Q1 2025 Genworth Financial Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Genworth Financial's first quarter 2025 earnings Conference call. My name is Daniel and I'll be your coordinator today at this time all participants are in a listen only mode. We will facilitate a question and answer session towards the end of the conference call. As a reminder, the conference is being recorded for replay purposes also we ask you refer.
Speaker Change: From your screen cell phones speaker phones or headsets during the Q&A portion of today's call I would now like to turn the conference over to Christina Zhu <unk> head of Investor Relations. Please go ahead.
Christina Zhu: Thank you and good morning, welcome to Genworth first quarter 'twenty 25 earnings call.
Christina Zhu: The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth website investor that Genworth Dot com.
Christina Zhu: Our earnings release and financial supplement can also be found there and we encourage you to review these materials.
Speaker Change: Again today will be Tom Mcinerney, President and Chief Executive Officer, and Jerome Upton Chief Financial Officer.
Speaker Change: Following our prepared remarks, we will open the call up for a question and answer period.
Molla Arlen: In addition to our speakers to Molla Arlen <unk>, President and CEO of our U S life insurance business, Kelly felt gaber, Chief investment Officer, and Samir Shah CEO of Kerr Scout services will also be available to take your questions.
Molla Arlen: During the call. This morning, we may make various forward looking statements.
Molla Arlen: Our actual results may differ materially from such statements.
Molla Arlen: We advise you to read the cautionary notes regarding forward looking statements in our earnings release and related presentation as well as the risk factors of our most recent annual report on Form 10-K as filed with the FCC.
Molla Arlen: This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors.
Molla Arlen: In our investor materials, non-GAAP measures have been reconciled to GAAP, where required in accordance with SEC rules.
Molla Arlen: Also references to statutory results are estimates due to the timing of the filing of the statutory statements.
Molla Arlen: And now I'll turn the call over to our President and CEO Tom Mcinerney.
Tom Mcinerney: Thank you Christine good morning, everyone and thank you for joining Genworth 's earnings call for the first quarter.
Tom Mcinerney: Before I dive into our first quarter performance.
Tom Mcinerney: Want to give a special welcome to Christine Jewel, who recently took over as Genworth head of Investor Relations.
Tom Mcinerney: There's been a genworth since 2009, most recently, serving as senior director of financial planning and analysis for our U S life insurance companies.
Tom Mcinerney: We are excited to have Christine in this new role.
Tom Mcinerney: I want to thank Brian Johnson for serving in this position for the past several quarters.
Tom Mcinerney: Brian will be focusing on its existing roles as vice president of financial planning and analysis of Genworth and its finance leader of care skilled services.
Tom Mcinerney: I'm also pleased to welcome Morris tailored to Genworth, who joined US on April 7th as our New Senior Vice President and Chief Information Officer with.
Tom Mcinerney: With his proven experience executing long term visions for large technology organizations also lead our efforts to deliver a technology enabled and human centered experience for our customers an important component of our care scaled growth strategy.
Tom Mcinerney: Turning to our first quarter results, starting with reported net income of 54 million or <unk> 13 per share.
Tom Mcinerney: First quarter adjusted operating income was 51 million led by an act, which had another excellent quarter and contributed 137 million and adjusted operating income to Genworth.
Tom Mcinerney: The total estimated pretax statutory loss for our U S life insurance companies was $1 million driven by losses in life, and annuities, which were mostly offset by long term care insurance.
Ron: Ron will discuss the financial results in more detail.
Ron: Our liquidity remains strong with genworth, ending the first quarter with cash and liquid assets of $211 million.
Ron: We continue to execute well against Genworth three strategic priorities first we increase shareholder value through an X growing market value and consistent capital returns.
Ron: Since its IPO in 2021, our mortgage insurance subsidiary has returned approximately 980 million to genworth, serving as a reliable and a central source of free cash flow.
Ron: And that can also yesterday announced a 14% increase to its quarterly dividend and a new 350 million share repurchase authorization.
Ron: We remain very pleased with our approximately 81% ownership stake in that which helps fuel genworth share repurchase program and growth investments and Kerr Scott.
