Wilfredo Lee/ AP
- A Friday Goldman Sachs note contrasted with the controversial General Electric whistleblower report, saying the conglomerate’s long-term care reserves "compare favorably to peers."
- Analyst Alex Scott compared GE’s reserves to Prudential’s block of individual policies, finding Prudential had about $66,000 reserves per life and GE held about $70,000 on the same metric.
- Harry Markopolos’ report alleged massive fraud in GE’s financial reports, and said that among the comparable players in the insurance industry, "either these 8 insurance companies filed false statutory financial statements with their regulators or GE’s financial statements are false."
- Watch GE trade live here.
Goldman Sachs says a key financial metric targeted in a controversial General Electric report holds up with insurance-industry peer Prudential’s numbers, contrasting the whistleblower Harry Markopolos.
In the report published on Thursday, Markopolos alleged that GE was hiding up to $29 billion in liabilities for its long-term care business, which covers claims like adult-care housing expenses.
Contrary to the allegation, GE‘s reserves per covered life "compare favorably to peers," Goldman analyst Alex Scott said in a note Friday.
Scott compared GE’s reserves with Prudential’s LTC1 block of individual policies, the metric he found to be "closest."
Prudential’s most comparable collection of policies represent about 35,500 lives, with 68% of the polices covering spouses, Scott said. The company’s LTC1 block holds $113,000 reserves per policy, and about $66,000 per life. GE’s similar policy holds about $70,000 per life.
"Going deeper into the peer group we find that GE’s reserve levels compare favorably to peers, though we find this rational as GE’s policies have more aggressive features," Scott said.
Scott’s note never explicitly references Markopolos’ report, but both documents focus on GE’s long-term care reserves. Goldman "received significant client interest" in the metric, Scott said.
Markopolos’ report said that publicly filed financial data might not be viable in comparing GE with eight major life insurance companies. The company uses "many of the same accounting tricks as Enron did" to hide critical and negative information, the report alleged.
"Either these 8 insurance companies filed false statutory financial statements with their regulators or GE’s financial statements are false," Markopolos said.
GE traded at $8.78 as of 1:15 p.m. ET, up about 21% year-to-date.
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