CHATTANOOGA, Tenn.--(BUSINESS WIRE)--
Unum Group (NYSE: UNM) today reported net income of $267.2 million
($0.80 per diluted common share) for the second quarter of 2009,
compared to net income of $240.3 million ($0.69 per diluted common
share) for the second quarter of 2008.
Included in the results for the second quarter of 2009 are net realized
after-tax investment gains of $51.4 million ($0.15 per diluted common
share), compared to net realized after-tax investment gains of $17.1
million ($0.04 per diluted common share) in the second quarter of 2008.
Net realized after-tax investment gains for the second quarter of 2009
include an after-tax gain of $91.0 million resulting from changes in the
fair value of an embedded derivative in a modified coinsurance contract,
compared to an after-tax gain of $16.2 million in the second quarter of
2008. Also included in net realized after-tax investment gains for the
second quarter of 2009 is a net after-tax investment loss of $39.6
million related to sales and write-downs of investments, compared to a
net after-tax investment gain of $0.9 million in the second quarter of
2008.
Adjusting for these items, income on an after-tax basis was $215.8
million ($0.65 per diluted common share) in the second quarter of 2009,
compared to $223.2 million ($0.65 per diluted common share) in the
second quarter of 2008.
"I am pleased that all of our businesses have continued to perform well
despite the challenging economic and financial market conditions," said
Thomas R. Watjen, president and chief executive officer. "As we look to
the second half of 2009, we remain cautious on the general environment,
but confident in our ability to successfully execute our plans and
capitalize on opportunities that present themselves to profitably grow
our business."
Watjen added that given Unum's performance through the first six months
of the year, the Company is revising its guidance for full year 2009
operating earnings per share to a range of $2.50 to $2.60 from its
previous range of $2.45 to $2.55.
RESULTS BY SEGMENT
In the following discussions of the Company's operating segment results,
"operating revenue" excludes net realized investment gains and losses.
"Operating income" or "operating loss" excludes income tax and net
realized investment gains and losses.
Effective with the fourth quarter of 2008, we made slight modifications
to our reporting segments to better align the debt of our
securitizations with the business segments and to align the allocation
of capital for Unum UK similar to that of Unum US and Colonial Life.
Financial results by segment for 2008, as previously reported, have been
revised to reflect these reclassifications.
Unum US Segment
Unum US reported operating income of $191.3 million in the second
quarter of 2009, an increase of 11.5 percent from $171.6 million in the
second quarter of 2008. Premium income for the segment declined by 1.9
percent to $1,223.7 million in the second quarter of 2009 from $1,246.9
million in the second quarter of 2008.
Within the Unum US operating segment, the group disability line of
business reported operating income of $68.3 million in the second
quarter of 2009, compared to operating income of $47.0 million in the
second quarter of 2008. The benefit ratio for the second quarter of 2009
was 87.0 percent compared to 90.5 percent in the second quarter of 2008.
Improvements in the benefit ratio continue to reflect the on-going
strategic shift for the line, from a large case concentration to a
balanced mix of business with a focus on increasing exposure to the core
market (employee groups with fewer than 2,000 lives). Results also
reflect favorable claim recovery trends; relatively stable claim
incidence trends in both the group long-term and short-term disability
lines of business relative to the second quarter of 2008; maintenance of
pricing discipline, specifically as it relates to the large case market;
and the implemented improvements in the claims management process.
Premium income in group disability declined 5.7 percent to $541.0
million in the second quarter of 2009, compared to $573.6 million in the
second quarter of 2008. Increasing competition, along with softening
economic conditions and the Company's on-going commitment to disciplined
pricing, renewals, and risk selection were contributing factors to the
decline in the current premium. Sales of fully insured group long-term
disability products in the second quarter of 2009 increased by 19.6
percent to $54.3 million compared to $45.4 million in the second quarter
of 2008. Sales of fully insured group short-term disability products
increased by 18.3 percent to $19.4 million in the second quarter of
2009, compared to $16.4 million in the second quarter of 2008. Sales of
fully insured group disability products (inclusive of both long-term and
short-term disability products) in the Company's core market increased
by 11.1 percent in the second quarter of 2009 to $45.0 million from
$40.5 million in the second quarter of 2008. Sales of fully insured
group disability products in the large case market (employee groups with
2,000 or more lives) increased by 34.7 percent to $28.7 million in the
second quarter of 2009, from $21.3 million in the comparable period in
2008. Premium persistency in the group long-term disability line of
business was 88.2 percent for the first six months of 2009, compared to
88.3 percent in the first six months of 2008. Premium persistency in the
group short-term disability line of business was 89.0 percent for the
first six months of 2009, compared to 83.6 percent for the comparable
period in 2008.