Ron: Furthermore, as of April 16th and Act was added to the S&P Smallcap 600 index and important milestone that underscores its strong performance and positioning during its early years as a public company.
Ron: We continued executing on our share repurchase program in the first quarter and was bought back $55 million worth of shares year to date through April and since the program's initial authorization has repurchased a total of 600 million worth of shares in <unk>.
Ron: Average price of 575 per share.
Ron: Second we continue to maintain the self sustainability of our customer centric legacy LTC life and annuity businesses in the first quarter, we achieved 24 million of gross incremental premium approvals for a multi year rate action program or my wrap with an average percentage increase of 28%.
Ron: Since the program's inception in 2012, the my Rep has been proven to be the single most effective labor well, maintaining self sustainability generating a total of $31 3 billion and net present value.
Ron: We anticipate that enforce rate approvals this year will be smaller than in 2024, consistent with our long term my rep plans.
Ron: Turning to our third strategic priority, we are seeing strong growth occur scope.
Ron: Sure Scott has achieved dramatic growth in the number of matches between Genworth policyholders and care style quality of network providers during.
Ron: During the first quarter of 2025, the number of matches increased to 576 compared to 52 in the first quarter of 2020 for more than a 10 X increase year over year as Youll see on slide six we expect continued strong growth in the number of matches between cares got providers.
Ron: Genworth policyholders.
Ron: Our provider network continues to strengthen its coverage and maintained its competitive pricing approximately 90% of Kerr Scott quality network for CQ and providers arid region negotiated rates below the local cost of care and up to 20% lower than their standard rates with homecare costs exceeding 5000.
Ron: Per month this translates to a monthly discounts of approximately a thousand per month.
Ron: <unk> received a fee equal to 25% of the monthly discount and the remaining 75% of the discount is a reduction to genworth LTC claim costs.
Ron: In some instances the revenue per car scout and Genworth claim savings can be lower than the respective 25% and 75% levels. If a policies maximum benefit amount has been reached.
Ron: We continue to expand the Kerr Scott quality network.
Ron: The network now includes nearly 550 high quality person centered homecare providers nationwide and has grown to a 90% coverage level for the aged 65, plus sensors population in the United States. This.
Ron: This represents three times growth in the network size year over year.
Ron: We have begun discussions with several national assisted living communities.
Ron: Adding them to the network. So we can serve a wider range of care needs.
Ron: Notably, we're seeing growing interest from providers, who initially declined to join the network a clear signal that the CQ and is getting traction and credibility in the provider marketplace.
Ron: As network size and awareness grows we anticipate a greater portion of our LTC claimants will choose credential providers from our network for their care, helping them optimize each dollar of benefits and driving an estimated one to one 5 billion and claims savings to genworth over time.
Ron: We are also executing on our plan to expand network access to other LTC insurance carriers with closed LTC blocks of business.
Ron: Regarding our large potential new source of revenue care skilled services.
Ron: Already begun pilot programs with two leading insurers and continue to have productive discussions with several other national carriers about using the network.
Ron: We made excellent progress towards bringing our new lower risk individual care SCADA insurance product to market and recently received product approval from the insurance compact, which includes 23 individual states and.
Ron: In addition to these approvals representing 23 states, we advanced product filings in eight additional jurisdictions.
Ron: <unk> on track to reenter the market in the second half of 2025.
Ron: Our goal is to obtain approvals from a critical mass of 30 to 35 stage before launching the product later this year.
We are also in the process of developing a hybrid LTC product, which will combine cash value accumulation using equity index funds with a minimum guaranteed LTC benefit. In addition to our holistic suite of long term care resources, including the CQ N.
Ron: We expect the demand for these new innovative care scout LTC products underscores the market need for responsible scalable solutions to help Americans afford rising longhorn care costs.
Ron: We're also encouraged by the recent reintroduction of the wish Act a bipartisan Bill co sponsored by Representatives Swasey of New York and John Luminaire of Michigan. This legislation would establish a public private framework to provide financial support for individuals requiring long term care, while also strengthening the private market.
