There will be a big shake-up at Genworth Financial in about 2 weeks. As of March 7, they will stop selling their popular fixed annuities and life insurance products. This information comes from the Insurance News Net article, “Genworth Stops Life, Annuity Sales, May Split” by Cyril Tuohy. The company is also likely to undergo a complete restructuring. All of these changes stem from large losses over the past couple of years, caused by low interest rates and millions of long-term care policyholders. The president and CEO of Genworth Life Insurance said that these decisions are being made to help the company increase their financial and strategic flexibility.
Although he also said that current policy holders shouldn’t see any changes, many have already received letters increasing their annual premiums or decreasing their current benefits. Genworth currently has 2.8 million annuity and life insurance policy holders and beneficiaries. The company plans to retain their long-term care business as they are one of the top five sellers, but they will isolate that business from the rest of the company. After three very hard financial years, Genworth said that they had to make a move to save the company. Their 4th quarter loss of $292 million was actually quite an improvement from the 4th quarter of 2014’s $760 million loss. Genworth is making these restructuring moves with what they call a sense of urgency.
We have previously talked about many of the Genworth fixed annuity products that are being discontinued. In the Secure Living series of single-premium deferred annuities, the SL Independence, SL Liberty, SL Smart Rate, SL Smart Rate Saver, SL Advantage Pro and SL America Plus will no longer be sold. The single-premium immediate annuities SL Income Provider and SL Income Provider NY are discontinued. Genworth also sold some popular fixed indexed annuities. Their Secure Living Index 5, Index 7, and Index 10 Plus, SL Growth + with Income Choice Rider, SL Protection Plus, and SL Growth Advantage with Income Security Rider won’t be available for purchase any longer. There are also four life insurance products that the company is discontinuing.
Genworth said that they simply could not recover from the steep losses they had seen over the past few years. These losses came from a mix of ratings issues, low interest rates, distributors suspending some sales, higher claim counts and higher severity. Their U.S. life insurance segment includes annuities, life insurance and long term care. This unit had a net loss in the 4th quarter of $135 million, much better than the 4th quarter of 2014, which saw a net loss of $482 million. Genworth’s managers discussed their long-term care business with U.S. regulators and both parties agreed that Genworth has an important role to play in long-term care policies going forward. They have consistently remained in the top 5 of the 12 companies selling long-term care policies. The company believes that their best chance at having a profitable future lies in long-term care because that market is expanding and they have shown dominance with the products already. Genworth will no longer sell new fixed annuities or life insurance, but will remain in the long-term care business in the future.
Written by Rachel Summit