Genworth Executives Review Long-Term Care Rate Hike Settlements

What You Need to Know

Genworth has spent years trying to get the regulatory approvals needed to increase the premiums enough to keep the life insurance company unit solvent.
Lawyers have organized class-action lawsuits on behalf of many of the recipients of the Genworth premium increase notices.
Genworth has nixed plans to to begin offering a new long-term care insurance policy together with a reinsurer.

Genworth Financial executives talked to securities analysts Wednesday about new and pending lawsuit settlements related to long-term care insurance premium increases.

Daniel Sheehan, the Richmond, Virginia-based insurer’s chief financial officer, told the analysts that Genworth has already implemented one of the settlements.

“We believe that, overall, the settlements are favorable to both the policyholders and Genworth, and will reduce our tail risk on our LTC block,” Sheehan said.

Sheehan spoke during a conference call Genworth held to discuss results for the third quarter.

What It Means

Many Genworth long-term care insurance policyholders who have not opted out of settlements might find that a court settlement will structure the premium increase notices they get.

The settlements may also affect the options clients have for using benefits adjustments to hold down the premiums.

The Background

Genworth came to life in 2004, as the company that inherited most of General Electric’s life insurance, annuity and mortgage insurance operations.

It was one of the creators of the modern U.S. long-term care insurance market.

Many of the assumptions Genworth and its competitors used to design and price long-term care insurance policies were wrong, and it has spent years trying to get the regulatory approvals needed to increase the premiums enough to keep the life insurance company unit responsible for paying the claims solvent.

The life unit still has about 999,000 long-term care insurance policies in force. It’s generating $2.6 billion in long-term care insurance premiums per year and is paying 47,739 long-term care insurance claims, according to an earnings summary Genworth released earlier this week.

Genworth includes the success of efforts to get regulatory approval for long-term care insurance premium increases in its quarterly earnings packets, and it reports on the percentage of affected policyholders who have agreed to pay the full, increased premiums; accepted some benefits reductions to hold the premiums down; or stopped making premium payments and accepted a minimum level of benefits, or “non-forfeiture” benefits.

As of the third quarter, for example, 55% of the affected policyholders were paying the full premiums, 27% had accepted reduced benefit options, and 17% had accepted non-forfeiture options.

Litigation

Lawyers have organized class-action lawsuits on behalf of many of the recipients of the Genworth premium increase notices.

New Service

Genworth had hoped to begin offering a new long-term care insurance policy together with a reinsurer.

Instead, the company has decided to start by creating a business that will use less capital. The new Global Care Solutions unit will offer long-term care navigation and advice services based partly on services developed by Genworth’s CareScout unit and the company’s long-term care insurance business.

Genworth hopes to launch that business by June 30, 2023, according to Tom McInerney, Genworth’s CEO.

“The new business will include a digital platform where those in need of long-term care can search for and compare local care options, bolstered by a preferred network of quality senior care providers offering more attractive pricing,” McInerney said.

The business will also be able to help assess what kind of help people need, he said.

Earnings

The third quarter ended Sept. 30.

Genworth is reporting $139 million in net income for the quarter on $1.8 billion in revenue, compared with $318 million in net income on $2.1 billion in revenue for the third quarter of 2021.

The long-term care insurance unit is reporting $25 million in adjusted operating income on $1.1 billion in revenue, compared with $133 million in adjusted operating income on $1.3 billion in revenue for the year-earlier quarter.