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Unum Group Q4 Earnings Beat, Revenues in Line, View Intact

Zacks Equity Research

Unum Group’s UNM operating net income of 95 cents per share in the fourth quarter of 2015 beat the Zacks Consensus Estimate by 3 cents. The bottom line improved 6.7% year over year.

Strong performance at Unum U.S. and Colonial Life were partially offset by a soft performing Unum U.K.

Including net realized investment loss and non-operating retirement-related loss of 1 cent each, the company’s net income of 93 cents per share was down 17% year over year.

Total revenue of Unum Group improved nearly 4% year over year to $2.7 billion. Revenues were in line with the Zacks Consensus Estimate.

Full-Year Highlights

Unum Group’s operating net income of $3.64 per share in 2015 surpassed the Zacks Consensus Estimate by 3 cents. The bottom line improved 3.7% year over year. Net income came in at $3.50 per share, more than double year over year.

Revenues came in at $10.8 million, up 2.8% from 2014.

Quarterly Segment Update

Unum U.S.: Premium income was $1.3 billion, up 5.5% year over year. Operating income was $214.2 million, up 2.2% year over year.

Unum U.K.: Premium income increased 1% year over year to $150.4 million. In local currency, income improved 5.4% year over year to £99.1 million.

Operating income was $37 million, down 3.1% year over year. In local currency, the figure came in at £24.4 million, up 1.2% year over year.

Benefit ratio was 69.9%, up 110 basis points (bps). A higher benefit ratio reflects increased new claims in the group long-term disability and group life lines. However, higher claim recoveries in the group long-term disability line were partial dampeners.

Colonial Life: Premium income increased 5.1% year over year to $337.4 million on sales growth. Operating income increased 4.9% to $77.6 million.

Benefit ratio decreased 110 bps year over year to 51.2%. This primarily reflects favorable experience in the accident, sickness, and disability product line.

Closed Block: Premium income fell 4.1% from the year-ago quarter. The decline stemmed from expected policy terminations and maturities for the individual disability line of business and a slight decline in premium income for the long-term care line of business.

Operating income came in at $28.1 million compared with $29.4 million in the year-ago quarter.

Corporate: The segment reported an operating loss of $36.4 million, wider than operating loss of $24.4 million in the year-ago quarter.

Capital Management

As of Dec 31, 2015, the weighted average risk-based capital for Unum’s traditional U.S. insurance companies was nearly 400%. Unum exited the quarter with cash and marketable securities worth $475 million.

Book value per share of Unum increased 6.5% year over year to $35.96 as of Dec 31, 2015.

The company spent $100 million on buying back 2.9 million shares in the quarter.

Guidance

Unum Group expects 2016 operating earnings to grow in 3–6% band over the 2015 level.

Zacks Rank

Unum presently carries a Zacks Rank #4 (Sell).

Performance of Other Stocks

The bottom line at The Travelers Companies, Inc. TRV and Aflac Incorporated AFL outperformed their respective Zacks Consensus Estimate in the fourth quarter. The bottom line at RLI Corp. RLI missed the same.

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