Unum Group (UNM) reported fourth-quarter 2012 operating income of 82 cents per share, beating the Zacks Consensus Estimate of 77 cents. Earnings improved 5.1% year over year.
The company benefited from better performances at the Unum US and Colonial Life Segment. However, soft results at Unum UK and the Closed Block dwarfed the positives. Lower share count due to share repurchases buoyed the bottom line.
The quarter had net realized investment gain of $16.4 million or 6 cents per share and incurred non-operating Retirement-related loss of $7.5 million or 3 cents per share. Adjusting for these items, Unum reported net income of $233.9 million or 85 cents per share in the fourth quarter of 2012, reversing the loss of $369 million or $1.26 per share in the prior-year quarter.
The year-ago quarter included net realized investment gain of $4.8 million or 2 cents per share and incurred non-operating Retirement-related loss of $5.1 million or 2 cents per share.
Total revenues in the quarter were $2.63 billion, up 2.5% year over year. The top line comfortably surpassed the Zacks Consensus Estimate of $2.62 billion.
Full Year Highlights
Operating income in 2012 came in at $3.15 per share, beating the Zacks Consensus Estimate of $3.09. Earnings improved 5.7% year over year.
Including net realized investment gains of 13 cents per share and incurred non-operating Retirement-related loss of 11 cents per share, net income in 2012 was $3.17 per share, much higher than 94 cents earned in 2011.
The company reported revenue of $10.5 billion, up 2.3% over 2011. It was also above the Zacks Consensus Estimate of $10.4 billion.
Quarterly Review by Segment
Unum US Segment: Segment premium in the quarter was $1.12 billion, up 3.2% year over year.
Operating income augmented 2.3% year over year to $212.2 million in the quarter.
Unum UK Segment: Premium increased 3.7% year over year to $175.5 million in the quarter. In local currency, premium increased 1.6% year over year to $109.3 million.
Segment operating income was $35 million in the quarter, down 32.6% year over year.
The benefit ratio was 76.2% in the fourth quarter of 2012, up from 69.2% in the prior-year quarter. The increase in benefit ratio reflects unfavorable group life risk experience, somewhat offset by favorable risk experience in the group long-term disability line of business.
Colonial Life Segment: Premium in the quarter increased 4.4% year over year to $301.9 million.
Operating income improved 5.1% year over year to $68.3 million in the reported quarter.
The benefit ratio of 52.5% was in line with the year-ago quarter. Higher benefit costs in the life line of business offset the favorable experience in the cancer and critical illness, and accident, sickness and disability lines of businesses.
Closed Block Segment: The segment now includes the results of the closed blocks of individual disability, long-term care and other closed blocks, previously reported in the Corporate and Other segment.
The segment reported an operating income of $28.8 million, down 6.5% year over year. The decline was attributable to lower income in the long-term care line of business, somewhat offset by higher income from the individual disability line of business.
Corporate and Other Segment: Operating loss of $34.6 million in the reported quarter was wider than the loss of $18.8 million incurred a year ago.
Unum Group ended the fourth quarter with a debt of $2.19 billion, in line with the prior-quarter end.
The debt-to-capital ratio was 25.3%, a meager 10 basis points increase from 25.2%, as of Sep 30, 2012.
Book value as of Dec 31, 2012, was $31.87 per share, up 14.2% from $27.91 as of Dec 31, 2011.
Unum Group spent $100.1 million to buy back 4.9 million shares in the quarter.
Unum Group expects operating income per share to amplify in the range of 0% to 6%.
Performance of a Few Accident and Health Insurers
AFLAC Inc.’s (AFL) earnings of $1.48 per share in the fourth quarter were in line with the Zacks Consensus Estimate but slightly ahead of the year-ago quarter earnings of $1.45 per share.
ACE Limited (ACE) reported fourth-quarter 2012 operating income of $1.43 per share, up 14 cents from the Zacks Consensus Estimate. However, it declined 25% from $1.90 earned in the year-ago quarter.
Unum Group presently caries a Zacks Rank #4 (Sell). Employers Holdings, Inc. (EIG), another accident and health Insurer with a Zacks Rank #2 (Buy), is expected to release its results on Feb 25.
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