensation program.
  • GE was easily the worst Dow performer last year, falling 42% over the last 12 months. The benchmark industrial average was up 30% in the same period. The company is expected to report earnings on January 24.

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