Strong Investment and Risk Results on a Solid Capital Position
CHATTANOOGA, Tenn.--(BUSINESS WIRE)--
Unum Group (NYSE: UNM) today reported net income of $221.1 million
($0.66 per diluted common share) for the third quarter of 2009, compared
to net income of $108.0 million ($0.32 per diluted common share) for the
third quarter of 2008.
Included in the results for the third quarter of 2009 are net realized
after-tax investment gains of $9.5 million ($0.02 per diluted common
share), compared to net realized after-tax investment losses of $108.9
million ($0.32 per diluted common share) in the third quarter of 2008.
Net realized after-tax investment gains for the third quarter of 2009
include an after-tax gain of $28.9 million resulting from changes in the
fair value of an embedded derivative in a modified coinsurance contract,
compared to an after-tax loss of $44.1 million in the third quarter of
2008. Also included in net realized after-tax investment gains for the
third quarter of 2009 is a net realized after-tax investment loss of
$19.4 million related to sales and write-downs of investments, compared
to a net after-tax investment loss of $64.8 million in the third quarter
of 2008.
Adjusting for these items, income on an after-tax basis was $211.6
million ($0.64 per diluted common share) in the third quarter of 2009,
compared to $216.9 million ($0.64 per diluted common share) in the third
quarter of 2008.
"I am pleased with our results for the third quarter, as well as our
continued strong position in our markets, in what remains a challenging
economic environment," said Thomas R. Watjen, president and chief
executive officer. "While we expect the environment will remain
challenging, we are well positioned to profitably grow our business as
general business conditions improve and, in the meantime, continue to
generate solid results and maintain a strong balance sheet and capital
position."
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 $197.1 million in the third quarter
of 2009, an increase of 14.9 percent from $171.6 million in the third
quarter of 2008. Premium income for the segment declined by 1.9 percent
to $1,215.2 million in the third quarter of 2009; premium income in the
third quarter of 2008 was $1,239.1 million.
Within the Unum US operating segment, the group disability line of
business reported operating income of $75.0 million in the third quarter
of 2009, compared to operating income of $54.6 million in the third
quarter of 2008. The benefit ratio for the third quarter of 2009 was
85.3 percent compared to 89.3 percent in the third quarter of 2008.
Improvement in the benefit ratio in the third quarter reflects a
generally consistent rate of claim recoveries and net favorable claims
experience in the group long-term disability line of business as
compared to the third quarter 2008. Results for the group disability
line also 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); 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 4.4 percent to $537.4 million in the third quarter of 2009,
compared to $562.4 million in the third 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 third quarter of 2009 decreased by 34.1 percent to $20.7 million
compared to $31.4 million in the third quarter of 2008. Sales of fully
insured group short-term disability products increased by 29.0 percent
to $13.8 million in the third quarter of 2009, compared to $10.7 million
in the third quarter of 2008. Premium persistency in the group long-term
disability line of business was 87.3 percent for the first nine months
of 2009, compared to 87.9 percent in the first nine months of 2008. Case
persistency for this line was 87.2 percent for the first nine months of
2009, compared to 89.3 percent for the comparable period in 2008.
Premium persistency in the group short-term disability line of business
was 88.5 percent for the first nine months of 2009, compared to 82.1
percent for the comparable period in 2008. Case persistency for the
short-term disability line was 86.2 percent for the first nine months of
2009, comparable to 88.1 percent for the first nine months of 2008.
The group life and accidental death and dismemberment line of business
reported a 1.8 percent decrease in operating income to $50.0 million in
the third quarter of 2009, compared to $50.9 million in the third
quarter of 2008. Premium income for this line of business declined 2.3
percent to $293.4 million in the third quarter of 2009, compared to
$300.3 million in the third 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 63.7 percent in the third quarter of 2009 to $28.0
million; in the third quarter of 2008 sales were $17.1 million. Premium
persistency in the group life line of business was 86.8 percent in the
first nine months of 2009, compared to 84.3 percent for the comparable
period in 2008. Case persistency in the group life line of business for
the first nine months of 2009 was 86.9 percent compared to 88.9 percent
for the comparable period in 2008.
The Unum US supplemental and voluntary lines of business reported a 9.1
percent increase in operating income to $72.1 million in the third
quarter of 2009, compared to $66.1 million in the third quarter of 2008.
