Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Life
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Actuarial Jobs by State

New York  New Jersey  Connecticut  Massachusetts 
California  Florida  Texas  Illinois  Colorado


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 01-16-2018, 10:53 AM
Jonas Grumby's Avatar
Jonas Grumby Jonas Grumby is offline
Chief Semiotician, Retired
CAS
 
Join Date: Oct 2001
Location: the lonesome prairie
Favorite beer: Beer is for closers
Posts: 8,789
Default General Electric's 6B+ writeoff for life and health

http://www.latimes.com/business/la-f...116-story.html

$6B on $28B or so of reserves seems massive, but I don't have a sense of how life and health reserves work....
Reply With Quote
  #2  
Old 01-16-2018, 12:44 PM
Klaymen's Avatar
Klaymen Klaymen is offline
Member
CAS
 
Join Date: Oct 2001
Studying for 2018 Las Vegas NABC
Posts: 19,195
Default

Quote:
Originally Posted by Jonas Grumby View Post
http://www.latimes.com/business/la-f...116-story.html

$6B on $28B or so of reserves seems massive, but I don't have a sense of how life and health reserves work....
Sounds like the problem is long-term care insurance. That's got to be much more uncertain than life or health reserving.
__________________

You make known to me the path of life; you will fill me with joy in your presence, with eternal pleasures at your right hand. (Psalm 16:11)
Reply With Quote
  #3  
Old 01-16-2018, 01:00 PM
msydlaske's Avatar
msydlaske msydlaske is offline
Member
SOA AAA
 
Join Date: Sep 2009
Location: NYC
Studying for High altitude hiking
College: Univ of Michigan - alum
Favorite beer: Liberty Ale (Anchor)
Posts: 73
Default

Yeah a lot of money. It's $9.5 bn GAAP basis, pretax, and GE has committed to making contributions of $15 bn to its insurer subsidiary over a bunch of years.

I had no luck getting any relevant detailed or even high level actuarial information from a cursory internet search. What few facts I found were that GE Captial spun off Genworth and lots of LTC business more than 10 years ago, but was forced to retain some (or a lot of) LTC reinsurance exposure to make the spinoff work.

Based on the SOA directory, Genworth seems to have a lot of LTC actuaries, but GE Capital less so. It would be great if an actuary from one or both of these organizations could shed some light on the relatively sudden GE Capital realization that reserves were inadequate.
__________________
Countdown
Reply With Quote
  #4  
Old 01-16-2018, 01:03 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,428
Default

Quote:
Originally Posted by Klaymen View Post
Sounds like the problem is long-term care insurance. That's got to be much more uncertain than life or health reserving.
And the issues with the business are hardly news. Low interest environment combined with early mispricing. Possibly comparatively new GE leadership has been convinced to take action now and reduce or eliminate future bleeding.

Full disclosure - some of my pension plan income is from the GE affiliate Employers Re. I don't have any special current insight into what's going on - I retired about 4 years ago.
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.

Last edited by JMO; 01-16-2018 at 01:05 PM.. Reason: revise wording about leadership decision
Reply With Quote
  #5  
Old 01-16-2018, 05:16 PM
Numbers Nerd's Avatar
Numbers Nerd Numbers Nerd is offline
Member
SOA AAA
 
Join Date: Sep 2001
Location: Midwest
College: University of Wisconsin
Favorite beer: Ale, Lager, you name it
Posts: 1,613
Default

Yes, I agree. They knew for a long time that their LTC reserves were inadequate. They simply were content to let the annual losses hurt a little every year instead of recognizing a big loss all at once. It is entirely possible that the tax rate change made it more economical to accelerate those losses into 2017.
Reply With Quote
  #6  
Old 01-16-2018, 07:17 PM
A Student A Student is offline
Member
Non-Actuary
 
Join Date: Dec 2001
Posts: 3,679
Default

Quote:
Originally Posted by Numbers Nerd View Post
Yes, I agree. They knew for a long time that their LTC reserves were inadequate. They simply were content to let the annual losses hurt a little every year instead of recognizing a big loss all at once. It is entirely possible that the tax rate change made it more economical to accelerate those losses into 2017.
Interesting point regarding the tax changes. On the life side, additional actuarial reserves would not be deductible, so they would have a stat loss, but not a tax loss. I'm not sure how it works on the LTC side - there is considerably more leeway on assumptions there, so maybe it was a change of assumptions and not booked as additional actuarial reserves.
Reply With Quote
  #7  
Old 01-17-2018, 06:37 AM
Marcie's Avatar
Marcie Marcie is offline
Member
CAS
 
Join Date: Feb 2015
Posts: 8,285
Default

Quote:
Originally Posted by Numbers Nerd View Post
Yes, I agree. They knew for a long time that their LTC reserves were inadequate. They simply were content to let the annual losses hurt a little every year instead of recognizing a big loss all at once. It is entirely possible that the tax rate change made it more economical to accelerate those losses into 2017.
IANALTCA, so help me out here: it looks like GE has disclosed that it knows that its reserves are/were ~$15B deficient, but they're only adding ~$6B now, committing to shore up the reserves over the next seven years. How is that viewed?

