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LTCI earnings: The rest of the story

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Genworth Financial Inc. (NYSE:GNW) recently reported pretty good long-term care insurance (LTCI) results for the fourth quarter of 2015, for an otherwise messy quarter.

Executives from some other insurers have talked, without much enthusiasm, about LTCI results in their own earnings releases, statistical supplements and conference calls with securities analysts.

The insurers continue to face some concerns about underwriting and LTCI claims, and worries about low interest rates to hang over all insurance products that involve significant use of general account investment income. 

See also: Fear and loathing of negative-yield debt: Bond trader’s dilemma

At Manulife Financial Corp. (NYSE:MFC), the John Hancock Long-Term Care unit reported $8 million in LTCI sales for the quarter, down from $14 million in the fourth quarter of 2014. The company has been shifting to a new Performance LTC product, which gives the purchasers a chance to share in the upside of interest rates rise.

Although sales for the quarter were down year-over-year, the new product was doing better during the latest quarter than it was earlier in the year, the company said. 

LTCI premiums and deposits fell just 1 percent, to $561 million.

Cindy Forbes, the company’s chief actuary officer, said the company has seen some adverse experience in the LTCI block in the current quarter.

CNO Financial Group Inc. (NYSE:CNO) says its LTCI sales increased to $6.7 million for the quarter, from $5.8 million. The same company reported that its LTCI revenue fell to $117 million, from $127 million.

Interest-adjusted benefit ratio for the quarter rose to 79.6 percent on $119 million in earned premiums, from 77.8 percent on $124 million in earned premiums for the fourth quarter of 2014. 

The company says its strategic direction involves reducing exposure to LTCI by about one-half over the next three to six years, by driving growth of other lines of business and looking for reinsurance arrangements or other potential solutions.

Erik Helding, a senior vice president at CNO, said that the company does not include any assumptions about “shock lapse” when it analyzes the possible effects of future rate increases.

The term “shock lapse refers to policyholder decisions to drop LTCI because of premium increases.

Some LTCI issuers have said their policyholders usually keep LTCI policies even when premiums rise. Helding said CNO policyholders seem more likely to give up policies due to shock lapse, in part because the company has focused on serving middle-market consumers. Those moderate-income policyholders may have less flexibility to handle rate increases than some other companies’ LTCI policyholders might, Helding said.

Jack McGarry of Unum Group Corp. (NYSE:UNM) talked about opportunities to find a reinsurer for his company’s closed block of LTCI business.

The company clearly looks for capital management opportunities, he said.

“Whether those opportunities can actually come to fruition this year, it would be really hard to say,” McGarry said.

See also: 

AALTCI finds drop in prices for new LTCI policies

Earnings: Disability insurers feel (a little) breeze


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