Executives at Genworth Financial Inc. (NYSE:GNW) held a conference call Wednesday to sell shareholders and securities analysts on the idea that staying in the long-term care insurance (LTCI) makes sense.
Some analysts have written about insurers’ LTCI units in recent years as if they were radioactive.
Tom McInerney, Genworth’s president, said during the call that, after a long review, the company wants to stay in the LTCI business.
“We have determined that long-term care insurance is a business that we believe can be managed successfully,” McInerney said.
Genworth has revamped its LTCI policy design strategy and prices to reduce its exposure to risk, and that the company is selling state insurance regulators on the idea that LTCI issuers’ should seek regular, modest rate changes to reflect changes in conditions, McInerney said.
In the past, many consumer groups and regulators have argued that LTCI issuers should get prices right when they first sell the products.
“In hindsight,” McInerney said, “I think the industry would have been much better off if they managed the business more like a health insurance business versus life and sought regular price increases of more modest amount that are easier for regulators to approve and more comfortable for consumers.”
In the real world, no LTCI company can predict interest rates, lapse rates, morbidity rates and mortality for the 30 years a typical LTCI policy might be in force, McInerney said.
McInerney and Marty Klein, the company’s chief financial officer, said they are telling state regulators that, if inability to adjust rates leads Genworth to leave the LTCI market, that would lead to a significant contraction in the amount of private LTCI available.
For a rate increase that could produce a total of $280 million in additional premiums that was announced in 2012, the company has received approvals for $155 million in increases from 31 states and is waiting for decisions on $50 million in approvals from 20 states.
Genworth is appealing partial or complete increase denials in nine states. The increases proposed in those states could produce $75 million in additional premium revenue.
Executives noted that the life expectancy of people with policies is increasing, which can hurt the profitability of LTCI policies, but that the likelihood that policyholders will need LTC services is falling, which helps profitability.