CHATTANOOGA, Tenn.–(BUSINESS WIRE)–Unum Group (NYSE: UNM) today reported net income of $280.9 million
($1.31 per diluted common share) for the first quarter of 2019, compared
to net income of $273.5 million ($1.23 per diluted common share) for the
first quarter of 2018.
Included in net income are net after-tax realized investment gains and
losses on the Company’s investment portfolio. Excluding net after-tax
realized investment gains and losses, after-tax adjusted operating
income was $280.3 million ($1.31 per diluted common share) in the first
quarter of 2019, and $275.1 million ($1.24 per diluted common share) in
the first quarter of 2018.
“The first quarter was a very good start to 2019, with results
consistent with our growth expectations for the year. Our core business
segments continue to demonstrate the positive operating trends we have
seen over the past several quarters, with solid premium growth and
stable benefits experience driving strong margins and cash generation,”
said Richard P. McKenney, president and chief executive officer. “Our
strong financial position allows us to continue to execute on our
strategy of growing our existing business, investing in our operations,
and expanding our reach, while consistently returning capital to our
shareholders.”
RESULTS BY SEGMENT
We measure and analyze our segment performance on the basis of “adjusted
operating income” or “adjusted 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. 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 adjusted operating income of $252.3 million in the
first quarter of 2019, an increase of 3.4 percent compared to adjusted
operating income of $243.9 million in the first quarter of 2018. Premium
income for the segment increased 4.4 percent to $1,501.9 million in the
first quarter of 2019, compared to premium income of $1,438.8 million in
the first quarter of 2018. Net investment income for the segment
declined 6.2 percent to $182.1 million in the first quarter of 2019,
compared to $194.2 million in the first quarter of 2018.
Within the Unum US operating segment, the group disability line of
business reported a 0.5 percent decline in adjusted operating income to
$82.6 million in the first quarter of 2019, compared to $83.0 million in
the first quarter of 2018. Premium income in group disability increased
3.9 percent to $641.6 million in the first quarter of 2019, compared to
$617.5 million in the first quarter of 2018, with growth in the in-force
block due to higher sales and improved persistency. Net investment
income declined by 7.6 percent to $100.0 million in the first quarter of
2019, compared to $108.2 million in the first quarter of 2018, due to a
decrease in the level of invested assets, a decline in yield on invested
assets, and lower miscellaneous investment income. The benefit ratio for
the first quarter of 2019 was 74.7 percent, compared to 75.6 percent in
the first quarter of 2018, due primarily to lower claims incidence and
favorable claim recovery experience in our group long-term disability
product line, partially offset by higher paid claim volumes in our group
short-term disability product line. Group long-term disability sales
were $36.9 million in the first quarter of 2019, an increase of 22.6
percent from $30.1 million in the first quarter of 2018. Group
short-term disability sales were $20.9 million in the first quarter of
2019, an increase of 28.2 percent from $16.3 million in the first
quarter of 2018. Persistency in the group long-term disability line of
business was 90.9 percent in the first quarter of 2019, compared to 90.8
percent in the first quarter of 2018. Persistency in the group
short-term disability line of business was 90.5 percent in the first
quarter of 2019, compared to 86.6 percent in the first quarter of 2018.
The group life and accidental death and dismemberment line of business
reported adjusted operating income of $67.4 million in the first quarter
of 2019, an increase of 4.3 percent compared to adjusted operating
income of $64.6 million in the first quarter of 2018. Premium income for
this line of business increased 4.0 percent to $455.4 million in the
first quarter of 2019, compared to $437.9 million in the first quarter
of 2018, primarily due to prior period sales growth and overall
favorable persistency. Net investment income declined 4.5 percent to
$25.6 million in the first quarter of 2019, compared to $26.8 million in
the first quarter of 2018, primarily due to a decline in yield on
invested assets and lower miscellaneous investment income, partially
offset by an increase in the level of invested assets. The benefit ratio
in the first quarter of 2019 was 70.9 percent and was generally
consistent with the benefit ratio of 70.7 percent in the first quarter
of 2018. Sales in the group life and accidental death and dismemberment
product line decreased 9.0 percent in the first quarter of 2019 to $40.6
million, compared to $44.6 million in the first quarter of 2018.
Persistency in the group life line of business was 91.0 percent in the
first quarter of 2019, compared to 89.3 percent in the first quarter of
2018. Persistency in the accidental death and dismemberment line of
business was 90.3 percent in the first quarter of 2019, compared to 86.2
percent in the first quarter of 2018.
