Why is GE performing better this week?
Investors holding battered General Electric stock and others who want to see the company do well will be excited by this morning’s pre-market jump … GE’s price value moved to a new $9 point before the bell.
This 2% jump follows close inspection of GE’s insurance holdings and general accounting practices by financial experts. Wolf Research analyst Nigel Coe reportedly called findings “the apogee of the GE bear case” (hint: that’s a compliment).
Many investors didn’t even know that GE was in the insurance business at all. So some may undoubtedly get a rude awakening upon the realization that GE not only sells long-term insurance policies but is also mired in risk related to its insurance business.
GE Sells Insurance?
Reuters reported in March how the company had been putting aside enormous amounts of money to cover losses on long-term care insurance policies. Specifically, GE had to shell out to the tune of no less than $15 billion to cover risk on 300,000 long-term care policies written over 10 years ago.
After probing by the U.S. Securities and Exchange Commission and an investor lawsuit, auditors began questioning whether $15 billion was enough.
The story shows the notoriously risky nature of policies that provide for individuals to get long-term skilled nursing care near the end of life. That’s all as experts are warning Americans that they need such policies, and insurance companies are trying to come up with ways to offer them while staying whole.
It’s a reflection of how the sky-high pricing of medical care can play out in providing nursing home beds.
Trouble Reflected in the Candlesticks
GE’s price chart tells its own story … The stock fell enormously in 2018, nearly by half. It started around $20 per share and bottomed out at the beginning of 2019 at about $7.
Year over year, GE stock went from just over $12 to a low of $6.70 last December before rising back up to above $10.
Six-month and one-month charts show starting points of around $10 each. That’s where GE made efforts to crest above that point in May, June, and July, before leaving those resistance points and plummeting to around $8 on August 15, then under $8 on August 28.
But the short-term price history tells a different tale as GE began the Labor Day weekend at $8.00. As of this morning, the stock is rising after the bell — jumping another 10 cents to above $9.10. That builds on yesterday’s 40-cent rise from around $8.30 to nearly $8.75.
That’s a two-day rally with an impressive turnaround from GE’s prior slumps.
While GE has a long way to go, it appears that the culmination of a mea culpa provided by company leaders on financial reserves is working.
There’s also news that analysts expect GE earnings per share to hit 62 cents per share in 2019, which may also have an effect on price action. The end of the year may be telling for GE as attempts to stanch the flow from the long-term care insurance business to help pad the company’s bottom line in all of its other endeavors.
