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COVID-19 Increases Unum's Group Life Claims

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This article was updated to reflect an earnings call that took place after the original publication time.

Unum Group did well in the fourth quarter of 2021, but the COVID-19 pandemic devastated many of the people who had its group life insurance coverage.

Unum reports claims for its U.S. group life business together with claims for its group accidental death and disememberment, or AD&D, insurance business.

The overall ratio of benefits to premium income soared to 98.3% in the fourth quarter of 2021, according to figures Unum released Tuesday.

That was up from 90.4% in the fourth quarter of 2020, and up from 71.7% in the fourth quarter of 2019, before the COVID-19 pandemic began.

Richard McKenney, Unum’s CEO, said in a comment, included in the earnings announcement, that the company has entered 2022 with solid premium growth and favorable investment returns.

“Yet our elevated claims experience is a reminder of the impact COVID continues to have on our world,” McKenney said.

During a call Unum held today, to go over the latest results with securities analysts, Steve Zabel, the company’s chief financial officer, noted that the 98.3% group life and AD&D benefit ratio for the fourth quarter was better than the 106% benefit ratio for the third quarter of 2021.

“We were impacted by the continued high level of national COVID-related mortality, which was a reported 94,000 in the third quarter and increased to a reported 127,000 in the fourth quarter,” Zabel said. “Age demographics continue to show a high impact on younger working-age individuals though this impact is lessened in the fourth quarter.”

McKenney noted that Unum believes that most of the group life claims that arrived in the fourth quarter were due to the COVID-19 delta variant.

Zabel said Unum might start to talk about the effects of the COVID-19 omicron variant in February.

At this point, Zabel said, forecasters with high omicron mortality forecasts seem to be reducing their estimates, but forecasters who started with low mortality forecasts seem to be increasing their estimates.”

“So, we’d like to see just a little bit more of how February plays out, I think before we try to call how the first quarter is,” Zabel said.

Unum has posted a recording of the call on the investor relations section of its website.

What the Numbers Mean

Working people and people with private insurance tend to be healthier than members of the general population, and most working people are under the age 65.

Some insurance claim watchers have suggested that the effects of the COVID-19 pandemic on insurers might be relatively mild, because of early indications that the pandemic was having the most severe effect on people ages 65 and older, and especially on people ages 85 and older living in nursing homes.

The new Unum claim figures support the idea that the pandemic is also increasing claim costs for working-age, privately insured people.

For individual agents, brokers, advisors and others who encouraged consumers to take up life insurance from Unum or Unum’s Colonial Life subsidiary, the claim figures may mean that some of those clients’ beneficiaries may now be using benefits from Unum or Colonial Life to pay their bills.

More Numbers

Unum — a Chattanooga, Tennessee-based insurer that sells a wide range of employee benefits insurance products in the United States and the rest of the world, but which may be best known for its group disability and group life products — is reporting $160 million in net income for the latest quarter on $3 billion in revenue, compared with $135 million in net income on $4.1 billion in revenue for the fourth quarter of 2020.

Total revenue fell because a drop in net investment gains. Premium revenue increased to $2.4 billion, from $2.3 billion.

Group life premium revenue increased to $413 million in the latest quarter.

That was up 2% from the group life premium total for the fourth quarter, and up just 0.1% from the total for the fourth quarter of 2019, before the COVID-19 pandemic begin.

The combined group life and group AD&D claim total soared to $448 million.

Claims were 11% higher than in the fourth quarter of 2020, and 37% higher than in the fourth quarter of 2019.

Unum said the benefit cost increase was due to a higher incidence of group life claims and higher average claim size.

Unum reported mixed U.S. disability insurance results: The group disability benefit ratio increased to 78.3%, from 72.5%, due to higher average claim size and disability incidence, but the individual disability insurance benefit ratio fell to 40.2%, from 42% in the fourth quarter of 2020.

(Image: Adobe Stock)