Genworth Financial Inc. needs to improve the way it manages its long-term care insurance (LTCI) business, according to Thomas McInerney, the company's president.
"We're conducting an intense, very broad and deep review of all aspects of our [long-term care] insurance business," McInerney said during the company's second-quarter earnings call.
Genworth executives continue to believe that there is an important role for private insurance in the long-term care (LTC) market, McInerney said.
But company executives believe the company has to increase the price of products sold before 2002 to bring them closer to the break-even point; ask for smaller, relatively frequent increases on newer blocks of business; and introduce new products that are designed, underwritten and priced more carefully, McInerney said.
Genworth as a whole is reporting $180 million in net income for the second quarter on $2.4 billion in revenue, up from $109 million in net income for the second quarter of 2012.
LTCI net operating income increased to $26 million, from $14 million.
Individual LTCI sales fell to $38 million, from $53 million, and group sales fell to $5 million, from $7 million.
Results for the quarter included $8 million in extra revenue resulting from LTCI price increases, the company said.
Policy lapse rates were higher than before, which helped reduce claims, but yields on investments were lower, and that hurt earnings on invested assets, the company said.
Although sales were lower than they were in the second quarter of 2012, individual LTCI sales were a little higher than they were in the first quarter, and group sales held steady. That might be partly because some consumers were hurrying to buy policies before rate increases were set to take effect, the company said.
McInerney said during the conference call that he has been meeting with state regulatory and policy specialists, and hoping that they will see that they have a stake in supporting the private LTCI industry.
"Most observers realize that 30 percent to 50 percent of state Medicaid budgets are already allocated to paying for long-term care for individuals," McInerney said.
Private insurance could help reduce that budget strain, McInerney said.
When Genworth has been able to implement the recent LTCI price increases, 81 percent of the policyholders have kept the same policies and paid the higher prices, 18 percent have held premiums steady in exchange for reduced benefits, and just 1 percent have let the policies lapse, McInerney said.
"We believe it is possible that policyholders see their benefits provided on these older-generation policies as a good value despite the higher prices," McInerney said.