The Kansas Insurance Department said today that it’s taking a new attack on General Electric Co.’s reinsurance business accounting seriously but believes that the author has an incomplete understanding of the reinsurance unit’s finances.
Harry Markopolos, an accounting fraud investigator, asserted last week that GE needs to add $18.5 billion to its long-term care insurance (LTCI) reinsurance reserves soon, and that the company has hidden the state of the LTCI reinsurance unit’s finances from investors.
Markopolos said in a disclaimer accompanying the report that members of his company have investments that could rise in value if his report helps make the price of GE’s stock fall.
The Kansas department is the lead regulator for GE’s reinsurance business.
“The Kansas Insurance Department takes seriously all allegations of fraud or misconduct,” department officials said in the statement.
The department first learned about Markopolos’s concerns from the media, officials said.
Department officials put Markopolos’s disclosure about the possibility that members of his company could profit from a drop in GE’s share price in the statement, in italics.
The department routinely reviews news articles and outside reports for information about risks that might affect the insurers the department regulates, and those insurers’ affiliates, officials said.
“After initial review, components of this particular report appear fairly simplistic in nature and don’t appear to incorporate certain technical reserve considerations that were considered during the department’s most recent financial examination as of Dec. 31, 2017, and the annual analysis review of the confidential actuarial opinion memorandum at Dec., 2018,” officials said.
Wall Street’s View
Investors’ sentiment seemed to be leveling off today.