Genworth to drop AARP LTC product line

Sales through independent producers fell to $21 million, from $28 million, and sales through dedicated sales specialists fell to $10 million, from $12 million.

The loss ratio for “older generation” policies fell to 103 percent, from 115 percent; the loss ratio for newer generation policies rose to 59 percent, from 57 percent.

During the conference call with analysts, Tom McInerney, Genworth’s president, said he believes that Genworth can play an important role in helping to protect consumers and state governments against the financial impact of the projected increases in long-term care costs.

But “we are prepared to take actions, such as suspending sales in states and ending new sales through distribution channels where we cannot offer products with an acceptable risk-adjusted return,” McInerney said.

The company is now about 20 percent to 30 percent of the way through previously announced price increases on old, pre-2004 blocks of LTCI policies that should add about $200 million to $300 million per year in premium revenue, executives said.

The company is talking to regulators about watching post-2004 LTCI policies more closely and seeking smaller, more frequent increases when necessary, rather than seeking infrequent increases of 50 percent or more, executives said.

Genworth believes that adjusting rates more frequently would be easier on consumers and also help the company manage the LTCI business more effectively, executives said.

The company also is trying to re-position new products by focusing on more tightly underwritten products based on more conservative assumptions, executives said.

The new products will come with shorter benefit periods, lower daily benefit options and fewer riders, executives said.

Last week, executives at a smaller player in the LTCI market, CNO Financial Group Inc. (NYSE:CNO), painted a similar picture of the LTCI market when that company released its earnings.

CNO’s Bankers Life unit reported $6.1 million in new LTCI sales on $135 million in LTCI premium revenue, down from $7.9 million in new LTCI sales on $137 million in LTCI premium revenue.

Bankers Life is “exercising strict pricing discipline” when it sells LTCI policies, and focusing on selling smaller policies with lower premiums, in part because of the effects of low interest rates on the investment returns that help the company support LTCI policy benefits obligations, CNO executives said during their company’s earnings call.

See also:

• Genworth: LTC costs keep rising
• Connecticut trims LTCI rate hikes
• Genworth LTCI unit turns profit