Long term care insurance review gives Genworth stock a slap in the face

Long Term Care Insurance Premiums on the Rise

The reaction from Wall Street was far from positive as the company looks into its claims reserves.

When Genworth Financial Inc. announced that it would be reviewing the adequacy of their claims reserves with regards to their long term care insurance business, the reaction from Wall Street was to send the company’s stock tumbling.

The company has already reported that it had experienced a drop in its operating profits in the second quarter.

In fact, the long term care insurance company’s stock fell by 14 percent, bringing it down $2.28 to reach $13.98 on the New York Stock Exchange. The drop in the stock price arrived despite the fact that the overall financial results from the company had actually seen an improvement during that same second quarter. Genworth had also reported that its profits had increased by a more than healthy 25 percent, to reach $176 million, as its mortgage insurance business experienced improvements in its earnings. That was a considerable change for the business, which had been hit hard during the downturn in the housing market.

The long term care insurance business, however, has had the bottom fall out of its profits, with a 77 percent drop.

senior medicare long term care insuranceThis business, which provides coverage for the cost of assisted living care, nursing homes, and other related expenses, saw its profits fall by 77 percent, bringing them down to $6 million within the second quarter, from having been $26 million during the same time span in 2013.

Company execs recently held a conference in which they spoke to industry analysts and revealed that a review of the claim reserves is justified, when those profits results are taken into consideration. Genworth has every intention of completing that review ahead of the announcement of its third quarter results. Company officials have stated that they don’t know whether or not the earnings will be affected by the outcome of that review.

According to Morgan Stanley analyst, Nigel Dally, who was quoted in a research note about the long term care insurance situation at Genworth, this review “is a sizable negative surprise, with most investors having the impression that prior long-term care challenges were behind the company.”

2 Thoughts to “Long term care insurance review gives Genworth stock a slap in the face”

  1. Gregg Kroman

    Genworth has been a leading company helping thousands of families plan ahead for a potential a devastating life event that an extended care event can bring. My hope is the company can get their reserve foundation in order so they can continue offering this important financial guard rail for those dealing with extended care now and in the future. Genworth representing 60% of the traditional LTC insurance market pulling out of states if they can not receive appropriate rate increases will have a deteriorating effect on an already bruised industry. Claims and reserves are part of our business, agents and brokers can assist clients in finding proper landing spots to ease the blow of a rate correction as well utilizing other products that may replace more expensive riders on existing products but will still work in concert if an extended care event occurs.

  2. Bilbo Baggins

    Think of Genworth LTC insurance as having two pieces or sides to the business: claims (back end) and sales (front end.) On the back side of their business they remain the clear choice for policyholders who want the best possible claims experience. Superior client services in every detail. But on the front side of the business where agents live they have not proven to be a reliable partner in the past two years. Genworth can’t decide whether they want a captive retail sales channel or not. Agents sense this and are wary of hitching their business prospects to such a wavering partner. Other LTC insurance carriers may not have the breadth of product offerings as does Genworth but they don’t disappoint or endlessly frustrate those independent agents who send business they way. Genworth needs to decide what it wants to be when it grows up and clearly demonstrate more loyalty to their retail agents before the cloud currently overhanging the company disappears.

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