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Genworth losses from LTCI
Old 11-06-2014, 11:34 AM   #1
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Genworth losses from LTCI

Interesting comment regarding Genworth and their business of offering long term care insurance. Will they be around and healthy to pay off? Stock nose-dived today.

Perhaps most disappointing to investors was McInerney's statement that the turnaround in Genworth's long-term care business (where most of the quarter's loss came from) is going to be more difficult and will take longer than the company thought, mainly because of the poor performance of Genworth's older-generation products.
This is particularly disheartening to investors. After all, shareholders knew things weren't great right now. However, the company's turnaround strategy and leading position in long-term care gave them hope for a bright future. Now, they don't seem to be so sure.
After the results were released, shares of Genworth plunged by about 14% to around $12.10. If these losses stand, the company will be trading for about 35% less than it was about six months ago.
Looking forward
The turnaround in the LTC business could still happen, but probably at a much slower rate than anticipated. In fact, the company sold more LTC and life insurance policies than it did in the previous quarter. It's just the poorly performing older policies that are the big burden.
Genworth is in the process of attempting to get states' approval to raise rates on their legacy policies. As of the most recent data available, 43 states had approved some kind of increase, although many of those were less than the company had been seeking. Genworth is trying to obtain the approval of the rest of the states and get some of the others to allow them to raise premiums further.
And there is definitely money to be made in long-term care. According to Genworth, there are 78 million Baby Boomers between 50 and 68, and 70% of them will need some type of long-term care in their lifetime. However, only 10% currently have any long-term care insurance, so there is definitely a lot of potential here, if the company can get its old policies under control."

From:Genworth Financial Earnings: Not Very Promising

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Old 11-06-2014, 12:23 PM   #2
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Mine is about 10 years old, just got our first 12% increase this year.
Great that means they will want more increases, bigger and at a faster pace.
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Old 11-06-2014, 07:51 PM   #3
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Well, they're kind of up a creek no matter what. Don't raise rates and they'll go out of business. Raise rates too much and the only people who stick with the policy are the ones who anticipate needing it soon, which makes results even worse. Some companies have also offered cuts in the coverage amounts rather than rate increases.
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Old 11-07-2014, 02:41 AM   #4
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While there is definitely a need I don't feel the LTC industry is on track yet. I hate to feel I'm assuming additional risks when purchasing an insurance policy.
Taking Social Security at 62 and hoping I live long enough to regret the decision.
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Old 11-07-2014, 06:03 AM   #5
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The impression I have is that most carriers are trying to get out of LTC - the risks are too high and returns too small.

Dodge the Long-Term Care Insurance Mess - Forbes
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Old 11-07-2014, 10:17 AM   #6
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Originally Posted by pb4uski View Post
The impression I have is that most carriers are trying to get out of LTC - the risks are too high and returns too small.

Dodge the Long-Term Care Insurance Mess - Forbes
Good article. I'm 61 and I just can't trust that a company in business now will be around in 25 years when I might need them. The author makes a good case for an annuity for those who might want/need LTC. (I'm not into annuities but agree that it would be a better option than LTC insurance.)

I worked for an insurance sub of GE (parent company of Genworth) and when they sold my sub, the acquiring company wanted nothing to do with the LTC business.
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Old 11-07-2014, 10:33 AM   #7
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LTC is a broken system at the moment.

You are supposed to start chipping in premiums at a young age like 55, building up equity that covers you much later in life.
The problem is that you are NOT building up any equity because
it is to easy for customers to be priced out of the insurance just as the odds of their needing it start to increase a lot.

LTC insurance needs fixing. Personally, I would like to see longer waiting periods say 6 to 12 months, maybe even 24 months for those who can afford that risk.

I would also like to see a cap on the maximum payment, like the one I had years ago with my term life insurance.

One reason I will take SS at 70 is in case I need the extra money to help pay for care. It's not perfect, but it's better than nothing. And, if I don't need care, I can spend it on wine and women, and waste the rest.
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Old 11-07-2014, 12:31 PM   #8
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LTCI has been in a death spiral for 10+ years. It's just a matter of time when all inforce biz is sold to one company who will manage all of the remaining LTC policies in force and slowly force them into termination. If insurance companies can not make a profit on this dog they will continue to bail.

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