Premium income for supplemental and voluntary lines increased 2.1
percent to $384.4 million in the third quarter of 2009, compared to
$376.4 million in the third quarter of 2008. Relative to the third
quarter of 2008, sales in the voluntary benefits line of business
decreased by 17.8 percent in the third quarter of 2009, sales in the
individual disability - recently issued line decreased by 19.2 percent,
and long-term care sales decreased 47.9 percent.
Unum UK Segment
Unum UK reported operating income of $58.7 million in the third quarter
of 2009, a decrease of 36.5 percent from $92.5 million in the third
quarter of 2008. Results for the quarter, when translated into dollars,
have been impacted by continuing volatility in the exchange rate of the
dollar to British pound sterling. In local currency, operating income
for the third quarter of 2009 decreased 26.9 percent, to 35.8 million
from 49.0 million in the third quarter of 2008.
The benefit ratio in the third quarter 2009 was 50.2 percent, compared
to 52.4 percent in the comparable quarter in 2008. The lower benefit
ratio for the current quarter is reflective of the impact of lower
general inflation on claim reserves associated with group long-term
disability policies containing an inflation-linked benefit increase
feature as well as a decline in the level of claim incidence in the
group long-term disability line. Premium income decreased 24.5 percent
to $169.7 million in the third quarter of 2009, compared to $224.7
million in the third quarter of 2008. In local currency, premium income
decreased 12.8 percent to 103.4 million in the third quarter of 2009,
compared to 118.6 million in the third quarter of 2008. In local
currency, net investment income in the quarter declined by 43.2 percent
compared to the third quarter of 2008 due primarily to the impact of
lower inflation which resulted in lower returns on inflation-indexed
bonds. These bonds match the claim reserves associated with certain
group long-term disability policies that provide for inflation-linked
increases in disability benefits. Premium persistency in the group
long-term disability line of business was 87.7 percent for the first
nine months of 2009, compared to 87.0 percent for the comparable period
in 2008. Premium persistency in the group life line of business was 78.2
percent for the first nine months of 2009, compared to 74.8 percent for
the 2008 comparable period. Sales increased 40.2 percent to $32.1
million in the third quarter of 2009, compared to $22.9 million in the
third quarter of 2008. In local currency, sales for the third quarter of
2009 increased 63.3 percent to 19.6 million, compared to 12.0 million
in the third quarter of 2008.
Colonial Life Segment
Colonial Life reported a 6.3 percent increase in operating income to
$70.4 million in the third quarter of 2009, compared to $66.2 million in
the third quarter of 2008. The benefit ratio in the third quarter of
2009 was 48.2 percent, compared to 47.5 percent for the same period in
2008. The increase in the benefit ratio for the quarter was attributable
to a higher level of paid claims in the cancer and critical illness line
of business. Premium income for the third quarter of 2009 increased by
3.4 percent to $253.5 million compared to $245.2 million in the third
quarter of 2008. Sales increased 3.4 percent to $78.5 million in the
third quarter of 2009 from $75.9 million in the third quarter of 2008,
as sales growth in the public sector market offset a slight decline in
the commercial market segment. New accounts increased 16.7 percent in
the third quarter of 2009 compared to the third quarter of 2008 and
average weekly producers increased 7.6 percent compared to the third
quarter of 2008.
Individual Disability - Closed
Block Segment
The Individual Disability - Closed Block segment reported operating
income of $7.2 million in the third quarter of 2009, compared to $2.5
million in the third quarter of 2008. The interest adjusted loss ratio
for the segment was 81.6 percent in the third quarter of 2009, compared
to 81.5 percent in the third quarter of 2008. Risk results in this
segment remained generally consistent with the trends of the past
several quarters. Net investment income for the segment declined 2.6
percent, to $184.4 million in the third quarter of 2009 from $189.3
million in the third quarter of 2008.
Corporate and Other Segment
The Corporate and Other segment reported an operating loss of $13.7
million in the third quarter 2009, compared to $7.2 million in the third
quarter of 2008, primarily due to a decrease in net investment income
resulting from lower levels of assets and lower interest rates on
short-term investments as well as an increase in pension costs.
OTHER INFORMATION
Investor Meeting
The Company will hold its annual Investor Meeting on November 9, 2009 at
the New York Palace Hotel in New York City. The meeting will begin at
10:00 A.M. (Eastern Time) and will conclude at noon. A live videocast of
the meeting, which will also include the meeting presentation, will be
accessible from the "Investors" section of the Company's website, www.investors.unum.com.
