By Momoneymoproblemz (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
General Electric (GE) has announced that the company is currently under investigation by the US regulator, after its announcement last week that the firm would have to pay an additional $15bn over the coming seven years towards legacy insurance liabilities.
The Securities and Exchange Commission (SEC) is due to investigate the accounting practices of the multinational conglomerate, as GE announced during the past week that the company was taking an after-tax charge amounting to $6.2bn in the fourth quarter of last year relating to the issues on insurance.
The SEC is said to be “investigating the process leading to the insurance reserve increase and fourth quarter charge, as well as GE’s revenue recognition and controls for long-term service agreements”, said Jamie Miller, the chief financial officer of the company, today during an analysts’ call that was discussing fourth-quarter earnings.
GE departed from the insurance market before the financial crisis. However, it still maintains a run-off portfolio. Majority of the liabilities are related to long-term care policies, whose cost has been increasing as lifespans have extended.
“We are cooperating fully with the investigation, which is in very early stages,” said Miller, saying also that she was not “overly concerned.”
The fourth quarter earnings of GE fell short from the expectations of analysts and shares were down by 3.4 percent at the time of writing.