The supplemental and voluntary line of business reported an increase of
6.2 percent in adjusted operating income to $102.3 million in the first
quarter of 2019, compared to adjusted operating income of $96.3 million
in the first quarter of 2018. Premium income increased 5.6 percent to
$404.9 million in the first quarter of 2019, compared to $383.4 million
in the first quarter of 2018, driven primarily by higher prior period
sales, particularly in our dental and vision products. Net investment
income decreased 4.6 percent to $56.5 million in the first quarter of
2019, compared to $59.2 million in the first quarter of 2018, primarily
due to a decline in yield on invested assets and lower miscellaneous
investment income, partially offset by growth in the level of invested
assets. The benefit ratio for the individual disability product line was
49.9 percent for the first quarter of 2019, compared to 51.0 percent for
the first quarter of 2018, reflecting favorable claims incidence and
lower average claim size. The benefit ratio for voluntary benefits was
35.4 percent in the first quarter of 2019, compared to a benefit ratio
of 42.3 percent in the first quarter of 2018, due primarily to the
release of active life reserves resulting from a higher level of policy
terminations. The benefit ratio for dental and vision was 67.7 percent
for the first quarter of 2019, compared to 68.6 percent for the first
quarter of 2018, due primarily to lower claims utilization. Relative to
the first quarter of 2018, sales in the individual disability line of
business decreased 15.6 percent in the first quarter of 2019 to $15.1
million. Sales in the voluntary benefits line of business decreased 0.7
percent in the first quarter of 2019 to $152.4 million. Sales in the
dental and vision line totaled $12.5 million for the first quarter of
2019, an increase of 2.5 percent compared to the first quarter of 2018.
Persistency in the individual disability product line was 90.3 percent
in the first quarter of 2019, compared to 90.7 percent in the first
quarter of 2018. Persistency in the voluntary benefits product line was
73.0 percent in the first quarter of 2019, compared to 76.9 percent in
the first quarter of 2018. Persistency in the dental and vision product
line was 84.3 percent in the first quarter of 2019 compared to 85.0
percent in the first quarter of 2018.
Unum International Segment
The Unum International segment reported adjusted operating income of
$29.1 million in the first quarter of 2019, a decrease of 2.3 percent
from $29.8 million in the first quarter of 2018.
Premium income increased 10.3 percent to $154.0 million in the first
quarter of 2019, compared to $139.6 million in the first quarter of
2018, primarily due to the addition of Unum Poland in the fourth quarter
of 2018. Net investment income was $24.8 million in the first quarter of
2019, compared to $27.6 million in the first quarter of 2018.
Sales increased by 32.2 percent to $22.6 million in the first quarter of
2019, compared to $17.1 million in the first quarter of 2018.
The Unum UK line of business reported adjusted operating income, in
local currency, of £21.6 million in the first quarter of 2019, an
increase of 0.9 percent from £21.4 million in the first quarter of 2018.
Premium income was £105.0 million in the first quarter of 2019, an
increase of 4.7 percent from £100.3 million in the first quarter of
2018, driven by higher overall persistency and sales growth. Net
investment income was £17.8 million in the first quarter of 2019, a
decrease of 10.6 percent from £19.9 million in the first quarter of
2018, due primarily to a lower yield on fixed-rate bonds and lower
investment income from inflation index-linked bonds, which we invest in
to support the claim reserves associated with certain of our group
policies that provide for inflation-linked increases in benefits.
Partially offsetting the decrease in net investment income was a higher
level of invested assets. The benefit ratio in the first quarter of 2019
was 70.2 percent, compared to 71.9 percent in the first quarter of 2018,
reflecting the favorable impact of inflation-linked decreases in
benefits related to our group products. Sales increased by 19.5 percent
to £14.7 million compared to £12.3 million in the first quarter of 2018.
Persistency in the group long-term disability line of business was 89.3
percent in the first quarter of 2019, compared to 86.7 percent in the
first quarter of 2018. Persistency in the group life line of business
was 85.7 percent in the first quarter of 2019, compared to 85.5 percent
in the first quarter of 2018. Persistency in the supplemental line of
business was 91.5 percent in the first quarter of 2019, which was
consistent with the first quarter of 2018.
Colonial Life Segment
Colonial Life reported a 5.2 percent increase in adjusted operating
income to $85.2 million in the first quarter of 2019, compared to
adjusted operating income of $81.0 million in the first quarter of 2018.
Premium income for the first quarter of 2019 increased 5.3 percent to
$419.3 million, compared to $398.3 million in the first quarter of 2018,
primarily driven by sales growth, which includes the expansion of our
dental and vision products, offset partially by a lower level of
persistency. Net investment income totaled $36.9 million in the first
quarter of 2019, compared to $37.3 million in the first quarter of 2018,
primarily due to a decline in yield on invested assets and lower
miscellaneous investment income, partially offset by an increase in the
level of invested assets. The benefit ratio in the first quarter of 2019
was 51.1 percent, compared to 51.6 percent in the first quarter of 2018,
reflecting favorable experience in the life product line, partially
offset by unfavorable experience in the cancer and critical illness
product line.
