The American Association for Long-Term Care Insurance (AALTCI) is working to educate the investment community about the effects of interest rates on issuers of private long-term care insurance (LTCI).
Jesse Slome, the group’s executive director, recently used a blog on Motley Fool to spread the word about the relationship between interest rates and earnings on LTCI reserves.
U.S. interest rates have started to rise in recent months after falling to record lows.
Slome cited LTCI specialist Claude Thau’s observation that a 1-percentage-point increase in rates generates $100 million in extra earnings on a $10 billion insurance company bond portfolio.
Six publicly traded insurers with large blocks of LTCI business on their books are using $41 billion in reserves to support that business, Slome said.