Genworth Financial Inc., the provider of life insurance and mortgage guaranties, said it is suspending sales of individual long-term care coverage in California as the company works to start replacement offerings with better returns.
Genworth will stop selling the policies, which can help pay for home-health aides or nursing home stays, effective March 21, according to a statement today from the Richmond, Virginia-based company. The products being suspended in California, the most populous U.S. state, accounted for 12 percent of Genworth’s long-term care sales last year.
“The company was not going to write business in a product which did not fit its desired return profile,” said Mark Palmer, an analyst at BTIG LLC. “Discipline is called for and this is a demonstration of discipline by the management team.”
Chief Executive Officer Tom McInerney is seeking to improve results from long-term care coverage after fourth-quarter profits at the unit tumbled 75 percent amid low interest rates and rising health-care costs. Genworth has been requesting rate increases from state regulators on existing policies and said today that it’s working with California’s insurance overseer as it seeks to introduce a new long-term care offering.
Genworth has made “fairly good progress working with regulators” on requests for higher rates, McInerney said in an interview last month. “That is an area that, because of its complexity, will continue to need a lot of focus.”
Genworth rallied 2.3 percent to $9.61 at 4:15 p.m. in New York, extending its gain to 28 percent since Dec. 31. McInerney started as CEO in January. Mortgage insurers surged this year as Radian Group Inc. sold shares and notes to bolster capital.
MGIC Investment Corp. has more than doubled this year, and was up 5.1 percent today after saying it began an offering of stock and bonds, underwritten by Goldman Sachs Group Inc. Radian has advanced 63 percent this year.
MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, have retreated from long-term care coverage amid higher-than-expected claims costs.