MetLife Inc., the largest U.S. life insurer, will halt the sale of new long-term care coverage after citing “financial challenges” in the business.
MetLife, led by Chief Executive Officer Robert Henrikson, is focusing on growth in Asia after buying a business from American International Group Inc. this month for $16.2 billion. Insurers including CNO Financial Group Inc. have been burned by policies sold in the past when they underestimated the number of claims, the cost of care and life expectancies of their clients.
“The financial challenges facing the long-term care industry in the current environment are well known,” Jodi Anatole, a vice president for MetLife, said today in a statement.
Long-term care policies provide coverage to help pay for home-health aides or residence in a nursing home or assisted-living facility. New York-based MetLife will accept applications for new coverage through Dec. 30 and continue to honor previously written contracts after that date, the company said.
The cost of assisted living has climbed at an annual rate of 6.7 percent over the past five years and the price for a private room in a nursing home jumped 4.5 percent annually over that span, according to a report in April from Genworth Financial Inc., which also sells the coverage.
More than 10 million Americans need long-term medical services and support and that number is projected to rise as the U.S. population ages, according to an October 2009 report by the Henry J. Kaiser Family Foundation. Medicaid helps cover such long-term care expenses for low-income Americans while Medicare covers only short-term nursing and home health services, according to Kaiser.
Premiums on long-term care coverage were $10.6 billion last year, and protect about 7.1 million people, according to Limra. Sales from new individual policies dropped 32 percent from 2005 to $464 million in 2009, the trade group said in a report.
“This is a market that is challenged even in the best of times,” said Catherine Theroux, a Limra spokeswoman, of pressure on sales due to the economy. “It’s an expensive product and it’s not something people want to talk about.”
Manulife Financial Corp.’s John Hancock unit, Prudential Financial Inc. and Genworth are also among the top 10 sellers of the coverage, according to Limra. MetLife is reviewing ways to address the long-term care financing of clients and its business goals, the insurer said.
“People have discussed combining long-term care coverage with life insurance or with annuities,” said Karen Eldred, a spokeswoman for the firm. “Those are some options we continue to explore.”
MetLife dropped 79 cents, or 1.9 percent, to $40.13 at 4 p.m. in New York Stock Exchange composite trading. The firm has gained 14 percent this year, compared with the 17 percent advance in the 24-company KBW Insurance Index.
The insurer has about 600,000 long-term care customers among its 90 million customers worldwide, Eldred said. The long-term care coverage is part of MetLife’s non-medical health business, which generated about $6.1 billion in revenue in 2008, according to a slide in MetLife’s annual presentation to investors in December. The company’s total revenue was more than $50 billion in 2008.
The slide touted MetLife’s top ranking in group life sales and No. 2 position in group dental and disability without making reference to long-term care.