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August 17, 2017 at 02:49 PM
Wall Street investors are still treating stand-alone long-term care insurance as if it were a terrible disease that an insurance company has to overcome.
Executives at publicly traded insurers that sell, or have sold, the product in the United States told investors a little about their blocks of in-force LTCI business, and any remaining LTCI sales operations they still have, recently, when they released second-quarter results.
(Related: Firm Proposes Long-Term Care Insurance Run-Off Program)
Executives from Manulife Financial Corp. were the coldest told their closed block of LTCI business.
Executives from Genworth Financial Inc. showed the most warmth.
Executives from CNO Financial Group Inc. gave a few performance numbers for the LTCI operations at the company’s Bankers Life unit.
Executives at AEGON N.V. said almost nothing about LTCI sales at its U.S.-based Transamerica business.
The publicly traded companies account for just part of the market. Mutual insurers that do not sell stock to the public are still active in the market, but they file different kinds of financial reports, on a different schedule.
Here are seven glimpses of the state of the U.S. LTCI market drawn from earnings reports, and insurers’ quarterly earnings conference calls with securities analysts.
1. Manulife appears to be open to offers for John Hancock.
Manulife, a Toronto-based company, acquired John Hancock, which is based in Boston, in 2004, around the time the U.S. LTCI and annuity markets were starting to peak.
The U.S. division is reporting $575 million in net income for the second quarter on $16 billion in premiums and deposits, up from $316 million in net income on $14 billion in premiums and deposits for the second quarter of 2016.
But Manulife has now stopped selling annuities and LTCI in the United States. The LTCI business is reporting $561 million in LTCI premiums and deposits, up from $543 million in the year-earlier quarter, and no LTCI sales, down from $9 million.
The Wall Street Journal reported in July that Manulife executives were eager to sell or spin off John Hancock, in partly because of the challenges facing its LTCI operations. Roy Gori, Manulife’s new president, has told investors that he is “impatient” to dispose of the U.S. operations, according to the article.
During Manulife’s conference call, Don Guloien, the outgoing president, said the company’s long-standing policy is not to comment on rumors.
“Having said that, we’ve been very clear on many occasions that we have some challenging blocks of legacy business,” Guloien said. “As we’ve repeatedly said, we regularly investigate all opportunities for improving shareholder value. We believe this is good governance, plain and simple, and there is no news here.”
Gori said one lever for improving Manulife’s returns is “exploring strategic options for legacy blocks of business that do not generate sufficient risk-adjusted returns.”
Michael Doughty, interim president of the John Hancock unit, included the LTCI unit in a discussion of John Hancock’s legacy businesses.
2. Manulife wants to cut costs at John Hancock’s LTCI operations while it still has them.
Doughty told investors during Manulife’s analyst call that, “A focus on expense management runs across all our U.S. businesses, but particularly our legacy businesses.”
3. Genworth is eager to complete the China Oceanwide deal.
Genworth, a company based in Richmond, Virginia, sells mortgage insurance as well as LTCI. The company as a whole is reporting $271 million in net income for the second quarter on $2.2 billion in revenue, up from $220 million in net income on $2.2 billion in revenue for the second quarter of 2016.
The LTCI unit is reporting $33 million in adjusted operating income for the latest quarter on $1 billion in revenue, compared with $37 million in adjusted operating income on $1.1 billion in revenue for the year-earlier quarter.
LTCI sales fell to $3 million, from $6 million.
(Image: Thinkstock)
Sales are down primarily because rating agencies have cut Genworth’s credit ratings, the company says.
A unit of China Oceanwide Holdings Group Co. Ltd. has agreed to acquire Genworth for about $2.7 billion. Genworth shareholders have approved the deal, but the companies still need approvals from regulators in the United States, China and other jurisdictions.
Genworth says in the 10-Q report, a document filed with the U.S. Securities and Exchange Commission, that it’s making major upgrades to its systems and continuing to move its LTCI business to a new modeling system, to improve cash flow and policyholder behavior analysis and forecasting.
