GE under investigation from US regulator after $6.2bn charge

General Electric is facing an investigation from the US Security and Exchanges Commission after it admitted to taking a $6.2bn after-tax charge for insurance liabilities in the fourth quarter of last year.

The charge stemmed from billions of dollars of unexpected costs for coverage of long-term care policies. The company has also claimed that it needed to pay an additional $15bn to cover these insurance liabilities.

The investigation will focus on GE’s revenue recognition and controls for long-term service agreements.

Although General Electric has not executed new insurance business since 2006 it still has to deal with obligations and contracts written years ago. Rising longevity means that the cost of this long-term care has been very high.

GE reported a loss of $9.6bn in the fourth quarter of 2017 blaming the insurance liabilities, problems in the manufacturing of products for the power industry sector and Trump’s tax reform.

The company will have to restate its 2016 and 2017 financial results to match the way the company’s accounting is reported.

“We’ve been notified by the SEC that they are investigating the process leading to the insurance-reserve increase and fourth-quarter charge, as well as GE’s revenue recognition and controls for long-term service agreements,” said chief financial officer Jamie Miller.

She also said that the company would be cooperating with the probe and that she wasn’t “overly concerned”.

The company’s stock was down 1% on Wednesday.