General Electric's (NYSE:GE) surprise disclosure of a $6.2B charge related to its legacy reinsurance business triggered a nearly 3% drop in the shares - the biggest in more than two months - and some analysts say it could be just the beginning.
Cowen analyst Gautam Khanna says a GE breakup may not be economical, as the company’s current share price is now worth more than the sum of its many parts; Khanna says GE Capital’s $15B of cash payments through 2024 related to its divested insurance portfolio "raises concerns about eventual Industrial cash infusions to Capital, and reinforces our view that the sum-of-the-parts value of GE is below the current stock price."
RBC's Deane Dray says "our prior experience has been that most reserve charges for distressed GE Capital businesses are usually inadequate in size and necessitate follow-on charges in subsequent years... We would not be surprised to see further charges related to GE Capital insurance businesses."
In a bit of good news, GE's credit ratings are reaffirmed by Moody's, which "estimates that GE Capital's plan will restore leverage to the company's September levels within two years and to within a more acceptable long-term range of 11%-12% within three years."
Now read: GE: Ugly Quarter Coming Up »
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