News Details

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- Unum Group (NYSE: UNM) today reported net income of $236.8 million ($1.00 per diluted common share) for the second quarter of 2016, compared to net income of $224.3 million ($0.90 per diluted common share) for the second quarter of 2015.

After-tax operating income, which excludes after-tax realized investment gains and losses on the Company’s investment portfolio and the amortization of prior period actuarial losses on the Company’s pension plans, was $235.7 million ($0.99 per diluted common share) in the second quarter of 2016, compared to $222.6 million ($0.89 per diluted common share) in the second quarter of 2015. The combined impact of the amounts excluded for the second quarters of 2016 and 2015 equaled net after-tax income of $1.1 million ($0.01 per diluted common share) and $1.7 million ($0.01 per diluted common share), respectively.

“Second quarter results were very strong, reflecting the on-going operating performance of our business segments. We continue to see solid levels of premium growth in our core business segments along with stable benefits experience and favorable expense management trends,” said Richard P. McKenney, president and chief executive officer. “These strong operating results continue to provide a significant level of financial flexibility for our Company as we continue to create value for our shareholders through our share repurchase activity, dividends, and our investments in our future growth.”

RESULTS BY SEGMENT

We measure and analyze our segment performance on the basis of "operating income" or "operating loss", which differ from income before income tax as presented in our consolidated statements of income due to the exclusion of net realized investment gains and losses and non-operating retirement-related gains or losses. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for income before income tax or net income.

Unum US Segment

Unum US reported operating income of $227.2 million in the second quarter of 2016, an increase of 12.0 percent from $202.8 million in the second quarter of 2015. Premium income for the segment increased 5.1 percent to $1,299.4 million in the second quarter of 2016, compared to premium income of $1,236.4 million in the second quarter of 2015. Net investment income for the segment was $207.7 million in the second quarter of 2016 compared to $215.7 million in the second quarter of 2015.

Within the Unum US operating segment, the group disability line of business reported a 21.6 percent increase in operating income to $74.4 million in the second quarter of 2016 compared to $61.2 million in the second quarter of 2015. Premium income in group disability increased 5.0 percent to $589.1 million in the second quarter of 2016, compared to $561.0 million in the second quarter of 2015, primarily due to prior period sales growth partially offset by a decline in persistency in the group long-term disability product line. Net investment income declined by 4.3 percent to $119.8 million in the second quarter of 2016, compared to $125.2 million in the second quarter of 2015, primarily due to a decline in yields and lower miscellaneous investment income. The benefit ratio for the second quarter of 2016 was 80.0 percent, compared to 83.4 percent in the second quarter of 2015, reflecting lower claims incidence rates and favorable claim recovery experience in the group long-term disability product line and shorter claim duration periods in the group short-term disability product line. Group long-term disability sales were $48.3 million in the second quarter of 2016, compared to $51.9 million in the second quarter of 2015. Group short-term disability sales declined to $24.9 million in the second quarter of 2016, compared to $32.4 million in the second quarter of 2015. Persistency in the group long-term disability line of business was 90.3 percent for the first half of 2016, compared to 91.4 percent for the first half of 2015. Persistency in the group short-term disability line of business was 87.0 percent for the first half of 2016, compared to 86.4 percent for the first half of 2015.

The group life and accidental death and dismemberment line of business reported operating income of $56.9 million in the second quarter of 2016, an increase of 8.4 percent from $52.5 million in the second quarter of 2015. Premium income for this line of business increased 3.9 percent to $383.6 million in the second quarter of 2016, compared to $369.3 million in the second quarter of 2015, primarily due to favorable persistency in both group life and accidental death and dismemberment and sales growth. Net investment income declined 14.5 percent to $28.9 million in the second quarter of 2016, compared to $33.8 million in the second quarter of 2015, primarily due to a decline in the level of invested assets supporting this line of business. The benefit ratio in the second quarter of 2016 was 71.5 percent, compared to 73.1 percent in the second quarter of 2015, reflecting favorable group life waiver of premium benefits. Sales of group life and accidental death and dismemberment products increased 13.6 percent in the second quarter of 2016 to $55.3 million, compared to $48.7 million in the second quarter of 2015. Persistency in the group life line of business was 90.0 percent for the first half of 2016, compared to 88.0 percent for the first half of 2015.

