The Recession Has Been Kind to Unum Group

New York, NYThe lingering economic recession appears to have helped insurance companies such as Unum, providers of Unum disability insurance, in a way they may not have expected. According to Unum Provident Chief Executive Officer Thomas Watjen, in comments appearing in Bloomberg News, Unum Insurance is recording fewer claims than expected.

Beyond the recessionary disappearance of jobs, the assumption is that workers who sustain injury and might have otherwise filed a disability claim, are now working through their pain and remaining at work in an effort to protect their jobs.

Watjen's comments came during a conference September 9th in New York. He said claims industry-wide have stayed about the same during the recession, an occurrence that surprised the industry given its expectation of a claims increase. When the industry examined past economic slumps, it was found that there was a greater number of work-related injuries—and thus, an increase in claims—when the economy was in the doldrums.

And yet, with national unemployment sitting at 9.7 percent in August, which is the highest since 1983 according to Bloomberg News, claims have not spiked.

Watjen, speaking at a conference sponsored by the investment-banking firm KBW Inc., reported that patterns have been broken and, "we're a bit surprised to be honest with you," the Unum Chief said. What's more, "it's not just unique to our company." In musing about the reason for the change, Watjen said "people just don't feel as comfortable—they'd rather stay at work with an injury, rather than leave and take the risk they don't have a job when they come back."

Fewer Claims Mean Higher Profits for Unum et al

The claims status quo can only be described as a win for insurers, whose profits are often tied to claims. The fewer claims made, the better it is for the insurer's bottom line. Unum Group is still smarting from a reputation of denying legitimate claims needlessly in an effort to avoid paying out funds.

The reality of fewer claims when a recessionary spike was expected will have translated into better performance for many companies. For Unum, the Chattanooga-based insurer has boosted its quarterly dividend by 10 percent or 8.25 cents a share this year and last month increased its profit estimate for 2009 to somewhere between $2.50 and $2.60 per share.

Watjen told the New York conference that Unum has shifted its emphasis on sales of disability coverage to firms with fewer than 2000 employees, with the view that smaller companies typically report fewer claims.

Fewer claims translate to better performance for the insurer.

Unum has posted 11 consecutive profitable quarters.