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Just Group plc
20 November 2015

Partnership announces agreement with Genworth to launch immediate need care annuity in US

Partnership Assurance Group plc ('Partnership') today announces an agreement between its life company, Partnership Life Assurance Company Ltd and Genworth Life Insurance Company ('Genworth') to launch a medically underwritten immediate annuity, comparable to Partnership's UK Care Annuity.

The agreement brings together the outstanding combination of Genworth's strong distribution footprint and leading position in the US Long Term Care ('LTC') Insurance market with Partnership's intellectual property and expertise as the UK's leading provider of care annuities. The product launch is planned for Q1 2016.

It is estimated that $45 billion is spent annually in the US by individuals self-funding their care costs and fewer than 10% have any form of insurance to meet such costs(1). The product is expected to address a clear unmet need in the US to help individuals pay future care or other costs with a guaranteed income for life.

Deal structure brings together complementary strengths of Partnership and Genworth

  • The agreement brings together the complementary strengths of each partner in a structure that has been designed to align the interests of both parties
  • Genworth is an expert and market leader in LTC insurance having written approximately 25% of US in-force LTC policies.(2) The product will benefit from Genworth's brand, market-leading expertise, existing operating platform and distribution capability in the US
  • The business will be substantially reinsured into Partnership's main UK life company, Partnership Life Assurance Company Limited, with pricing based on Partnership's expert understanding of longevity and Intellectual Property, which has undergone testing to confirm its validity for use in the US
  • Assets backing Partnership's US liabilities will be managed within mandates approved by the Partnership Board. Partnership's existing investment management strategy will be applied across the US business, with cashflows matched across the portfolio and USD liabilities/cashflows expected to be matched by USD denominated assets/cashflows

Steve Groves, CEO of Partnership, commented;

"I am delighted to announce that the journey we began in 2013 to explore the global application of our leading Intellectual Property has led to this agreement with a market leader for Long Term Care insurance in the US. The potential for this product is very significant; the market is huge and customers seeking to protect themselves against the cost of care over a highly variable future lifetime have limited alternative solutions at the point of need. With data collected over the last 20 years in the UK, we are well placed to help fulfil that need and pursue this opportunity and we look forward to working with Genworth."

Tom McInerney, President and CEO of Genworth commented;

"Partnership's expertise in managing longevity risk complements Genworth's strategic vision for leadership and stewardship within the Long Term Care Insurance industry and we believe it helps solve a clear unmet need in the US. As market leaders in our respective domestic markets, Partnership and Genworth are natural partners with shared and aligned objectives, which will allow us to bring this product to the U.S. market for the benefit of customers and their families."

Further information

Meaningful sales opportunities in the medium-long term supported by strong structural growth drivers

It is estimated that $45 billion is spent annually in the US by individuals self-funding their care costs. Fewer than 10% have any form of insurance to meet such costs(1), despite the fact that the average annual cost of LTC in the US can range from $45,000 for in-home care to $91,000 for a private room in a nursing home(3)

The US market is supported by strong structural growth drivers including:

  • The number of people age 80 and over is expected to increase from 11.6 million in 2012 to 19.5 million in 2030(4) 
  • At least 70% of those over the age of 65 will require some form of long term care services and support during their lives(3)
  • 67% of adults over 40 have done little to no planning for LTC(5)

Proposition addresses an unmet need in the US

The medically underwritten immediate annuity provides a guaranteed income for life through a single premium product, which may be purchased at the point of entering a facility or requiring care and can be used to help fund the costs of care or any other living expenses as individuals age. Approximately 1 million (or 30% of) existing facility care residents are estimated both to need and be able to afford to purchase this guaranteed income for life.(1)

A clear distinction exists between this immediate annuity proposition and existing non-annuity US pre-funded LTC insurance products. The majority of existing products are sold to healthy individuals in their fifties and sixties to meet the potential future costs of care they may have in later life. However, there are limited alternatives currently available at the point of need for individuals seeking a source of income to help offset the potentially significant costs of care over an extended period.

The proposition has significant potential benefits for all key stakeholders;

  • Individual is given security from a guaranteed income for life and is able to manage their estate during their lifetime
  • Family are comforted knowing that their loved one has an identifiable stream of annuity payments to provide financial support
  • Care homes and facilities have certainty that the guaranteed income is available to help pay ongoing fees

Approach to launch and distribution

  • The product has been filed by Genworth and approved in most US states to support a launch in Q1 2016
  • A carefully managed and controlled roll out will be undertaken with trained and licensed distribution, which is expected to deliver a gradual build-up of sales
  • These annuities are relatively short duration (typically 3-4 years on average), which will allow experience to be refined, learnings to be captured and capital to be recycled

 

Sources

(1)  Towers Watson Research for Partnership at November 2014

(2)  LIMRA's "U.S. Individual Long Term Care Insurance Annual Review 2014," published in 2015

(3)  Genworth 2015 Cost of Care Survey, April 2015

(4)  US Census Bureau 2012 and 2012 National Projections

(5)  Kaiser Family Foundation August 2013