A.M. Best Special Report: Past Sins, Weak Economy Extend Long-Term Care Writers’ Struggle

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. continues to have a pessimistic view of the individual long-term care (LTC) market segment. Over the past several years, it has downgraded and assigned negative outlooks to many smaller companies selling LTC products; and its outlook on these small- to mid-size companies remains negative. Although no insurer has been reporting consistently healthy statutory profits on its LTC block, small- to mid-size or monoline LTC writers are expected to continue to be challenged to maintain the necessary surplus levels for this capital intensive product. Larger companies, generally those more diversified and with greater access to capital, are less likely to be impacted significantly by the performance of their older LTC blocks of business; and therefore, their ratings have been more stable.

• While new product pricing has become more conservative, state regulators have been slow to approve rate increases at requested levels on older blocks. The inability to gain needed rate increases on a timely basis has had a negative financial impact on many LTC writers.
• Insurers are being challenged by: current low interest rates, investment losses, higher expenses and the need to increase claims reserves.
• Far fewer policyholders than anticipated have let their policies lapse, and liabilities are much higher than expected. Elderly policyholders, in particular, have been maintaining their coverage.
• A sizable portion of total LTC premium income is being generated by the premium rate increases that have been necessary to address past pricing mistakes related to persistency and investment assumptions. Every carrier has implemented at least one round of increases on older blocks of business.
• Since 2000, several companies—formerly in the top 10 individual LTC providers—have stopped selling new business in this product line or are no longer in the business.

To download a PDF copy of all long-term care special reports at no cost and to access data, analytical methodologies and news on the U.S. health industry, please visit www.ambest.com/research.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.
Analysts
Jeffrey Lane, 908-439-2200, ext. 5567
[email protected]
or
Carl Austin, 908-439-2200, ext. 5500
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or
Public Relations
Rachelle Morrow, 908-439-2200, ext. 5378
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.