What You Need to Know
- Genworth is reporting $149 million in net income for the first quarter on $1.9 billion in revenue.
- Earnings were strong enough that the company is preparing to spend up to $350 million on buying back shares of its stock.
- But McInerney acknowledged that past problems with LTCI product pricing will affect future LTCI efforts.
Genworth Financial may need to focus more on providing support services and less on insurance as it works to revive its long-term care operations.
Tom McInerney, the company’s CEO, talked about that shift in thinking earlier this week, during a conference call with securities analysts.
Genworth was once a dominant player in the U.S. long-term care insurance market. It ran into problems because of low premiums and inaccurate assumptions about how policyholders would use their coverage. Like many competitors, it has persuaded regulators to help it recover from the pricing problems by increasing premiums.
Insurers argue that the increases are necessary to keep LTCI businesses solvent.
Insureds ask why they bear the burden of helping insurers deal with their errors.
In recent months, McInerney has talked about the possibility of working with highly rated reinsurers to resume selling stand-alone long-term care insurance.
“Based on discussions with many third parties, including the rating agencies, we believe that offering full LTC risk-bearing insurance products in the future will be very capital-intensive because of the problems of the past,” McInerney said.
Genworth has not yet made final decisions about what new long-term care products and services it will introduce. ”It is likely the Genworth will initially focus on less-capital intensive long-term care advice and service offerings,” he said.
Genworth has relationships with 90,000 care providers. McInerney suggested that Genworth could try to organize a network that would provide discounts on long-term care services.
With help from the discounts, Genworth could provide care coordination services without increasing total costs for individuals and their families, McInerney said.
What It Means
The market for long-term care insurance might be thawing, but it’s not yet heating up.
Genworth held the conference call to go over its first-quarter earnings.