The group life and accidental death and dismemberment line of business
reported a 10.3 percent decrease in operating income to $48.7 million in
the second quarter of 2009, compared to $54.3 million in the second
quarter of 2008, reflecting lower premium income and higher mortality
from the prior year comparable period. Premium income for this line of
business declined 2.9 percent to $291.8 million in the second quarter of
2009, compared to $300.6 million in the second quarter of 2008,
reflecting the Company's ongoing disciplined approach to pricing,
renewals, and risk selection, and softening economic conditions. Sales
of fully insured group life products increased by 25.9 percent in the
second quarter of 2009 to $48.6 million; in the second quarter of 2008
sales were $38.6 million. Premium persistency in the group life line of
business was 87.1 percent in the first six months of 2009, compared to
84.8 percent for the comparable period in 2008.
The Unum US supplemental and voluntary lines of business reported a 5.7
percent increase in operating income to $74.3 million in the second
quarter of 2009, compared to $70.3 million in the second quarter of
2008. The improvement in operating income was driven by favorable risk
in the individual disability - recently issued and voluntary benefits
lines and premium growth in all three business lines: individual
disability - recently issued, long-term care, and voluntary benefits.
Premium income for supplemental and voluntary lines increased 4.9
percent to $390.9 million in the second quarter of 2009, compared to
$372.7 million in the second quarter of 2008. Sales in the voluntary
benefits line of business decreased by 6.1 percent in the second quarter
of 2009, sales in the individual disability - recently issued line
decreased by 9.4 percent, and long-term care sales decreased 43.6
percent, all relative to the second quarter of 2008.
Unum UK Segment
Unum UK reported operating income of $67.3 million in the second quarter
of 2009, a 27.3 percent decrease compared to $92.6 million in the second
quarter of 2008. In local currency, operating income for the second
quarter of 2009 decreased 6.6 percent, to 43.9 million from 47.0
million in the second quarter of 2008. Results for the quarter, when
translated into dollars, have been impacted by continuing volatility in
the foreign exchange markets, specific to the exchange rate of the
dollar to British pound sterling.
The benefit ratio in the second quarter 2009 was 54.4 percent, compared
to 58.3 percent in the comparable quarter in 2008, reflecting a lower
rate of claim incidence in the both the group long-term disability line
and group life line, which was partially offset by slightly lower claim
recoveries in the group long-term disability line. The benefit ratio was
also favorably impacted by lower inflation on claim reserves associated
with group long-term disability policies containing an inflation-linked
benefit feature. Premium income decreased 28.3 percent to $173.4 million
in the second quarter of 2009, compared to $241.7 million in the second
quarter of 2008. In local currency, premium income decreased 9.0 percent
to 111.6 million in the second quarter of 2009, compared to 122.6
million in the second quarter of 2008. Premium persistency in the group
long-term disability line of business was 88.8 percent for the first six
months of 2009, compared to 86.0 percent for the comparable period in
2008. Premium persistency in the group life line of business was 77.5
percent for the first six months of 2009, compared to 78.1 percent for
the 2008 comparable period. Sales decreased 4.5 percent to $29.5 million
in the second quarter of 2009, compared to $30.9 million in the second
quarter of 2008. In local currency, sales for the second quarter of 2009
increased 21.0 percent to 19.0 million, compared to 15.7 million in
the second quarter of 2008, primarily due to sales growth in the Unum UK
group life large case market (employee groups with 500 or more lives)
and the Unum UK group disability core market segment (fewer than 500
lives).
Colonial Life Segment
Colonial Life reported a 4.5 percent increase in operating income to
$71.3 million in the second quarter of 2009, compared to $68.2 million
in the second quarter of 2008. The benefit ratio in the second quarter
of 2009 was 46.4 percent, compared to 46.9 percent for the same period
in 2008, with a lower benefit ratio in the cancer and critical illness
line offsetting a higher benefit ratio in the accident, sickness, and
disability line of business. Premium income for the second quarter of
2009 increased by 3.4 percent to $250.8 million, compared to $242.6
million in the second quarter of 2008. Sales decreased 3.9 percent to
$78.0 million in the second quarter of 2009 from $81.2 million in the
second quarter of 2008, primarily due to lower sales in existing
accounts. New accounts increased 7.4 percent in the second quarter of
2009 compared to the second quarter of 2008.
Individual Disability - Closed
Block Segment
The Individual Disability - Closed Block segment reported operating
income of $10.0 million in the second quarter of 2009, compared to $15.2
million in the second quarter of 2008. The interest adjusted loss ratio
for the segment was 82.0 percent in the second quarter of 2009, compared
to 82.4 percent in the second quarter of 2008. Risk results in this
segment remained generally consistent with the trends of the past
several quarters, with a slight increase in claim incidence during the
second quarter of 2009 relative to the second quarter of last year. Net
investment income for the segment declined 5.5 percent, to $187.4
million in the second quarter of 2009 from $198.4 million in the second
quarter of 2008.
