In the mid-2000s, the company decided to spin-off insurance assets into Genworth and Swiss Re but chose to retain their insurance liabilities. GE had a history of poor decisions that stacked on several losses, Aguilar says. While it recovered for a time, that proved to be only a short-lived trend. The financial crisis laid this strategy bare when it lost its AAA rating in 2009, Aguilar notes.ĭuring the financial crisis, GE’s value in the stock market collapsed, falling to just 15% of its peak. These included huge liabilities around subprime mortgages, long-term-care insurance, and Polish mortgages denominated in Swiss francs. At one point, GE Capital was greater than 50% of GE’s earnings, and they had lots of underappreciated risks that became visible during the crisis, he says. Aguilar notes that GE overly relied on its financial unit, GE Capital, to fund GE’s operations, which moved it past its industrial core competency. "But mostly it was a combination of a deterioration of culture and poor capital allocation decisions.” Now, by splitting into three companies that focus on aviation, healthcare, and energy, “it allows each of its businesses to determine their own destiny and allows investors to pick which combination of GE businesses they like best.”Īnother big hit to GE’s reputation came in the 2008 global financial crisis. What went wrong for the company over the past 20 years? “A lot,” says Aguilar.
But since 2000, GE’s stock price has fallen 50%, a time when the Morningstar Large Cap Index returned 350%. This week, GE announced it is splitting into three companies, a move that Morningstar analyst Josh Aguilar-and the stock market-applauded.
Despite its massive global business presence, it is now the 75th largest company in the U.S. But in the past 20 years, GE has seen a massive fall from grace. When GE held the crown, it was a sprawling industrial conglomerate with businesses that ranged from credit cards to appliances and jet engines. That title is now closely fought among technology-driven giants ( AMZN), Microsoft ( MSFT), and Apple ( AAPL). Seasoned investors may have forgotten-and newer investors may find it hard to believe-but two decades ago, General Electric ( GE) was the most valuable company on earth.