So, what Does Everyone Think About Genworth's 180?

[ned55]

OK, Mr. Ned, I guess I'm ignorant of what matters.

I never thought that stock price was of any concern.

Yet, it seems to be a very big concern, especially based upon this last post you made.

Can you explain to me and the rest of the readers of this forum why the drop in stock price by 35% is bad for someone who owns a gnw LTCi policy?

Thank you.

I am just a new member here, not a Guru.

The price of the stock is more important to investors than to policyholders. A lower market capitalization that results from a lower stock price may impact the way Genworth runs its business, and the flexibility it has available. Genworth does not have an unlimited supply of capital to continuously add money to the coffers of the life insurance unit whenever there is a shortfall. Policyholders should care about Genworth's long term future stability.

The lower agency ratings are more important. This impacts the ability for Genworth to borrow. A lower agency rating for Genworth will raise the interest rates of funds which Genworth can borrow. If Genworth is expecting to profit on the margins between borrowed money and investments, a lower rating and the higher borrowing costs hurt their margins. With the low interest rate environment that currently exists, many long term care insurers are having a tough enough time as is trying to earn enough investment income over time to cover future claims. For Genworth, it is now even harder. This impacts policyholders as even more severe rate increases may be requested, and the financial stability of Genworth may be further challenged.

 

[Mr_Ed]

I am just a new member here, not a Guru.

The price of the stock is more important to investors than to policyholders. A lower market capitalization that results from a lower stock price may impact the way Genworth runs its business, and the flexibility it has available. Genworth does not have an unlimited supply of capital to continuously add money to the coffers of the life insurance unit whenever there is a shortfall. Policyholders should care about Genworth's long term future stability.

The lower agency ratings are more important. This impacts the ability for Genworth to borrow. A lower agency rating for Genworth will raise the interest rates of funds which Genworth can borrow. If Genworth is expecting to profit on the margins between borrowed money and investments, a lower rating and the higher borrowing costs hurt their margins. With the low interest rate environment that currently exists, many long term care insurers are having a tough enough time as is trying to earn enough investment income over time to cover future claims. For Genworth, it is now even harder. This impacts policyholders as even more severe rate increases may be requested, and the financial stability of Genworth may be further challenged.

Two quick questions:

1) Why does Genworth need to borrow money for LTC insurance? They have over $20 Billion in their long-term care reserves? Why do they need to borrow money for LTCi?

2) If all that you are saying is true, how has Genworth survived over the past 5 years considering their stock price was only 84 cents per share in March 2009? Did they stop paying claims when their stock was only 84 cents per share?

 

[ned55]

Two quick questions:

1) Why does Genworth need to borrow money for LTC insurance? They have over $20 Billion in their long-term care reserves? Why do they need to borrow money for LTCi?

2) If all that you are saying is true, how has Genworth survived over the past 5 years considering their stock price was only 84 cents per share in March 2009? Did they stop paying claims when their stock was only 84 cents per share?

So far, I have contributed my opinions and feedback to this forum more than I really intended to. Mr. Ed, it sounds like there is no need to worry about Genworth. Their $20 Billion in reserves should be enough to pay all future claims, with no need for higher investment returns. That $20 Billion should be adequate so that Genworth will not request any more future premium increases.

If you are in the business working with policyholders, perhaps you can tell them that there will not be any future premium increases because Genworth has all the reserves necessary. If you don't believe that Genworth borrows money as part of its investment strategy, you could choose to tell policyholders that Genworth's returns on investment are sufficient to cover all future claims without borrowing.

This is a different environment since 2009, as financial institutions have more rigorous requirements for capital reserves, and government assistance options will likely not be as prevalent in the future.

My opinion about Genworth remains the same, solidified by the ratings action by Standard and Poors. Some may choose to believe that Genworth is doing great, and that is up to them.

 

[Mr_Ed]

So far, I have contributed my opinions and feedback to this forum more than I really intended to. Mr. Ed, it sounds like there is no need to worry about Genworth. Their $20 Billion in reserves should be enough to pay all future claims, with no need for higher investment returns. That $20 Billion should be adequate so that Genworth will not request any more future premium increases.

If you are in the business working with policyholders, perhaps you can tell them that there will not be any future premium increases because Genworth has all the reserves necessary. If you don't believe that Genworth borrows money as part of its investment strategy, you could choose to tell policyholders that Genworth's returns on investment are sufficient to cover all future claims without borrowing.

This is a different environment since 2009, as financial institutions have more rigorous requirements for capital reserves, and government assistance options will likely not be as prevalent in the future.

My opinion about Genworth remains the same, solidified by the ratings action by Standard and Poors. Some may choose to believe that Genworth is doing great, and that is up to them.

why don't you believe that Genworth has $20 billion dollars in LTCi reserves?


as a side note, the extent of parochialism amongst agents in this business is sickening.