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Unum Group (UNM) Q4 Earnings Miss Estimates, Revenues Beat

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Unum Group’s (UNM - Free Report) fourth-quarter 2020 operating net income of $1.15 per share missed the Zacks Consensus Estimate by 3.4%. Also, the bottom line decreased 18.4% year over year.

The company witnessed soft performances across its Unum U.S., Unum International and Colonial Life segments.

Operational Update          

Total operating revenues of Unum Group were nearly $3 billion, down about 2% year over year due to lower premiums, net investment income and other income. However, the top line beat the Zacks Consensus Estimate by 1.3%.

Net investment income decreased 3.7% to $593.5 million.

Total benefits and expenses increased 56.1% year over year to $4.1 billion, largely attributable to rise in benefits and change in reserves for future benefits and other expense.

Unum Group Price, Consensus and EPS Surprise

Quarterly Segment Update

Unum U.S.: Premium income was $1.5 billion, down 1.5% year over year.

Adjusted operating income was down 45.5% year over year to $143.5 million, attributable to lower group disability line of business and group life, accidental death and dismemberment line of business and supplemental and voluntary line of business.

Unum International: Premium income remained almost flat year over year at $165.7 million.  Adjusted operating income was $20.7 million, down 13.4% year over year.

Unum UK line of business’ premium income was £108.9 million, down 4.4%, attributable to  lower persistency in both the group long-term disability and group life product lines as well as lower sales, partially offset by rate increases in the group long-term disability product line. Adjusted operating income, in local currency, of £15.4 million was down 11.5%.

Benefit ratio was 75.6%, down 170 basis points (bps), due to lower inflation-linked experience in benefits related to its group products.

Persistency decreased in group long-term disability but improved in group life business and supplemental line of business.

Colonial Life: Premium income declined 1.4% to $418.8 million attributable to lower sales, partially offset by a higher level of persistency. Sales decreased 26.5% to $154.2 million. Adjusted operating income decreased 18.8% to $71.2 million.

Benefit ratio deteriorated 510 bps year over year to 56.6 due to unfavorable experience in the life and disability product lines, resulting from the impacts of COVID-19.

Closed Block: Premium income decreased 1.43% year over year due to policy terminations and maturities, partially offset by premium rate increases on certain in-force business in the long-term care line of business. Adjusted operating income was $104.2 million, more than double year over year.

Corporate: The segment incurred an operating loss of $42.7 million, narrower than operating loss of $50.5 million in the year-earlier quarter.

Full-Year Highlights

Adjusted earnings were $4.93 per share, down 9.4% year over year. The bottom line missed the Zacks Consensus Estimate of $4.98.

Operating revenues of $12 billion for 2020 decreased 0.5% year over year and marginally beat the consensus estimate.

Capital Management

As of Dec 31, 2020, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 365%.

Unum Group exited the quarter with cash and marketable securities worth $1.5 billion.

Book value per share of Unum Group improved 8.7% year over year to $53.37 as of Dec 31, 2020.

Business Update

Closed Block individual disability reinsurance transaction is expected to free $650 million of capital. Of this, $400 million was realized in the fourth quarter.

Guidance

Unum expects a modest year-over-year decline in after-tax adjusted operating income per share for 2021.

Zacks Rank

Unum Group currently carries a Zacks Rank #4 (Sell).

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

Performance of Other Insurers

Fourth-quarter earnings of Brown & Brown, Inc. (BRO - Free Report) , RLI Corp. (RLI - Free Report) and W.R. Berkley Corporation (WRB - Free Report) beat the respective Zacks Consensus Estimate.

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