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Ameriprise Says Its LTCI Has Extra Genworth Life Credit Woe Protection

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Ameriprise Financial Inc. has a small, closed block of old long-term care insurance (LTCI) policies that did fine in the first quarter.

Genworth Financial Inc. is set to report its own earnings May 1, and it might have done well.

But Jim Cracchiolo, the chief executive officer of the Minneapolis-based company, and Walter Berman, the company’s chief financial officer, took a question from a securities analysts Thursday about what might happen if the Genworth unit that reinsures Ameriprise LTCI policies ran into trouble.

(Related: Ameriprise Will Be a Careful LTCI Reinsurance Shopper)

The questions came up during a conference call Ameriprise held to go over its first-quarter earnings with the analysts.

Some other insurers have transferred some of their LTCI benefits risk to other parties through reinsurance transactions. The analysts were asking about the possibility of Ameriprise making LTCI risk transfer deals.

John Nadel, an analyst with UBS, asked a general question about LTCI risk transfer deals, and also about any concerns about what could happen if Genworth is unable to be acquired by China Oceanwide, and problems with Genworth’s existing reinsurance program for Ameriprise LTCI policies come up.

“Have you had any discussions with the Genworth around providing more details as to the protections you have in place around your reinsurance agreement with them?” Nadel asked.

LTCI Risk Transfer Reinsurance Deals

Cracchiolo said Ameriprise has a well-seasoned book of LTCI business, with very strong claim experience, a great deal of claim experience, and no new policies added to the block since 2002.

Even if something with the block went wrong, the problems would be too small to have much effect on Ameriprise’s performance, Cracchiolo said.

Ameriprise could be willing to make a reasonable LTCI reinsurance transaction with a good party, Cracchiolo said.  “One of the big variables is interest rates,” he said. He said higher rates could make a deal look more appetizing.


Cracchiolo said of Genworth that he has seen the view expressed that the insolvency of Genworth’s LTCI reinsurance business, if it ever occurred, could lead to a large amount of exposure for Ameriprise.

That view “is not only highly theoretical,” Cracchiolo said. “It’s wrong.”

In 2016, the Ameriprise unit that holds the LTCI policies, RiverSource, negotiated substantial enhancements to its reinsurance credit protections under its reinsurance arrangement with Genworth Life Insurance Company (GLIC), the Genworth reinsurance arm, Cracchiolo said.

The enhancements were intended to protect RiverSource against erosion in GLIC’s financial position, Cracchiolo said.

“Due to confidentiality obligations, we are not at liberty to disclose the extent or nature of such credit protections,” Cracchiolo said.

But Cracchiolo said Ameriprise continues to believe that its net counterparty credit exposure to GLIC is very different from the gross exposure, and is well within Ameriprise’s overall risk tolerance.

GLIC is domiciled in Delaware, and that means any GLIC insolvency proceedings would be located in Delaware and governed by Delaware laws, Cracchiolo said.

The Delaware courts have tested and supported credit protections similar to the ones RiverSource now has with GLIC, Cracchiolo said.

“The same holds true elsewhere in the United States,” Cracchiolo said. “We believe that these protections will be respected even in the unlikely event that GLIC eventually become subject to insolvency proceedings in Delaware. While we know no credit productions are perfect. we believe the correct way to think about our counterparty credit exposure to GLIC is not the full amount of any gross liability that GLIC reinsures, but rather the net exposure to GLIC after taking into account our credit protections, which would be a significantly smaller exposure, if it were to exist.”


Ameriprise as a whole is reporting $395 million in net income for the first quarter on $3.1 billion in revenue, compared with $594 million in net income on $3.2 billion in revenue for the first quarter of 2018.

Earnings declined partly because the amount of interest credited to fixed accounts increased to $204 million, from $141 million, and partly because benefits and claims expenses increased to $670 million, from $494 million.

Ameriprise executives said the drop was due partly to a previously disclosed settlement with a vendor.

Annuity, Life and LTCI Earnings

The Ameriprise annuity unit is reporting $128 million in pretax adjusted operating earnings for the latest quarter on $604 million in net revenue, compared with $126 million in pretax adjusted operating earnings on $613 million in net revenue for the year-earlier quarter.

Variable annuity pretax earnings increased 5%, to $115 million.

The fixed annuity operation saw its operating earnings fall 19%, to $13 million, in part because of the effects of lower interest rates.

The protection unit, which sells life insurance and disability insurance, is reporting $74 million in pretax adjusted operating earnings on $262 million in net revenue, up from $65 million in pretax adjusted operating earnings on $253 million in net revenues for the year-earlier period.

The amount of life insurance in force fell to $195 billion, from $196 billion.

Ending universal life and variable universal life account balances increased 1%, to $12.6 billion.

The companys LTCI unit is reporting $6 million in pretax adjusted operating earnings on $68 million in net revenue and $697 million in allocated capital, compared with $2 million in pretax adjusted operating earnings on $66 million in net revenue and $681 million in allocated capital for the year-earlier capital.


Links to documents related to Ameriprise’s first-quarter earnings are available here.

Information about the company’s earnings call recording is available here.

— Read Wilton Re Picks LTCG to Help It Manage CNO Policieson ThinkAdvisor.

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