The Federal Reserve Board kept hammering at StanCorp Financial Group Inc. (NYSE:SFG) in the third quarter.
StanCorp, the parent of Standard Insurance Company, says the discount rate it uses to set reserves for new long-term disability (LTD) insurance claims — and to set prices for new LTD plans — fell to 4 percent during the quarter, down 20 percent from the already-low discount rate used during the third quarter of 2011.
The Federal Reserve Board has been keeping interest rates low in an effort to help banks, mortgage borrowers and holders of variable-rate debt.
But StanCorp and other insurers have reported that the low rates have been hard on their portfolio yields, product prices and ability to sell new business in recent quarters.
StanCorp executives talked about the effects of the low rates today during a conference call the company held with analysts to discuss the company’s third-quarter earnings.
StanCorp is reporting $45 million in net income for the third quarter on $714 million in revenue, compared with $47 million in net income on $723 million in revenue for the third quarter of 2011.
The company managed to cut the ratio of spending on group benefits to 79.7 percent of group insurance premiums during the quarter, from 80.7 percent a year earlier.
The group insurance benefits ratio was down from 88.5 percent in the second quarter.
In spite of low bond rates, net insurance services investment income actually increased 0.2%, to $86 million.
But the group long-term disability (LTD) unit generated only $6.5 million in sales for the quarter on $199 million in revenue, down from $23.5 million in sales on $225 million in sales for the third quarter of 2011.