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Insurers: Our LTCI units are OK

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Executives at Manulife Financial Corp. (TSX:MFC) and CNO Financial Group Inc. (NYSE:CNO) have been trying to reassure investors about their long-term care insurance (LTCI) operations.

The LTCI units came up recently when the companies posted results for the fourth quarter of 2014.

Manulife says its John Hancock Long-Term Care unit reported $566 million in premiums and deposits for the fourth quarter of 2014, compared with $570 million in the fourth quarter of 2013.

Sales at the unit increased to $14 million, from $13 million.

At CNO, the Bankers Life unit is reporting $127 million in LTCI revenue for the latest quarter, compared with $134 million for the fourth quarter of 2013. Sales increased to $5.8 million, from $5.7 million. The interest-adjusted benefit ratio fell to 77.8 percent, from 80 percent. CNO noted that, with the effects of actual low interest rates included, the benefit ratio increased to 70 percent, from 65.7 percent.

Cindy Forbes, chief actuary at Manulife, said Canadian accounting rules require Manulife to update interest rate assumptions in financial statements every quarter. Because LTCI reserves already incorporate the current low rates, “I wouldn’t expect to see any particular impact from interest rates on LTC versus any of our other blocks of business,” Forbes said during a conference call the company held with securities analysts.

CNO executives said during a CNO conference call that their LTCI block risk profile looks relatively good because they always sold to middle-market customers, who bought LTCI coverage with limited durations, rather than to customers who bought policies with lifetime benefits.

Ed Bonach, chief executive officer, also said CNO has made a point of treating the LTCI business as a regular business, rather than reporting on it as a closed block. 

“Carving it out as some kind of different sort of block doesn’t really fit with the way in which we’re managing the business,” Bonach said. “Every single day we have a long-term care policy with the client, a Bankers field agent is potentially still working with that client and that client’s family, actively cross-selling and working with them.”

CNO is “not a product-driven company,” Bonach said later during the call. “This is one of a number of products that is either going to be in favor, or out of favor.”

CNO wants to focus on whether the company is providing solutions for its clients, not on whether efforts to sell specific products are in or out of favor, Bonach said.

See also: Analyst: Unum LTCI charge in line with expectations

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