Ron: By encouraging broader access to insurance solutions.
Ron: Generally we will continue to actively engage with policymakers support constructive proposals and we are encouraged by the increasing policy momentum aimed at addressing the nation's long term care financing gap.
Speaker Change: Next I want to provide an update on the litigation between Axa and send them there that we've previously referenced.
Speaker Change: While for the liability aspect of the case took place in London in March and concluded on April 10.
Speaker Change: Waiting for the judge to issue a ruling a liability which is expected to occur sometime in mid to late summer a separate hearing on any damage amounts to be awarded will take place in December.
Speaker Change: <unk> has always believed axa has a very strong case on the merits and outside feels good about how the trial with.
Speaker Change: However, as we all know litigation outcomes are impossible to predict and will have no further comments on this litigation until the judge makes a liability ruling.
Speaker Change: During the first quarter. We also took actions to strengthen the alignment of our interests with axa to seek the highest litigation recovery possible by agreeing to potentially cover up to 80 million pounds of axis losses in this matter in installments over the next year and a half depending on developments in the case, we believe that protein.
Speaker Change: Resulting from this case will exceed any amounts that we may be required to pay to access under this arrangement.
Before I conclude I wanted to take a moment to discuss the current macroeconomic environment.
Speaker Change: Many business leaders Wall Street analysts economists that others have said we.
Speaker Change: We faced substantial volatility and uncertainty because of the pending tariff negotiations currently taking place across global markets.
Speaker Change: As a financial services company Genworth and our subsidiaries are not directly impacted by tariffs.
Speaker Change: However, if the ultimate outcome of the global tariff negotiations significantly impacts the U S and global economies and the equity and fixed income markets.
Speaker Change: We'll have some impact on our businesses.
Speaker Change: Our 2025 base case assumes a low single digit increase in U S. GDP.
Speaker Change: However, we rigorously stress test, our operating plans, including under recession scenarios, a moderate recession. If it happens will have a negative impact on earnings but it is quite manageable for genworth.
Speaker Change: Genworth has a very low level of holding company debt of only $790 million, which provides significant financial flexibility for us even if we face a more severe recession scenario.
Speaker Change: Regardless of the short to intermediate term disruption in world markets demand for agent care products and services is expected to rise significantly as the 70 million baby boomers begin to reach peak longterm care age with the number of 80 year old Baby Boomers expected to double in the next 20 years.
Speaker Change: This trend will continue regardless of the broader economic backdrop, along with a growing need for practical funding solutions as younger generations confront the high cost of caring for their parents offerings like the Carescout quality network and help Americans stretch every dollar they spend on care.
Speaker Change: During both meaningful impact for families and sustained value for Jennifer.
In closing.
Speaker Change: We are very pleased with our continued progress on Genworth key value drivers along with another quarter of strong performance from a nap looking forward, we are well positioned to continue advancing these initiatives throughout the rest of 2025 with that I'll turn the call over to Jerome for a more detailed discussion of our financial results.
Jerome: Thank you Tom and good morning, everyone.
Jerome: In the first quarter, we continued to build on our solid foundation and financial flexibility and deliver on our strategic priorities.
Jerome: <unk> once again drove operating performance and continues to operate from a strong capital and liquidity position.
Jerome: We also continued to advance our multi year rate action plan and made significant progress expanding care scout and return capital to shareholders through our share repurchase program.
Jerome: I'll start with an overview of our financial performance and drivers then provide an update on our investment portfolio and holding company liquidity before we open the call for Q&A.
Jerome: As shown on slide seven first quarter adjusted operating income was $51 million driven by an act or.
Jerome: Our long term care insurance segment reported an adjusted operating loss of $30 million driven by lower limited partnership income and the anticipated decline in premiums from the impact of benefit reduction elections.
Jerome: This was partially offset by a liability remeasurement gain related to the actual variances from expected experience or a to E primarily driven by seasonally high mortality.
