Unum Group (UNM) reported third-quarter 2013 operating earnings of 85 cents per share, beating the Zacks Consensus Estimate of 82 cents by 3.6%. Results also improved nearly 6.2% year over year from 80 cents per share. Operating net income rose 0.3% from the year-ago quarter to $224.6 million.
Unum benefited from disciplined pricing, underwriting and risk results across its primary business segments and derived consolidated returns and profitability.
Including net realized investment gains and non-operating retirement-related losses, Unum reported net income of $205.7 million or 78 cents in the quarter, declining from $230.2 million or 83 cents per share.
Quarterly Operational Update
Total revenues of Unum in the reported quarter declined 3.3% year over year to $2.54 billion. The top line also missed the Zacks Consensus Estimate of $2.59 billion. Decelerated sales from the Unum U.S. and Colonial Life segments were responsible for the overall top-line shortfall.
Quarterly Segment Update
Unum U.S. Segment: Premium income in the quarter was $1.12 billion, up 1.1% year over year. Operating income augmented 1.6% year over year to $219.8 million.
The benefit ratio during the third quarter stood at 82.9%, down 200 basis points (bps) over the prior-year quarter. The improvement was driven by favorable rates of incidence, strong experience in claim recovery and increase in premium rates.
Unum U.K. Segment: Premium income decreased 21.6% year over year to $137.3 million mainly due to the reinsurance agreements entered into in the first quarter of 2013 to cede an additional portion of the group life business. In local currency, the figure decreased 20.2% year over year to £88.4 million.
Operating income was $31.3 million, up 13.8% year over year. In local currency, the figure came in at £20.1 million, up 16.2% year over year.
Benefit ratio was 70.6% in the quarter, down 710 bps from 77.7% in the year-ago quarter. The lower benefit ratio is attributable to the group life line’s favorable risk experience, which in turn was impacted by the reinsurance agreements entered into in first-quarter 2013.
Colonial Life Segment: Premium income in the quarter was $309.1 million, up 3.2% year over year, driven by consistent growth in the active block of business. Operating income inched up 0.4% year over year to $69 million.
However, benefit ratio increased 20 bps year over year to 53.1%. Unfavorable risk experience in the accident, sickness and disability product line and the life product line considerably neutralized improved incurred claims experience in the cancer and critical illness product line.
Closed Block Segment: Premium income fell 4.8% from the year-ago quarter. The decline is attributable to the expected run-off of the individual disability business.
Operating income in the segment was $25.7 million, up 0.4% year over year. Higher net investment income, driven by an increase in assets supporting the long-term care business, led to the upside.
Corporate Segment: The segment reported an operating loss of $37.1 million, wider than the year-ago loss of $25.9 million. A wider operating loss resulted from lower net investment income which in turn derived by lower yielding assets and decreased investment income due to tax credit partnerships.
Capital Management
As of Sep 30, 2013, the weighted average risk-based capital for Unum’s traditional U.S. insurance companies was nearly 397%, up from 396% as of 2012-end. Unum’s Cash and marketable securities were $678 million at the end of third quarter of 2013, down 15.8% from $805 million at 2012-end.
During the third quarter, Unum purchased 2.5 million shares for $75 million. Currently the company is left with 261.1 million shares under its buyback authorization.
Financial Position
Shareholder’s equity of Unum stood at $8.67 billion at the end of Sep 2013, almost on par with the year-ago quarter-end level. Book value per share of Unum increased 5.3% year over year to $33.20 as of Sep 30, 2013.
2013 Guidance
Unum expects full year 2013 operating earnings to grow in the range of nil to 6% over the 2012 level, including the effect of expected share repurchases.
Performance of Other Accident and Health Insurers
Aflac Inc. (AFL) reported third-quarter 2013 operating earnings per share of $1.47, which came in line with the Zacks Consensus Estimate. However, results declined 16.9% from the year-ago quarter figure of $1.77.
ACE Ltd (ACE) reported third-quarter 2013 operating net income of $2.49 per share, which surpassed the Zacks Consensus Estimate by 12.7% and the year-ago quarter figure by 23.9%.
Lincoln National Corp. (LNC) reported third-quarter 2013 operating earnings of $1.34 per share. The results surpassed the Zacks Consensus Estimate of $1.23 and breezed past the prior-year quarter earnings of $1.27 a share.
Zacks Rank
Unum presently carries a Zacks Rank #3 (Hold).
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