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.
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.