Genworth Financial Inc. cited “adverse long-term care insurance claims experience” as a challenge for the company at the top of its second-quarter earnings release.
Genworth (NYSE:GNW) as a whole is reporting $228 million in net income for the quarter on $2.4 billion in revenue, compared with $174 million in net income on $2.4 billion in revenue for the comparable quarter in 2013.
The global mortgage insurance business increased its net operating income to $136 million, from $102 million in the second quarter of 2013, but the U.S. life division as a whole earned $69 million, down from $79 million. At the U.S. life division, operating profits were higher for life insurance and down a little for fixed annuities.
The long-term care insurance (LTCI) business reported $6 million in net operating income on $872 million in total revenues, compared with $26 million in net operating income on $826 million in total revenues for the second quarter of 2013. Premiums increased to $577 million, from $550 million, and net investment income increased to $292 million, from $277 million. Benefits and other changes in policy reserves increased to $735 million, from $663 million.
The company recorded $26 million in LTCI sales. That was down from $43 million in the second quarter of 2013 but up from $22 million in the first quarter.
Genworth noted in a discussion of its results that it recently introduced the Privileged Choice Flex 3.0 LTCI program in 42 states. The program gives consumers the ability to choose between richer benefits or lower premiums. “The company is continuing to invest in distribution and marketing to increase LTC sales over time and expects to begin seeing some impact from these actions during the second half of the year,” the company said.
Recent efforts to increase LTCI premiums and cut benefits helped improve results by $34 million when compared with the second quarter of 2013. But Genworth is seeing “higher severity and frequency on new and existing claims,” the company said.
In part because of that experience, the company is reviewing the adequacy of its claim reserves. Genworth hopes to complete the review by the time it releases third-quarter results this fall.
The company announced James Boyle, who took over as the head of the life unit in January, will be leaving to run a health care technology company. Tom McInerney, Genworth’s president and chief executive officer (CEO), will become the CEO of the U.S. life division, the company said.