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General Electric Company (GE) has ousted chief executive officer (CEO) John Flannery after little more than a year at the helm of the flagging firm. He will be replaced at the top by board member Larry Culp who has a monumental task on his hands if the company wants to get close to its 2018 profit forecast.
The leadership change comes just months after GE announced it was looking for ways to shed its ever-deteriorating insurance business. The firm sold most of its insurance business to Genworth Financial in 2004, but since has struggled with its remaining run-off business.
In January, GE announced that its remaining insurance portfolio had around 300,000 policies that needed $15 billion in reserves to cover potential payouts - about $50,000 per policy. According to Reuters, many of GE’s insurance liabilities revolve around its long-term care (LTC) insurance policies because premiums have been unable to match soaring healthcare costs and extended life expectancy in the US.
Shareholders are unhappy with the firm, highlighted by the 35% shares crash so far this year and the staggering 45% dip in 2017 due to cash-flow shortages and weak sales. Some shareholders accused GE of hiding mounting insurance liabilities (which stood at $38 billion at the end of 2017) and concealing information about a US Securities and Exchange Commission (SEC) probe into the company’s insurance business.
As CEO, Flannery has been unable to stanch bleeding at GE and repair the firm’s tainted name. Bloomberg reported that the iconic corporation was worth just under $100 billion as of the close September 28, with its stock at around $11. It’s a long road ahead for Larry Culp.
