Genworth Financial paid $10 million in COVID-19-related life insurance claims in the second quarter.
Kelly Groh, Genworth’s chief financial officer, talked about the impact of the COVID-19 pandemic on claims today, during a conference call the company held to go over its latest financial results with securities analysts.
Genworth may be best known to life, health and annuity agents as a provider of stand-alone long-term care insurance (LTCI).
Genworth is not giving details about the effects of COVID-19 on the performance of the LTCI unit, but it did say an increase in deaths improved the unit’s performance.
- Links to Genworth earnings resources are available here.
- An earlier article about Genworth’s earnings is available here.
When a life insurance policyholder dies, an insurer has to pay death benefits to the beneficiaries.
When an LTCI claimant dies, the death reduces the LTCI issuer’s obligation to pay LTCI benefits on behalf of the claimant.
At the LTCI unit, an increase in mortality affected “active claims, pending claims and active policies,” Genworth said in its earnings announcement.
“Although it is not the company’s practice to track cause of death for [LTCI] policyholders and claimants, current quarter [LTCI] results were likely impacted by the COVID-19 pandemic,” the company said.
Genworth noted that an apparent decrease in claims might be partly the result of a delay in people filing claims. Because of uncertainty about how real the reduction in LTCI claims is, Genworth has added $37 million to reserves for LTCI claims that are “incurred but not reported,” or IBNR.
Groh said during the conference call that the second-quarter drop in claims affected older LTCI policies, not newer policies.
“We do believe that this decrease is temporary, reflecting delays in reporting of claims due to social distancing and shelter-in-place protocols and that our incidence experience will ultimately resemble previous trends,” Groh said.
Stand-alone LTCI is known for being a product with high persistency rates. The consumers who buy it tend to hold on to the coverage with an iron grip, even in the face of large premium increased.
“In long-term care, claim and active policy terminations were significantly higher in the second quarter versus the prior period and prior year,” Groh said. “Although we do not require death certificates for [LTCI] and cannot make a direct attribution to official causes of death, we do believe some degree of incremental terminations were the result of COVID-19.”
COVID-19 and Life Insurance
Genworth said in the 10-K annual report it filed for 2019 that it ended 2019 with about $55 billion in in-force life insurance coverage on its books, net of reinsurance.
That would mean that Genworth accounts for about 0.25% of the life insurance in force in the United States.
If Genworth paid about 0.25% of U.S. COVID-19-related life insurance claims in the second quarter, that would imply that the U.S. life insurers as a whole might have paid $4 billion in COVID-19-related benefits.
Genworth is reporting a $441 million net loss for the latest quarter on $2.1 billion in revenue, compared with $168 million in net income on $2 billion in revenue for the year-earlier quarter.