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Some of GE's LTC policies started increasing rates in 2004

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Some of GE's LTC policies started increasing rates in 2004

Some of the long-term care policies behind General Electric Co.'s approximately $15 billion in reserve strengthening started to receive rate increases as early as 2004.

The long-term care business has been a challenge for the industry as faulty pricing assumptions at time of policy issuance and low interest rates have caused many insurers to seek rate hikes to help shore up reserves.

Union Fidelity Life Insurance Co., a GE insurance unit, reinsures a block of Brighthouse Financial Inc long-term care policies under a retrocession agreement with Genworth Financial Inc. The retrocession agreement between Genworth and GE occurred around the time Genworth spun off from GE in 2004. At that time, the policies did not meet Genworth's target return thresholds.

The state product filings offer a glimpse of the effort undertaken to correct the initial pricing of those products. Recent filings show four rounds of requests for various policy forms across the nation between 2004 and 2018, with the third round having multiple iterations. The numerous requests for the third wave were mainly due to state regulators not granting the full increase initially requested, according to a review of the filings. In total, some state regulators have granted six separate rate increases.

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On a cumulative basis, policy form H-LTC3JP5 et al. rates have been raised between 17.9% and 172.8% depending on the state, with the majority of the increases greater than 100%. In some cases, the approved rate hikes are not sufficient to what is actuarially needed, according to a review of the filings.

A filing in Iowa with a renewal business effective date of Nov. 22, 2017, stated that "emerging experience continues to show the need for the full amount requested in prior filings." Milliman Inc., the third-party firm retained to submit the rate filing, said the insurer is prepared to go without about 90% of the increase it needed to bring the loss ratio in line with original pricing expectations.

Data in the filing projects a nationwide lifetime loss ratio of 110.7% with estimated incurred claims of $2.91 billion. That compares to projections of earned premiums of $2.63 billion and factors in the requested rate increase of 31.5%. Iowa regulators have only approved a 17.5% increase at this time.

The insurer agreed to accept the lower rate even though it believes a higher increase is necessary to "alleviate the poor performance on this block of business," a letter attached to the filing stated.

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The analysis conducted by S&P Global Market Intelligence show numerous policy forms for Brighthouse estimating a nationwide lifetime loss ratios greater than 100%, even if the full requested increases are implemented in those states. The nationwide projections reflect the rate level approved in a particular state, including any prior approved increase, but restated on a national basis.

Another GE unit, Employers Reassurance Corp., has agreements with 11 different U.S. counterparties to reinsure their long-term care business. For at least two of the counterparties, Lincoln Benefit Life Co. and State Life Insurance Co., LifeCare Assurance Co. has been working in conjunction with Employers Reassurance in seeking rate increases on the reinsured blocks.

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Lincoln Benefit policy forms LB-6302-P has received several enhanced rate requests in Maine. In total, regulators approved rate increases of 39.5%, 12.0%, and 44.0% in 2007, 2011, and 2018, respectively.

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S&P Global Market Intelligence offers a variety of tools to analyze the rate and product filings of insurance companies.

Click here for a webinar with information on the resources S&P Global Market Intelligence has available regarding rate filings.