General Electric is exiting the insurance business by selling its Electric Insurance Company to RiverStone International (“RiverStone”), which specializes in managing discontinued insurance operations and granting the renewal rights for Electric’s personal lines policies to Plymouth Rock Assurance.
This move is part of GE’s previously announced corporate restructuring into three separate public companies. See Agency Checklists’ August 1, 2023, article, “AM Best Affirms GE’s Electric Insurance Company’s Excellent Ratings Amid Pending Sale.”
Driving the Exit is GE’s Corporate Restructuring
Electric Insurance’s exit comes as parent company GE executes a sweeping corporate reorganization initially announced in 2021 – separating the conglomerate into three stand-alone companies.
With GE Healthcare already spun off in January 2023 and GE’s remaining businesses set to split into separate energy and aviation entities in 2024, the strategic rationale for an internal insurance subsidiary focused on GE employees, alumni, and commercial policies has evaporated.
GE books a $109 million loss on the sale of its insurer
Electric Insurance had assets totaling $541 million against liabilities of $378 million as of the year-end 2023. In the third quarter of 2023, GE entered into a definitive agreement with RiverStone to divest itself of the insurer by the first half of 2024, pending the satisfaction of regulatory mandates and customary closing prerequisites.
Per its 10K filing, GE booked the sale on its financial statements for the year concluding on December 31, 2023, noting “a $109 million loss under ‘Other income (loss),’ underscoring the financial implications of this strategic decision in our Statement of Earnings.”
Background of Electric Insurance
GE established Electric Insurance in 1966 as a subsidiary of Electric Mutual Liability Insurance to write personal lines for GE employees and former employees and provide commercial coverage for GE operations. This unique positioning allowed Electric Insurance to develop tailored offerings for GE-owned businesses and their employees.
Electric Insurance currently provides:
- Commercial and personal lines coverage in all 50 states, Washington DC, Puerto Rico, and Canada
- The personal lines offerings include auto, homeowners, and umbrella, largely for current and former GE employees and through direct marketing and independent agents to the general public.
- Commercial lines like workers’ compensation, commercial auto, and general liability are primarily for GE businesses and written on a retrospectively rated basis.
Ten-Day Notice to File Hearing Request on Withdrawal Plan
On February 8, 2024, Massachusetts Insurance Commissioner Gary Anderson formally notified the Commonwealth Automobile Reinsurers (CAR) of Electric Insurance’s intent to exit the state’s private passenger auto insurance marketplace.
As part of the notification, Commissioner Anderson established a ten-day window for the CAR Governing Committee, CAR member companies, or agent associations to request a hearing on Electric’s withdrawal plan and its potential impact on the Massachusetts automobile insurance market. The ten-day period for requesting a hearing expires February 19, 2024.
Components of Electric’s Withdrawal Plan
Electric Insurance’s strategic withdrawal from Massachusetts incorporates the following:
- Non-renewal of all existing personal lines policies upon expiration.
- Cessation of new personal lines business in the state.
- Renewal rights transaction with Plymouth Rock. Eligible policyholders can transition to Plymouth Rock or other carriers.
- Regulatory compliance actions – proper notices, stakeholder engagement.
- Meeting obligations to Massachusetts Auto Insurance Plan (MAIP).
- Adjusting operations and staffing to handle runoff.
Understanding the Runoff Plan with RiverStone
Central to GE’s exit from the insurance business is a runoff plan transitioning legacy liabilities to RiverStone International, an expert in managing discontinued insurance book runoffs. The key aspects of the runoff plan are:
- RiverStone acquires Electric Insurance to administer legacy commercial and personal line portfolios.
- Divestment triggered by GE’s restructuring, making ongoing insurance operations unnecessary.
- A thorough auction process resulted in the RiverStone agreement to oversee orderly book runoff.
- Electric retains licenses and authorities for a structured market exit across states.
- Separate from Plymouth Rock, the renewal rights deal focuses on transitioning active policyholders.
Plymouth Rock Gains Valuable Renewal Rights
While RiverStone oversees Electric’s legacy portfolio exit, Plymouth Rock Assurance stands to gain new clients by securing Electric’s renewal rights. The multi-state agreement gives Plymouth Rock first access to offer replacement policies to Electric customers in Massachusetts and the five other states where it operates: Connecticut, New Hampshire, New Jersey, New York, and Pennsylvania.
Per the terms, Plymouth Rock will directly offer replacement auto, homeowners, and umbrella policies to about 90% of Electric’s auto and home clients, plus 35% of umbrella policyholders. Electric’s 45 yacht insurance clients will also receive support in finding alternative coverage through Plymouth Rock’s network of affiliate insurers and agencies.
In the plan, Electric notes that Plymouth Rock has “completed 23 similar insurance transactions since 1991, including 15 replacement carrier or renewal rights transactions.”
Electric will start winnowing down its 280 employees
Electric’s withdrawal plan advises that the Company has 280 employees presently. After RiverStone acquires the company, it intends to retain sufficient staffing levels to service the runoff of its legacy business (personal and commercial lines). Since Electric is a Massachusetts-domiciled insurer, the Massachusetts Division of Insurance must approve the acquisition.
Any employees not needed to service the runoff claims will receive 60 days notice of their termination and severance benefits provided by the General Electric Employee Benefits Program.
According to Electric, “There is no plan to transfer any employees to Plymouth Rock.”
Implications for Policyholders
Under the plan, most impacted policyholders should find the transition process relatively seamless. The transition process includes:
- A renewal rights sale involves 6,077 auto policies, 4,943 homeowner policies, and 1,770 umbrella policies based on July 2023 figures.
- Plymouth Rock expecting to make offers to 90% of auto and homeowners policyholders and 35% of Electric’s umbrella clients.
- Yacht policies getting assistance in securing alternative coverage.
- The withdrawal plan’s communication provision includes the proposed information packages on transition resources.
- All existing policies continue until non-renewal at expiration following notice periods.
A quality replacement option for its policyholders
Electric Insurance concludes its withdrawal plan by stating: “The Company believes the replacement transaction negotiated with Plymouth Rock, a leading insurer in the Commonwealth, provides its Massachusetts policyholders with quality replacement options for their Company policies.”
