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Life Health > Health Insurance > Health Insurance

LTCI issuers post earnings

By Allison Bell

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Issuers of long-term care insurance (LTCI) continue to face low interest rates, and uncertainty about how well they can forecast claims. But company executives told securities analysts they also see reasons for optimism.

Genworth Financial (NYSE:GNW) reported $8 million in net individual and group LTCI sales for the quarter. Sales were down from $9 million in the second quarter, and from $29 million for the third quarter of 2014, in part because of a shift to new, higher-cost products. The LTCI unit posted a $10 million operating loss on $618 million in premium revenue, compared with an operating loss of $361 million on $587 million in premium revenue for the year-earlier quarter.

Premium increases are starting to improve revenue totals, Genworth said.

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At CNO Financial (NYSE:CNO), LTCI sales at the Bankers Life unit increased to $6 million, from $5.6 million. The LTCI unit generated $122 million in premiums, compared with $124 million in premiums in the year-earlier quarter.

Unum Group Corp. (NYSE:UNM) reported $159 million in operating revenue at its closed block of LTCI business, up slightly from $158 million in LTCI operating revenue for the year-earlier quarter.

The companies all reported increases in loss ratios, but all said claims were in line with expectations.

Investment yields were at or near record lows. At Genworth, for example, the net investment yield for LTCI business increased slightly, to 5.41 percent, from 5.36 percent.

Erik Helding, CNO’s treasurer, said during a call with securities analysts that continued low interest rates put pressure on the company’s margins. “The amount of potential deterioration will depend on the assumed recovery of interest rates, as well as the project at ultimate rate,” he said.

Rick McKenney’s, Unum’s president, said in his company’s earnings call that the low-rate environment is challenging and dampens the company’s profit growth. But “interest rates can be modeled,” McKenney said. “It’s very clear, very straightforward, and can be priced.”

McKenney said managing uncertainty about how many LTCI policyholders will eventually file claims, and how long they’ll stay on claim, is more complicated. “It is getting better, but it’s going to take time, because data is still coming in,” he said.

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Tom McInerney, the president of Genworth, said one helpful trends is regulators’ growing understanding of the need to help LTCI issuers adjust rates to sustainable levels, and consumers’ continuing interest in keeping their policies.

About 87 percent of the Genworth LTCI policyholders affected by increases are keeping their full coverage as is, and 8 percent to 9 percent are holding premiums down by accepting reduced benefits, McInerney said.

Only about 5 percent accept the nonforfeiture option, which gives a policyholder a chance to stop paying premiums and get some paid-up LTCI coverage.

Executives also talked about the possibility of selling blocks of LTCI business or using reinsurance arrangements or other arrangements to manage LTCI risk.

Jack McGarry, Unum’s chief financial officer, said discussions about Unum’s closed LTCI block have picked up. “I would say most of the interest is related to the asset side of the balance sheet,” he said. “I think there’s still some trepidation on the liability side…. I wouldn’t say any kind of big deal seems imminent.”

At CNO, Ed Bonach, the chief executive officer, said he sees a “good mix of players,” including traditional reinsurers and newcomers backed by private equity firms, showing an interest in LTCI deals.

Some buyers seem to be more interested in the oldest blocks of LTCI business, and some in newer blocks with shorter durations, Bonach said. But CNO is “not at that point to have something announced,” he added.

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