Some Genworth businesses were too weak for investors' tastes. GE would need to backstop them. Long-term-care insurance is a business that's gotten tougher over the years. Policyholders are living longer. Medical costs have risen. Some insurance companies have quit selling the product altogether. Genworth has taken writedowns to shore up the business with cash reserves. GE is certainly not the first company to get its assumptions wrong, and the insurance policies date as far back as the s.
No new contracts were written after But GE didn't change its assumptions in a big way -- a decision that baffled industry veterans. It was a warning sign to the industry that long-term-care insurance policies were more toxic than initially thought.
It also captured the attention of people familiar with the GE reinsurance contracts. They asked, why Genworth was revising its assumptions while executives at the financial conglomerate mostly left theirs alone. Some employees were aware that long-term-care insurance was in bad shape. And even as it sold the bulk of its finance business, executives resisted selling reinsurance assets, even when bankers encouraged them.
Doing so would have forced GE to book a huge charge to reflect a drop in value, according to people with familiar with the situation who asked for anonymity because they weren't authorized to speak.
That was an indication that the business was worth less than what GE reported to investors, the people said. GE disclosed last year that it was reviewing the long-term-care business and would suspend dividends paid to the parent company.
On a Jan. Chief Risk Officer Ryan Zanin blamed increasing claims from aging policyholders in the past two years. We share the same dream of homeownership and the same challenges of aging and caregiving for people we love. They affect all of us. Hear from Tom McInerney about what inspires him and all Genworth employees to help our customers live life on their own terms as they age. As we continue to monitor the situation with Coronavirus COVID , we are taking steps to help protect the health and well-being of our employees and customers.
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