Why Breaking Up General Electric May Be Hard to Do

General Electric’s profligate past is haunting its future. A fresh $6.2 billion post-tax charge relating to reinsurance — a business the company left over a decade ago — shows the challenge of managing a conglomerate. As the chief executive John Flannery struggles to reshape the $163 billion company, it’s another reason to consider a breakup.

In the 1980s and ’90s, the legendary Jack Welch built GE Capital, the finance unit, into a behemoth that threatened to overwhelm G.E.’s industrial operations. Jeff Immelt, who took over from Mr. Welch and recently handed the torch to Mr. Flannery, pruned the financial-services arm aggressively after the 2008 financial crisis.

G.E. sold or spun off its reinsurance operations between 2004 and 2006 but remained on the hook for certain risks, including long-term care policies. With people living longer and health care costs rising, G.E.’s exposure has climbed sharply. Hence the latest hit to earnings and the company’s plan to bolster its insurance reserves by $15 billion over seven years.

The “deeply disappointing” charge, as Mr. Flannery called it on Tuesday, raises the question of whether time bombs lurk elsewhere. GE Capital last year suspended dividends to its parent, which had been projected at some $4 billion over 2017 and 2018. Mr. Flannery said the subsidiary can finance itself, but with the charge boosting its debt-to-equity ratio to 7.1 times from 4.6 times, the risk is now that GE Capital could become a drain on its parent.

G.E.’s stock is down more than 40 percent over the past 12 months, compared with a 23 percent gain for the Standard & Poor’s 500 index. The slide has wiped more than $110 billion off the market capitalization of what was the world’s most valuable company at the turn of the century.

Mr. Flannery said he’s considering all options. Separating businesses prevents them from endangering each other, which makes a breakup or separate listings for the group’s power, health care and aviation businesses a serious possibility. G.E. took a step in that direction last year by merging its oil and gas division with Baker Hughes. Yet analysts at Cowen reckon G.E.’s parts are worth no more than $15 a share, less than its current stock price, making the financial benefits questionable. For Mr. Flannery, breaking up may be hard to do.