Assume you are asked as part of an audit of GE's insurance business to assess fraud risk, ehat would you include in your report and why Required information The following information applies to the questions displayed below ) On January 30, 2018, General Electric (GE) announced that it was taking an after tax charge of $6 2 billion in the December 31, 2017 financial statements and additional cash funding of $15 billion in statutory capital contributions to its insurance subsidiary GE acknowledged a Securities and Exchange Commission investigation into the process leading to the sudden multibillion dollar charge and an additional review of revenue recognition and controls over its long term contracts When GE first announced the charge on January 16, 2018, which related to the remnants of its long term care reinsurance portfolio, CEO John Flannery told analysts he had 'underappreciated the risk in this book (A book of business, in the context of insurance, is a database or book that lists all of the insurance policies the insurance company has written GE's North America Life Health subsidiary is a reinsurance portfolio the company held on to after mostly exiting the business between 2004 and 2006 A reinsurer buys the right to receive premiums from the primary insurers that deal directly with consumers in exchange for eventually shouldering any potential losses Those primary insurers underwrite and administer the policies and process claims when they come in The majority of GE Capital's remaining Insurance business 60 percent, is related to long term care insurance At the time Flannery told analysts, GE believed that a gradual runoff of existing claims no new business has been added since 2006 would be more profitable than selling the whole business Unfortunately, Flannery said, GE didn't anticipate the low Interest rate environment, low policy lapse rates, and higher claims cost that it is seeing now GE warned analysts as long ago as the second quarter of 2017 that a review of its claims experience and reserves was under way, and any charge would happen in the fourth quarter In its 2017 second quarter filing with the SEC, GE wrote We have recently experienced elevated claim experience for a portion of our long term care insurance products, which may result in a deficiency in reserves plus future premiums compared to future benefit payments Should such a deficiency exist, we would record a charge to earnings in the second half of 2017 upon completion of this review And in its third quarter 2017 filing with the SEC, GE warned about the potential charge again but with more details We have recently experienced elevated claim experience for a portion of our long term care insurance contracts and are 0 This question will be sent to your instructor for grading We have recently experienced elevated claim experience for a portion of our long term care insurance contracts and are conducting a comprehensive review of premium deficiency assumptions across all Insurance contracts, including a reassessment of future claim projections for long term care contracts that will be incorporated within our annual test of future policy benefit reserves for premium deficiencies in the fourth quarter of 2017 We would record a charge to earnings for any premium deficiencies in the fourth quarter of 2017 upon completion of this review Accounting experts were expecting the review to result in some financial charge, but not on this scale The review of business always carries the risk of unexpected findings, yet the magnitude of the $6 2 billion charge is far more staggering than the $3 billion that the market anticipated, research firm Audit Analytics wrote in a note to subscribers At its annual meeting last November, chief financial officer Jamie Miller told shareholders that GE was likely to take a charge of more than $3 billion Changes in insurance claim reserves typically are disclosed in advance as changes in accounting estimates related to ired to disclose adjustments that are material In its note, Audit Analytics wrote it looked at 30 Insurance companies and found 60 changes in accounting estimates filed with the SEC for adjustment to the long term care loss reserves filed since 2004 The last time GE disclosed any changes in reserves even partly attributable to the long term care reinsurance portfolio according to Audit Analytics, was in its 2004 annual report the same year it spun off the Genworth Financial business another insurance company GE wrote that liabilities, reserves, and annuity benefits were $4 5 billion higher than in 2003 and attributable to growth in annuities, long term care insurance, structured settlements, the effects of the weaker U S dollar, increases in loss reserves for policies written in prior years and 2004 U S hurricane related losses On the call when the charge was first announced, Chief Risk Officer Ryan Zanin told analysts that a large percentage of the policyholders in their book of business were sold the policies at a very early age and are only now reaching the prime claim paying period ages 80 and up Therefore, approximately 40 of inception to date claims have occurred in the last two years A GE spokeswoman told MarketWatch GE has tested the adequacy of its policy reserves for the runoff insurance business every year through premium deficiency testing In all prior years Zanin said on the call with analysts, these A GE spokeswoman told MarketWatch GE has tested the adequacy of its policy reserves for the runoff insurance business every year through premium deficiency testing In all prior years, Zanin said on the call with analysts, these tests resulted in a positive margin, which, under GAAP requires that original assumptions above the book remain locked JP Morgan analyst Stephen Tusa asked GE Chief Financial Officer Jamie Miller if the company was happy with its auditor If these guys reviewed this stuff every year for the last several years and this is kind of a result of that doesn't that kind of raise questions he asked Flannery said that he was not planning an auditor change KPMG, the GE auditor for more than 100 years, is also the external auditor for Genworth Financial A spokesman for KPMG emailed MarketWatch to say this We are confident that our audits and reviews were appropriately performed in accordance with applicable professional standards, and we stand behind our work Our client confidentiality obligations prohibit us from commenting further Assume you are asked as part of an audit of GE's Insurance business to assess fraud risks, what would you include in your report and why

