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Unum Talks About What COVID-19 Did in January

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What You Need to Know

  • U.S. group life and AD&D premium revenue fell a little.
  • Benefit spending at the unit increased by $126 million.
  • The unit’s benefit spending was 39% higher than in the first quarter of 2020.

Unum Group executives spent their company’s latest earnings call giving securities analysts a sobering look at what COVID-19 did to the people of the United States in the first quarter.

Unum is a major provider of group life insurance, group disability insurance and worker-paid insurance products in the United States and the United Kingdom.

Unum turned a profit in the first quarter, and company executives said they expect vaccines to help reduce the number of pandemic-related U.S. deaths to fewer than 60,000 in the second quarter, from about 200,000 in the first quarter.

Even in the first quarter, conditions improved dramatically after the first few weeks.

“While the human loss from the pandemic continues to be heartbreaking for all of us, COVID-19-related mortality across the U.S. has been trending favorably on a weekly basis from peak levels in December and January,” Richard McKenney, Unum’s CEO, said during the call. “Our own results mirror these week-to-week improving trends that you see in national statistics, and we look forward to improved results in our life insurance lines, beginning in the second quarter and accelerating further into the second half of 2021.”

But in January, the effects of COVID-19 on the people Unum insures were painful.

The pandemic “has generated higher volumes of short-term disability claims and leave requests in the workplace,” McKenney said.

Steven Zabel, the company’s chief financial officer, told analysts that Unum’s Unum US unit expects to receive about one group life insurance claim for every 100 excess U.S. COVID-19 deaths. That rule of thumb worked in the first quarter, and Unum US received about 2,050 COVID-19-related claims, with an average claim of about $50,000, he said.

The number of deaths not attributed to COVID-19 was also higher, but the average claim for those deaths was lower, and the increase in non-COVID-19-related deaths had little effect on results, Zabel said.

Group Life and AD&D Numbers

Unum’s Unum US earnings supplement shows that group life and accidental death and dismemberment (AD&D) premium income fell slightly during the quarter, to $410 million, from $415 million.

Mainly because of COVID-19-related life insurance claims, benefits spending at the unit increased to $446 million, up 39% from the total for the first quarter of 2020.

The unit’s $126 million increase in benefits spending amounted to 31% of the unit’s premium revenue, and about 4.1% of Unum Group’s total revenue.

U.S. life insurers generate about $10 billion in group life premiums per quarter. If the Unum US benefits figures are representative, then U.S. group life insurers may have paid more than $3 billion in pandemic-related life claims in the first quarter, or an average of about $15,000 per pandemic-related death.

Earnings

Unum (UNM) is reporting $153 million in net income for the first quarter on $3.1 billion in revenue, compared with $161 million in net income on $2.9 billion in revenue for the first quarter of 2020.

Companywide commission spending at the Chattanooga, Tennessee-based company fell to $260 million, from $279 million.

Unum US

Unum US, the company’s traditional group insurance unit, is reporting $116 million in adjusted operating income for the latest quarter on $1.7 billion in revenue, compared with $262 million in adjusted operating income on $1.7 billion in revenue.

Commission spending fell to $148 million, from $154 million.

Here’s what happened to sales revenue for some key products between the year-earlier quarter and the latest quarter:

  • Group Long-Term Disability: $31 million (unchanged).
  • Group Short-Term Disability: $24 million (up from $14 million).
  • Group Life and AD&D: $30 million (up from $28 million).

COVID-19 pushed the group life and AD&D benefit ratio, or ratio of claim spending to revenue, to 98.8%. That’s up from 90.4% in the fourth quarter of 2020, and up from 70.6% in the first quarter of 2020.

For the supplemental voluntary vision and dental benefits product line, the benefit ratio increased to 73.2%, from 65.1% in the year-earlier quarter. Earlier, COVID-19 led many people to put off getting routine dental and vision care. Unum saw that trend reverse in the first quarter.

Colonial Life

Colonial Life, Unum’s work-site marketing unit, is reporting $73 million in adjusted operating income on $464 million in adjusted operating revenue, compared with $81 million in adjusted operating income on $473 million in adjusted operating revenue.

Commission spending fell to $78 million, from $93 million.

Here’s what happened to Colonial Life sales for several key products, year-over-year:

  • Accident, Sickness and Disability: $57 million (down from $65 million).
  • Life: $21 million (unchanged).
  • Cancer and Critical Illness: $12 million (down from $14 million).

Deaths from the first, second and third U.S. COVID-19 waves. (Image: CDC)