Learn about Genworth’s three-part strategy designed to help stabilize the in-force portfolio and bring new products to market faster.
For nearly 40 years, Genworth has been committed to helping families plan for their long term care needs. During that time, Genworth has provided long term care protection to almost two million Americans and paid close to $10 billion in long term care insurance claims. We view our role not only as an industry leader, but as an industry steward; laying the foundation for the future of our market.
As the private long term care insurance market has evolved, Genworth has leveraged our extensive experience to refine underwriting and introduce new and innovative features and pricing. In addition, Genworth has adopted a broad three-part strategy that is designed to help stabilize the in-force portfolio and bring new products to market faster. We believe these objectives are essential to ensuring a vibrant, growing and competitive private long term care insurance market. Our senior leaders have spent the last several months meeting with regulators and policymakers to discuss this strategy. As a valued distribution partner, I believe it is important to keep you updated on our progress.
Objective #1: Older Generation Policies
To help mitigate losses on certain older blocks of business, Genworth is working with regulators to implement necessary premium rate increases. We believe that a regulatory framework designed to allow companies to mitigate losses on older blocks of business when experience is significantly worse than the original pricing expectations is essential.
We have made good progress to date stabilizing the in-force portfolio through rate actions. As of June 30, 2013, premium rate actions on the older blocks of business have been filed in all 50 states and District of Columbia. Genworth has received approvals representing approximately $115-120 million of the targeted premium increase of $200-300 million.
Objective #2: Newer Generation Policies
We believe the ability to pursue smaller premium rate increases on newer generation products is vital to growing the private long term care insurance market. Initiating increases earlier in the product lifecycle may help mitigate the need for larger rate increases in the future. This approach is better for both policyholders and regulators. This approach is also not unique to Long Term Care Insurance.
Consistent with our strategy to file actuarially justified rate increases earlier in a product’s lifecycle, and as previously communicated, we began filing a rate increase request on Privileged Choice® and Classic Select® policies sold between 2003 and 2012. The premium rate increase requests range from six to thirteen percent on more than $800 million in annualized in force premiums. Although these policies have generated positive operating earnings to date, the rate increase will help offset lower than pricedfor returns, primarily due to improvements in life expectancy and lower-than anticipated lapse rates.
Objective #3: Refreshed Products
Genworth continually evaluates mortality, morbidity, lapse experience, and the interest rate environment. We routinely update our products and pricing assumptions to reflect our most current experience. We are focused on initiatives to help promote faster product approvals so the new products we offer reflect our most current assumptions and underwriting discipline.
To this end, on April 15, 2013 we launched Privileged Choice® Flex 2 in 31 states, with gender-based pricing strategy and life insurance like underwriting practices to help reduce risk. We will continue to evaluate our products and will offer innovative products that incorporate current pricing assumptions with an emphasis on long term pricing stability.
Overall, we are encouraged that regulators and policymakers in almost all states have been willing to discuss these important priorities. As an industry steward, we believe this strategy is not only important to Genworth, but will help promote the viability and stability of the overall market by encouraging more companies to participate.
We will continue to keep you informed of our progress. I hope this information provides additional clarity regarding our approach to the long term care insurance business. I would welcome the opportunity to further discuss this or answer any questions you may have.