- GE said this week that it was looking to cut its exposure to long-term care, which has haunted the company even though it stopped writing insurance more than a decade ago.
- On a conference call on Tuesday announcing a partial break-up of the conglomerate, GE chief executive John Flannery said: “ We are aggressively working on actions and alternatives to mitigate, reduce or eliminate our exposure to long-term care insurance.“
Apollo affiliate suggests acquiring some or all of the troubled long-term care business
Athene Holding, the life insurance affiliate of private equity firm Apollo Global Management, has expressed interest in acquiring all or parts of General Electric’s troubled long-term care insurance business, according to two people familiar with the matter.
GE said this week that it was looking to cut its exposure to long-term care, which has haunted the company even though it stopped writing insurance more than a decade ago.
In January, GE announced that it would have to contribute an extra $15bn in cash over the next six years to increase reserves at North America Life & Heath, a reinsurance business with $30bn in assets. NALH mainly wrote long-term healthcare insurance for the elderly, along with structured litigation settlement annuities.
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Talks with Athene are at an early stage and no transaction is imminent, according to the people familiar with the matter, and it is likely that GE will seek talks with multiple potential buyers.
On a conference call on Tuesday announcing a partial break-up of the conglomerate, GE chief executive John Flannery said: “ We are aggressively working on actions and alternatives to mitigate, reduce or eliminate our exposure to long-term care insurance.“
The GE reinsurance business had remained with the company even as it had divested primary insurers like Genworth Financial and ERC more than a decade ago. The business was in “run-off” mode as new policies had not been written since 2006.
Long-term care insurance had been purchased by working-age adults in the 1980s and 1990s, to be used to help pay for nursing home care. However, exploding healthcare costs and longer lifespans meant that insurers had not collected nearly enough in premiums to pay out benefits.
Athene was formed by Apollo in 2009 to buy distressed life insurance assets whose premiums could be managed by Apollo for sizeable fees. Athene today has $100bn in assets, which have helped swell Apollo’s credit division to $165bn in assets under management, up from just $22bn in 2009.
The private equity firm owns one-tenth of Athene, which went public in 2017, and it maintains 45 per cent of the voting power.
GE, Athene and Apollo all declined to comment on their talks.
Date: June 29, 2018
Source: Financial Times