Jerome: As we said last quarter since the implementation of L. D. T. I in 2023, we have seen an average quarterly loss from the Ada E of about $65 million and continue to expect that we could see losses at this average level throughout 2025.
Jerome: As a reminder, quarterly fluctuations in U S. GAAP results do not impact our cash flows economic value or how we're managing the business.
Jerome: Life and annuities reported an adjusted operating loss of $33 million in the first quarter.
Jerome: This included an adjusted operating loss of $44 million in life insurance, reflecting the unfavorable impacts of seasonally high mortality, partially offset by adjusted operating income of $11 million from annuities.
Jerome: In corporate and other we reported a $23 million loss for the first quarter.
Jerome: The improvement versus the prior year loss of 38 million was driven by unfavorable tax timing of $15 million in the first quarter of 2020 for.
Jerome: That reversed by the end of the year and did not recur.
Jerome: Now taking a closer look at <unk> first quarter performance on slide eight.
Jerome: Enact delivered $137 million and adjusted operating income in line with the prior quarter and up slightly versus the prior year, reflecting ongoing strong business performance and continued reserve releases driven by favorable care performance.
Jerome: Primary insurance in force grew 2% year over year to 268 billion.
Supported by New insurance, written and continued elevated persistency.
Jerome: As shown on slide nine and ex favorable 47 million pre tax reserve release drove a loss ratio of 12%.
Speaker Change: <unk> estimated P. Myers sufficiency ratio remained strong at 165% or approximately 2 billion above requirements.
Speaker Change: <unk> share of an expert value, including a OCI has increased to $4 2 billion at the end of the first quarter up from $4 1 billion at year end 2024.
Speaker Change: At the same time enact has delivered significant capital returns to Genworth.
Speaker Change: Genworth received 76 million in capital returns from enact in the first quarter.
Speaker Change: As an act announced yesterday it has increased its quarterly dividend by 14% and received board approval for a new share repurchase authorization of $350 million.
Speaker Change: Genworth will participate in the share repurchase program in order to maintain its overall ownership at approximately 81%.
Speaker Change: Looking ahead, despite an uncertain macroeconomic backdrop and that continues to operate with solid business fundamentals are strong balance sheet and is well positioned to navigate through a range of potential market conditions.
Speaker Change: As a result and that continues to expect to return to similar levels of capital to its shareholders in 2025 as it did in 2024.
Speaker Change: Turning to long term care insurance, starting on slide 10.
Speaker Change: We are proactively managing LTC risk and maintaining the self sustainability of the legacy LTC business.
Speaker Change: We continue to significantly reduce tail risk through our multiyear rate action plan or my right.
Speaker Change: As part of this effort, we're offering a suite of options to help policyholders manage premium increases, while maintaining meaningful coverage and to enable us to reduce our exposure to certain higher cost benefit features such as 5% compound inflation options and large lifetime benefit amounts.
Speaker Change: As of the end of the first quarter, we have achieved approximately $31 3 billion of enforce rate actions on a net present value basis.
Speaker Change: About 59% of policyholders presented with options have chosen to reduce benefits, helping to lower long term risk.
Speaker Change: Notably the exposure to individual L. P. C policies with a 5% compound inflation feature has decreased to approximately 36% down from 57% in 2014.
In addition to the my wrap we're reducing risk in innovative ways, including through the Kerr Scott quality network, and our live well age well intervention program.
Speaker Change: Which deliver value for policy holders, while also driving claims savings overtime.
Speaker Change: As we said before we are committed to managing the U S life insurance companies as a closed system leveraging their existing reserves and capital to cover future claims.
Speaker Change: We will not put capital into the legacy life insurance companies.
Speaker Change: And given the long tail nature of our LTC insurance policies with P claim years, so over a decade away, we do not expect capital returns from these companies.
Speaker Change: Slide 11 shows statutory pretax earnings for the U S life insurance companies with a loss of 1 million for the quarter L. T. C income of 50 million included a benefit from seasonally high mortality, which typically trends lower through the remainder of the year.
Speaker Change: Earnings from in force rate actions of $340 million were down from 462 million in the prior year.
