Ailing U.S. workers, hounded by debt and the 9.9 percent unemployment rate, are forgoing compensated leave with greater frequency and sticking to the daily grind, said the head of the biggest U.S. long-term disability insurer.
“If you don’t feel good about your own personal financial position, you’re going to kind of gut it out, if you will, at the office as opposed to filing the claim,” Unum Group Chief Executive Officer Thomas Watjen said today in an interview at Bloomberg headquarters in New York. “You’re going to be fearful that when you come back maybe your job isn’t there.”
People seeking to re-enter the workforce are facing an unemployment rate that remained near a 25-year high even as the economy returned to growth. For those contemplating leave, debts and home-price depreciation have left fewer financing options to boost funds beyond what disability stipends typically pay.
“The American consumer went into the recession so heavily in debt the calculation changed,” said Steven Schwartz, an analyst with Raymond James & Associates Inc., who has a “market perform” rating on Unum shares. “If you tapped your credit card and home prices are coming down, there’s no way to supplement” the payments from the insurer, he said.
Home prices fell 3.1 percent in the first quarter from a year earlier as record foreclosures added to the inventory of houses on the market, the Federal Housing Finance Agency said today. U.S. credit-card issuers closed accounts, pared credit lines and focused on more affluent customers after writing off a record $89 billion in soured loans last year.
Lower back pain, nervous conditions and other “more discretionary” claims are less likely to be filed than in earlier economic slumps, Watjen said. Disability payments typically amount to about 60 percent of an employee’s earnings, he said.
“You can’t make a windfall on these products,” Watjen said. “It’s not like you can go on claim and make an enormous amount of money.”
The reluctance of some to file claims has helped Chattanooga, Tennessee-based Unum and its rivals as sales fall because of the decline in client payrolls. Unum has reported five straight quarterly profit increases, and this month it boosted the dividend and approved a $500 million share repurchase program.
Unum has advanced about 14 percent this year on the New York Stock Exchange, compared with the 3.7 percent decline in the Standard & Poor’s 500 Index. Unum gained 11 cents to $22.19 at 4:15 p.m. in composite trading.
Premium revenue at the Unum U.S. division was $1.22 billion in the three months ended March 31, a decline of about 0.8 percent from a year earlier. Watjen said payrolls at his clients haven’t shown signs of rebounding from the recession yet.
“They’re not adding employees at this point,” Watjen said. “It’s still a relatively cautious business environment.”