The Unum Disclosure
On May 4, 2020, Unum Group (NYSE: UNM) filed with the Securities and Exchange Commission (SEC) an 8-K (significant event) report. Unum disclosed an important aspect of an ongoing financial examination of Maine-domiciled Unum Life Insurance Company of America by the Maine Bureau of Insurance (MBOI). Here are the key disclosures:
MBOI has concluded that Unum America's long-term care statutory reserves are deficient by $2.1 billion as of December 31, 2018. As permitted by MBOI, Unum America will phase in the additional statutory reserves over seven years beginning with year-end 2020 and ending with year-end 2026. The 2020 phase-in amount is estimated to be between $200 million and $250 million. This strengthening will be accomplished by the Company's actuaries incorporating explicitly agreed upon margins into its existing assumptions for annual statutory reserve adequacy testing. These actions will add margins to Unum America's best estimate assumptions. The Company plans to fund the additional statutory reserves with expected cash flows. The Company's long-term care reserves and financial results reported under generally accepted accounting principles are not affected by the MBOI's examination conclusion.
The Company has suspended its current share purchase authorization and will not repurchase shares in 2020. Additionally, the Company intends to continue to pay its common stock dividend at the current rate.
General Observations
Language similar to that quoted above is in Unum's 10-Q report for the quarter ended March 31, 2020, as filed with the SEC on May 5, 2020. The MBOI examination of Unum is scheduled to close at the end of the second quarter of 2020. Therefore, the examination report is not yet publicly available. In the meantime, I felt that readers would be interested in this development relating to Unum's LTC insurance reserves.
Available Material
I am offering a complimentary three-page PDF containing Unum's 8-K report. Email jmbelth@gmail.com and ask for the May 2020 package about the Unum 8-K report.