The supplemental and voluntary line of business reported an increase of 7.6 percent in operating income to $95.9 million in the second quarter of 2016, compared to $89.1 million in the second quarter of 2015. Premium income for supplemental and voluntary increased 6.7 percent to $326.7 million in the second quarter of 2016, compared to $306.1 million in the second quarter of 2015, driven by favorable persistency and sales growth. Net investment income increased to $59.0 million in the second quarter of 2016, compared to $56.7 million in the second quarter of 2015, due to an increase in the level of invested assets, partially offset by a decline in yields. The benefit ratio for the individual disability product line was 53.8 percent for the second quarter of 2016, compared to 51.7 percent for the second quarter of 2015, primarily driven by higher average size of submitted claims. The benefit ratio for voluntary benefits was 42.4 percent in the second quarter of 2016, compared to 43.1 percent in the second quarter of 2015, primarily driven by lower claim incidence in the disability product line. Relative to the second quarter of 2015, sales in the individual disability line of business increased 12.3 percent in the second quarter of 2016 to $14.6 million. Sales in the voluntary benefits line of business increased 14.0 percent in the second quarter of 2016 to $44.8 million. Persistency in the individual disability product line was 91.3 percent for the first half of 2016, compared to 90.4 percent for the first half of 2015. Persistency in the voluntary benefits product line was 76.7 percent for the first half of 2016, compared to 75.2 percent for the first half of 2015.

Unum UK Segment

Unum UK reported operating income of $36.9 million in the second quarter of 2016, a decline of 3.7 percent from $38.3 million in the second quarter of 2015. In local currency, operating income increased by 2.8 percent to £25.7 million in the second quarter of 2016, compared to £25.0 million in the second quarter of 2015.

Premium income declined by 1.0 percent to $140.8 million in the second quarter of 2016, compared to $142.2 million in the second quarter of 2015. In local currency, premium income was £98.1 million in the second quarter of 2016, an increase of 5.7 percent from £92.8 million in the second quarter of 2015, primarily resulting from the acquisition of National Dental Plan in the third quarter of 2015. Net investment income declined 11.9 percent to $34.0 million in the second quarter of 2016, compared to $38.6 million in the second quarter of 2015. In local currency, net investment income declined 6.0 percent to £23.7 million in the second quarter of 2016, compared to £25.2 million in the second quarter of 2015, primarily due to lower income from inflation index-linked bonds. The benefit ratio in the second quarter of 2016 was 70.1 percent, compared to 70.7 percent in the second quarter of 2015, reflecting favorable benefits experience in the group long-term disability line, partially offset by a higher average claim size and an increase in the claim incidence rate in the group life line. The acquisition of National Dental Plan also contributed to theincrease in our benefit ratio as this product line typically has a higher benefit ratio than other product lines reported in our supplemental product line.

Sales increased by 12.2 percent to $23.0 million in the second quarter of 2016, compared to $20.5 million in the second quarter of 2015. In local currency, sales for the second quarter of 2016 increased by 19.4 percent to £16.0 million. Persistency in the group long-term disability line of business was 87.8 percent for the first half of 2016 compared to 87.5 percent for the first half of 2015. Persistency in the group life line of business was 78.8 percent for the first half of 2016, compared to 79.9 percent for the first half of 2015.

Colonial Life Segment

Colonial Life reported a 0.4 percent increase in operating income to $77.9 million in the second quarter of 2016, compared to $77.6 million in the second quarter of 2015.

