Long Term Care Insurance

Transcription

1 Long Term Care Insurance U.S. Statutory Experience Reporting Forms 1-5 (Supplements The Annual Statement) May 21, Genworth Financial, Inc. All rights reserved.

2 Cautionary Note Regarding Forward-Looking Statements This presentation contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements regarding the outlook for Genworth Financial, Inc. s (Genworth) future business and financial performance. Forward-looking statements are based on management s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including those discussed at the end of this presentation, as well as in the risk factors section of Genworth s Annual Report on Form 10- K, filed with the United States Securities and Exchange Commission (SEC) on February 28, Genworth undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Additional Information All financial data as of March 31, 2013 unless otherwise noted. For additional information, please see Genworth s first quarter of 2013 earnings release and financial supplement posted at genworth.com. Unless otherwise stated, all references in this presentation to net income should be read as net income available to Genworth s common stockholders. 1

3 Key Messages Long Term Care Insurance (LTC) Experience Statutory Reporting Forms 1-5 Developed To Report: Actual Vs. Expected Claims & Active Life Persistency Ratio Of Experience Reserve To Reported Reserve Adequacy Of Historical Claims Reserves Difficult To Compare Statutory Reporting Forms 1-5 To Peers Insurers With Similar Experience Can Have Very Different Form 1 & 2 Results Depending Upon Whether Their Statutory Reserves Have Been Unlocked Due To Premium Rate Increases Or Loss Recognition Genworth Has Initiated Multiple Rounds Of In Force Premium Rate Actions That Are Not Incorporated In Forms 1-5 Genworth Has Not Unlocked Its Expected Active Life Reserves Assumptions Originally Set At Issue Form 3 Measures Historical Reserve Adequacy As Claims Experience Develops, Reserves Are Reviewed For Adequacy Subsequent Disabled Life Reserve Strengthening Will Cause Historical Trend To Look Worse As Claim Reserves Increase Versus Initial Expectations Current Statutory Reserve Adequacy Is Validated By Annual Cash Flow Testing Current GAAP Reserve Adequacy Is Validated By Annual Loss Recognition Testing ~$1.8B After-Tax Gain From Hedges On GAAP Balance Sheet As Of 3/31/2013 GAAP LTC Interest Adjusted Loss Ratio Ranged From 63%-76% Since

4 Statutory Experience Forms 1-5 Background Introduced In 2008 To Provide Information Regarding LTC Experience. First Experience Reporting Year Was Replaced Forms A.B.C. To Better Reflect Experience Forms A.B.C. Focused On Lifetime Loss Ratio Standards New Forms Incorporate Morbidity & Active Life Persistency Assumptions Forms Are Very Dependent On Expected Experience Within Active Life Reserve Assumptions Do Not Include Impact Of Reinsurance Information Includes Details Of Actual Claims & Lapse Experience During The Current Reporting Period 3

5 Statutory Experience Forms 1-5 Basics Form 1 Form 2 Form 3 Form 4 Purpose Compares Actual Incurred Claims & Actual Lives In Force To The Expected Amounts Within The Active Life Reserves Assumptions Ratio Of Experience Reserve (i.e. Accumulated Premiums Less Accumulated Claims)To Reported Reserve Compares Historical Estimates Of Actual Benefits Paid (Or To Be Paid) To Original Disabled Life Reserves Track Life & Annuity Products With LTC Accelerated Benefits A/E Incurred Claims A/E Lives In Force Metrics Experience/Reported Reserves Loss Ratio Net/Gross Premiums Persistency Rate Calendar Year Trends Of The Present Value Of Incurred Claims By Incurral Year Policies In Force & Reserve Balances Form 5 State Specific Information Policies In Force, Earned Premiums, Incurred Claims 4

6 Statutory Experience Form 3 Details GLIC 1 LTC Experience Development Form 3 As Of 12/31/2012 ($000) Calendar Year Strengthening/(Redundancy) Incurral Year V'09-10 V'10-'11 V'11-'12 Prior To ,198,322 3,229,335 3,260,852 3,299,508 3,333,943 3,356,555 3,376,444 3,393,171 22,612 19,889 16, , , , , , , , ,371 15,398 10,515 5, , , , , , , ,714 21,982 14,050 6, , , , , , ,693 7,336 25,073 7, , , , , ,406 48,463 18,946 16, , , , ,955 92,580 22,104 12, , , ,127 81,456 33, ,045,734 1,043,871 (1,863) ,305,847 Total 208, ,033 99,015 Represents Best Estimate Reserves (i.e. Reviewed For Adequacy As Experience Develops) For Disabled Lives Recent Disabled Life Reserve Strengthening Driven By: 4Q11 Improved Methodology For Recognizing Claims Costs On Incurred But Not Reported & 3Q12 Claim Methodology Refinement To Better Reflect Claims Transitions 2011 Incurred Claims Showing Favorable Experience As Part Of Annual Actuarial Valuation, Assumptions Underlying Disabled Life Reserves Will Change Over Time As Experience Emerges Results Of Form 3 Do Not Inform Reader Regarding Adequacy Of Current Disabled Life Reserves 1 Genworth Life Insurance Company 5

7 LTC Statutory Reserve Adequacy Policy Reserves Are Tested For Adequacy (Cash Flow Testing) Under Current Conditions & Experience Assumptions Reflects Expectations On In Force Rate Actions Results Of The Most Recent Testing (Completed In 1Q13 For 12/31/2012 Statutory Reserves) Indicate That There Is Margin For Future Deterioration In The Business Under Current Assumptions & Expectations. In Addition To Best Estimate Assumptions, Several Sensitivity Tests Were Completed, Including Possible Reductions In The Portfolio Rate. In Addition, Since We Have Significant Interest Rate Risks Due To The Long Duration Of Liabilities, We Supplement Asset Liability Management Strategies With Hedging Programs Using Derivatives Approximately 70% Of The Next 10 Years In Force Product Cash Flows Have Yield Enhancement In A Low Interest Rate Environment Resulting From Hedging Strategies 6

8 GAAP LTC Ratios Excluding Tabular Interest On Reserves Better Reflects Loss Performance 130% 120% 110% 100% 90% 80% 70% 60% Interest Adjusted Loss Ratio Gross Benefit Ratio The Gross Benefits Ratio Was Calculated By Dividing The (i) Benefits And Other Changes In Policy Reserves By (ii) Net Earned Premiums. The Interest Adjusted Loss Ratio Was Calculated By Dividing (i) Benefits & Other Changes In Policy Reserves Less Tabular Interest On Reserves Less Loss Adjustment Expenses By (ii) Net Earned Premiums. 7