Disability Insurers Suffer from Earnings Blahs

(LHP Graphic/Allison Bell) (LHP Graphic/Allison Bell)

Three big insurers have given a glimpse at the performance of their disability insurance business performance in newly released third-quarter earnings announcements.

Unum Group Corp., Chattanooga, Tenn. (NYSE:UNM), reported earlier this week the sales have been fine but that soft employment levels have bitten into revenue.

Now Hartford Financial, Hartford (NYSE:HIG), Lincoln National Corp., Radnor, Pa. (NYSE:LNC) and Prudential Financial Inc., Newark, N.J. (NYSE:PRU) have included a little more information about the disability insurance market.

Because those companies get less of their revenue from disability insurance sales, they provide less information about their disability insurance operations, but they do sprinkle a little disability data in with the rest.

Few companies go into much detail about individual disability insurance operations, and, in some cases, the group disability figures may give some clues about what's happening in the individual disability market.

Hartford, for example, is reporting $36 million in new sales for the latest quarter on $467 million in earned premiums, fees and other considerations, down from $37 million in new sales on $487 million in earned premiums, fees and other considerations for the third quarter of 2010.

The company increased reserves, as measured using Generally Accepted Accounting Principles, to $5.3 billion, from $5.1 billion.

The economic downturn and the difficulty for getting employees to pay for contributory and voluntary products have hurt, the company says.

“Over time, as employers design benefit strategies to attract and retain employees, while attempting to control their benefit costs, management believes that the need for the company’s products will continue to expand,” the company says. “This combined with the significant number of employees who currently do not have coverage or adequate levels of coverage, creates continued opportunities for our products and services.”

Disability loss ratios rose in 2010, but the company expects the ratios to stay about the same this year.

Lincoln National is reporting $34 million in group disability sales for the latest quarter on $190 million in insurance premiums, up from $28 million in group disability sales on $182 million in insurance premiums for the third quarter of 2010.

The company’s loss ratio for the product, or ratio of claims to revenue, fell to 70.4%, from 79.2%, and operating income increased to $15 million, from $4 million.

Prudential is reporting $29 million in new group disability sales for the quarter on $296 million in earned premiums, policy charges and fee income, up from $26 million in new group disability sales on $284 million in earned premiums, policy charges and fee income for the third quarter of 2010.

The benefits ratio, or share of premiums going to pay claims, fell to 97%, from 99.7%, and the persistency ratio, or percentage of business staying on the books, fell to 91.6%, from 92.9%.

The estimated value of future policy benefits owed increased to $1.7 billion, from $1.4 billion.

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