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

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Unum Group’s (UNM - Free Report) fourth-quarter 2017 operating net income of $1.13 per share beat the Zacks Consensus Estimate of $1.08 by 4.6%. The bottom line also improved 14.1% year over year.

Unum Group Price, Consensus and EPS Surprise

 

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

 

The quarter witnessed premium income growth across Unum U.S., Colonial Life and Unum U.K. segments.

The company’s sustained performance is mainly driven by both bottom and top-line rise. For 2018, the company remains focused on growth and execution of strategy along with increasing shareholder value.

Including after-tax realized investment gains of 3 cents, unclaimed death benefits reserve increase of 11 cents and net tax benefit from enactment of the U.S. tax reform bill, net income improved 11.2% year over year to $1.19 per share.

Total operating revenues of Unum Group were $2.8 billion, up 2.2% year over year. Revenues missed the Zacks Consensus Estimate by 0.7%. Nonetheless, both premium income as well as net investment income increased on a year-over-year basis.

Total benefits and expenses increased 2.8% year over year to $2.5 billion. Rise in benefits and change in reserves for future benefits, interest and debt expense, commissions, amortization of deferred acquisition costs plus other expenses led to an overall increase in costs.

Full-Year Highlights

For 2017, Unum Group reported operating net income per share of $4.29, beating the Zacks Consensus Estimate by 1.4% and improving 10.6% year over year.

Total operating revenues of $11.2 billion grew 2% year over year.

Quarterly Segment Update

Unum U.S.: Premium income was $1.4 billion, up 3% year over year. Adjusted operating income declined 1% year over year to $237.6 million.

Unum U.K.: Premium income grew 9.4% year over year to $133.4 million. In local currency, premium rose 2.3% year over year to £100.5 million, mainly owing to growth in the in-force block, resulting from prior-period sales that offset a decline in persistency.

Adjusted operating income was $29.7 million, down 0.7% year over year. In local currency, the figure declined 7.1% year over year to £22.4 million.

Benefit ratio was 75.8%, up 820 basis points (bps) due to higher claim incidence in the group long-term disability product line and the impact of inflation-linked increases in benefits. Also, lower discount rate implemented in the first quarter of 2017 across several products of the company added to this downside.

Colonial Life: Premium income increased 6% year over year to $382.1 million on sales growth in recent quarters. Adjusted operating income decreased 16.5% to $66.7 million.

Benefit ratio deteriorated 340 bps year over year to 54.8%.

Closed Block: Premium income reduced 4.6% from the year-ago quarter. This decline stemmed from expected policy terminations and maturities for the individual disability line of business. Nonetheless, improvement in premium income for the long-term care line of business owing to premium rate increases on certain in-force policies, limited the downside.

Adjusted operating income was $33.1 million, falling nearly 4.3% year over year.

Corporate: The segment incurred an operating loss of $33.2 million, narrower than the operating loss of $41.7 million in the year-ago quarter. This was mainly driven by reduced operating expenses and higher investment income.

Capital Management

As of Dec 31, 2017, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 390%. Unum Group exited the quarter with cash and marketable securities worth $864 million.

Book value per share of Unum Group increased 10.3% year over year to $43.02 as of Dec 31, 2017.

The company spent around $100 million to buy back about 1.9 million shares in the quarter.

2018 Guidance Revised

Taking into account the beneficial impact of tax reform, Unum Group projects after-tax operating income growth per share between 17% and 23% in comparison to the previous range of 4-7% before the effect of the revised tax policy legislation.

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 fourth-quarter earnings, the bottom line of Brown & Brown, Inc. (BRO - Free Report) , MGIC Investment Corporation (MTG - Free Report) and The Progressive Corporation (PGR - Free Report) beat the respective Zacks Consensus Estimate.

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