Unum Group’s (UNM) operating earnings of 91 cents per share in the second quarter surpassed the Zacks Consensus Estimate by 4.6%. This marks the ninth straight quarter of positive surprise. Earnings improved 14.6% year over year.
Better performance by the core business along with a lower share count due to continued share repurchases largely drove the upside.
Including net realized investment gain of 7 cents per share and costs related to the early retirement of debt, Unum reported net income of 94 cents in the quarter, up 14.6% year over year.
Total revenue of Unum Group improved 1.5% year over year to $2.6 billion. The top line was almost in line the Zacks Consensus Estimate.
Share price of Unum Group gained 2.9% in the after-market session following its earnings strength.
Quarterly Segment Update
Unum U.S.: Premium income in the quarter was $1.2 billion, up 2.3% year over year. Operating income was $218.8 million, up 2.2% year over year.
Unum U.K.: Premium income increased 11.9% year over year to $154 million. In local currency, the income decreased 2.1% year over year to £91.5 million.
Operating income was $39.6 million, down 18.2% year over year. In local currency, the figure came in at £23.6 million, up 8.3% year over year.
Benefit ratio was 74%, down 1,020 basis points (bps) from 84.2% in the year-ago quarter. The lower benefit ratio is reflects favorable risk experience in both group disability and group life.
Colonial Life: Premium income increased 2.9% year over year to $316.8 million driven by consistent growth in the in-force block of business attributable to new sales growth and stability. Operating income improved 5.9% to $75.3 million.
Benefit ratio improved 10 bps year over year to 52% as favorable risk results in the cancer and critical illness lines offset higher benefit ratios in the life and accident, sickness and disability lines of business.
Closed Block: Premium income fell 4.2% from the year-ago quarter. The decline was due to the expected run-off of the individual disability business.
Operating income came in at $37.3 million, up 26% year over year.
Corporate: The segment reported an operating loss of $49 million versus the year-ago loss of $37.1 million. Increase in net investment income on a higher level of invested assets aided the improvement.
As of Jun 30, 2014, the weighted average risk-based capital for Unum’s traditional U.S. insurance companies was nearly 401%, down from 405% as of 2013 end. Unum exited the quarter with cash and marketable securities of $616 million, improving 19.8% from $514 million at 2013 end.
During the second quarter, Unum repurchased 2.9 million shares for $100 million.
Book value per share of Unum increased 14.1% year over year to $36.28 as of Jun 30, 2014.
2014 Guidance Reiterated
Unum expects 2014 operating earnings to grow in the range of 5–10% over the 2013 level.
Unum presently carries a Zacks Rank #3 (Hold).
Performance of other Insurers
While Aflac Inc. (AFL) and Reinsurance Group of America Inc. (RGA) outperformed the Zacks Consensus Estimate, Genworth Financial Inc. (GNW) missed the same in the second quarter.