Genworth diverts $327 million to shore up long-term-care insurance

Firm also raised premiums an average 53% last year through the third quarter for some policyholders.

Genworth Financial Inc., the largest long-term-care insurer by number of policyholders, diverted $327 million before taxes in the fourth quarter in order to shore up the reserves it uses to pay LTC insurance claims.

The amount, which came to $258 million after taxes, relates to an update the insurer made to assumptions and methodologies used to calculate its LTC liabilities, including the rates of benefit utilization and claim termination, the firm said Tuesday in an announcement of its quarterly earnings results.

Long-term-care insurers have had to grapple with a number of economic challenges, including increased longevity, spiking health-care costs and sustained low interest rates. Unum Group, for example, diverted $593 million after taxes last year to boost its LTC reserves.

Firms have raised premium prices for existing customers as a way to manage the fallout, which they argue is necessary for their financial health but has drawn the ire of customers and their financial advisers. Cost increases must be approved by state insurance regulators.

Genworth, which spun-off from General Electric in 2006, raised costs an average 53% on $526 million worth of in-force long-term-care policies last year through Q3. That’s nearly double the average 28% increase the insurer assessed some policyholders in the full year of 2016 and 2017, according to a presentation for stockholders in December.

Genworth also diverted $91 million (after-tax) in the fourth quarter to shore up universal life insurance reserves. The amount was primarily because of updates to mortality and interest-rate assumptions, said the firm, which didn’t have a quarterly conference call with analysts due to a pending sale to China Oceanwide.