Virginia's Genworth Financial has ushered in the New Year with a decision to axe its group variable annuities (VAs) business.
The firm will continue to service existing VAs and will continue to sell fixed annuities as well as other insurance and wealth management products, but will no longer sell new VA policies. The firm also suspended the sale of a particular annuity, which incorporated a long-term care insurance feature.
"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," chairman and CEO Michael Fraizer said in a statement released on 6 January.
The variable annuity business had been part of Genworth's retirement and protection business unit. The fee-based business provided the firm with annual fees that varied from 0.75% to 4.05% per VA contract, according to Genworth's annual report for the year-ending December 2009. Some of those VA policies offered a guaranteed minimum income benefit stream that policyholders could not outlive and an opportunity to participate in market appreciation.
The firm expects to incur a $12m charge in the first quarter of 2011 to pay for the severance and outplacement services of employees who will now have to leave the firm.
According to US individual annuities sales data provided by market association Limra, as of the third quarter of 2010 Genworth's retail VA business did not rank among the top 20 firms by sales volume which, collectively, accounted for 92% of the $94.6bn in VA sales during the first nine months of the year. By the end of Q3 2010, the industry had sold more than $102.8bn, of which Prudential Annuities had a 15% market share, followed by MetLife with 13.2%.