Someday, the closed block of long-term care insurance (LTCI) at Unum Group Corp. could free up a lot of cash for general corporate purposes.
Executives at Unum (NYSE:UNM) talked about the possibility with securities analysts Wednesday during a conference call.
Unum stopped selling individual LTCI in 2009, and it suspended sales of group LTCI in 2012. It has been working since then to increase LTCI premiums.
The LTCI block generated $157 million in operating revenue for the quarter, down from $160 million in the fourth quarter of 2012.
The interest-adjusted loss ratio for the LTCI block fell to 89.6 percent for the year, from 90.1 percent in 2012.
Persistency dropped only slightly, to 95.5 percent, from 95.8 percent.
Policy reserves increased to $5.8 billion, from $5.3 billion.
Thomas Watjen, Unum’s president, said the company continues to make good progress with increasing LTCI prices.
Eric Berg, RBC Capital Markets, asked about the possibility that Unum could eventually release some of the reserves backing the LTCI block, if interest rates rise and claims improve.
Richard McKenney, the chief financial officer, said Unum is unlikely to release LTCI reserves in the next two years.
But the company “is definitely positioning the team to be ready for that,” McKenney said.
John McGarry, the head of individual disability and LTCI closed-block operations, said the company would be cautious about releasing reserves but might be in a position to do so in three to five years.
McGarry said one challenge is that the average age of the insureds in Unum’s large block of group LTCI business is still under 50.
“This is going to be around for a long time,” McGarry said.