Flu, higher rates shape LTC earnings

Increases in long-term care insurance (LTCI) prices helped an LTCI carrier in the fourth quarter of 2012, and influenza helped a provider of long-term care (LTC) services.

CNO Financial Group Inc. (NYSE:CNO), the insurer, is reporting a total of $101 million in net income for the latest quarter on $1.1 billion in revenue, up from $64 million in net income on $1.1 billion in revenue for the fourth quarter of 2011.

The Bankers Life generated $6 million in new LTCI sales on $135 million in premium revenue, compared with $7 million in new LTCI sales on $136 million in premium revenue during the comparable quarter in 2011.

LTCI revenue fell partly because the company is shifting towards sales of a limited-benefit LTCI product, the company said in an investor presentation.

The Bankers Life LTCI benefit ratio — the quotient that results from dividing LTCI policy benefits by policy revenue — fell to 64.8 percent, from 72.6 percent.

Frederick Crawford, CNO’s chief financial officer (CFO), noted during a call the company held to discuss its earnings that the LTCI business results and benefit ratio benefited from the company’s efforts to increase rates on some blocks of LTCI business.

The rate hikes increased premium revenue on the policies that stayed in force, and, in addition, the rate hikes caused some holders of older policies with higher reserves to drop their policies, Crawford said.

“Long-term care benefited from a spike in lapse-related reserve releases,” Crawford said.