Favorable Operating Trends and Solid Capital Position Maintained
CHATTANOOGA, Tenn.--(BUSINESS WIRE)--
Unum Group (NYSE: UNM) today reported net income of $199.4 million
($0.60 per diluted common share) for the fourth quarter of 2009,
compared to net income of $41.8 million ($0.13 per diluted common share)
for the fourth quarter of 2008.
Included in the results for the fourth quarter of 2009 are net realized
after-tax investment losses of $18.9 million ($0.06 per diluted common
share), compared to $167.6 million ($0.50 per diluted common share) in
the fourth quarter of 2008. Net realized after-tax investment losses for
the fourth quarter of 2009 include an after-tax gain of $22.7 million
resulting from changes in the fair value of an embedded derivative in a
modified coinsurance contract, compared to an after-tax loss of $120.1
million in the fourth quarter of 2008. Also included in net realized
after-tax investment losses for the fourth quarter of 2009 is a net
realized after-tax investment loss of $41.6 million related to sales and
write-downs of investments, compared to $47.5 million in the fourth
quarter of 2008.
Adjusting for these items, income on an after-tax basis was $218.3
million ($0.66 per diluted common share) in the fourth quarter of 2009,
compared to $209.4 million ($0.63 per diluted common share) in the
fourth quarter of 2008.
"The Company had another solid quarter and we closed the year well
positioned for the year ahead," said Thomas R. Watjen, president and
chief executive officer. "While we believe that the general business and
economic environment will continue to pose challenges, the actions we
have taken the past several years have positioned us well and provide us
with significant operating and financial flexibility."
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.
Unum US Segment
Unum US reported operating income of $203.0 million in the fourth
quarter of 2009, an increase of 11.2 percent from $182.6 million in the
fourth quarter of 2008. Premium income for the segment declined 3.1
percent to $1,207.9 million in the fourth quarter of 2009; premium
income in the fourth quarter of 2008 was $1,246.6 million.
Within the Unum US operating segment, the group disability line of
business reported operating income of $72.6 million in the fourth
quarter of 2009, compared to operating income of $59.7 million in the
fourth quarter of 2008. The benefit ratio for the fourth quarter of 2009
was 84.6 percent compared to 88.7 percent in the fourth quarter of 2008,
reflecting 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 fourth quarter 2008. Premium income in group
disability declined 5.9 percent to $535.6 million in the fourth quarter
of 2009, compared to $569.2 million in the fourth quarter of 2008.
Increased competition, along with soft economic conditions and the
Company's ongoing 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 fourth quarter of 2009 decreased 2.6 percent to $75.4 million,
compared to $77.4 million in the fourth quarter of 2008. Sales of fully
insured group short-term disability products increased 12.3 percent to
$34.8 million in the fourth quarter of 2009, compared to $31.0 million
in the fourth quarter of 2008. Premium persistency in the group
long-term disability line of business was 86.9 percent in 2009, compared
to 87.8 percent in 2008. Case persistency for this line was 87.4 percent
in 2009, compared to 89.2 percent in 2008. Premium persistency in the
group short-term disability line of business was 86.8 percent in 2009,
compared to 82.1 percent in 2008. Case persistency for the short-term
disability line was 86.5 percent in 2009, compared to 88.2 percent in
2008.
The group life and accidental death and dismemberment line of business
reported a 5.2 percent decrease in operating income to $47.7 million in
the fourth quarter of 2009, compared to $50.3 million in the fourth
quarter of 2008. Premium income for this line of business declined 2.6
percent to $289.4 million in the fourth quarter of 2009, compared to
$297.1 million in the fourth quarter of 2008, due to the same conditions
affecting group disability premium income. Sales of group life and
accidental death and dismemberment products declined 8.2 percent in the
fourth quarter of 2009 to $84.3 million from $91.8 million in the fourth
quarter of 2008. Premium persistency in the group life line of business
was 86.9 percent in 2009, compared to 83.8 percent in 2008. Case
persistency in the group life line of business for 2009 was 87.2 percent
compared to 89.1 percent in 2008.