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Assume you are asked as part of an audit of GE's insurance business to assess fraud risk, ehat would you include in your report and why  Required information  The following information applies to the questions displayed below ) On January 30, 2018, General Electric (GE) announced that it was taking an after tax charge of $6 2 billion in the December 31, 2017 financial statements and additional cash funding of $15 billion in statutory capital contributions to its insurance subsidiary  GE acknowledged a Securities and Exchange Commission investigation into the process leading to the sudden multibillion dollar charge and an additional review of revenue recognition and controls over its long term contracts  When GE first announced the charge on January 16, 2018, which related to the remnants of its long term care reinsurance portfolio, CEO John Flannery told analysts he had 'underappreciated the risk in this book   (A book of business, in the context of insurance, is a database or  book  that lists all of the insurance policies the insurance company has written   GE's North America Life   Health subsidiary is a reinsurance portfolio the company held on to after mostly exiting the business between 2004 and 2006  A reinsurer buys the right to receive premiums from the primary insurers that deal directly with consumers in exchange for eventually shouldering any potential losses  Those primary insurers underwrite and administer the policies and process claims when they come in  The majority of GE Capital's remaining Insurance business  60 percent, is related to long term care insurance  At the time  Flannery told analysts, GE believed that a gradual runoff of existing claims   no new business has been added since 2006    would be more profitable than selling the whole business  Unfortunately, Flannery said, GE didn't anticipate the low Interest rate environment, low policy lapse rates, and higher claims cost that it is seeing now  GE warned analysts as long ago as the second quarter of 2017 that a review of its claims experience and reserves was under way, and any charge would happen in the fourth quarter  In its 2017 second quarter filing with the SEC, GE wrote   We have recently experienced elevated claim experience for a portion of our long term care insurance products, which may result in a deficiency in reserves plus future premiums compared to future benefit payments  Should such a deficiency exist, we would record a charge to earnings in the second half of 2017 upon completion of this review   And in its third quarter 2017 filing with the SEC, GE warned about the potential charge again but with more details   We have recently experienced elevated claim experience for a portion of our long term care insurance contracts and are 0 This question will be sent to your instructor for grading   We have recently experienced elevated claim experience for a portion of our long term care insurance contracts and are conducting a comprehensive review of premium deficiency assumptions across all Insurance contracts, including a reassessment of future claim projections for long term care contracts that will be incorporated within our annual test of future policy benefit reserves for premium deficiencies in the fourth quarter of 2017  We would record a charge to earnings for any premium deficiencies in the fourth quarter of 2017 upon completion of this review   Accounting experts were expecting the review to result in some financial charge, but not on this scale   The review of business always carries the risk of unexpected findings, yet the magnitude of the $6 2 billion charge is far more staggering than the $3 billion that the market anticipated,  research firm Audit Analytics wrote in a note to subscribers  At its annual meeting last November, chief financial officer Jamie Miller told shareholders that GE was likely to take a charge of more than $3 billion  Changes in insurance claim reserves typically are disclosed in advance as changes in accounting estimates related to ired to disclose adjustments that are material  In its note, Audit Analytics wrote it looked at 30 Insurance companies and found 60 changes in accounting estimates filed with the SEC for adjustment to the long term care loss reserves filed since 2004 The last time GE disclosed any changes in reserves even partly attributable to the long term care reinsurance portfolio according to Audit Analytics, was in its 2004 annual report the same year it spun off the Genworth Financial business  another insurance company  GE wrote that liabilities, reserves, and annuity benefits were $4 5 billion higher than in 2003 and  attributable to growth in annuities, long term care insurance, structured settlements, the effects of the weaker U S  dollar, increases in loss reserves for policies written in prior years and 2004 U S  hurricane related losses   On the call when the charge was first announced, Chief Risk Officer Ryan Zanin told analysts that a large percentage of the policyholders in their book of business were sold the policies at a very early age and are only now reaching the prime claim paying period ages 80 and up  Therefore, approximately 40  of inception to date claims have occurred in the last two years  A GE spokeswoman told MarketWatch   GE has tested the adequacy of its policy reserves for the runoff insurance business every year through premium deficiency testing   In all prior years  Zanin said on the call with analysts,  these A GE spokeswoman told MarketWatch   GE has tested the adequacy of its policy reserves for the runoff insurance business every year through premium deficiency testing  In all prior years, Zanin said on the call with analysts,  these tests resulted in a positive margin, which, under GAAP requires that original assumptions above the book remain locked   JP Morgan analyst Stephen Tusa asked GE Chief Financial Officer Jamie Miller if the company was happy with its auditor  If these guys reviewed this stuff every year for the last several years and this is kind of a result of that doesn't that kind of raise questions   he asked  Flannery said that he was not planning an auditor change  KPMG, the GE auditor for more than 100 years, is also the external auditor for Genworth Financial  A spokesman for KPMG emailed MarketWatch to say this   We are confident that our audits and reviews were appropriately performed in accordance with applicable professional standards, and we stand behind our work  Our client confidentiality obligations prohibit us from commenting further   Assume you are asked as part of an audit of GE's Insurance business to assess fraud risks, what would you include in your report and why

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