Premium income for the second quarter of 2016 increased 4.6 percent to $351.4 million, compared to $335.9 million in the second quarter of 2015, primarily due to sales growth partially offset by a decline in persistency. Net investment income declined by 3.5 percent to $35.6 million in the second quarter of 2016, compared to $36.9 million in the second quarter of 2015, primarily due to lower miscellaneous investment income and a decrease in yields, partially offset by an increase in the level of assets supporting this segment. The benefit ratio in the second quarter of 2016 was 51.1 percent, compared to 50.4 percent in the second quarter of 2015, primarily reflecting less favorable mortality experience in the life product line, which offset favorable claims experience in the accident, sickness, and disability product line and the cancer and critical illness product line.

Sales increased 13.3 percent to $108.5 million in the second quarter of 2016 from $95.8 million in the second quarter of 2015, with favorable sales trends in both the commercial and public sector market segments. Persistency in Colonial Life was 78.5 percent for the first half of 2016 compared to 79.2 percent for the first half of 2015.

Closed Block Segment

The Closed Block segment reported operating income of $32.6 million in the second quarter of 2016, compared to operating income of $36.6 million in the second quarter of 2015.

Premium income for this segment declined 4.3 percent in the second quarter of 2016 compared to the second quarter of 2015, due to expected policy terminations and maturities for the individual disability line of business which was partially offset by an increase in premium income for the long-term care line of business resulting from premium rate increases on certain in-force policies. Net investment income increased 2.8 percent to $341.1 million in the second quarter of 2016, compared to $331.7 million in the second quarter of 2015, due to an increase in the level of invested assets and higher miscellaneous investment income. The interest adjusted loss ratio for the individual disability line of business increased to 84.3 percent in the second quarter of 2016, compared to 83.6 percent in the second quarter of 2015, due primarily to a slight reduction in the claim reserve discount rate to recognize the impact on future portfolio yields from the higher than normal level of bond tenders and calls experienced in the second quarter of 2016. The interest adjusted loss ratio for the long-term care line of business was 92.6 percent in the second quarter of 2016 compared to 83.4 percent in the second quarter of 2015, due primarily to a higher average claim size.

Corporate Segment

The Corporate segment reported an operating loss of $35.7 million for the second quarter of 2016, compared to an operating loss of $33.4 million in the second quarter of 2015. The higher operating loss in the second quarter of 2016 was due primarily to lower net investment income and higher interest and debt expense, which were partially offset by lower operating expenses.

OTHER INFORMATION

Shares Outstanding

The Company’s average number of shares outstanding, assuming dilution was 237.3 million for the second quarter of 2016, compared to 249.2 million for the second quarter of 2015. Shares outstanding totaled 235.0 million at June 30, 2016. During the second quarter of 2016, the Company repurchased approximately 2.8 million shares at a cost of approximately $100 million.

Capital Management

At June 30, 2016, the weighted average risk-based capital ratio for the Company’s traditional U.S. insurance companies was approximately 390 percent, and cash and marketable securities in the holding companies equaled approximately $600 million, excluding amounts committed for the third quarter debt maturity, subsidiary contributions, and the anticipated acquisition of H&J Capital, LLC, parent of Starmount Life Insurance Company and AlwaysCare Benefits.

Book Value

Book value per common share as of June 30, 2016 was $38.96, compared to $34.53 at June 30, 2015.

Outlook

The Company’s expectation for after-tax operating income growth per share for full-year 2016 is at the higher end of the range of three percent to six percent.

NON-GAAP FINANCIAL MEASURES

We analyze our performance using non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measure of "after-tax operating income" differs from net income as presented in our consolidated operating results and income statements prepared in accordance with GAAP due to the exclusion of net realized investment gains and losses and non-operating retirement-related gains or losses as specified in the reconciliations below. We believe operating income is a better performance measure and better indicator of the profitability and underlying trends in our business.

Realized investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation of realized investment gains or losses. Although we may experience realized investment gains or losses which will affect future earnings levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature, and we need to earn the interest rates assumed in calculating our liabilities.

The amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pensions and other postretirement benefit plans, is driven by market performance as well as plan amendments and is not indicative of the operational results of our businesses. We believe that excluding the amortization of prior period gains or losses from operating income or loss provides investors with additional information for comparison and analysis of our operating results. Although we manage our non-operating retirement-related gains or losses separately from the operational performance of our business, these gains or losses impact the overall profitability of our company and have historically increased or decreased over time, depending on plan amendments and market conditions and the resulting impact on the actuarial gains or losses in our pensions and other postretirement benefit plans.

We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.

CONFERENCE CALL INFORMATION

Members of Unum Group senior management will host a conference call on Thursday, July 28, at 9 a.m. (Eastern Time) to discuss the results of operations for the second 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) 812-8589for U.S. and Canada (pass code8904656). For international, the dial–in number is (913) 312-0833 (pass code 8904656). 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 approximately 5-10 minutes prior to the start of the call. The Company will maintain a replay of the call on its website through Thursday, Aug. 4. A replay of the call will also be available by dialing (888) 203-1112 (U.S. and Canada) or (719) 457-0820 (International) pass code 8904656.

In conjunction with today’s earnings announcement, the Company’s Statistical Supplement for the second quarter of 2016 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

Certain information in this press release constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those not based on historical information, but rather relate to our outlook, future operations, strategies, financial results, or other developments and speak only as of the date made. These forward-looking statements, including statements about anticipated growth in after-tax operating income per share, are subject to numerous assumptions, risks, and uncertainties, many of which are beyond our control. The following factors, in addition to other factors mentioned from time to time, may cause actual results to differ materially from those contemplated by the forward-looking statements: (1) sustained periods of low interest rates; (2) fluctuation in insurance reserve liabilities and claim payments due to changes in claim incidence, recovery rates, mortality and morbidity rates, and policy benefit offsets 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, the effectiveness of our claims operational processes, and changes in government programs; (3) unfavorable economic or business conditions, both domestic and foreign; (4) legislative, regulatory, or tax changes, both domestic and foreign, including the effect of potential legislation and increased regulation in the current political environment; (5) investment results, including, but not limited to, changes in interest rates, defaults, changes in credit spreads, impairments, and the lack of appropriate investments in the market which can be acquired to match our liabilities; (6) a cyber attack or other security breach could result in the unauthorized acquisition of confidential data; (7) the failure of our business recovery and incident management processes to resume our business operations in the event of a natural catastrophe, cyber attack, or other event; (8) increased competition from other insurers and financial services companies due to industry consolidation, new entrants to our markets, or other factors; (9) execution risk related to our technology needs; (10) changes in our financial strength and credit ratings; (11) damage to our reputation due to, among other factors, regulatory investigations, legal proceedings, external events, and/or inadequate or failed internal controls and procedures; (12) actual experience that deviates from our assumptions used in pricing, underwriting, and reserving; (13) actual persistency and/or sales growth that is higher or lower than projected; (14) changes in demand for our products due to, among other factors, changes in societal attitudes, the rate of unemployment, consumer confidence, and/or legislative and regulatory changes, including healthcare reform; (15) effectiveness of our risk management program; (16) contingencies and the level and results of litigation; (17) availability of reinsurance in the market and the ability of our reinsurers to meet their obligations to us; (18) ineffectiveness of our derivatives hedging programs due to changes in the economic environment, counterparty risk, ratings downgrades, capital market volatility, changes in interest rates, and/or regulation; (19) changes in accounting standards, practices, or policies; (20) fluctuation in foreign currency exchange rates; (21) ability to generate sufficient internal liquidity and/or obtain external financing; (22) recoverability and/or realization of the carrying value of our intangible assets, long-lived assets, and deferred tax assets; and (23) terrorism, both within the U.S. and abroad, ongoing military actions, and heightened security measures in response to these types of threats.

For further discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Part 1, Item 1A “ Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2015 and, to the extent applicable, our subsequent quarterly reports on Form 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.

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Unum Group
Investors:
Tom White, 423-294-8996
or
Matt Barnett, 423-294-7498
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Jim Sabourin, 423-294-6300

Source: Unum Group