The rising commission spending numbers at Colonial Life appear to be sending an accurate message: Unum Group executives say they really do want more salespeople there.
Commission spending at Colonial Life, a U.S. supplemental health benefits unit, increased 6.1 percent, to $80 million, in the fourth quarter of 2016, or 20 percent of unit revenue.
Companywide commission spending increased just 2.6 percent, to $255 million, or about 9 percent of total revenue.
Rick McKenney, the chief executive officer of the Chattanooga, Tennessee-based insurer, told securities analysts during a conference call Thursday that Unum has been investing in expanding Colonial Life’s salesforce footprint. Colonial Life sells products such as cancer insurance, disability insurance, critical illness insurance and accident insurance at the worksite.
“We are very encouraged by our success there, and we’ll continue to do that in 2017,” McKenney said during the call, which was streamed live on the web.
Tim Arnold, the CEO of the Colonial Life, said the company continues to see many opportunities in Colonial Life’s market.
Unum, which is best known for its disability insurance, held the call to go over fourth-quarter earnings. The company is reporting $248 million in net income for the fourth quarter on $2.8 billion in revenue, compared with $226 million in net income on $2.7 billion in revenue for the fourth quarter of 2015.
At the Unum US unit, which sells traditional group benefits products along with voluntary benefits, sales of group short-term disability insurance were the strongest, rising 28 percent, to $62 million. Individual disability did the worst. Sales of that product fell 17 percent, to $17 million.
At Colonial Life, sales of accident, sickness and disability products rose 8.2 percent, to $115 million. For the worst-performing category of products, cancer and critical illness insurance, sales rose 1.6 percent, to $31 million.
Thirty percent of American households have no life insurance. (Photo: iStock)
Opportunities for growth
Unum has a large insurance business in the United Kingdom. McKenney said he was happy to see the company do well in spite of the effects of low interest rates on the company’s investment portfolios and the effects of the weak British pound on the value of the U.K. unit’s earnings in U.S. dollars.
Executives said that, in spite of the new uncertainty about how efforts to change or replace the Affordable Care Act might work, U.S. demand for benefits products appears to be strong.
Thirty percent of American households have no life insurance, and many face rising deductibles, and that creates significant sales opportunities, Arnold said.
Mike Simonds, CEO of the Unum US unit, which sells traditional group plans along with voluntary and worksite products, said that persistency at this unit was strong, and that enrollment increased at employers already using Unum products.
“At the very smallest end of the market, we saw an increase year-over-year on new client sales,” Simonds said.
Executives at Columbus, Georgia-based Aflac Inc. said earlier in the week that they saw solid sales at employers with fewer than 100 employers or more than 250 employees, but falling sales at midsize employers.
Simonds said his optimism about the market for 2017 is “tempered just a bit by the mid-market.”
Simonds described the market for midsize employer groups as “quite competitive.”
Arnold said that, at the small employers Colonial Life serves, wages are increasing. “We have employees who are earning more and need more income protection, and more protection from our other products,” he said.
In comments on Unum’s closed block of long-term care insurance business, Jack McGarry, the chief financial officer, said regulator approvals of rate increases have helped. Investment yields on newly invested assets are still low, but they’ve been higher than what Unum has assumed when it established its reserves, he said.
McGarry said Unum “continues to talk to people” to make some kind of deal to dispose of the LTCI block.
“But I wouldn’t say that anything is imminent,” McGarry said of the efforts to find a home for the LTCI block.
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