Rate Hike Helps Genworth LTCI Sales

Because of the increase in policy terminations and the increase in premium rates, the ratio of benefits paid to premiums held steady at about 67%, Genworth says.

Genworth Chairman Michael Fraizer said during the company’s earnings call that, in addition to increasing the price of new LTCI products, Genworth will continue to focus on selling to consumers healthy enough to fit in the preferred risk category.

The company is continuing to emphasize sales of less capital-intensive fixed annuities, and it is holding LTCI capital demands down by reinsuring 40% of the new LTCI coverage that it writes, executives said.

Genworth is using forward-starting interest rate swaps to protect itself against the possibility that interest rates could fall still further, Fraizer said.

Martin Klein, the Genworth chief financial officer, said the loss ratio on newer LTCI policies is only about 50%, but he indicated that holders of older policies could see more rate increases coming their way.

“We are closely watching the performance of the older business and will assess potential additional rate actions accordingly,” Klein said.

Klein also talked about an accounting change that will keep Genworth from deferring the impact of the cost of generating sales leads. The change could have an effect of about $25 million to $30 million on earnings at the LTCI business, he said.

Klein noted that the accounting change will affect only financial statements prepared using the Generally Accepted Accounting Principles.

The change will have no effect on statutory results, Klein said.