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.
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