Sales increased 4.9 percent to $108.8 million in the first quarter of
2019 from $103.7 million in the first quarter of 2018, driven by growth
in existing customer account sales and the expansion of our dental and
vision products, partially offset by a decrease in new customer account
sales. Persistency was 77.3 percent in the first quarter of 2019 and
79.0 percent in the first quarter of 2018.
Closed Block Segment
The Closed Block segment reported adjusted operating income of $31.0
million in the first quarter of 2019, compared to $28.9 million in the
first quarter of 2018.
Premium income declined 3.6 percent in the first quarter of 2019
compared to the first quarter of 2018, primarily due to policy
terminations and maturities, partially offset by a slight 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 2.6 percent to $346.6 million in the first quarter of
2019, compared to $337.7 million in the first quarter of 2018, primarily
due to a higher level of invested assets, partially offset by lower
miscellaneous investment income. The interest adjusted loss ratio for
the individual disability line of business was 80.1 percent in the first
quarter of 2019, compared to 77.1 percent in the first quarter of 2018,
due to less favorable mortality experience and average new claim size.
The interest adjusted loss ratio for the long-term care line of business
was 88.5 percent in the first quarter of 2019 and was not comparable to
the interest adjusted loss ratio of 96.6 percent in the first quarter of
2018 due to the update in our assumptions during the third quarter of
2018, but was consistent with our expectations. The interest adjusted
loss ratio for the period subsequent to the update in our assumptions
was 86.4 percent.
Corporate Segment
The Corporate segment reported an adjusted operating loss of $45.4
million in the first quarter of 2019, compared to an adjusted operating
loss of $40.3 million in the first quarter of 2018, due primarily to
lower net investment income and an increase in expenses resulting from a
higher level of outstanding debt, a higher overall rate of interest, and
higher pension costs.
OTHER INFORMATION
Shares Outstanding
The Company’s weighted average number of shares outstanding, assuming
dilution, was 214.4 million for the first quarter of 2019, compared to
222.6 million for the first quarter of 2018. Shares outstanding totaled
212.3 million at March 31, 2019. During the first quarter of 2019, the
Company repurchased approximately 2.7 million shares at a cost of
approximately $100 million.
Capital Management
At March 31, 2019, the weighted average risk-based capital ratio for the
Company’s traditional U.S. insurance companies was approximately 360
percent, and cash and marketable securities in the holding companies
equaled $594.0 million.
Book Value
Book value per common share as of March 31, 2019 was $42.68, compared to
$42.95 at March 31, 2018.
Outlook
The Company continues to expect after-tax adjusted operating income
growth per share for full-year 2019 to be within the range of 4 percent
to 7 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 adjusted 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 as specified in the reconciliations
in the Financial Highlights section below. We believe after-tax adjusted
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.
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. We exclude these items as we believe them to be infrequent
or unusual in nature, 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.
Information reconciling the Company’s outlook on after-tax adjusted
operating income growth per share to the comparable GAAP financial
measure is not provided. The only amounts excluded from after-tax
adjusted operating income are those described in the preceding
paragraphs. The Company is unable to predict with reasonable certainty
realized investment gains and losses, which are affected by overall
market conditions and also by factors such as an economic or political
change in the country of the issuer, a regulatory change pertaining to
the issuer’s industry, a significant improvement or deterioration in the
cash flows of the issuer, unforeseen accounting irregularities or fraud
committed by an issuer, movement in credit spreads, ratings upgrades or
downgrades, a change in the issuer’s marketplace or business prospects,
or any other event that significantly affects the issuers of the fixed
maturity securities which the Company holds in its investment portfolio.
CONFERENCE CALL INFORMATION
Members of Unum Group senior management will host a conference call on
Wednesday, May 1, at 9:00 a.m. (Eastern Time) to discuss the results of
operations for the first 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 (800) 479-1004 for U.S.
and Canada (pass code 1053742). For international, the dial-in
number is (323) 794-2598 (pass code 1053742). 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 Wednesday, May
8. 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 1053742.