Speaker Change: As the prior year included a significant benefit from the implementation of the LTC legal settlements, which are now materially complete life insurance had a loss of $34 million driven by seasonally high mortality and our annuity products reported a loss of $17 million, reflecting the net unfavorable impact of interest rate in <unk>.
Speaker Change: QWERTY market movements in the quarter.
Speaker Change: The consolidated risk based capital ratio for Genworth life insurance company or <unk> was an estimated 304% at the end of March compared to 306% at year end 2024.
Speaker Change: <unk> the increase in required capital as we continue to grow our limited partnership portfolio.
Speaker Change: <unk> consolidated balance sheet remains sound with capital and surplus of $3 5 billion as of the end of March.
Speaker Change: Final statutory results will be available on our investor website with our first quarter filings later this month.
Speaker Change: Turning to slide 12, our investment portfolio remains a resilient and is conservatively positioned to weather periods of market volatility.
Speaker Change: And we will continue to invest through the cycle.
Speaker Change: The majority of our assets are in investment grade fixed maturities held to support our long duration liabilities.
Speaker Change: New investable cash flows in her life insurance companies during the quarter, including alternatives achieve yields of approximately 7%.
Speaker Change: Our alternative assets program is largely comprised of diversified private equity investments and has targeted returns of approximately 12%.
Speaker Change: There is potential to experience pressure around short term performance given current market volatility. However, we are focused on investing for the long term, where we are confident that our track record of robust returns will prevail.
Speaker Change: We are committed to growing our alternative assets within regulatory limitations as it remains a natural fit with long tail liabilities.
Speaker Change: Next turning to the holding company on slide 13.
Speaker Change: We received $76 million in capital from enact and ended the quarter with $211 million of cash and liquid assets.
Speaker Change: Included in our cash and liquid assets, we hold approximately $98 million of advanced cash payments from our subsidiaries for future obligations.
Speaker Change: This includes the remainder of our planned $75 million investment of capital and the New care Scout insurance company in 2025 to meet regulatory requirements as we discussed last quarter.
Speaker Change: We do not consider this cash when evaluating holding company liquidity for the purpose of capital allocation or calculating the buffer to our debt service target.
Speaker Change: Our top capital allocation priorities as shown on slide 14 already to invest in long term growth through care Scout.
Speaker Change: Returned cash to shareholders through our share repurchase program when our share price is below intrinsic value and opportunistically retire debt when attractive to us.
Speaker Change: We continue to expect to invest approximately $45 million to $50 million and Kerr Scott services in total throughout 2025, as we continue to build out the platform.
Speaker Change: This investment will go towards adding new products customers and foundation as we scale the business.
Speaker Change: Moving to shareholder returns, we repurchased $45 million of shares in the first quarter at an average price of $6 91 per share and another $10 million through the end of April for.
Speaker Change: For the full year 2025, we continue to expect to allocate between $100 million to $120 million of share repurchases.
Speaker Change: This range may vary depending on business performance market conditions, and our share price.
Speaker Change: We're very pleased with the value created for shareholders through our share repurchase program.
Speaker Change: Our holding company debt stands at $790 million and we are pleased with our financial flexibility given our liquidity level.
Speaker Change: Sustainable cash flows from an act and manageable debt level.
Speaker Change: In closing, we are delivering on our strategic priorities, while proactively managing our liabilities and risk as.
Speaker Change: As Tom said, we maintain the operational and financial flexibility to weather market volatility and uncertainty in today's macroeconomic environment.
Speaker Change: The multiyear rate action plan and additional risk mitigation strategies are ensuring the self sustainability of the legacy LTC blocks.
Speaker Change: And we will continue to focus on delivering sustainable long term growth through enact and care scout.
Speaker Change: While returning meaningful value to shareholders through share repurchases and opportunistic debt retirement.
Speaker Change: Now, let's open up the line for questions.
Speaker Change: Ladies and gentlemen, we will now begin the Q&A portion of the Com as a reminder, please refrain from using cell phones speaker phones and headsets.