Corporate and Other Segment
The Corporate and Other segment reported an operating loss of $16.0
million in the second quarter 2009, compared to an operating loss of
$6.7 million in the second quarter of 2008, primarily due to
approximately $10.4 million in increased expenses related to pension
costs relative to last year's second quarter. Interest and debt expense
in the second quarter of 2009 was $25.6 million, compared to $30.6
million in the second quarter of 2008, primarily due to lower levels of
outstanding debt.
OTHER INFORMATION
Capital Management
With the results of the second quarter 2009, the Company continued to
exceed its previously announced target capital management metrics. At
the end of the second quarter of 2009, combined risk-based capital of
approximately 340 percent for its traditional US insurance companies
exceeded the Company's 300 percent threshold target, leverage of 18.5
percent remained significantly less than the stated 25 percent target,
and holding company liquidity of $475 million was in excess of the
Company's minimum target of one year's fixed charges, or approximately
$230 million. Leverage is measured as total debt to total capital, which
the Company defines as total long-term and short-term debt plus
stockholders' equity, excluding the net unrealized gain or loss on
securities and the net gain or loss on cash flow hedges. Leverage also
excludes the non-recourse debt and associated capital of Tailwind
Holdings, LLC and Northwind Holdings, LLC.
Shares Outstanding
The Company's average number of shares (000s) outstanding, assuming
dilution, was 331,955.2 for the second quarter of 2009, compared to
346,035.4 for the second quarter of 2008.
Book Value
Book value per common share as of June 30, 2009 was $22.57, compared to
$22.19 at June 30, 2008. Excluding the net unrealized loss on securities
and the net gain on cash flow hedges, book value per common share at
June 30, 2009 was $22.07, compared to $21.77 at June 30, 2008.
OUTLOOK
The Company is increasing its previously stated guidance for operating
earnings per share of $2.45 to $2.55 for full year 2009 and currently
anticipates operating earnings for the year to be between $2.50 and
$2.60 per diluted common share. The revised guidance includes higher
operating earnings in the Company's Unum US segment relative to
previously stated expectations and an upward revision to the foreign
currency exchange rate assumption for the British pound sterling to
$1.60 from $1.50.
NON-GAAP RECONCILIATION
The Company analyzes its performance using non-GAAP financial measures
which exclude certain items and the related tax thereon from net income.
The Company believes operating income or loss, excluding realized
investment gains and losses, which are recurring, is a better
performance measure and a better indicator of the profitability and
underlying trends in its business. Realized investment gains and losses
are primarily dependent on market conditions and general economic events
and are not necessarily related to decisions regarding the Company's
underlying business. The Company believes leverage and book value per
common share excluding unrealized gains and losses on securities and the
net gain or loss on cash flow hedges, which also tend to fluctuate
depending on market conditions and general economic trends, are
important measures. For a reconciliation to the most directly comparable
GAAP measures, refer to the attached digest of earnings.
CONFERENCE CALL INFORMATION
Members of Unum Group senior management will host a conference call on
Wednesday, August 5, 2009 at 9:00 a.m. (Eastern Time) to discuss the
results of operations for the second quarter. Topics may include
forward-looking information, such as guidance on future results and
trends in operations, as well as other material information.
The dial-in number for the conference call is (800) 239-9838 for U.S.
and Canada. For International, the dial-in number is (913)
981-4905. A live webcast of the call will also be available at www.investors.unum.com
in a listen-only mode. It is recommended that webcast viewers access the
"Investors" section of the Company's website and opt-in to the webcast
fifteen minutes prior to the start of the call. A replay of the call
will be available by telephone and on the Company's website through
Wednesday, August 12, 2009.
In conjunction with today's earnings announcement, the Company's
Statistical Supplement for the second quarter of 2009 is available on
the "Investors" section of the Company's website.
ABOUT UNUM GROUP
Unum (www.unum.com)
is one of the leading providers of employee benefits products and
services and the largest provider of disability insurance products in
the United States and the United Kingdom.
