General Electric Co. shocked Wall Street last month when it announced a reserve shortfall of $15 billion in its portfolio of long-term-care insurance.
Wall Street better get used to it.
It’s an industrywide problem. There’s fear among analysts and some investors that GE may have to reserve more. Altogether, long-term-care insurers will have to boost reserves by more than $100 billion, according to Mike Kreidler, Washington state’s insurance commissioner.
The insurers’ eventual gap may ultimately surpass $300 billion, Credit Suisse Group AG analysts said last year.
Twelve million Americans will need the coverage by 2020, according to America’s Health Insurance Plans, a trade group.
MetLife Inc., Prudential Financial Inc., Genworth Financial Inc. and Manulife Financial Corp.’s John Hancock unit are among the insurers that have offered long-term care. It helps pay for nursing homes, assisted-living facilities and other aid for people with chronic maladies.
GE shares have fallen more than 20% since its Jan. 16 announcement of the shortfall. The same day, the company also revealed a $6.2 billion charge related to the long-term-care portfolio. GE has said it will continue to analyze its business on an annual basis and its funding requirements could change based on interest rates, death rates and other variables.
Kim Friedman, spokeswoman for MetLife, which quit selling the policies in 2012, declined to comment. John Hancock spokeswoman Melissa Berczuk said the company stopped offering stand-alone long-term-care insurance in 2016 and declined to comment further. Prudential spokeswoman Laura Burke declined to comment.
(Image: Thinkstock) Genworth, which split off from GE in 2004, said Tuesday that margins for some of the business narrowed for at least the third-straight year. If that continues, the need to boost reserves increases.
Julie Westermann, a Genworth spokeswoman, said the company regularly evaluates the adequacy of its reserves and has taken a “very proactive approach to rate increases, without which we would have needed much larger reserve increases.”