Speaker Change: Please press star one to ask a question at any time. Your question has already been answered or you would like to withdraw. Your question. Please press star two to be removed from the queue. Please press star one now.
Speaker Change: And we will take our first question from the line of Ryan Krueger with K B W. Please go ahead.
Ryan Krueger: Hey, Thanks, good morning.
Speaker Change: Tom I know you said you are going to talk about the litigation, but my question is more around the change in the agreement with Axa.
Speaker Change: Thanks, Don.
Speaker Change: To make sure I understand it sounds like you are agreeing to cover up to 80 million of losses, if they occur in the trial, but then you will receive a greater amount of proceeds.
Speaker Change: If they win or can you give any is that correct or if not can you clarify.
Speaker Change: Yeah. So Ryan. Thank you very much for the question and it's a good question and obviously Axa is a very important.
Speaker Change: The case for us because of the potential for significant proceeds so just to go back and big picture it.
Speaker Change: Axa is claiming damages for approximately 700 million and depending on what the judge decided besides in addition to that amount or some lower amount. There are there are expenses and interest.
Speaker Change: So it look because we've reimbursed most axa for most of that amount.
Speaker Change: To the extent that it goes to trial or Theres, a settlement, which may or may not occur.
Speaker Change: We weren't perfectly aligned because for axa around 80 million pounds is what they would have a recovery and we obviously have much more than that so because they would be they would be happy for a much lower ultimate amount.
Speaker Change: We wanted to.
Speaker Change: The trial is going on in March we wanted to align their interests and our interests. So that they have an interest.
Speaker Change: And.
Speaker Change: With us are looking to get the most recovery and the highest settlement possible.
Speaker Change: Our arrangement with them ensures that they have the similar incentive for us to get the maximum amount and to do it for them to be willing to do that we had to.
Speaker Change: And if that guarantee.
Speaker Change: The amount that they have coming to them under the under.
Speaker Change: A result, where.
Speaker Change: The bank has to pay something and that we don't know what that amount will be again as I said in my remarks, we have always thought axa has a very strong case and the precedent is in most cases the.
Speaker Change: The selling entity in this case, the bank were deemed to be or they they.
Speaker Change: Are they paid for these new selling costs so.
Speaker Change: And just given the size we wanted to make sure that axa in Genworth, we're working together.
Speaker Change: Generally our interests are aligned.
Speaker Change: Got it. Thank you that makes sense and then I had a couple of questions on care Scout one was just.
Speaker Change: I know youre, making a capital contribution to the new insurance entity this year to get it going which I think you've already deducted from your Holdco liquidity would you expect further capital contribution beyond this year to be needed for the insurance business or is it is it more just the startup contribution.
Ryan Krueger: So Ryan again good question.
Ryan Krueger: So under the statutory or regulatory rules when you start a new insurance company <unk> insurance.
Ryan Krueger: You have to put in an initial amount of capital well beyond what's needed by.
Ryan Krueger: By RBC ratios et cetera.
Ryan Krueger: They they want that because we.
Ryan Krueger: We project out.
Ryan Krueger: As.
Ryan Krueger: Any startup would do in the insurance space.
Ryan Krueger: What the first five years or so will be in a break even is around five years can be longer or shorter.
Ryan Krueger: And so we they want you to cover in the earlier then you know for sat in their focus on statutory accounting that all the selling and commission expenses or expense early on so there is a drag on statutory earnings early and so basically the 75 million who would be the amount of <unk>.
Ryan Krueger: Capital needed to cover.
Ryan Krueger: Any any loss in that.
Ryan Krueger: In the early years annual loss by a factor of five times. So I think the 75 million is significant.
Ryan Krueger: Capital now as we sell insurance policies.
Ryan Krueger: We will incur those statutory expenses and obviously, we have to have RBC capital supporting that so if you look out over five or six years. We will we will have to put in some more amount of capital, but it's not all that significant the other lever. We have is a 100% of the liabilities.
Ryan Krueger: We'll be reinsurer to our a plus rated reinsurer and so that'll also dampens the because we get ceding commissions from from the reinsurer. So a dancer dampens. The use of capital we do anticipate that will they'll retrocede back to us, 40%, maybe 50% of the earlier.
