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.

Contents

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.