Expenses can be one of the most crippling parts of old age. Even the wealthiest people can have difficulty maintaining and aiding incapacitated citizens. Money that was saved for retirement and health issues is disappearing, and it seems like most of us are playing a high-stakes poker game with the house holding all the cards. Thankfully, there is a solution. Long-term care insurance. (Read our related article, Bundle Your Insurance For Big Savings.)

IN PICTURES: Top 7 Social Security Myths: Exposed

A Need Exists
Some financial planners suggest that households with a net worth of $1.5 million (excluding principal residence) or more pay for long-term care "out of pocket." According to a report in March by CNN Money, the number of households with a net worth of $1 million (excluding home) dropped 27% in 2008 to 6.7 million. Given there were 105 million households in America, according to the 2000 census, potentially 98.3 million households will need some sort of financial aid to cover these expenses. A January study by the American Association of Retired Persons (AARP) found that 15% of the American population receives Medicare coverage and are likely to qualify for long-term care. Subtracting Medicare's 15.8 million households, 82.5 million households might require some financial assistance to pay for long-term care. With one out of every two people receiving long-term care at some point, the market for long-term care insurance is approximately 106.8 million Americans. That's one-third of the population. Yet, long-term care insurance continues to lag other forms of coverage.

Top Five LTC Insurance By Premium As of 2007




Company


Premiums


Market Share


CNA Financial Corp (NYSE:CNA)


$6.2 billion


41.36%


Genworth Financial (NYSE:GNW)


$1.5 billion


10.18%


Manulife Financial (NYSE:MFC)


$1.2 billion


7.71%


MetLife (NYSE:MET)


$607.0 million


4.06%


Conseco Inc. (NYSE:CNO)


$582.0 million


3.89%



Source: http://www.iii.org

LTC Sales Drop
There was $600 million in individual long-term care policies sold in 2008, a drop of 7% from 2007. The recession played a big part in the decline. In addition, the number of new buyers of long-term care insurance was 277,000, down 9% year-over-year. While not great, at the end of the day $8.6 billion in long-term care premiums were in force in 2008 with 4.8 million policies outstanding. As a glass half-full person, I see a great deal of opportunity for both current market share leaders and those new-to-the-game who are willing to make a bet on boomers finally coming to grips with aging. Even if my guesstimate of the long-term care market (106.8 million Americans) is off by 50%, it still leaves almost 50 million policies to sell and $90 billion in annual premium potential. Whether this happens is another matter altogether. (For more, see our related article Understand Your Insurance Contract.)

They're All Worth a Look
Insurance companies, like every other industry in America, have been hard-hit by the current recession. Who wants to buy insurance when you can't even pay your mortgage? CNA Financial, the market leader in LTC is down but definitely not out. First quarter operating earnings, excluding $344 million in investment losses, were 56 cents a share. In comparison, they were 82 cents a share in the same quarter of last year. Despite the drop in earnings, they still beat analyst expectations by 30 cents a share. (For more, read the related article Bargain Shopping At Loews.)

Bottom Line
The five companies above account for 67.2% of the total long-term care premiums in the U.S. That's five out of 194 insurers writing coverage. One of two things will happen in the future; the five will continue to capture additional market share or an unknown dark horse will appear with an innovative product to take it away from the big boys. Either way, the market potential is real and untapped. (For more, see our related article Long-Term Care Insurance: Who Needs It?)



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Tickers in this Article: CNA, GNW, MFC, MET, CNO, L

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