SEC investigating GE
$6.2B insurance-related charge at issue.
A federal regulator is investigating General Electric’s recently disclosed $6.2 billion insurance-related charge, the struggling conglomerate disclosed Wednesday while reporting fourthquarter earnings.
The Securities and Exchange Commission investigation also focuses on GE’s revenue recognition and controls for long-term service agreements and is in its early stages, Jamie Miller, the company’s chief financial officer, told Wall Street analysts during a conference call.
GE is “cooperating fully” with the investigation, she said, adding that the financial issue had been “exhaustively reviewed” by the company.
“There’s nothing here that I’m overly concerned about,” Miller said . “But look, if I see something, we’ll deal with it.”
The insurance charge stems from billions of dollars in higher-than-expected costs for coverage of longterm-care policies, the company said last week. The SEC declined to comment on the investigation.
GE also disclosed that it would restate 2016 and 2017 financial results as it adjusts the way the company’s accounting is reported to comply with new revenue recognition rules around the long-term service contracts.
“This doesn’t change anything related to our cash balances or cash flows,” Miller said.
The company’s stock, which traded roughly 2% higher in premarket trading, closed nearly 2.7% lower at $16.44 a share Wednesday.
Shares of GE, a Dow component, have lost roughly 45% of their value since this time last year.
The investigation revelation came as GE reported a $9.83 billion loss for the fourth quarter, driven in part by
$11 billion in previously announced cumulative charges linked to the insurance business and the federal tax overhaul.
The disappointing results included a 15% year-over-year loss for GE’s power division and a similar decline in the company’s renewable energy unit. The company in December announced
12,000 job cuts in the power business as it copes with energy sector changes.
GE CEO John Flannery told financial analysts during the conference call that the power business was “challenging.” He also cited “execution misses” by the company as one driver of the disappointing results.
Nonetheless, the company stood by its forecast of $1 to $1.07 adjusted earnings a share for 2018, citing financial strength in GE’s health care and jet engine businesses.
GE presented the financial results one week after Flannery told Wall Street analysts he and other executives are weighing a potential breakup of the iconic company familiar to generations of Americans for home appliances, health care, jet engines and more.
Flannery disclosed no new details Wednesday about an ongoing analysis of the corporate operating structure beyond telling financial analysts: “There will be a GE in the future, but it will look different than it does today.”
He took on the top job from predecessor Jeffrey Immelt in August after the company had moved to dismantle most of its GE Capital financial business.
Flannery launched a broader corporate turnaround effort focused on its power, aviation and health care businesses.
GE said its quarterly loss amounted to a loss of $1.13 in net earnings a share.