Genworth Financial Provides Additional Disclosure On Long Term Care Insurance
RICHMOND, Va., July 31, 2014 /PRNewswire/ -- Genworth Financial, Inc. (NYSE: GNW) announced on July 29, 2014 that it is conducting a comprehensive review of its long term care insurance claim reserves. Many of the company's investors have asked for additional information about the last in-depth review of the claims reserve, which was conducted in 2012. The company cannot predict how the results of the current review will compare with the results of its review in 2012.
As a result of the 2012 claims review, the company established refinements to its claim reserves to reflect how a claim transitions by diagnosis and care facility, trends in benefit utilization, and refinements to claim terminations. The impact to GAAP claim reserves as a result of the new methodology was an increase to reserves of approximately $166 million as of September 30, 2012. Separately, the company also made changes to claim reserves to appropriately reflect waiver of premium benefit, shared policies where both lives are on claim, reinsurance on incurred but not reported claims, and the valuation interest rate. The impact to GAAP claim reserves as a result of these changes was a decrease to reserves of approximately $165 million as of September 30, 2012. The net impact to GAAP claim reserves as a result of the 2012 claims review was a net increase to reserves of approximately $1 million as of September 30, 2012.
The primary areas of focus in the current review are: (i) an analysis of potential causes of the meaningful increases in adverse claims experience in the second quarter of 2014 and (ii) an assessment of the assumptions and methodology underlying the associated reserves, including morbidity, mortality, interest rates and claim terminations. The company intends to complete this review before the release of financial results for the third quarter of 2014. The company continues to believe that the existing assumptions and methodology provide the most reliable best estimate. However, given the review underway that will consider both long-term and recent experience, the company will likely change some of its assumptions, which could increase our long term care insurance claim reserves, and any increase may or may not be material.
Can someone please interpret this statement - they appear to be saying there was minimum impact - however on the September date in question the stock stood just off its all time low, marking a 37% loss at the time.
GNW is just saying the prior review only netted to only a $1 million increase in the reserves (basically $0 overall adjustment) and while GNW cannot say what this reserve review outcome will be, they believe they have it fairly accurate based on their current methodology but will likely tweak a few assumptions.
Seems like a lot to do about nothing, GNW believes it will not be material but can't officially say that in their disclosures today.