Low interest rates and soft employment are continuing to chill the group benefits market.
StanCorp Financial Group Inc. (NYSE:SFG) cut the discount rate it used for the long-term disability (LTD) claim reserves it established in the fourth quarter of 2012 0.75 percentage points below the discount rate it was using in the fourth quarter of 2011.
The company has warned that more discount rate cuts may be on the way.
Because “a continued low interest rate environment” seems likely to continue to put downward pressure on the discount rate for new LTD reserves, “the discount rate may be lowered 50 to 75 basis points during 2013,” the company said in a discussion of its fourth-quarter earnings.
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A basis point is equal to one hundredth — or 1 percent — of a percentage point.
StanCorp, the parent of Standard Insurance, is reporting $38.4 million in net income for the latest quarter on $718 million in revenue, compared with $38.6 million in net income on $728 million in revenue for the comparable quarter in 2011.
New group insurance sales premiums fell to $73 million, from $75 million.
“The decrease in group insurance sales was primarily due to pricing competition as the company implemented pricing actions on its long-term disability business to address the impact of the elevated claims incidence and the continued low interest rate environment,” the company said.
Total group insurance premiums fell 2.4 percent, to $486 million.
The discount rate fell to 4 percent, from 4.75 percent.