If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(Bloomberg)   GE to take a loss of $6.2 billion on its earnings related to losses it incurred after it apparently decided selling long-term medical care insurance to old people was a good idea. Because really, how long were those geezers gonna live anyway?   ( bloomberg.com) divider line
    More: Fail, Dow Jones Industrial Average, long-term care, General Electric, Long term care insurance, long-term care market, GE, Finance, GE Capital  
•       •       •

829 clicks; posted to Business » on 17 Jan 2018 at 4:15 AM (26 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



9 Comments     (+0 »)
 
View Voting Results: Smartest and Funniest
 
2018-01-17 05:38:58 AM  
That was in a period when they knew medicine was only going to get more expensive, and they still underestimated how stupid high it would go.
 
2018-01-17 08:36:01 AM  
Karmically, they were sure they were making a killing selling expensive insurance to people who were terrified about rapidly inflating care costs.
 
2018-01-17 10:53:17 AM  
I work for a contractor for GE Aviation. Management likes to point out that the division is still quite profitable. I like to point out that means they can get a good price when they sell the division to a Canadian-Korean conglomerate in Q3.
 
kab
2018-01-17 10:57:39 AM  
It's almost as if effectively reducing your product line makes you that much more susceptible to financial setbacks.
 
2018-01-17 01:01:46 PM  
The article writer clearly doesn't understand long term care insurance.  The "cost of care" is irrelevant - long term care pays out a predetermined maximum dollar amount per day, and has a lifetime maximum payout.  You decide how much you will want per day, and the premium is set accordingly.  The idea is to pay for long term care at a nursing home, or an in-home aide.  Your medical expenses will be paid for by medicare or your medical insurance, not long term care.  Of course, if more people than expected live to burn through to their maximum lifetime benefits, that will be costly.

The three elements that are causing the problem are a)persistency is waaaay higher than the insurers expected, b) even more importantly, investment returns on bonds have been far, far less than priced for and have been stubbornly persistent for much longer than anyone expected, and c) people are living longer and burning through a higher percentage of maximum lifetime benefits than priced for.
 
2018-01-17 03:36:36 PM  

Priapetic: The article writer clearly doesn't understand long term care insurance.  The "cost of care" is irrelevant - long term care pays out a predetermined maximum dollar amount per day, and has a lifetime maximum payout.  You decide how much you will want per day, and the premium is set accordingly.  The idea is to pay for long term care at a nursing home, or an in-home aide.  Your medical expenses will be paid for by medicare or your medical insurance, not long term care.  Of course, if more people than expected live to burn through to their maximum lifetime benefits, that will be costly.

The three elements that are causing the problem are a)persistency is waaaay higher than the insurers expected, b) even more importantly, investment returns on bonds have been far, far less than priced for and have been stubbornly persistent for much longer than anyone expected, and c) people are living longer and burning through a higher percentage of maximum lifetime benefits than priced for.


That sounds like the cost of care is a very big factor. More people kept paying premiums because they were seeing how expensive covering those costs themselves would be. And living longer is only one factor in paying out higher percentages of the predetermined maximums - lifespan and costs have both been increasing, and costs a lot faster.
 
2018-01-17 04:39:34 PM  

OccamsWhiskers: Priapetic: The article writer clearly doesn't understand long term care insurance.  The "cost of care" is irrelevant - long term care pays out a predetermined maximum dollar amount per day, and has a lifetime maximum payout.  You decide how much you will want per day, and the premium is set accordingly.  The idea is to pay for long term care at a nursing home, or an in-home aide.  Your medical expenses will be paid for by medicare or your medical insurance, not long term care.  Of course, if more people than expected live to burn through to their maximum lifetime benefits, that will be costly.

The three elements that are causing the problem are a)persistency is waaaay higher than the insurers expected, b) even more importantly, investment returns on bonds have been far, far less than priced for and have been stubbornly persistent for much longer than anyone expected, and c) people are living longer and burning through a higher percentage of maximum lifetime benefits than priced for.

That sounds like the cost of care is a very big factor. More people kept paying premiums because they were seeing how expensive covering those costs themselves would be. And living longer is only one factor in paying out higher percentages of the predetermined maximums - lifespan and costs have both been increasing, and costs a lot faster.


That's not how it works.  You buy a long term care policy that will pay you your predefined benefit, such as $200 a day if you are unable to care for yourself.  So, every day you're an invalid they write you a check for $200.  If the cost of care goes up to $300, you don't get more money - you have to make up the difference yourself.  Now, the number of days that they have to write you a check - that is a concern, since they price the policies assuming some average rate of survivorship, but even that is capped at a lifetime maximum.
 
2018-01-17 08:02:36 PM  

Fabric_Man: I work for a contractor for GE Aviation. Management likes to point out that the division is still quite profitable. I like to point out that means they can get a good price when they sell the division to a Canadian-Korean conglomerate in Q3.


More likely, the French (Safran) will buy up the division.  Already, they're heavily involved with the biggest selling GE engines (CFM-56, etc).

Nuclear might go to Hitachi (or likely, just die.  The BWR is dead thanks to TEPCO).

Automation might go to Emerson - they wanted Rockwell, offered 29billion, got told to stuff it.

The rest...Siemens (Healthcare), some generic random firms (other stuff), and I suspect that the transportation division is flat out dead.  Seriously, a 'train' company that only makes a niche heavyweight locomotive for the North American market, with no competition?  Nobody needs that.

Maybe someone'll buy up Finance.

GE's dead.
 
2018-01-18 09:31:05 AM  
I used to work for GE Energy in the UK, they closed our factory last year.
 
Displayed 9 of 9 comments

View Voting Results: Smartest and Funniest

This thread is closed to new comments.

Continue Farking

On Twitter





Top Commented
Javascript is required to view headlines in widget.
  1. Links are submitted by members of the Fark community.

  2. When community members submit a link, they also write a custom headline for the story.

  3. Other Farkers comment on the links. This is the number of comments. Click here to read them.

  4. Click here to submit a link.

Report