Long-Term Care Insurance Still in Investors' Doghouse: Morgan Stanley

Analysts at the firm say transferring LTCI risk to another entity may be difficult.

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One takeaway from a recent Morgan Stanley analyst review of the life and annuity market is that stand-alone long-term care insurance (LTCI) is still in the Wall Street doghouse.

(Related: Long-Distance Caregiving, Up Close: LTCI Insider)

A team led by Nigel Dally based the report on what analysts from the firm have been hearing from life insurance investors.

The investors themselves may eventually need long-term care services, or to provide care for an elderly friend or relative, but they are not especially sympathetic to insurers’ efforts to figure out how to turn financing care into a commercial product.

The Morgan Stanley analysts cited “details around long-term care exposure” as a top investor concern.

Executives from Ameriprise, for example, have talked at length about how that company manages its closed block of LTCI policies and why managers believe the capital needs of that block will have no effect on shareholders.

In spite of those assurances, “investors remain concerned that long-term care exposures will negatively impact capital management plans,” the Morgan Stanley analysts write.

The analysts also looked at the idea that a company like General Electric might be able to make a deal to transfer LTCI risk to another entity.

“From our perspective, there appears to be limited appetite for legacy long-term care operations from traditional reinsurers,” the analysts write.” Perhaps at a certain price something could be completed, and there is the possibility non-traditional players could also have some interest.”

The long duration of the policies and uncertainty about claims make assessing the possibility of a company making non-traditional deals difficult, the analysts write.

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