In conjunction with today’s earnings announcement, the Company’s
Statistical Supplement for the first quarter of 2019 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 news 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 adjusted
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 governmental programs; (3) unfavorable economic or business
conditions, both domestic and foreign, that may result in decreases in
sales, premiums, or persistency, as well as unfavorable claims activity;
(4) changes in or interpretations of laws and regulations, including tax
laws and regulations; (5) a cyber attack or other security breach could
result in the unauthorized acquisition of confidential data; (6) 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; (7) 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; (8) increased
competition from other insurers and financial services companies due to
industry consolidation, new entrants to our markets, or other factors;
(9) changes in our financial strength and credit ratings; (10) our
ability to execute on our technology system upgrades or replacements;
(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 in the
broad array of our products that deviates from our assumptions used in
pricing, underwriting, and reserving; (13) changes in accounting
standards, practices, or policies; (14) effectiveness of our risk
management program; (15) contingencies and the level and results of
litigation; (16) availability of reinsurance in the market and the
ability of our reinsurers to meet their obligations to us; (17)
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; (18)
fluctuation in foreign currency exchange rates; (19) ability to generate
sufficient internal liquidity and/or obtain external financing; (20)
recoverability and/or realization of the carrying value of our
intangible assets, long-lived assets, and deferred tax assets; and (21)
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, 2018. The forward-looking
statements in this news release are being made as of the date of this
news release, and we expressly disclaim any obligation to update or
revise any forward-looking statement contained herein, even if made
available on our website or otherwise.
| Unum Group | ||||||||||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| ($ in millions, except share data) | ||||||||||||||||
| Three Months Ended March 31 | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| Revenue | ||||||||||||||||
| Premium Income | $ | 2,338.7 | $ | 2,250.0 | ||||||||||||
| Net Investment Income | 594.7 | 602.3 | ||||||||||||||
| Net Realized Investment Gain (Loss) | 1.1 | (2.2 | ) | |||||||||||||
| Other Income | 53.1 | 49.5 | ||||||||||||||
| Total Revenue | 2,987.6 | 2,899.6 | ||||||||||||||
| Benefits and Expenses | ||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 1,840.8 | 1,807.9 | ||||||||||||||
| Commissions | 290.1 | 282.3 | ||||||||||||||
| Interest and Debt Expense | 42.1 | 40.2 | ||||||||||||||
| Deferral of Acquisition Costs | (173.7 | ) | (169.3 | ) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 170.6 | 151.5 | ||||||||||||||
| Other Expenses | 464.4 | 445.9 | ||||||||||||||
| Total Benefits and Expenses | 2,634.3 | 2,558.5 | ||||||||||||||
| Income Before Income Tax | 353.3 | 341.1 | ||||||||||||||
| Income Tax | 72.4 | 67.6 | ||||||||||||||
| Net Income | $ | 280.9 | $ | 273.5 | ||||||||||||
| PER SHARE INFORMATION | ||||||||||||||||
| Net Income Per Common Share | ||||||||||||||||
| Basic | $ | 1.31 | $ | 1.23 | ||||||||||||
| Assuming Dilution | $ | 1.31 | $ | 1.23 | ||||||||||||
| Weighted Average Common Shares – Basic (000s) | 214,297.1 | 221,894.0 | ||||||||||||||
| Weighted Average Common Shares – Assuming Dilution (000s) | 214,429.7 | 222,577.0 | ||||||||||||||
| Outstanding Shares – (000s) | 212,290.3 | 221,168.7 | ||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||
| Three Months Ended March 31 | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| (in millions) | per share * | (in millions) | per share * | |||||||||||||
| Net Income | $ | 280.9 | $ | 1.31 | $ | 273.5 | $ | 1.23 | ||||||||
| Excluding: | ||||||||||||||||
|
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $0.5; $(0.6)) |
0.6 | – | (1.6 | ) | (0.01 | ) | ||||||||||
| After-tax Adjusted Operating Income | $ | 280.3 | $ | 1.31 | $ | 275.1 | $ | 1.24 | ||||||||
| * Assuming Dilution | ||||||||||||||||
| March 31 | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| (in millions) | per share | (in millions) | per share | |||||||||||||
| Total Stockholders’ Equity (Book Value) | $ | 9,060.5 | $ | 42.68 | $ | 9,499.5 | $ | 42.95 | ||||||||
| Excluding: | ||||||||||||||||
| Net Unrealized Gain (Loss) on Securities | (0.1 | ) | – | 356.1 | 1.61 | |||||||||||
| Net Gain on Hedges | 230.1 | 1.08 | 273.5 | 1.24 | ||||||||||||
| Subtotal | 8,830.5 | 41.60 |
|
8,869.9 | 40.10 | |||||||||||
| Excluding: | ||||||||||||||||
| Foreign Currency Translation Adjustment | (287.9 | ) | (1.36 | ) | (207.0 | ) | (0.94 | ) | ||||||||
| Subtotal | 9,118.4 | 42.96 |
|
9,076.9 | 41.04 | |||||||||||
| Excluding: | ||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs | (444.4 | ) | (2.09 | ) | (505.0 | ) | (2.28 | ) | ||||||||
|
Total Stockholders’ Equity, Excluding Accumulated Other Comprehensive Income (Loss) |
$ | 9,562.8 | $ | 45.05 |
|
$ | 9,581.9 | $ | 43.32 | |||||||
Contacts
INVESTORS
Tom White 423 294 8996
MEDIA
Jim Sabourin
423 294 6300
