Genworth Financial Inc. is exiting the variable annuities market.
The insurer said on Wednesday it will cease sales of retail and group variable annuities, and will also suspend sales of its linked benefit product — a combination annuity product with long-term care features.
Current contract holders won't be affected by the change.
“With this decision, we have taken an additional step in advancing our specialist strategy to concentrate on the markets, customers and products where we have distinct leadership positions and strengths,” said chief executive Michael D. Fraizer in a statement.
Variable annuity sales have slipped in the last year at the insurer. Currently, Genworth is ranked 25th out of 37 insurers for new VA sales, according to Morningstar Inc. That's down from 20th in 2009.
The carrier was never a tremendous player in variable annuities, noted Steven Schwartz, a life insurance analyst with
Raymond James Financial Inc. “[In a year] they will sell one-fourth of what Prudential [Financial Inc.] and
MetLife [Inc.] will do in a quarter,” he said, estimating some $700 million in VA sales for Genworth in 2010.
The insurer hasn't been getting any demand for the annuity and long-term-care hybrid product from its agents, either, he added. “It doesn't strike me as particularly surprising,” Mr. Schwartz said.
In 2010, Genworth shuttered five of its VA contracts: Personal Income Design, RetireReady Choice, RetireReady Extra, RetireReady Freedom and RetireReady Selections. Genworth's ClearCourse group variable annuity is another product that will no longer be available.
Though the announcement was a surprise to advisers, they noted that they didn't hear much from Genworth's variable annuity wholesalers to begin with.
“When we talked to other advisers, nobody ever said ‘Wow, have you seen the latest Genworth product?'” said Jim Saulnier, an adviser at an eponymous firm. In the past, he recommended fixed annuities from Genworth to clients, but always turned to larger insurers for VA business. “Genworth never came out and taught me about them.”
Genworth said it will continue providing fixed annuities, life insurance, long-term-care insurance and wealth management. The insurer will also continue selling its hybrid life insurance and long-term-care product.
The carrier will concentrate on distributors that have been the strongest for growth, including the brokerage general agency channel, said Al Orendorff, spokesman for Genworth. The insurer expects to record a pre-tax charge of about $12 million in the first quarter for closing down its VA operation.
Currently, A.M. Best Co. rates Genworth an A. Genworth's life insurance companies have an insurance financial strength rating of A2 at Moody's Investors Service. Standard and Poor's rated Genworth Life and Annuity Insurance Co.'s financial strength an A.
But memories of how the financial crisis affected Genworth's ratings and share price -- which had dropped below a dollar in 2008 and 2009 -- remain fresh for some financial advisers.
“We were a little skeptical about their financial strength at one point,” said Steve Esposito, a financial adviser with Macro Consulting Group. “It's always in our advisers' thoughts.”
Genworth landed on the firm's radar for its Clear Course group variable annuity, he noted. But typical of Genworth's VA woes, no one at Macro has actually sold the product.
