Genworth Financial Inc. (NYSE:GNW) has taken a $478 million charge in connection with a previously announced effort to increase reserves for margins for active long-term care insurance (LTCI) lives.
The charge contributed to the company reporting a $760 million net loss on $2.4 billion in revenue for the fourth quarter of 2014. That compares with $208 million in net income on $2.4 billion in revenue for the fourth quarter of 2013.
The company also took a $340 million charge for a write-off of life insurance and LTCI goodwill. “Goodwill” is a figure that represents the difference between the price a company has paid for acquired companies’ and the acquired companies’ tangible value.
Genworth’s LTCI unit is reporting a $506 million net operating loss, compared with $42 million in net operating income for the year-earlier quarter.
Tom McInerney, Genworth’s president, said challenges in older LTCI blocks, which were sold when interest rates were higher and views on LTCI claim risk were different, have overshadowed the otherwise strong performance of other Genworth businesses.
“However, we have taken steps on many fronts to deal with these challenges in order to strengthen and rebuild the future,” McInerney said in a discussion of the company’s earnings.
Genworth is working to save money by consolidating with U.S. life operations with its corporate holding company, the company said.
The company also has generated $108 million in tax benefits by restructuring its debt, and it’s planning to sell a lifestyle protection insurance business.
“While LTC continues to be challenged, we plan to capitalize on our industry leadership and drive regulatory changes that are necessary to sustain this business long term,” McInerney said.
Another carrier, Unum Group Corp. (NYSE:UNM), last week announced that it was recording a $698 million charge in connection with efforts to increase reserves at its closed block of LTCI business. Unum attributed the charge to low interest rates and a discovery that LTCI policyholders are living longer than the company had expected.