Ryan Krueger: So we are able through how much we take back to control how much additional cash or capital we have to put in so the way I would look at it Ryan is it's a lot going in for upfront because you have to cover the adverse scenario test of the regulators.
Ryan Krueger: And then going forward based on our growth and how much are we we cover versus the reinsurer will determine how much capital we need so I would say we were hoping we are very successful in dry and if we do that will be some some capital in the future over time.
Ryan Krueger: It's quite manageable and certainly not anywhere close to <unk> 5 million at one time I think the additional capital amounts would be more in the 2000 $25 million range over the over time and.
Ryan Krueger: And we May do that a few times. So that's how it works so it's capital intensive upfront.
Ryan Krueger: Because of the regulatory requirements.
Speaker Change: Makes sense and then just one more question just one more on.
Ryan Krueger: Carescout quality network.
Ryan Krueger: Too early for this but I just I guess wondering if you have like a rough time timeframe that you think that that business not the insurance business, but that business might get to.
Ryan Krueger: A level that's closer to breakeven profitability.
Speaker Change: Right. So I'll, let Samir Shah who is the CEO of that business talk about the.
Speaker Change: The profitability of the business and breakeven, but remember given we now have 550 providers and we have the 20% discounts we're projecting for genworth claim costs in the future that will save one to one 5 billion. So we don't.
Speaker Change: Count that in the break even but I would say for.
Speaker Change: We've been fund.
Funding the expenses as we build up that business in the $35 $50 million range, but if you look at even if the breakeven is.
Speaker Change: A ways out we've already in effect added value to the company in the one to one 5 billion range because of the projections on how those discounts will lower our claim costs, but I think more important and more interesting I'm sure you and other investors is.
Speaker Change: The growth rate of the business and what our expectations are so I'll just ask Samir to comment on that.
Speaker Change: Hi, Bryan. Thank you for the question as Tom alluded and as Jerome I said before.
Speaker Change: Given this is a new business that will require some investments early on and take a couple of years to build out.
Speaker Change: But the early momentum has been really strong.
Speaker Change: Network is continuing to build that with great coverage.
Speaker Change: Choice and efficiency with the rate reductions, we're able to do and as we onboard assisted living communities and rollout new products. We think it will make it a more holistic offering for Asian consumers all over the adoption, we're seeing from clients.
Speaker Change: Beyond January the into other insurance companies in the pipeline will building.
Speaker Change: Or was that the value proposition is not only clear, but it is necessary to solve what is becoming a bigger problem.
Speaker Change: And as you know we've talked about 70 million direct to consumer clients. So the opportunity for us becomes quite significant in terms of value and impact of January but I think we deliver impact in three different ways. One is the savings and we're on pace for the $1 billion 1 billion and a half and savings and I think the savings alone allow carescout services.
Speaker Change: To be breakeven, but I think we bring in new revenue as we add new clients with insurance and direct to consumer clients and over the long run we hope to add significant valuation to the company.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Thanks, Brian.
Speaker Change: And once again, if you'd like to ask a question Press Star One we'll take our next question from the line of Brett ASIC with key BW. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: You guys mentioned the wish act in your prepared remarks can you just elaborate a little bit more about what kind of tailwind do you think that might provide for the Kerr Scott it offering going forward. Thanks.
Speaker Change: Yeah. So thank you Brad it's a great question.
Speaker Change: Our first product.
Speaker Change: Which is a traditional LTC insurance product with but it's fairly catheter <unk>. So if you. If you look at the claims the average claims over the last 40 years I've been in the 250000 range now the most expensive claims I think we paid $3 4 million.
Speaker Change: A woman who had all simers and was on claim a long time and it's still ongoing.
Speaker Change: So.
Speaker Change: We're we buy by offering the Maxim and this new policies by 250000, it protects a lot of our tail risk we learned that because originally we were all selling unlimited benefits with with high compound inflation.
Speaker Change: But if you. So 250000 is the average of claims over time.
