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Life Health > Life Insurance > Term Insurance

Unum: A little wind would help

By Allison Bell

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Executives at Unum Group Corp. (NYSE:UNM) say the company is doing well in tough times.

Thomas Watjen, president of the disability insurance and voluntary benefits company, said the company has been squeezing growth out of the small and midsize employers with fewer than 2,000 lives that it sees as being part of its core market.

But, for 2013, “we still have a generally cautious view of the environment, with continued low employment growth and low interest rates.”

Wajen and other Unum executives spoke at a conference call the company held to discuss results for the fourth quarter of 2012.

Numbers

Unum is reporting $244 million in net income for the quarter on $2.7 billion in revenue, compared with a $369 million net loss on $2.6 billion in revenue for the fourth quarter of 2011.

In the fourth quarter of 2011, the company recorded $620 million in charges related to increases on reserve costs and adjustments in deferred acquisitions related to a move to suspend sales of long-term care insurance (LTCI).

After-tax operating income, which excludes the effects of the LTCI charge and several much smaller charges and gains, fell to $225 million, from $228 million.

Although the LTCI business is now a “closed block business,” LTCI premium income rose to $160 million, from $155 million, and persistency fell just slightly — to 95.8 percent, from 96 percent. The interest-adjusted LTCI loss ratio increased to 89.9 percent, from 86.4 percent.

U.S. group STD premium income increased to $514 million, from $511 million.

New group short-term disability (STD) sales increased 14 percent, to $46 million, and new group long-term disability (LTD) sales increased 15 percent, to $87 million.

Sales to employers with fewer than 2,000 lives fell 2.6 percent, to $141 million, but sales to larger groups increased 27 percent to $87 million, in part because of an alliance with UnitedHealth Group Inc. (NYSE:UNM), executives said during the call.

Discussion

Kevin McCarthy, president of the Unum US unit, said the three changes that could provide “tailwinds” for Unum in the coming year are an increase in interest rates, an increase in employment, and an increase in wages.

Employment and wage totals are important because the performance of Unum’s group disability and group life business is linked directly to changes in covered payroll, McCarthy said.

The company has tried to take a “disciplined approach” to LTD pricing, and that has affected sales to employers with fewer than 2,000 lives, executives said.

Also during the call, executives said:

- Unum is trying to cope with low interest rates by making heavier use of private placements, commercial mortgage loans, bonds with ratings below investment grade, and hedging programs.

- Unum has applied for permission to raise LTCI rates about 25 percent in about 60 percent of the markets in which it has LTCI business. The approval process has been going well, and the increases in LTCI rates should start to show up in company financial reports later this year and in early 2014.

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