Executives from Unum Group say they believe that their company’s long-term care insurance (LTCI) reserves are already adequate.
But they said Tuesday, during a conference call with securities analysts, that they have agreed with state insurance regulators to add $2.1 billion in reserves over seven years, and to make a number of LTCI reserving assumptions more conservative.
- A link to the webcast of Unum’s earnings call is available here.
- An article about Unum’s earnings release is available here.
Unum will update its assumptions about interest rates, morbidity improvement, and how long people over age 90 can expect to live.
For interest rates, for example, Unum is cutting its discount rate assumption by about 0.5 of a percentage point, according to Steven Zabel, Unum’s chief financial officer,
The Chattanooga, Tennessee-based insurer announced the LTCI reserve addition Monday. The addition affects Unum Life Insurance Company of America, a subsidiary that has its official state of domicile in Maine.
Zabel said during the analyst call that Maine insurance regulators brought in outside consulting actuaries to examine Unum and reach their own conclusions about Unum Life’s LTCI reserves.
“Those conclusions were agreed to by the other regulators in the country,” Zabel said “So, we view this as being a final resolution for all states, not just Maine, as it relates to our Unum America reserves.”
Company executives said Unum will make the first reserve addition, for $200 million to $250 million, by the end of this year, then might contribute about $300 million per year to the LTCI reserves every year for six years.
“We plan to fund these additional reserves through adjusted cash flows,” Rick McKenney, Unum’s chief executive officer, said.
Unum should be able to generate more than enough cash flow to beef up the LTCI operation’s reserves, even under a stress scenario brought on by the current economic downturn, Zabel said.
COVID-19 and Operations
Unum executives also talked about COVID-19 during the call.