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Unum Group (UNM) Q4 Earnings Miss, Up Y/Y as Premiums Rise

Zacks Equity Research

Unum Group’s UNM fourth-quarter 2018 operating net income of $1.30 per share lagged the Zacks Consensus Estimate by a cent. However, the bottom line improved 15% year over year.

The quarter witnessed good premium growth and stable benefits experience, which led to solid margin and cash flow.

Including after-tax realized investment gains of 15 cents, net income declined 3.4% year over year to $1.15 per share.

Operational Update

Total operating revenues of Unum Group were $2.9 billion, up 3.3% year over year on 4.9% higher premiums and a 1.4% increase in other income, partially offset by 1.8% lower investment income. However, the top line missed the Zacks Consensus Estimate by 0.3%.

Total benefits and expenses increased 3.1% year over year to $2.6 billion. Rise in benefits and a change in reserves for future benefits, commission, interest and debt expense, amortization of deferred acquisition costs plus other expenses resulted in an overall increase in costs.

Unum Group Price, Consensus and EPS Surprise

Unum Group Price, Consensus and EPS Surprise | Unum Group Quote

Full Year Highlights

Operating net income of $5.20 per share lagged the Zacks Consensus Estimate by a cent. However, the bottom line increased 21.2% year over year.

Total operating revenues of Unum Group were $11.6 billion, up 3.5% year over year. However, the top line missed the Zacks Consensus Estimate by 0.1%.

Quarterly Segment Update

Unum U.S.: Premium income was $1.4 billion, up 5.2% year over year. Adjusted operating income was down 5.9% year over year to $248.7 million.

Solid performance at group life and accidental death and dismemberment line of business was offset by weak results at group disability line of business as well as supplemental and voluntary line of business.

Unum International (earlier known as Unum U.K.): Premium income grew 14.2% year over year to $152.3 million driven by the acquisition of Pramerica Zycie TUiR S.A. Sales improved 0.8% to $24.7 million.  Adjusted operating income was $30.4 million, up 3.4% year over year.

Benefit ratio was 74.6%, up 120 basis points (bps), driven by favorable benefits experience in the supplemental and group long-term disability product lines. Persistency increased across group long-term disability, group life, and supplemental lines of business.

Colonial Life: Premium income increased 7.3% year over year to $410.1 million on sales growth. Sales improved 2.3% to $204.4 million driven by higher sales in the core commercial market segment. Adjusted operating income rose 8% to $85.4 million.

Benefit ratio remained flat year over year at 51.6%.

Closed Block: Premium income decreased 4.5% from the year-ago quarter’s level. This decline stemmed from policy terminations and maturities for the individual disability line of business.

Adjusted operating income was $34.8 million, up 5.1% year over year.

Corporate: The segment incurred an operating loss of $48.2 million, wider than operating loss of $33.2 million in the year-earlier quarter attributable to higher expenses.

Capital Management

As of Dec 31, 2018, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 370%. Unum Group exited the quarter with cash and marketable securities worth $602 million.

Book value per share of Unum Group fell 6.6% year over year to $40.19 as of Sep 30, 2018.

2019 Guidance

Unum Group projects after-tax operating income growth per share between 4% and 7%.

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 Other Insurers

Among the other insurance industry players who have reported fourth-quarter earnings so far, the bottom line of Aflac Incorporated AFL and Reinsurance Group of America Incorporated RGA beat their respective Zacks Consensus Estimate while the same at Torchmark Corporation TMK met expectations.

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