The Unum US supplemental and voluntary lines of business reported a 13.9
percent increase in operating income to $82.7 million in the fourth
quarter of 2009, compared to $72.6 million in the fourth quarter of
2008. Premium income for supplemental and voluntary lines increased 0.7
percent to $382.9 million in the fourth quarter of 2009, compared to
$380.3 million in the fourth quarter of 2008. Relative to the fourth
quarter of 2008, sales in the voluntary benefits line of business
increased 12.6 percent in the fourth quarter of 2009, sales in the
individual disability - recently issued line decreased 10.4 percent, and
group long-term care sales decreased 28.0 percent.
Unum UK Segment
Unum UK reported operating income of $61.3 million in the fourth quarter
of 2009, an increase of 12.3 percent from $54.6 million in the fourth
quarter of 2008. Results for the quarter, when translated into dollars,
benefitted from the exchange rate of the dollar to British pound
sterling. In local currency, operating income for the fourth quarter of
2009 increased 8.7 percent, to 37.6 million from 34.6 million in the
fourth quarter of 2008.
The benefit ratio in the fourth quarter 2009 was 59.6 percent, compared
to 63.0 percent in the comparable quarter in 2008. The lower benefit
ratio for the current quarter reflects net favorable claims experience
in the group long-term disability line, which was partially offset by
higher paid claims in the group life line. Premium income decreased 1.3
percent to $180.0 million in the fourth quarter of 2009, compared to
$182.3 million in the fourth quarter of 2008. In local currency, premium
income decreased 4.8 percent to 110.2 million in the fourth quarter of
2009, compared to 115.8 million in the fourth quarter of 2008. Premium
persistency in the group long-term disability line of business was 88.6
percent in 2009, compared to 87.4 percent in 2008. Premium persistency
in the group life line of business was 80.1 percent in 2009, compared to
74.9 percent in 2008. Sales increased 55.6 percent to $42.0 million in
the fourth quarter of 2009, compared to $27.0 million in the fourth
quarter of 2008, aided in part by the exit of another large insurance
provider from the U.K. group risk market. In local currency, sales for
the fourth quarter of 2009 increased 47.7 percent to 25.7 million,
compared to 17.4 million in the fourth quarter of 2008.
Colonial Life Segment
Colonial Life reported a 3.0 percent increase in operating income to
$68.3 million in the fourth quarter of 2009, compared to $66.3 million
in the fourth quarter of 2008. The benefit ratio in the fourth quarter
of 2009 was 48.5 percent, compared to 48.3 percent for the same period
in 2008. The benefit ratio in the accident, sickness, and disability
line was slightly lower in the fourth quarter of 2009 relative to the
year ago quarter, while the benefit ratios in the life and cancer and
critical illness lines were both higher than the year ago quarter due to
higher claims experience. Premium income for the fourth quarter of 2009
increased 3.3 percent to $257.4 million, compared to $249.1 million in
the fourth quarter of 2008. Sales increased 3.7 percent to $119.7
million in the fourth quarter of 2009 from $115.4 million in the fourth
quarter of 2008, driven primarily by a strong level of sales in the
public sector market. New accounts increased 17.9 percent in the fourth
quarter of 2009 compared to the fourth quarter of 2008, and average
weekly producers increased 7.9 percent compared to the fourth quarter of
2008.
Individual Disability - Closed
Block Segment
The Individual Disability - Closed Block segment reported operating
income of $5.8 million in the fourth quarter of 2009, compared to $7.1
million in the fourth quarter of 2008. The interest adjusted loss ratio
for the segment was 81.6 percent in the fourth quarter of 2009, compared
to 82.6 percent in the fourth quarter of 2008. Risk results in this
segment remained generally consistent with the trends of the past
several quarters.
Corporate and Other Segment
The Corporate and Other segment reported an operating loss of $16.6
million in the fourth quarter 2009, compared to $0.4 million in the
fourth quarter of 2008, primarily due to higher interest expense as well
as an increase in pension costs. The fourth quarter of 2008 also
included $7.6 million of other income related to a refund of interest
primarily attributable to prior tax years.
