Unum Group, Chattanooga, Tenn., reported operating income in the second quarter of $57.3 million for its group life and accidental death and dismemberment line of business, a 10.2% increase over the year-ago period. Premium income for this line of business increased 7.2% to $322.9 million compared to $301.1 million a year ago, reflecting higher sales and premium persistency. The benefit ratio increased to 71.9% from 70.3%. This increase reflects a higher average claim size which was offset slightly by a lower claim incidence rate for group life.
In the last year, sales of group life and accidental death and dismemberment products increased 12.1% to $50.1 million from $44.7 million. Premium persistency in the group life line of business was 91.6% through the first six months of 2012, compared to 87.3% through the first six months of 2011. Case persistency in the group life line of business through the first six months of 2012, at 88.1%, was down slightly from 88.6% through the first six months of 2011.
The supplemental and voluntary line of business reported a 13.5% increase in operating income to $85.0 million in the second quarter of 2012, compared to $74.9 million in the second quarter of 2011. The increase was driven by strong results from both the voluntary benefits and individual disability – recently issued lines of business. Premium income for this line of business increased 5.7% to $276.1 million in the second quarter of 2012, compared to $261.3 million in the second quarter of 2011, primarily reflecting higher sales in the voluntary benefits line of business.
The benefit ratio for voluntary benefits decreased to 46.8%in the second quarter of 2012 from 50.3% in the second quarter of 2011 due primarily to higher premium income, a lower claim prevalence rate, and a lower average claim size for voluntary disability. Also favorably impacting voluntary benefits risk metrics for the second quarter of 2012 was the release of active life reserves associated with a voluntary benefits large case customer who terminated the existing individual contracts and bought voluntary group coverage during the second quarter of 2012. Relative to the second quarter of 2011, sales in the voluntary benefits line of business increased 8.0% in the second quarter of 2012 to $36.6 million.
In other industry news:
Swiss Re, Zurich, Switzerland, entered into a transaction with VITA Capital V Ltd. (Vita V), under which it could receive up to $275 million, in the event of excess mortality in any part of a pre-defined coverage area. Vita V, in turn, has issued Series 2012-I Class D-1 and Class E-1 notes to the capital markets, each of which is linked to extreme mortality risk in the respective covered areas.
The arrangement covers a five-year risk period starting in the issuance year and ending in 2017. This latest Vita issuance extends the geographic coverage by including Australia for the first time, reflecting Swiss Re’s global mortality business.
This is the fifth Vita securitization over the past three years, which brings the amount of extreme mortality risk protection raised by the program to over $2.25 billion.
The Vita V notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
The Swiss Re Group provides reinsurance, insurance and other insurance-based forms of risk transfer.
Digital Insurance, Atlanta, Ga., has acquired DSG Benefits Group in Dallas, marking the company’s entrance in the Texas market.