Unum Group Corp. (NYSE:UNM) is getting out of the group long-term care insurance (LTCI) and preparing to increase the premiums it charges for in-force group LTCI coverage.
“We intend to aggressively manage the long-term care business,” Thomas Watjen, president of Unum, Chattanooga, Tenn., said today during the company’s fourth-quarter earnings conference call. “This will include continuing our practice of seeking rate increases on the in-force business where warranted and also exploring opportunities for capital management.”
Unum is hoping to use reinsurance to reduce the amount of capital backing the closed block of group LTCI business, company executives said.
Unum, best known as a disability insurer, is reporting a $425 million net loss for the fourth quarter of 2011 on $2.6 billion in revenue, compared with $226 million in net income on $2.6 billion in revenue for the fourth quarter of 2010.
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Company executives said continuing operations did well.
Operating earnings at the operations Unum is keeping increased to $228 million after taxes in the latest quarter, from $209 million in the comparable quarter in 2010.
Book value per common share increased to $29.30 at the end of 2011, from $28.25 a year earlier. The company also ended the year with about 4 times as much risk-based capital (RBC) as it needed to meet regulators’ RBC requirements. In addition to having an RBC ratio above the 400% level, the company had $756 million in cash and marketable securities.
“Our capital position continues to be an asset and gives us a great deal of financial flexibility,” Watjen said.
The Colonial Life voluntary benefits business increased sales 4.2%, to $126 million. Operating income increased 11%, to $68 million, and premium revenue increased 5.7%, to $289 million.
Strong sales at commercial employers offset a drop in sales at government employers, Unum says.
The U.S. group disability business is reporting $77 million in operating income for the latest quarter on $511 million in premium revenue, compared with $77 million in operating income on $514 million in premium revenue for the comparable quarter in 2010.
Sales of fully insured group long-term disability insurance jumped 12%, to $75 million, and sales of fully insured group short-term disability insurance rose 9.1%, to $41 million.
Unum held U.S. group disability operating income steady in spite of a weak economy that continued to hurt employment levels and wage growth the company says.
But Unum looked hard at its LTCI operations, and at an LTCI experience study prepared by the Society of Actuaries (SOA), Schaumburg, Ill. The SOA study confirmed anecdotal evidence that LTCI policyholders are keeping policies in force longer than insurers had expected.