For additional information on the event, see "Investors" section of the
Company's website, www.investors.unum.com.
Capital Management
At the end of the third quarter of 2009, consolidated risk-based capital
was approximately 340 percent for the traditional US insurance
companies; leverage was 21.1 percent; and holding company liquidity
equaled $864 million.
The holding company liquidity includes the proceeds from the Company's
debt offering of $350 million on September 30, 2009. 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 332,622.1 for the third quarter of 2009, compared to
337,912.8 for the third quarter of 2008.
Book Value
Book value per common share as of September 30, 2009 was $24.86 compared
to $20.22 at September 30, 2008. Excluding the net unrealized gains and
losses on securities and the net gain on cash flow hedges, book value
per common share at September 30, 2009 was $22.61, compared to $21.46 at
September 30, 2008.
OUTLOOK
The Company is maintaining its previously stated guidance for full year
2009 and anticipates operating earnings per share for the year to be in
a range of $2.50 and $2.60 per diluted common share.
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 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, November 4, 2009 at 9:00 A.M. (Eastern Time) to discuss the
results of operations for the third quarter. Topics may include
forward-looking information such as guidance on future results, trends
in operations, and other material information.
The dial-in number for the conference call is (888) 213-3710 for U.S.
and Canada. For International, the dial-in number is (913)
312-0656. 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, November 11, 2009.
In conjunction with today's earnings announcement, the Company's
Statistical Supplement for the third 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, 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 September 30 Nine Months Ended September 30
2009 2008 2009 2008
Operating
Revenue by $ 2,502.6 $ 2,608.5 $ 7,556.8 $ 7,866.8
Segment
Net Realized
Investment Gain 14.9 (165.8 ) 37.6 (208.2 )
(Loss)
Total Revenue $ 2,517.5 $ 2,442.7 $ 7,594.4 $ 7,658.6
Operating
Income by $ 319.7 $ 325.6 $ 958.8 $ 979.7
Segment
Net Realized
Investment Gain 14.9 (165.8 ) 37.6 (208.2 )
(Loss)
Income Tax 113.5 51.8 343.2 260.1
Net Income $ 221.1 $ 108.0 $ 653.2 $ 511.4
PER SHARE
INFORMATION
Net Income Per
Common Share
Basic $ 0.67 $ 0.32 $ 1.97 $ 1.48
Assuming $ 0.66 $ 0.32 $ 1.97 $ 1.48
Dilution
Weighted
Average Common 331,411.2 337,236.4 331,132.6 344,440.3
Shares - Basic
(000s)
Weighted
Average Common
Shares - 332,622.1 337,912.8 331,850.6 345,111.9
Assuming
Dilution (000s)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended September 30
2009 2008
(in millions) per share* (in millions) per share*
After-tax Operating Income $ 211.6 $ 0.64 $ 216.9 $ 0.64
Net Realized Investment 9.5 0.02 (108.9 ) (0.32 )
Gain (Loss), Net of Tax
Net Income $ 221.1 $ 0.66 $ 108.0 $ 0.32
* Assuming Dilution
September 30
2009 2008
(in millions) per share (in millions) per share
Total Stockholders' Equity $ 8,243.0 $ 24.86 $ 6,735.9 $ 20.22
(Book Value)
Net Unrealized Gain (Loss) 385.7 1.17 (665.0 ) (2.00 )
on Securities
Net Gain on Cash Flow 359.1 1.08 254.5 0.76
Hedges
Total Stockholders' $ 7,498.2 $ 22.61 $ 7,146.4 $ 21.46
Equity, As Adjusted
September 30
2009
(in millions)
Debt, As Reported $ 2,580.2
Exclude Non-recourse Debt 815.8
Debt, As Adjusted $ 1,764.4
Total Stockholders' $ 8,243.0
Equity, As Reported
Exclude Net Unrealized
Gain on Securities and Net 744.8
Gain on Cash Flow Hedges
Exclude Northwind and 904.7
Tailwind Capital
6,593.5
Debt, As Adjusted 1,764.4
Total Capital, As Adjusted $ 8,357.9
Debt to Capital Ratio 21.1 %
Source: Unum Group
Contact: Unum Group
Investors:
Thomas A. H. White, 423-294-8996
or
Madhavi Venkatesan, 423-294-1630