Unum Group (UNM) Q3 Earnings Top Estimates on Higher Premium
Unum Group’s UNM third-quarter 2023 operating net income of $1.94 per share beat the Zacks Consensus Estimate by 1%. The bottom line increased 17.6% year over year.
The quarterly results reflected a continued strong operating performance, favorable claim incidence, premium growth and increased sales in the Colonial Life segment, partially offset by higher expenses.
Unum Group Price, Consensus and EPS Surprise
Unum Group price-consensus-eps-surprise-chart | Unum Group Quote
Operational Update
Total operating revenues of Unum Group were $3.1 billion, up 5.4% year over year, driven by higher premium income, other income and improved net investment income. The top line beat the Zacks Consensus Estimate by 0.7%.
Premium increased 5.7% from the prior-year quarter to $2.5 billion, which matched our estimate as well as the Zacks Consensus Estimate.
Total benefits and expenses increased 22.1% year over year to $2.8 billion, largely attributable to higher policy benefits, commissions, interest and debt expense, amortization of deferred acquisition costs and other expenses. Our estimate for the same was also $2.6 billion.
Quarterly Segment Update
Unum U.S.: Premium income was $1.6 billion, up 6.5% year over year.
Adjusted operating income rose 27.4% year over year to $357.8 million. The Zacks Consensus Estimate was pegged at $325 million.
Unum International: Premium income of $210.6 million increased 21.5% year over year. Adjusted operating income was $36.8 million, up 47.8% year over year. The Zacks Consensus Estimate was pegged at $38.59 million.
The Unum U.K. line of business premium income was £142.2 million, up 9.9% from the year-ago quarter due primarily to in-force block growth. Adjusted operating income, in local currency, of £28.4 million was up 21.9% from a year ago.
The benefit ratio, excluding the reserve assumption updates, was 67.4%, which improved 1,130 basis points (bps) due to favorable claim incidence, favorable claim resolutions and higher discount rates on new claims in the group long-term disability product line and lower inflation-linked experience in benefits. It was partially offset by higher incidence in the supplemental product line. Sales decreased 41.1%.
Persistency increased in the group long-term disability but decreased in the group life business and supplemental product line of business.
Colonial Life: Premium income increased 1.9% from the prior-year figure to $431.2 million, driven by higher sales in prior periods, partially offset by lower persistency.
Sales increased 4.7% from the year-ago figure to $121.3 million. Adjusted operating income decreased 12.7% from the prior-year period to $102.9 million. The Zacks Consensus Estimate was pegged at $117 million.
Persistency was 77.9% in the first nine months of 2023, which contracted 40 bps year over year.
The benefit ratio, excluding the reserve assumption updates, deteriorated 40 bps year over year to 49.1%, primarily due to higher incidence in the life product line.
Closed Block: Adjusted operating income was $34.2 million, which decreased 18.7% year over year.
Corporate: The segment incurred an adjusted operating loss of $41.5 million, narrower than the year-ago quarter’s loss of $49.5 million.
Capital Management
As of Jun 30, 2023, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 470%.
Unum Group exited the third quarter with holding company liquidity worth $1.2 billion.
Book value per share grew 16.8% year over year to $49.32 as of Sep 30, 2023.
UNM bought back 1.5 shares for $74.8 million. The board has approved a share repurchase program that authorizes Unum Group to repurchase up to $500 million of shares beginning on Jan 1, 2024.
2023 Guidance
UNM expects after-tax adjusted operating income per share to increase 20% to 25%.
Zacks Rank
Unum Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Everest Group, Ltd.’s EG third-quarter 2023 operating income per share of $14.14 beat the Zacks Consensus Estimate by 39%. The bottom line rebounded from the year-ago loss of $5.28. Everest Group’s total operating revenues of nearly $4 billion increased 25.6% year over year on higher premiums earned and net investment income. The top line beat the consensus mark by 4.9%. Gross written premiums improved 19.3% year over year to $4.4 billion, driven by 32.7% growth in Reinsurance and 3.5% growth in Insurance. Our estimate was $4.1 billion.
Net investment income was $406 million, more than double year over year. The upside was driven by strong fixed income and alternative investment returns. Our estimate was $238.5 million. The Zacks Consensus Estimate was pegged at $339 million. Total claims and expenses decreased 6% to $3.3 billion, primarily due to lower incurred losses and loss adjustment expenses. Our estimate was $3.5 billion. Pre-tax underwriting income was $301 million, rebounding from the year-ago loss of $367 million. Pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums were $170 million, narrower than $730 million in the year-ago quarter. The combined ratio improved 2,050 bps year over year to 91.4 in the reported quarter. The Zacks Consensus Estimate was 95, while our estimate was 95.6.
CNA Financial Corporation CNA reported third-quarter 2023 core earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 15.2%. The bottom line increased 35.9% year over year. Total operating revenues of CNA Financial were $3 billion, up 11.8% year over year due to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 3.1%.
Net written premiums of Property & Casualty Operations increased 6% year over year to $2.2 billion, driven by a retention rate of 83% and renewal premium change of 6%, with a written rate of 6%, exposure change of 1% and new business increase of 4%. Pre-tax net investment income increased 31% to $553 million pretax, including a $72 million increase from limited partnerships and common stock to $28 million and a $59 million increase from fixed-income securities and other investments to $525 million. Total claims, benefits and expenses remained almost flat year over year at $3 billion and came in line with our estimate. Catastrophe losses were $94 million, narrower than a loss of $114 million in the year-ago quarter. Underwriting income increased 56% year over year to $131 million. The combined ratio improved 150 bps year over year to 94.3. The Zacks Consensus Estimate was pegged at 95.
Arch Capital Group Ltd. ACGL reported third-quarter 2023 operating income of $2.31 per share, beating the Zacks Consensus Estimate by 50%. The bottom line increased more than eightfold year over year. Gross premiums written improved 17.2% year over year to $4.5 billion. Net premiums written climbed 35.8% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments as hard market rates and rising inflation drove client demand for many of its property and casualty products. Net premiums beat our estimate of $3 billion.
Net investment income increased 108.5% year over year to $269 million and beat our estimate of $265.3 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $261 million. Operating revenues of $3.5 billion rose 32.6% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 1.5%. Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $180 million. Arch Capital’s underwriting income increased more than tenfold year over year to $721 million.
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