Unum Group today announced that it has agreed with Maine insurance regulators to add $2.1 billion to its statutory reserves for long-term care insurance (LTCI) over seven years.
The company also hinted at how COVID-19 may be affecting the people who have been using long-term care insurance (LTCI) benefits to pay for care.
- Links to Unum earnings resources are available here.
- An article about Unum’s earnings for the fourth quarter of 2019 is available here.
The company mentioned briefly, in its earnings release for the first quarter, that the interest-adjusted loss ratio, or ratio of benefits payments to revenue, for its LTCI business fell to 81% in the latest quarter, from 88.5% in the first quarter of 2019.
The decrease was “driven primarily by higher claimant mortality,” Unum reported.
Unum did not give any more information in the release about details such as the number of deaths involved.
The Reserve Addition
Unum once sold large amounts of group LTCI coverage and some individual LTCI coverage. It stopped selling individual coverage in 2009, and it stopped selling group coverage in 2012.
Unum is still responsible for providing the benefits provided by the policies already sold.
Unum’s new agreement with Maine will affect the reserves set aside for LTCI, under state insurance regulators’ Statutory Accounting Principles rules, at Unum Life Insurance Company of America subsidiary, which has its official state of domicile in Maine.
Unum Life recorded $198 million in earned premiums in 2018 for providing individual LTCI for 104,000 people, and $352 million in earned premiums for providing group LTCI for about 806,000 people, according to a 2018 Unum Life annual statement posted on the California Department of Insurance website.
Unum Life was supporting the policies with $7.5 billion in reported policy reserves, according to the annual statement.
Unum Group said in the new earnings release that it will start increasing Unum Life’s statutory LTCI reserves by making a phase-in addition of $200 million to $250 million for 2020.
“This strengthening will be accomplished by our actuaries incorporating explicitly agreed upon margins into our existing assumptions for annual statutory reserve adequacy testing,” Unum Group said.
Unum reports on its earnings and reserves to investors using the Financial Accounting Standards Board’s U.S. Generally Accepted Accounting Principles (GAAP).
The Unum Life reserve addition will affect only Unum Life’s statutory reserves, not Unum Group’s GAAP long-term care insurance reserves or GAAP financial results, Unum Group said.