U.S. Markets closed

Unum (UNM) Q3 Earnings Top on Premium Growth, Stable Benefits

Zacks Equity Research
1 / 2

Unum (UNM) Q3 Earnings Top on Premium Growth, Stable Benefits

Unum's (UNM) Q3 scores on higher premiums and a stable benefits experience.

Unum Group’s UNM third-quarter 2018 operating net income of $1.37 per share beat the Zacks Consensus Estimate of $1.28 by 7%. Moreover, the bottom line improved 25.7% year over year on higher premiums and a stable benefits experience. Also, lower tax rate provided an additional boost to the metric.

Unum Group Price, Consensus and EPS Surprise

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

Including after-tax realized investment gains of 4 cents, net income rose 5.4% year over year to $1.30 per share.

Operational Update

Total operating revenues of Unum Group were $2.9 billion, up 2.8% year over year on 4.6% higher premiums and a 1.7% increase in investment income. Additionally, the top line came above the Zacks Consensus Estimate by 1%.

Total benefits and expenses surged 34.8% year over year to $3.3 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 led to an overall increase in costs.

Quarterly Segment Update

Unum U.S.: Premium income was $1.4 billion, up 6.3% year over year. Adjusted operating income rose 4.8% year over year to $2709 million.

Solid performance at group life and accidental death and dismemberment line of business, group disability line of business as well as supplemental and voluntary line of business fueled this improvement.

Unum U.K.: Premium income grew 4.9% year over year to $138 million. In local currency, premium rose 5.6% year over year to £106 million, largely owing to higher persistency, rate increase in the group long-term disability product line and growth in the in-force block.

Adjusted operating income was $26.1 million, down 1.5% year over year. In local currency, the figure was £20 million, slipping nearly 1% year over year.

Benefit ratio was 74.2%, having improved 70 basis points (bps), driven by favorable claim resolutions in the group long-term disability product line and the impact of lower inflation-linked increases in benefits. However, unfavorable claims activity in group life and supplemental product lines were a partial offset.

Colonial Life: Premium income increased 5.6% year over year to $400 million on sales growth. Adjusted operating income rose 3.1% to $84.2 million.

Benefit ratio improved 30 bps year over year to 51.5%.

Closed Block: Premium income decreased 5.3% 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 $32.2 million, up 21% year over year.

Corporate: The segment incurred an operating loss of $47.1 million, wider than the operating loss of $36.2 million in the year-earlier quarter.

Capital Management

As of Sep 30, 2018, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 385%. Unum Group exited the quarter with cash and marketable securities worth $973 million.

Book value per share of Unum Group fell 7.5% year over year to $38.95 as of Sep 30, 2018.

2018 Guidance Affirmed

Unum Group projects after-tax operating income growth per share between 17% and 23%.

Zacks Rank

Unum Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of Aflac Incorporated AFL, Torchmark Corporation TMK and Employers Holdings, Inc. EIG surpassed the respective Zacks Consensus Estimate.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.