An increase in LTCI claimant mortality reduced the LTCI loss
ratio.
Unum Group today announced that it has agreed
with Maine insurance regulators to add $2.1 billion to its statutory reserves
for long-term care insurance (LTCI) over seven years.
The company also hinted at how COVID-19 may be
affecting the people who have been using long-term care insurance (LTCI)
benefits to pay for care.
Resources
The company mentioned briefly, in its earnings
release for the first quarter, that the interest-adjusted loss ratio, or ratio
of benefits payments to revenue, for its LTCI business fell to 81% in the
latest quarter, from 88.5% in the first quarter of 2019.
The decrease was “driven primarily by higher
claimant mortality,” Unum reported.
Unum did not give any more information in the
release about details such as the number of deaths involved.
The
Reserve Addition
Unum once sold large amounts of group LTCI
coverage and some individual LTCI coverage. It stopped selling individual
coverage in 2009, and it stopped selling group coverage in 2012.
Unum is still responsible for providing
the benefits provided by the policies already sold.
Unum’s new agreement with Maine will affect
the reserves set aside for LTCI, under state insurance regulators’ Statutory
Accounting Principles rules, at Unum Life Insurance Company of America
subsidiary, which has its official state of domicile in Maine.
Unum Life recorded $198 million in earned
premiums in 2018 for providing individual LTCI for 104,000 people, and $352
million in earned premiums for providing group LTCI for about 806,000 people,
according to a 2018 Unum Life annual statement posted on the California
Department of Insurance website.
Unum Life was supporting the policies with
$7.5 billion in reported policy reserves, according to the annual statement.
Unum Group said in the new earnings release
that it will start increasing Unum Life’s statutory LTCI reserves by making a
phase-in addition of $200 million to $250 million for 2020.
“This strengthening will be accomplished by
our actuaries incorporating explicitly agreed upon margins into our existing
assumptions for annual statutory reserve adequacy testing,” Unum Group said.
Unum reports on its earnings and reserves to
investors using the Financial Accounting Standards Board’s U.S. Generally
Accepted Accounting Principles (GAAP).
The Unum Life reserve addition will affect
only Unum Life’s statutory reserves, not Unum Group’s GAAP long-term care
insurance reserves or GAAP financial results, Unum Group said.
The Earnings
Unum Group is reporting $161 million in
net income for the first quarter, under GAAP rules, on $2.9 billion in revenue,
compared with $281 million in net income on $3 billion in revenue for the
first quarter of 2019.
Premium revenue increased to $2.4 billion,
from $2.3 billion, and net investment income fell just a little, to $585
million, from $595 million. But the latest results include a $144 net realized
investment loss, compared with a $1.1 million gain for the year-earlier
quarter.
Spending on commissions fell to $279 million,
from $290 million.
Liquidity
Unum said it has about $1 billion in cash.
The company is suspending efforts to buy back
shares of its own stock, but it said it intends to continue to pay its
common stock dividend at the current rate. The company has been paying a
quarterly dividend of 28.5 cents per common share.
Unum US
Unum US, Unum’s based company’s traditional
group insurance unit, is reporting $262 million in adjusted operating income
for the latest quarter on $1.7 billion in revenue, up from $252 million in
adjusted operating income on $1.7 billion in revenue.
Commission spending fell to $154 million, from
$163 million.
Here’s what happened to sales revenue for
some key products between the year-earlier quarter and the latest quarter:
·
Group
long-term disability: $31 million
(down from $37 million)
·
Group
short-term disability: $14
million (down from $21 million)
·
Group
life and accidental death and dismemberment: $28 million (down from $41 million)
Colonial Life
Colonial Life, the worksite marketing
unit, is reporting $81 million in adjusted operating income on $473 million in adjusted
operating revenue, compared with $84 million in adjusted operating income on
$457 million in adjusted operating revenue.
Commission spending fell to $93 million, from
$94 million.
Here’s what happened to Colonial Life sales
for several key products, year-over-year:
·
Accident,
sickness and disability: $65
million (down from $72 million)
·
Life: $21 million (up from $20 million)
·
Cancer
and critical illness: $14 million
(down from $17 million)
Conference Call
Unum will be holding a conference call to go over
its latest results with securities analysts at 8 a.m. Eastern Time Tuesday.
Unum will stream the call live through the
web, and it will post a recording of the call after the call is over. A link
the conference call system is available here.
Allison Bell, ThinkAdvisor's insurance editor,
previously was LifeHealthPro's health insurance editor. She has a bachelor's
degree in economics from Washington University in St. Louis and a master's
degree in journalism from the Medill School of Journalism at Northwestern
University. She can be reached at abell@alm.com or on Twitter at
@Think_Allison.
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