SAFE HARBOR STATEMENT
Statements in this press release that are not historical facts, such as
the Company's earnings per share guidance and management's statements
about the Company's financial flexibility, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are made based on
management's expectations, plans and beliefs concerning future
developments. These forward-looking statements are not a guarantee of
future performance and involve risks and uncertainties that could cause
actual results to differ materially from those suggested by the
forward-looking statements. These risks and uncertainties include such
matters as (1) unfavorable economic or business conditions, both
domestic and foreign, including the continued financial market
disruption; (2) investment results, including but not limited to,
realized investment losses resulting from impairments that differ from
our assumptions and historical experience; (3) rating agency actions,
state insurance department market conduct examinations and other
inquiries, other governmental investigations and actions, and negative
media attention; (4) changes in interest rates, credit spreads, and
securities prices; (5) currency exchange rates; (6) changes in our
financial strength and credit ratings; (7) changes in claim incidence
and recovery rates due to, among other factors, the rate of unemployment
and consumer confidence, the emergence of new diseases, epidemics, or
pandemics, new trends and developments in medical treatments, and the
effectiveness of claims management operations; (8) increased competition
from other insurers and financial services companies due to industry
consolidation or other factors; (9) legislative, regulatory, or tax
changes, both domestic and foreign, including the effect of potential
legislation and increased regulation in the current political
environment; (10) effectiveness of our risk management program; (11) the
level and results of litigation; (12) effectiveness in supporting new
product offerings and providing customer service; (13) actual experience
in pricing, underwriting, and reserving that deviates from our
assumptions; (14) lower than projected persistency and lower sales
growth; (15) fluctuation in insurance reserve liabilities; (16) ability
and willingness of reinsurers to meet their obligations; (17) changes in
assumptions related to intangible assets such as deferred acquisition
costs, value of business acquired, and goodwill; (18) ability of our
subsidiaries to pay dividends as a result of regulatory restrictions;
(19) events or consequences relating to terrorism and acts of war, both
domestic and foreign; (20) changes in accounting standards, practices,
or policies; and (21) ability to recover our systems and information in
the event of a disaster or unanticipated event.
For further information about risks and uncertainties that could affect
actual results, see the Company's filings with the Securities and
Exchange Commission, including information in the sections titled
"Cautionary Statement Regarding Forward-Looking Statements" and "Risk
Factors" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 and any subsequently filed Forms 10-Q. The
forward-looking statements in this press release are being made as of
the date of this press release, and the Company expressly disclaims any
obligation to update or revise any forward-looking statement contained
herein, even if made available on our website or otherwise.
DIGEST OF EARNINGS
(Unaudited)
Unum Group (UNM:NYSE)
and Subsidiaries
($ in millions,
except share data)
Three Months Ended June 30 Six Months Ended June 30
2009 2008 2009 2008
Operating Revenue by $ 2,540.7 $ 2,649.2 $ 5,054.2 $ 5,258.3
Segment
Net Realized
Investment Gain 87.3 26.1 22.7 (42.4 )
(Loss)
Total Revenue $ 2,628.0 $ 2,675.3 $ 5,076.9 $ 5,215.9
Operating Income by $ 323.9 $ 340.9 $ 639.1 $ 654.1
Segment
Net Realized
Investment Gain 87.3 26.1 22.7 (42.4 )
(Loss)
Income Tax 144.0 126.7 229.7 208.3
Net Income $ 267.2 $ 240.3 $ 432.1 $ 403.4
PER SHARE
INFORMATION
Net Income Per
Common Share
Basic $ 0.81 $ 0.70 $ 1.31 $ 1.16
Assuming Dilution $ 0.80 $ 0.69 $ 1.30 $ 1.16
Weighted Average
Common Shares - 331,171.8 345,443.5 330,988.8 348,082.2
Basic (000s)
Weighted Average
Common Shares - 331,955.2 346,035.4 331,460.3 348,751.3
Assuming Dilution
(000s)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended June 30
2009 2008
(in millions) per share * (in millions) per share *
After-tax Operating $ 215.8 $ 0.65 $ 223.2 $ 0.65
Income
Net Realized
Investment Gain, Net 51.4 0.15 17.1 0.04
of Tax
Net Income $ 267.2 $ 0.80 $ 240.3 $ 0.69
As of June 30
2009 2008
(in millions) per share (in millions) per share
Total Stockholders' $ 7,478.4 $ 22.57 $ 7,664.3 $ 22.19
Equity (Book Value)
Net Unrealized Loss (201.7 ) (0.61 ) (32.7 ) (0.09 )
on Securities
Net Gain on Cash 367.5 1.11 177.7 0.51
Flow Hedges
Total Stockholders' $ 7,312.6 $ 22.07 $ 7,519.3 $ 21.77
Equity, As Adjusted
* Assuming Dilution
As of June 30
2009
(in millions)
Debt, As Reported $ 2,295.6
Exclude Non-recourse 834.4
Debt
Debt, As Adjusted $ 1,461.2
Total Stockholders' $ 7,478.4
Equity, As Reported
Exclude Net
Unrealized Loss on
Securities and Net 165.8
Gain on Cash Flow
Hedges
Exclude Northwind 886.8
and Tailwind Capital
6,425.8
Debt, As Adjusted 1,461.2
Total Capital, As $ 7,887.0
Adjusted
Debt to Capital 18.5 %
Ratio
Source: Unum Group
Contact: Unum Group
Media:
Jim Sabourin, 423-294-6300
or
Investors:
Thomas A. H. White, 423-294-8996
Madhavi Venkatesan, 423-294-1630