Unum Group executives on a fourth-quarter 2017 earnings call sought to differentiate the company's long-term care reserve position from General Electric Co.'s, outlining in four points on how its long-term care business will not experience the same fate.
GE incurred an after-tax GAAP charge of $6.2 billion tied to a review of its reserve testing. The GE Capital unit is expected to make statutory reserve contributions of about $15 billion over seven years.
CFO John McGarry said Unum's long-term care block was different from GE's, primarily because GE's block was reinsured, which "removes them one step from the customer," McGarry said. Because Unum's block was directly written, the company directly controls the underwriting benefit guidelines, he added.
Moreover, McGarry pointed out, 85% of Unum's long-term care insured lives are in group long-term care policies, comprised by a younger profile of consumers. Most lives in group long-term care policies are employer-funded, which have much smaller benefit levels and much more conservative plan designs, as opposed to employee-funded policies, which are typically less conservative.
"We've aggressively and actively managed our block over time," McGarry said.
McGarry also said that, between reserve increases and reserve charges, the company has strengthened the reserve margin by $4 billion. The company completed comprehensive reviews in 2014 and 2017 as well, he noted.
"We believe these buffers insulate our capital plans," McGarry said. "We've been dealing with this problem for a long time. I think our dealing with it is characterized, but there has been no surprises."
