US Securities and Exchange Commission Sends Notice to GE to Clarify Insurance Reserve Accounting Issues

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[Asia Economy Reporter Jeong Hyunjin] General Electric (GE) of the United States announced on the 6th (local time) that it received a 'Wells notice' from the U.S. Securities and Exchange Commission (SEC) regarding accounting issues related to insurance contract reserves.

According to the Wall Street Journal (WSJ) and others, the SEC and the U.S. Department of Justice have been investigating GE's accounting practices for two years following GE's announcement of a large-scale write-down in its insurance division in 2018, and subsequently sent the Wells notice to GE. Foreign media explained that a Wells notice is a document sent by the SEC to provide an opportunity for explanation before taking enforcement action, and by itself does not indicate specific allegations. However, since it is issued before legal actions, some foreign media suggested that GE may soon face a lawsuit.

In January 2018, GE announced the need to add $15 billion (approximately 17.4 trillion KRW) to its insurance contract reserves. This was a delayed acknowledgment of liabilities related to long-term care insurance acquired by GE Capital within its insurance business. The total amount reached $38 billion. Additionally, GE is under SEC investigation regarding revenue recognition in its power division and the handling of acquisition-related costs.

GE stated that it is cooperating with the SEC's investigation related to this Wells notice and will proceed with the necessary procedures.

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