LTCI Watch: Block Party

“That block will continue to be a challenge,” Watjen said.

Richard McKenney, the Unum chief financial officer, was not in a frame of mind to murmur sweet nothings about LTCI during the call.

Firming at the LTCI business is the result of rate increases that are only now starting to take effect, McKenney said during the call.

But all the pressures that have been squeezing the LTCI business “are still challenging,” McKenney said. “When I talk about improvement, it’s slight improvement over time. It’s nonmaterial improvement.”

McKenney also needed a lot of words to avoid really answering about whether Unum might have to add to the reserves backing the LTCI block.

But the block seems to be settling down and performing more the way Unum expects it to perform in the future, company executives said.

The current LTCI situation reminds me of an economic outlook luncheon I attended awhile back, maybe in 1991. Someone asked about the possibility of interest rates going up. An analyst at the table used a scenario in which rates went up 3 percentage points in a year as an example of an absurd scenario that couldn’t possibly happen. Then, of course, rates proceeded went up 3 percentage points.

If only rates would go up just 1 percentage point, or 2, in some kind of orderly fashion, with portfolio yields increasing but the economy somehow muddling along, maybe insurers would get their LTC businesses out of the closed-block cellar and back into the parlor.