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Anemic new individual LTC policy issuance a sign of the times

The number of new individual long-term care policies issued in 2017 plunged as several companies that once ranked among the leading sellers of the product have either exited the business or struggled against headwinds in their ongoing marketing initiatives.

Fewer than 72,000 new individual LTC policies were issued by property and casualty, life, health and fraternal benefit companies according to statutory data compiled May 14. That is down more than 27.3% from results reported in 2016 by the same entities and 35.7% below their 2015 volume. Ten of the top 15 cross-sector groups and standalone entities ranked by new individual LTC policies issued in 2017 experienced double-digit percentage declines.

The 2017 results partially reflect the cumulative impact of market exits over the course of the past decade by some of the industry's best-known insurers. Manulife Financial Corp.'s John Hancock Life Insurance Co. (U.S.A.) and affiliates, which discontinued individual LTC sales in December 2016 and required new policies to be issued by February 2017, showed a 70.5% drop in new issues. The decline was a much more modest 9.6% for State Farm Mutual Automobile Insurance Co. as that company's plans to discontinue marketing LTC policies were to take effect in March 2018.

Several companies that still offer new individual LTC coverage also reported sharp declines in new policies issued. Northwestern Long Term Care Insurance Co., the LTC subsidiary of Northwestern Mutual Life Insurance Co., ranked as the top issuer of new individual LTC policies in 2016, but reported a 42.2% drop in issuance on 2017.

Genworth Financial Inc., the largest individual LTC insurer based on earned premiums, saw a 39.8% drop in new issues in 2017. The company attributed a 30% decrease in the dollar volue of its individual and group LTC sales in 2017 primarily to its lower ratings. Various agencies have downgraded their financial strength ratings for Genworth's life insurance subsidiaries, including actions in February 2018 by Moody's and A.M. Best, amid uncertainty about the company's ability to close its proposed sale to China Oceanwide Holdings Group Co. Ltd.

Genworth suspended LTC sales in several states in which it has either been unable to secure what it considers to be satisfactory rate increases on in-force business or has been unsuccessful in obtaining approval for new products, most recently adding Montana and Florida to the four states where it had previously taken such action.

The company said in its most recent 10-Q filing that it continues to evaluate new LTC products, citing the recent launch of an enhanced product that it believes will improve competitiveness and meet its targeted returns through reduced premium rates and benefit levels.

New individual LTC issues also declined by greater than 20 percentage points for the likes of the group that includes Transamerica Life Insurance Co., as well as Blue Cross Blue Shield of Michigan Mutual Insurance Co.'s LifeSecure Insurance Co., Massachusetts Mutual Life Insurance Co., New York Life Insurance Co., Thrivent Financial for Lutherans, and United Security Assurance Co. of Pennsylvania. Issues increased, but only modestly, for Knights of Columbus and Global Atlantic Financial Group Ltd.'s Forethought Life Insurance Co. The group led by Mutual of Omaha Insurance Co. led the industry with 18,299 new issues, a year-over-year increase of nearly 14.3%.

Growth rates were particularly high, albeit from very low bases, for two entities: National Guardian Life Insurance Co., a company that entered the market in 2016, and Kemper Corp.'s Reserve National Insurance Co. The former company had 164 new issues in 2017; it did not issue any policies in 2016. The latter does not offer LTC insurance at all, but filed the reporting form as a result of limitations in certain states as to how its Kemper Senior Solutions-branded home health care product is classified.

There is a "very big difference" between the Kemper product and LTC coverage in terms of the policy itself and the benefits it offers, said Kemper CFO James McKinney. He added that the company's effective exposure to long-term care is "zero."