Genworth Beats Earnings Expectations in Q1

The company filed just 18 LTCI rate increase requests in the first quarter, down from 45 in the first quarter of 2016. The policyholders potentially affected by the new filings are paying about $24 million in premiums pear year. The filings submitted in the first quarter of 2016 could have affected policyholders that were paying $554 million in premiums per year.

Genworth received final state approval during the latest quarter for LTCI rate increases for policies that generate $98 million in annual premiums. In the year-earlier quarter, actual LTCI rate approvals affected policyholders who were paying $344 million in premiums per year.

The average size of a rate increase actually approved fell to 22%, from 25%.

Shock Lapse

Traditionally, LTCI purchasers have been serious, well-educated, motivated consumers who have held on to their policies even after facing steep rate increases.

Genworth included a table in an earnings presentation suggesting that pattern may be continuing.

The table shows how much benefit from LTCI rate increases is the result of extra premium revenue, and how much is the result of reserve releases. Reserve releases are often a result of “shock lapse,” or decisions by policyholders to give up their coverage after they see premiums are going up.

In the latest quarter, only 37% of the financial benefits of rate increases came from reserve changes. That was down from an average of 44% for all of 2016, and an average of 45% for all of 2015.

Penn Treaty

Many life and health insurers have reported that they will have to pay guaranty fund assessments in connection with the insolvency of Penn Treaty American Corp., a failed long-term care insurer.

Genworth said it expects to pay $13 million in Penn Treaty guaranty fund assessments.

— Read China’s Top Insurance Regulator Under Probe for Violations on ThinkAdvisor.