Speaker Change: But if you have a severe dementia alzheimers type disease and disability, it's going to be a lot higher.
Speaker Change: The challenge for the private insurers like her scout is if youre going to cover those very high claims that are dementia related you've got charged a lot on all of your policies. So we.
Speaker Change: We can keep the cost of this new this first new product and we'll have many more products, we're already working on other products.
Speaker Change: More manageable for more consumers.
Speaker Change: The average depending on what you buy in.
Speaker Change: Your age and.
Speaker Change: Medical history, it's probably in the 3000 to 3500 range.
Speaker Change: We think.
Speaker Change: It's very appropriate for the federal or state governments Theres already a plan in Washington state to cover them some amount of coverage, but the wish at that.
Speaker Change: Tom Swasey introduced reintroduced with a Republican colleague.
Speaker Change: It basically is a catastrophic coverage.
Speaker Change: So individuals through their savings or private insurance will be responsible for and it depends on your income. So if you are lower income you're you would be required to pay for up to a year if you're hiring.
Speaker Change: Higher income it could be up to five years, so that's private pay and so our capital coverage fits in very well for that and then anything over that.
Speaker Change: And his plan the federal government would pick up.
Speaker Change: The remaining costs and federal government and the states already or the payer of last resort in most of LTC claims are paid by Medicaid. So.
Speaker Change: I think the thinking that he has is that this will allow.
Speaker Change: Funded solution that will take some of the future pressure on Medicaid. So I think it's a very good fit for us and we really are designing our product assuming someday something like the wish Act passes the challenge in the current Congress for passage is I think everybody.
Speaker Change: Is very supportive of some coverage for people in 95% of the 70 million Baby Boomers don't have private LTC coverage, that's a big challenge.
Speaker Change: Uh huh.
Speaker Change: But the challenge is the pay force and just like we've seen over the last 40 years, it's very expensive.
Speaker Change: The.
Speaker Change: Average home care claim is now up to I think 75000 or more.
Speaker Change: Nursing homes private room is 127000 I think so.
The challenge is how do you pay for the catastrophic coverage and Thats I think where there is a challenge is not a lot of support right now in Congress.
Speaker Change: On a bipartisan basis for significant taxes to pay for it. So I think the challenge will be for ultimately for Congress to figure that out they're going to have to do something as these 70 million baby boomers.
Speaker Change: They started turning 80 this January so.
Speaker Change: We're hopeful in addition to Washington State I think California, New York a P.
Speaker Change: Other states are looking at state solution. So I do think ultimately.
Speaker Change: Certainly the private sector and we're not going to cover the very high tail risk aspects of LTC going forward and we do think that's a good place for the public sector. The challenge will be.
Speaker Change: Can you convince Congress administrations.
Speaker Change: The pay for us, which will be expensive, it's something they wanted to do.
Speaker Change: Got you that makes sense thanks, guys.
Speaker Change: Yeah.
Speaker Change: It appears that there are no questions at this time, ladies and gentlemen, I will now turn the conference back over to Mr. Mcinerney for closing comments.
Tom Mcinerney: Thank you very much Danielle and I want to thank everybody.
Tom Mcinerney: And Ryan and Brett for their for the great questions and I want to thank you all for joining the call and for your ongoing support and interest in investments in Genworth.
Tom Mcinerney: We're very proud of the first quarter results.
Tom Mcinerney: That continues to do extremely well.
Tom Mcinerney: And I assume many of you listened to their their earnings call and so they are in a good place and I think we're making great progress on our three.
Tom Mcinerney: Priority strategic priorities that that Jerome and I outlined so.
Tom Mcinerney: We're looking forward to.
Tom Mcinerney: Significant success in growing Carescout overtime and also.
Tom Mcinerney: Look forward to.
Tom Mcinerney: Continued good cash flow strong cash flow from a nap. So thank you very much and ill Danielle I'll turn it back over to you to close the call.
Speaker Change: Ladies and gentlemen, this concludes Genworth Financial's first quarter conference call. Thank you for your participation at this time the Colo Ed.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].