Tuesday, August 12, 2014
It is no secret that the long-term care insurance industry has struggled to offer products that are both attractive and affordable for consumers and financially worthwhile for the insurance companies. MetLife and Prudential no longer offer new policies, for example.
Genworth, the largest provider of long-term care insurance, announced on July 29, 2014 that its second quarter showed significant changes and that it is conducting a comprehensive review of its long term care insurance claim reserves. Apparently the company's investors have asked for additional information, following the last in-depth review of the claims reserve, which was conducted in 2012. Genworth's news release explained:
"The primary areas of focus in the current review are: (i) an analysis of potential causes of the meaningful increases in adverse claims experience in the second quarter of 2014 and (ii) an assessment of the assumptions and methodology underlying the associated reserves, including morbidity, mortality, interest rates and claim terminations. The company intends to complete this review before the release of financial results for the third quarter of 2014. The company continues to believe that the existing assumptions and methodology provide the most reliable best estimate. However, given the review underway that will consider both long-term and recent experience, the company will likely change some of its assumptions, which could increase our long term care insurance claim reserves, and any increase may or may not be material."
As reported by Reuters, ratings of Genworth by Fitch already assume some level of LTC earnings and reserve volatility, but depending on the size of any charges taken by Genworth in the third quarter, "Fitch may review the ratings of GNW [Genworth] and the review could result in a revision in the Outlook to Negative or a rating downgrade."