Genworth Remains All In on LTCi, Exec Says

by Cyril Tuohy,


Genworth Financial insists its recent sale to a Chinese investment company will not alter its commitment to the long-term care insurance market.

One company executive even painted a bright future for LTCi. However, market analysts are not so sure.

Some analysts point to recent moves by major LTCi players as evidence of the product's uncertain future. Among other moves, a Chinese investment company purchased Genworth for $2.7 billion, while a major competitor exited the LTCi market.

Brian Harrington, head of distribution with Genworth U.S. Life Insurance, sought to reassure hundreds of long-term care agents in a Nov. 14 memo. The Richmond, Va.-based company is committed to the LTCi business and “to providing solutions for this growing need,” the memo stated.

“We are working hard to earn the right to more of your business and appreciate your partnership, so that together we can help more families address the financial challenges of aging,” Harrington wrote.

“As the LTC insurance market continues to evolve, Genworth remains dedicated to providing leadership and advocacy,” he added. “Serving our policyholders is our top priority and we remain fully committed to our purpose — and to those who will help us achieve it.”

Rising claims, low mortality and lower-than-expected policy lapses have led to higher prices on many LTCi policies.

Genworth, like many other LTC insurers, is struggling with changes to assumptions and methodologies around claim terminations and benefit utilization, the company said in a filing.

Meanwhile, the extended period of low interest rates has gradually eroded the industry’s ability to earn higher rates of interest income on invested assets.

LTC Market Doubts Persist
Genworth increased its long-term care insurance claim reserves by hundreds of millions of dollars. Analysts have called for the company to place its long-term care business into runoff.

“We do not think long-term care is a good business,” wrote analyst Sean Dargan, in a 2014 research note.

Genworth’s financial troubles culminated with its sale to China Oceanwide in exchange for a massive cash infusion. The deal, announced last month, was revealed shortly before Genworth delivered third-quarter net operating losses of $405 million compared with the year-ago period.

On Nov. 10, in a move sure to cast further doubt on the viability of the long-term care market, John Hancock said it would no longer accept applications for individual LTC coverage after Dec. 2.

“There isn’t a lot of good news about this,” said insurance and financial advisor Gene A. Pastula, founder and president of Westland Financial Services in San Diego.

The recent developments add up to serious doubts about whether insurers can remain profitable in the long-term care market. Experts say the LTC market needs to be expanded if Congress is serious about shifting the burden for costs away from government programs like Medicaid and onto the private sector.

Genworth Plans Innovations in 2017
And yet, Genworth’s president and CEO Thomas McInerney seems to be steadily working through the company’s restructuring, confident that LTCi and Genworth’s place in it remain viable.

Genworth is one of about seven or eight LTC insurers left in the market, according to the American Association for Long Term Care Insurance. It expects to close on the China Oceanwide deal by the middle of next year, the company said.

Genworth retains important global market share positions with thousands of LTC policies in-force. It also owns - along with a mortgage insurance unit - a thriving group LTC business covering thousands of employees working for Fortune 1000 companies.

U.S. regulators granted the company premium increases over the past several quarters and demographic trends would seem to point to robust demand for LTCi products from aging populations in the U.S., Europe and China.

Next year, Genworth plans to introduce a new electronic process for LTC applications and to streamline underwriting procedures to shorten application approval times to less than three weeks, Harrington said.

Genworth does not manufacture hybrid LTC products, which typically come in the form of riders to augment a life insurance policy or an annuity, but the company is looking at such products, he added.

The hybrid segment has seen rapid growth recently as consumers seem drawn to the flexibility of a long-term care rider atop a life insurance policy or an annuity.

LTCi companies reported 129,000 individual policy sales in 2014, down from a high of 754,000 policy sales in 2002, according to the Center for Insurance Policy and Research.

In 2013, insurance companies sold 305,068 individual life and annuity products with accelerated LTC riders, compared with 72,736 life and annuity products with the riders in 2009, the CIPR study found.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years.