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AM BestTV: General Electric's Long-Term Care Exposure Casts Wide Shadow, Say AM Best Analysts

OLDWICK, N.J.

In this AMBestTV episode, Erik Miller and Jason Hopper, associate directors with AM Best, explain why long-developing problems with long-term care insurance have thrust General Electric (GE) and the wider long-term care industry into the spotlight. Click on http://www.ambest.com/v.asp?v=ltc919 to view the entire program.

Miller spoke about how AM Best views long-term care as having lower creditworthiness compared with other life/health insurance products.

“AM Best considers long-term care one of the most risky products that it monitors,” said Miller. “It is not just the number of assumptions that go into it, but the duration of the product. Due to the product being a long-term tail product, even small revisions to the assumptions can lead to large changes in reserves. Additionally, if GE’s subsidiaries could not make the shortfall, GE itself would be liable and that has the potential of having a significant impact on the overall company.”

Hopper discussed reserves at the GE insurance subsidiaries with long-term care exposure at Employers Reassurance Corporation and Union Fidelity Life Insurance Company (collectively referred to as the ERAC Group).

“A little over half of the ERAC Group’s total reserves, or roughly $28 billion, are in long-term care policies,” he said. “This makes for more of a risky profile given the repeated need to make additional reserve contributions over a number of years, based on initially inaccurate actuarial assumptions. Nevertheless, GE is not the only company that needs to continue to shore up its continued long-term care reserves; this is more of an industry-wide phenomenon.”

To access a copy of this commentary, titled, “GE’s Long-Term Care Exposure Magnifies Counterparty Risk for Several Insurers,” visit http://www3.ambest.com/bestweek/purchase.asp?record_code=289174.

Recent AMBestTV episodes include:

  • Health Insurers See Strong Results, Accommodate ACA, Say AM Best Analysts: Sally Rosen, senior director, Doniella Pliss, director and Jason Hopper, associate director, all of AM Best, said U.S. health insurers have continued to adapt to changes brought about from the Patient Protection and Affordable Care Act and its modifications: http://www.ambest.com/v.asp?v=aca919.
  • Rated U.S. Property/Casualty Mutual Insurers See Improved Results, Says AM Best Senior Financial Analyst: Kimberly Muccia, senior financial analyst, AM Best, said fewer catastrophe losses in 2018, along with better underwriting performance by smaller mutuals, led to better overall results for AM Best-rated U.S. property/casualty (P/C) mutual insurers: http://www.ambest.com/v.asp?v=mutuals919.
  • From the InsureTech Connect Conference: Application Program Interfaces Help Fuel the Insurtech Boom: A panel of insurance technologists examines the growth and advantages of application program interfaces: http://www.ambest.com/v.asp?v=apipanel919.
  • Energy Risks Dominate MENA Reinsurance Sector, Says AM Best Director: Salman Siddiqui, director of analytics, AM Best, said large European insurers are key players in the Middle East, with local reinsurers playing a follower role: http://www.ambest.com/v.asp?v=globalremena919.

AM BestTV covers exclusive AM Best and insurance industry information and reports, targeted topics and key developments in the insurance, reinsurance and related sectors daily. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View AM BestTV episodes at http://www.ambest.tv.

AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com

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