Securities analysts and investors pummeled Genworth Financial Inc. today in the wake of an announcement that the company is adding $531 million to its $15 billion in long-term care insurance (LTCI) claim reserves.
The price of the company’s shares ended the day at $8.65, down from a trading range of about $13 to $14.
But Genworth said it wants to continue to stick to its LTCI business and believes most of the problems have to do with bad assumptions on older LTCI policies.
“We remain committed to transforming this business,” the company said in a presentation for investors. “Despite current challenges on older blocks, we believe that long-term care insurance remains an attractive business over the long-term.”
Company executives said during a conference call with securities analysts that they are reviewing the assumptions underlying its entire block of LTCI business and may end up organizing new, multi-year efforts to increase rates.
But Tom McInerney, the company’s president, said during the call that the company continues to believe it can increase LTCI sales and earn solid profits.
“We continue to introduce higher-return, lower-risk products,” McInerney said.