Feb. 7 (Bloomberg) -- Unum Group dropped the most in the Standard & Poor’s 500 Index after the company reported a fourth-quarter loss tied to group long-term care coverage and said it was retreating from the business.
The insurer fell 5.7 percent to $22.31 at 9:57 a.m. in New York, the most since November. Unum swung to a $425.4 million loss in the period ended Dec. 31 on a charge tied to a review of long-term care coverage and will halt new sales of the policies, Chattanooga, Tennessee-based Unum said late yesterday.
Insurers including CNO Financial Group Inc. have been burned by coverage sold in the past when they underestimated the number of claims, the cost of care or the life expectancy of their clients. Lower interest rates have also pressured the business, limiting investment income on funds set aside for claims. MetLife Inc., the largest U.S. life insurer, said Nov. 11, 2010 it would retreat from long-term care coverage.
“The rate environment is a serious headwind,” said John Nadel, an analyst at Sterne Agee & Leach Inc., in a note to investors after results were released. Nadel said Unum had highlighted the prospects for the business at an investor meeting in late 2010 “following at least one major competitor’s exit.”
Long-term care policies provide coverage to help pay for home-health aides or residence in a nursing home or assisted-living facility. Unum also sells disability coverage.
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