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Unum Group (New York Stock Exchange:UNM) stock fell 13.2% on Wednesday, the worst intraday decline since March 2020, when Evercore ISI expressed concerns about the insurer’s strong third quarter, particularly its long-term care GAAP accounting change.
Within the company’s Closed Block business, the adjusted interest The loss ratio for its long-term care product line, which excludes the reserve increase related to the $368.1 million assumption update, jumped to 105.3% from 83.6% a year earlier, which excludes the decrease in reserves related to the update of assumptions of $2.9 million.
The increase was primarily due to a higher incidence of claims, as well as the impacts of the change in the net premium rate resulting from the update of the reserve assumption.
Overall, the Closed Block was the only segment to record a year-over-year decline in adjusted operating income in the third quarter. “The decline was primarily driven by greater long-term care benefit experience and a lower long-term care earnings trajectory following the assumption update,” Executive Vice President and Chief Financial Officer Steven Zabel said during the conference call. on the company’s third quarter earnings.
It noted that reserves saw a net increase of $177.2 million, or about $139.3 million after taxes, as a result of UNM’s updated assumptions.
In a note to clients, Evercore ISI analyst Thomas Gallagher wrote that the focus on long-term “accounting noise clouds another strong operating quarter.”
