Genworth Says It Needs $6 Billion in Additional LTCI Rate Hikes

"Achieving actuarially justified premium rate increases and benefit reductions through our LTC rate action plan remains a high strategic priority for Genworth," McInerney said.

From 2012 through the first quarter of 2019, Genworth has succeeded at getting state regulator approvals for LTCI premium approvals with a total net present value of about $11 billion, McInerney said.

Groh said that, in the first quarter, Genworth received 24 new state LTCI premium increase approvals in the first quarters, with a net present value of about $500 million. Those approvals will increase premiums for the affected policyholders an average of 62%, she said.

Future LTCI Rate Increase Reviews

Groh said Genworth sees regulators in most states approving actuarially justified rate action requests.

"These approval amounts have been in line with assumptions used in our margin testing," Groh said.

Genworth estimates that it still needs to get approvals for additional LTCI premium increases with a net present value of about $6 billion, Groh said.

Genworth's current rate action plan assumes it will take about 10 years to get the additional rate approvals, and it also includes an implementation schedule for the rate increases already approved but not yet completely implemented, Groh said.

For purposes of state insurance regulators' accounting, Genworth updates LTCI claim reserves immediately, even before it gets approvals for LTCI rate increases or implements the rate increases, Groh said.

"This creates a timing mismatch between the reserves increases and the offsetting implementation of actuarially justified rate actions," Groh said. "Therefore we may see variability in statutory results and declining risk-based capital ratios, given the time lag until the premium increase benefits are fully realized and reflected in the financials."

LTCI Rate Increase Resistance

McInerney said he believes that all state insurance regulators now recognize that LTCI issuers face significant needs for actuarially justified premium increases.

There have been "40 to 45 states" that have been "really stepping up and giving significant premium increases on some policy forms," McInerney said. "There are some states that are behind. And so, I do believe that one of the challenges in the industry and among the 50 states is, there are some states that are very far along in giving very significant premium increases to Genworth and to other companies, and then there are other states that are well behind."

The states that are approving big LTCI rate increases seem to be putting pressure on the other states, McInerney said.

"I think they need to put some pressure on their fellow regulators and commissioners to step up more," McInerney said.

China Oceanwide Deal Approvals

McInerney noted that Genworth and China Oceanwide have now received the necessary deal approvals from Fannie Mae, Freddie Mac a number of non-U.S. regulators.

The companies still need some approvals from regulators in Canada.

To pay for the deal, China Oceanwide will need to get regulatory approval to convert currency into dollars and transfer funds, McInerney said.

McInerney said that regulators have reviewed China Oceanwide's finances and believe that the company has the liquid assets needed to complete the deal.

"We obviously have been doing our own due diligence," McInerney said.

Genworth believes that China Oceanwide has significant financial assets and cash, and that China Oceanwide can use assets located outside of China to pay for the deal if the company has trouble with using assets in China to pay for the deal, McInerney said.

Resources

Links to Genworth's latest earnings release and financial supplement are available here.

Information about how to listen to the Genworth conference call recording is available here.

— Read Genworth Has Canada Problems, on ThinkAdvisor.

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