OTHER INFORMATION
Capital Management
At the end of the fourth quarter of 2009, combined risk-based capital
for the traditional US insurance companies was approximately 382
percent; leverage was 20.5 percent; and holding company capital equaled
$915 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 332,998.5 for the fourth quarter of 2009, compared to
330,981.5 for the fourth quarter of 2008.
Book Value
Book value per common share as of December 31, 2009 was $25.62 compared
to $19.32 at December 31, 2008.
OUTLOOK
The Company is maintaining its previously stated outlook for full year
2010 and anticipates operating earnings growth for the year to be in a
range of four percent to six percent.
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 excluding the
non-recourse debt as well as 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, is
an important measure. 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, February 3, 2010 at 10:00 A.M. (Eastern Time) to discuss the
results of operations for the fourth quarter. Topics may include
forward-looking information such as the Company's outlook on future
results, trends in operations, and other material information.
The dial-in number for the conference call is (888) 797-2994 for U.S.
and Canada. For International, the dial-in number is (913)
312-0828. 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, February 10, 2010.
In conjunction with today's earnings announcement, the Company's
Statistical Supplement for the fourth 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 outlook, 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, Three Months Ended Twelve Months Ended
except share data)
December 31 December 31
2009 2008 2009 2008
Operating Revenue by $ 2,522.5 $ 2,581.4 $ 10,079.3 $ 10,448.2
Segment
Net Realized
Investment Gain (25.9 ) (257.7 ) 11.7 (465.9 )
(Loss)
Total Revenue $ 2,496.6 $ 2,323.7 $ 10,091.0 $ 9,982.3
Operating Income by $ 321.8 $ 310.2 $ 1,280.6 $ 1,289.9
Segment
Net Realized
Investment Gain (25.9 ) (257.7 ) 11.7 (465.9 )
(Loss)
Income Tax 96.5 10.7 439.7 270.8
Net Income $ 199.4 $ 41.8 $ 852.6 $ 553.2
PER SHARE
INFORMATION
Net Income Per
Common Share
Basic $ 0.60 $ 0.13 $ 2.57 $ 1.62
Assuming Dilution $ 0.60 $ 0.13 $ 2.57 $ 1.62
Weighted Average
Common Shares - 331,672.8 330,846.0 331,266.2 341,022.8
Basic (000s)
Weighted Average
Common Shares - 332,998.5 330,981.5 332,136.2 341,560.3
Assuming Dilution
(000s)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended December 31
2009 2008
(in millions) per share * (in millions) per share *
After-tax Operating $ 218.3 $ 0.66 $ 209.4 $ 0.63
Income
Net Realized
Investment Loss, Net (18.9 ) (0.06 ) (167.6 ) (0.50 )
of Tax
Net Income $ 199.4 $ 0.60 $ 41.8 $ 0.13
*Assuming Dilution
December 31
2009 2008
(in millions) per share (in millions) per share
Total Stockholders' $ 8,500.1 $ 25.62 $ 6,397.9 $ 19.32
Equity (Book Value)
Net Unrealized Gain 379.6 1.14 (832.6 ) (2.51 )
(Loss) on Securities
Net Gain on Cash 370.8 1.12 458.5 1.38
Flow Hedges
Subtotal 7,749.7 23.36 6,772.0 20.45
Foreign Currency
Translation (78.7 ) (0.24 ) (177.6 ) (0.54 )
Adjustment
Unrecognized Pension
and Postretirement (330.7 ) (0.99 ) (406.5 ) (1.23 )
Benefit Costs
Total Stockholders' $ 8,159.1 $ 24.59 $ 7,356.1 $ 22.22
Equity, As Adjusted
December 31
2009
(in millions)
Debt, As Reported $ 2,549.6
Exclude Non-recourse 785.2
Debt
Debt, As Adjusted $ 1,764.4
Total Stockholders' $ 8,500.1
Equity, As Reported
Exclude Net
Unrealized Gain on
Securities and Net 750.4
Gain on Cash Flow
Hedges
Exclude Northwind 907.0
and Tailwind Capital
6,842.7
Debt, As Adjusted 1,764.4
Total Capital, As $ 8,607.1
Adjusted
Debt to Capital 20.5 %
Ratio
Source: Unum Group
Contact: Unum Group
Thomas A. H. White, 423-294-8996