I can only imagine how that would be viewed by the domiciliary regulator if a P/C insurer made a similar disclosure about its reserves. Booking only a portion of the acknowledged deficiency could be seen as managing earnings/losses or 'cooking the books.'
Reply With Quote
  #8  
Old 01-17-2018, 12:31 PM
msydlaske's Avatar
msydlaske msydlaske is offline
Member
SOA AAA
 
Join Date: Sep 2009
Location: NYC
Studying for High altitude hiking
College: Univ of Michigan - alum
Favorite beer: Liberty Ale (Anchor)
Posts: 73
Default

Marcie - Since we have few facts to work with, it's hard to answer with assurance. Here are some thoughts
- The GAAP pre-tax loss was $9.5 bn not $6 bn. Still not $15 bn but closer.
- The stat number is payable over a period of time and might be a worst-case commitment insisted upon by Kansas DOI, subject to review in a few years. The GAAP amount is best estimate today.
- For instance the GAAP number might be based on assumed increases to investment yields over the next (say) 10 years, while the worst-case stat commitment might result from assumed continued crappy yields.
- Under GAAP it is silly for a company - if it has a choice - to recognize losses under very pessimistic assumptions, since if experience warrants newer more optimistic best estimate assumptions, these assumptions can not be used for financial reporting. The Company would be "locked in" to use of the 2017 assumptions unless more pessimistic assumptions were warranted.
__________________
Countdown
Reply With Quote
  #9  
Old 01-17-2018, 12:34 PM
jraven's Avatar
jraven jraven is offline
Member
 
Join Date: Aug 2007
Location: New Hampshire
Studying for nothing!
College: Penn State
Posts: 1,305
Default

Courtesy of GE's 8-K filing:
As a regulated insurance business, NALH is subject to a statutory accounting framework for setting reserves that requires the modification of certain assumptions to reflect moderately adverse conditions and other differences from the reserve calculation under GAAP. Under that framework, we estimate that GE Capital will need to contribute approximately $15 billion of capital to NALH over the next seven years. GE Capital plans to make a first capital contribution of approximately $3 billion in the first quarter of 2018 and expects to make further contributions of approximately $2 billion per year in each of the six following years, subject to ongoing monitoring by NALH’s primary regulator, the Kansas Insurance Department. GE Capital plans to fund the capital contributions with its excess liquidity and other GE Capital portfolio actions and does not expect to make a common share dividend distribution to GE for the foreseeable future.
IANALTCA either, but my guess would be that GE Capital will concurrently be booking impairments on a Statutory basis (and that they'll be worse on a Stat basis than under GAAP), and that will blow a hole in their surplus (of the NALH legal entity). (It sounds like this is run-off business, so there probably wasn't much incentive to have a lot of unrequired surplus parked there.) So they worked out a plan with their regulator to re-capitalize the business to a more regulator-acceptable level over a few years.
__________________
The Poisson distribution wasn't named after a fish -- it was named after a man ... who was named after a fish.

Last edited by jraven; 01-17-2018 at 12:37 PM..
Reply With Quote
  #10  
Old 01-17-2018, 02:08 PM
echo echo is offline
Member
 
Join Date: Nov 2002
Posts: 868
Default

Quote:
Originally Posted by Marcie View Post
IANALTCA, so help me out here: it looks like GE has disclosed that it knows that its reserves are/were ~$15B deficient, but they're only adding ~$6B now, committing to shore up the reserves over the next seven years. How is that viewed?

I can only imagine how that would be viewed by the domiciliary regulator if a P/C insurer made a similar disclosure about its reserves. Booking only a portion of the acknowledged deficiency could be seen as managing earnings/losses or 'cooking the books.'
Are you saying you think the Kansas Insurance Department treats Health and P&C (and life) insurance companies differently? If so, why do you think that?

I don't know, but I would imagine they would treat all insurance companies the same and would make paying liabilities a priority, regardless of the line of business.
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 03:42 PM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.22787 seconds with 9 queries