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Life Health > Life Insurance

Low Rates, Unemployment Batter UnumProvident

By Allison Bell

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NU Online News Service, Feb. 5, 2004, 6:11 p.m. EST – Low interest rates and the weak economy hit UnumProvident Corp., Chattanooga, Tenn., hard in late 2003.[@@]

The disability insurer is reporting a $347.2 million net loss for the fourth quarter of 2003 on $2.5 billion in revenue, compared with $102 million in net income on $2.4 billion in revenue for the fourth quarter of 2002.

Total premium revenue went up slightly, and results for the company’s Colonial worksite marketing unit were strong. Sales of group short-term disability insurance rose 12%, to $60 million.

But sales of traditional individual and group disability insurance were down more than 10%, and the company said it had to take a $300 million charge during the quarter to cope with the fact that interest rates are low and look as if they will stay low.

The interest rate on the investments backing a long-term disability policy help determine the profitability of the policy.

UnumProvident says it also took a $140 million charge in the fourth quarter to recognize the effects of the weak economy on the likelihood that workers will file disability claims and the likelihood that disabled workers will return to work.

“Claim incidence in the second half of 2003 was 8.4% higher than the first half of the year and 5.8% above the second half of 2002,” the company says in a discussion of claims costs. “Claim incidence is expected to continue at an elevated level for several quarters as the early indications of a recovering economy are not yet reflected in improved consumer confidence or job creation.”

Moody’s Investors Service, New York, says it is placing the A3 insurance financial strength rating of UnumProvident’s key life subsidiaries on review for possible downgrade because of concerns about UnumProvident’s losses.

The company has done a good job of raising capital in the past year, but Moody’s says it is worried about ongoing weakness in key business lines as well as the trends in LTD claims.

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