Prudential Financial Inc. (PRU:US), the second-largest U.S. life insurer, will halt sales of group long- term care coverage as low interest rates pressure returns.
Policies already sold remain in effect and are renewable, the Newark, New Jersey-based insurer said today in a statement.
Prudential said in March it would stop selling individual long-term care policies and joins rivals in retreating from the industry as low interest rates limit investment income on funds set aside to cover claims that may not arise for decades. MetLife Inc. (MET:US), the No. 1 U.S. life insurer, said it would stop selling the coverage in 2010 and Unum Group (UNM:US) said this year it would exit the group business.
“The decision reflects the impact of the continued low interest-rate environment,” Prudential said in the statement. Stopping sales will help the insurer “further its longer-term goal of sustainable, profitable growth in its core group life and disability lines of business.”
Federal Reserve Chairman Ben S. Bernanke has said the central bank will keep U.S. interest rates low through at least 2014 to stimulate growth in the world’s largest economy. Low rates can pressure income at insurers that rely on bond investments to back liabilities.
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