Unum Group (UNM) reported first quarter 2013 operating earnings of 80 cents per share, beating the Zacks Consensus Estimate of 78 cents per share. Results also improved 9.6% year over year from 73 cents per share.
The company benefited from better performances at the Unum U.S., Colonial Life and Closed Block segment, partially offset by soft results at Unum U.K. segment. Lower share count due to share repurchases buoyed the bottom line.
Including net realized investment gains of 3 cents and non-operating retirement-related loss of 4 cents, Unum reported net income of 79 cents, up 8.2% year over year.
Quarterly Operational Update
Total revenues in the quarter increased 0.5% year over year to $2.62 billion. The top line was a tad lower than the Zacks Consensus Estimate of $2.63 billion.
Total benefits and expenses in the quarter were $2.3 billion, up 0.9% year over year.
Quarterly Segment Update
Unum U.S. Segment: Segment premium in the quarter was $1.1 billion, up 2.5% year over year.
Operating income augmented 1.1% year over year to $208.1 million in the quarter.
Unum U.K. Segment: Premium income decreased 15.8% year over year to $143.8 million in the first quarter of 2013. In local currency, premium income decreased 14.5% year over year to £92.8 million in the reported quarter.
Operating income was $31.3 million, down 19.3% year over year. In local currency, operating income was £20.2 million, down 18.2% year over year.
Benefit ratio was 69.5% in the quarter, down 290 basis points from 72.4% in the year-ago quarter. The lower benefit ratio is attributable to favorable group life risk experience relative to the year-ago quarter, partially mitigated by less favorable risk experience in the group long-term disability line of business.
Colonial Life Segment: Premium income in the quarter was $307.1 million, up 3.6% year over year.
Operating income increased 8.2% year over year to $75.4 million in the quarter.
Benefit ratio increased 40 basis points to 52.5% in the first quarter. Improved risk experience in the life line of business offset less favorable claim experience in both cancer and disability product lines.
Closed Block Segment: Premium income in the segment increased 0.5% year over year to $1.93 billion.
Operating income in the segment was $27.3 million during the quarter, up 77.3% year over year. Higher net investment income, improved risk experience in both the individual disability and long-term care lines of business, and lower expenses relative to the year-ago period led to the upside.
Corporate and Other Segment: The segment reported an operating loss of $33.7 million, wider than the year-ago loss of $20.6 million.
Share Repurchase Update
During the first quarter Unum purchased 3.7 million shares for $95 million. Currently the company is left with shares worth $454.9 million under its authorization.
Senior Notes Update
In Jan 2013, Unum purchased and retired the outstanding senior secured notes worth $62.5 million issued by Tailwind Holdings, LLC, resulting in a pretax gain of $4.0 million.
As of Mar 31, 2013, the weighted average risk-based capital for Unum’s traditional US insurance companies was nearly 396%, and cash and marketable securities in the holding companies were $652 million.
As of Mar 31, 2013, Unum had total assets worth $61.6 billion, down 1% from 2012 end level.
The debt-to capital ratio of the company as of Mar 31, 2013 was 25.4%, an improvement of 180 basis points from 27.2% at year end 2012.
Book value per share increased 12% year over year to $32.06 as of Mar 31, 2013.
Unum expects full year 2013 operating earnings to be in the range of 0–6%, including the effect of expected share repurchases.
Performance of a Few Accident and Health Insurers
Aflac Inc.’s (AFL) first-quarter 2013 operating earnings per share of $1.69 comfortably surpassed the Zacks Consensus Estimate of $1.62 but lagged the year-ago quarter earnings of $1.74 per share.A weak yen/dollar exchange rate had a negative impact of 15 cents per share on operating earnings
ACE Limited (ACE) reported first-quarter 2013 operating income of $2.17 per share, up 24 cents from the Zacks Consensus Estimate. Results improved 5.8% from $2.05 earned in the year-ago quarter.
Unum Group presently caries a Zacks Rank #3 (Hold). Employers Holdings, Inc. (EIG), another accident and health Insurer with a Zacks Rank #1 (Strong Buy), is expected to release its first quarter 2013 results on May 8.
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