Genworth Financial will remain in the long-term-care insurance market, including annuity/LTC combos, even if one of its companies is sold, said Chris Conklin, senior vice president-product design.
The statement of commitment comes on the heels of April news reports that the Richmond, Va. company is exploring possible sale of Genworth Life and Annuity Insurance Company (GLAIC). This is a subsidiary that sells combos as well as other products. Combos are annuities (or life policies) that include LTC benefits.
The news sent ripples through not only the investment and financial community but also through the LTC insurance community, because Genworth is the nation’s top-selling LTC carrier.
It also sent ripples through the budding “combo” products business. Producers and advisors have begun gradually increasing their sales of annuity/LTCs and life/LTCs as the traditional LTC business declined in the wake of higher prices and other problems. If Genworth sells GLAIC, some producers ask, how will that affect availability for combo products?
The question takes on new meaning in view this week’s news from LIMRA about rising combo sales.
In 2014, carriers sold nearly 100,000 individual life/LTC combo policies — an increase of 4 percent over 2013, the researcher said. More than 20 carriers are active in this market. As for new premium, it fell to $2.4 billion for a decline of 9 percent compared with 2013, but that is after several consecutive years of double-digit growth, said LIMRA product actuary Catherine Ho.
Also in 2014, carriers sold roughly $440 million annuity/LTC combos, with just five companies in the market, LIMRA said.
That annuity/LTC figure seems comparatively small but it’s up from total first-year premium of nearly $320 million in 2013, as reported by a Milliman study earlier this year. It is also up from $44 million in 2012, and from nearly $25 million in 2011, Milliman said. (The small size of this market may be expected, given that a relevant tax rule change did not take effect until 2010. The rule change allows a tax benefit for annuity/LTC policyholders.)
The potential sale would involve only one of Genworth’s companies, Conklin explained. “But we own multiple companies, including not only GLIAC but also Life Insurance Company (GLIC),” among others. Some combo products are being sold by both Genworth companies, he said.
Also, he added, although the company is considering a possible sale of GLIAC, nothing has been decided. Regardless, “our plan is to continue writing combo products” as well as other LTC product types.
New products coming
To that end, Genworth has new products in the works. In July, it hopes to roll out a new individual LTC with lower pricing than on the existing design, Conklin said.
In February 2016, it is planning to debut a new group LTC.
In December last year, it launched an annuity/LTC combo on a fixed index annuity (FIA) chassis. Training and sales are under way now. Called SecureLiving Growth+ with Income Choice rider, this FIA/LTC combo provides for double the withdrawal limit during an extended medical care confinement, access to caregiver support advocates, a bailout provision, and an optional guaranteed lifetime income rider with level or increasing income options.
On the combo life/LTC side of the business, the carrier is selling a single-premium universal life policy that accelerates the death benefit for LTC for two years and offers an extension rider for four additional years. It also sells an index universal life policy with a LTC acceleration rider and a no-lapse guarantee feature.
“All have seen sales that have grown,” said Conklin. For example, sales of the single-premium life policy increased by 60 percent last year.
The annuity/LTC buyers are more focused on retirement income and saving, but they like having the ability to turn it into LTC benefits or into income, depending on need, he said. The life/LTC buyers like having the death benefit, and access to a bigger pool of money if they need LTC.
“We’re not giving up on traditional LTC, although that market has been shrinking substantially,” he added. “We hope to turn that around with our new group and individual products, and our combos in a variety of flavors.”
Industrywide sales of individual LTC insurance has declined by 80 percent in the last 12 years, and it was down by 50 percent between 2012 and 2014, he pointed out. “Our experience has tracked with the industry for those last two years.”
The rating agencies are tuned in. In February, Fitch’s Rating Service reiterated its BBB rating of Genworth, with a negative ratings outlook due to the carrier’s “large exposure and market leading position” in the LTC insurance market. In May, A.M. Best placed Genworth ratings under review following the first quarter news about possible sale of its life and annuity businesses.
Genworth executives have noted publicly that their company was experiencing losses stemming from its legacy LTC insurance business written before 1996. It has since sought and secured rate increases, adjusted reserves and designed new products aimed at today’s buyers.
Now the carrier is looking for growth. “We feel confident the products we write today are profitable,” Conklin said. “That makes sense for the company … and the more we sell, that makes more sense.”
As for combos, those sales were up for the industry in the last two years, with a “slow and steady increase,” he said. That business does not replace what the industry lost, he allowed. But it shows there is growth and interest in this market.
Late last year, Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI) said that although sales of traditional LTC have declined, combo sales are increasing. "For the first time, we project annual sales (in 2015) of the newer options will equal and quite possibly surpass sales of traditional LTC insurance policies."
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].
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