Unum Group has agreed to provide $200 million to $250 million this year as part of the first phase of a 7-year program to add $2.1 billion of additional reserves to cover deficiencies identified by Maine regulators in Unum’s long-term care insurance program.
The Chattanooga-based insurer said Monday that the Maine Bureau of Insurance determined that the reserves for Unum Life Insurance Co. of America were $2.1 billion below what is needed to cover all of the expected costs for its long term care (LTC) policies.
Unum no longer markets or sells long-term care insurance, but the company’s book of LTC business continues to be costly. The long-term-care insurance industry has been hurt by persistently low interest rates, increasing longevity and the increase in health-care costs.
Unum said it expects to fund the extra reserves required for the long term care policies from its future cash flows.
The losses from such policies, combined with the economic uncertainty caused by the coronavirus pandemic, cut the after-tax adjusted operating income of Unum in the first quarter to $274.1 million, or $1.35 per common share, compared to $280.3 million, or $1.31 per share in the first quarter of 2019.