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Unum Group’s (UNM - Analyst Report) 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.

Capital Management

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.

Zacks Rank

Unum presently carries a Zacks Rank #3 (Hold).

Performance of other Insurers

While Aflac Inc. (AFL - Analyst Report) and Reinsurance Group of America Inc. (RGA - Analyst Report) outperformed the Zacks Consensus Estimate, Genworth Financial Inc. (GNW - Analyst Report) missed the same in the second quarter.

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