Insurers With LTCi Blocks Draw Distinctions With GE

Financial difficulties facing General Electric’s insurance run-off operation will not affect Genworth Financial’s long-term care insurance (LTCi) policies that were reinsured to a GE subsidiary, a Genworth executive said.

Genworth, based in Richmond, Va., was a subsidiary of GE until it was spun off as a separate company in 2004.

“We have no net economic exposure or liability associated with the UFLIC (Union Fidelity Life Ins. Co.) block,” said Genworth executive vice president and CFO Kelly L. Groh, in a conference call with analysts.

On Jan. 16, GE announced that it would boost reserve contributions by about $15 billion over seven years and take a $6.2 billion charge against the fourth quarter following a review and reserve testing for GE Capital’s run-off insurance portfolio.

The announcement led to interest around Genworth’s polices since some long-term care policies had been reinsured to UFLIC. It is a reminder of how precarious the entire LTC market is, even in the best of times.

“The charges GE is taking and the charges Genworth took in 2014 and 2016 illustrate the severity of the issues facing LTC insurers and the need for appropriate and timely premium rate increases or benefit modifications to ensure the adequacy of cash flows and reserves to pay future claims,” Groh said.

Genworth has been raising premiums on its LTC insurance policies to boost cash flows and has received about $8 billion in approved rate increases since 2013, said president and CEO Thomas J. McInerney.

The company will continue to seek additional annual premium increases from regulators over the next five to seven years with the intention of adding $8 billion to the company’s future cash flows, McInerney said.

UNUM Also Distances from GE

Unum Group, which reported fourth-quarter earnings the week before Genworth, was “in a very different place,” compared with GE and the problems facing GE’s long-term care block, Unum president and CEO Richard McKenney said.

“GE's block was a reinsured block, which removes them one step from the customer block,” McKenney said. “Our block was direct written, so we directly control the underwriting and benefit guidelines in that block.”

In addition, 85 percent of Unum’s insured lives are in group long-term care with a much younger client profile, funded mostly by employers and with smaller benefit levels with more conservative plan designs, he said.

Unum “aggressively and actively managed block over time,” setting aside as much as $4 billion over the years.

“I know, we've had ten full-time actuaries dedicated to the block since 2012,” said McKenney. “And for a period, I was one of them.”

Unum Group, a big disability insurer based in Chattanooga, Tenn., is the parent company of Colonial Life Insurance Co.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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