Genworth needs Delaware regulators' blessing, analysts say

Genworth has been trying to make GLAIC a sister of GLIC, rather than a daughter of GLIC.

Using the proposed $525 million cash infusion from China Oceanwide to make GLAIC a sister of GLIC, rather than a daughter “will help to isolate the downside risk from long-term care insurance,” McInerney said.

Genworth announced today that it could take more than $675 million in charges in connection with an increase in long-term care insurance claim reserves, and a writedown of the value of “deferred tax assets,” or tax breaks Genworth stored for the future but is unlikely to earn enough in the near future to use.

Genworth told China Oceanwide about the charges before it announced the charges to the publish, McInerney said.

The charges could hurt Genworth’s credit ratings and make completing an attractive alternative deal more difficult, McInerney said.

McInerney said China Oceanwide is a good suitor in this situation because it has about $30 billion in assets and $5.9 billion cash.

China Oceanwide is “a credible financial sponsor,” McInerney said.

McInerney said he also likes China Oceanwide because it has donated $250 million to worthy causes and has talked about leaving Genworth’s current operations in place.

“I think China Oceanwide’s very supportive of our mortgage insurance businesses around the world as well as our U.S. businesses,” McInerney said.

McInerney made a point of saying Genworth wants to continue to meet the needs of its distribution partners as well as of its policyholders and lenders.

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Reimbursement LTCI v. indemnity LTCI

Also during the call, Genworth’s chief financial officer, Kelly Groh, said the company is adding to the long-term care insurance claim reserves partly because a recently completed claim review turned up interesting information about how long-term care insurance policies with long durations work.  

Groh said the company will be increasing long-term care insurance reserves because it now has more information about how long-term care insurance policies designed to reimburse policyholders for actual long-term care expenses really work.

Originally, Genworth’s long-term care insurance units, like many other longtime issuers of stand-alone long-term care insurance products, focused on selling indemnity long-term care insurance policies. The indemnity long-term care insurance policies paid the holders who needed long-term care services a fixed amount of cash per month.

In the past, most of the information Genworth had about the performance of long-term care insurance claims had to do with indemnity long-term care insurance claims. Even in 2014, the company had too little information about the performance of reimbursement-type long-term care insurance claims with durations of seven years or more to include reimbursement long-term care insurance data in claim assumption adjustments it made this year.

This year, when the company conducted a new long-term care insurance claim review, information about long reimbursement long-term care insurance claims was still sparse, but the company had enough to use estimates to fine-tune reimbursement long-term care insurance claim assumptions, Groh said.

Genworth now has 23 percent more reimbursement long-term care insurance claims to analyze than it did in 2014, and it has 32 percent more reimbursement long-term care insurance claims with a duration of seven years or longer, Groh said.

Related: 

Rating agencies react to Genworth reserve announcement

Genworth reports long-term care insurance results

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