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Low interest rates continue to chill LTD

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Interest rates have been getting a little higher, but not enough to give the long-term disability (LTD) insurance business at StanCorp Financial Group Inc. any help.

Executives talked about the effects of continuing low rates on StanCorp (NYSE:SFG) today during the company’s third-quarter earnings conference call.

StanCorp is reporting $59 million in net income for the quarter on $702 million in revenue, compared with $45 million in net income on $714 million in net income for the third quarter of 2012.

Group LTD premiums fell to $191 million, from $199 million a year earlier; group short-term disability (STD) premiums increased to $56 million, from $53 million.

New group LTD sales rose to $9 million, from $6.5 million; new STD sales fell to $3 million, from $3.2 million.

Overall interest rates have been firming a bit, and company executives said they are happy with the company’s commercial mortgage lending business.

But the interest rate on newly invested money fell to 4.23 percent during the quarter, from 4.46 percent a year earlier, and the discount rate on new LTD claim reserves fell to 3.75 percent, from 4 percent.

Meanwhile, employment at employers with StanCorp products continued to fall a bit, according to J. Greg Ness, the company’s president.

“We’re hoping organic growth will return in 2014,” Ness said. 

Patient Protection and Affordable Care Act (PPACA) implementation distractions are another challenge, Ness said. “This continues to be a challenging sales environment.”

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