Unum Group (UNM) reported fourth-quarter
operating income of 78 cents per share, surpassing the Zacks
Consensus Estimate by 3 cents. Results compare favorably with 66
cents earned in the prior-year period. Operating income was $227.6
million in the quarter, up 9.1% from $208.6 million in
fourth-quarter 2010.
Strong performance at Unum US, Unum UK and Colonial Life led to
better-than-forecast results. Share repurchases also aided the
bottom line.
Including impairment and reserve charges for Long-term Care
Closed Block of $1.92 per share, reserve charge for Individual
Disability Closed Block of 41 cents, tax Reduction from IRS
Settlement of 14 cents, tax Related to U.K. Repatriation of 6 cents
and net realized investment gain of 2 cents, Unum Group incurred
net loss of $1.45 per share in the fourth quarter of 2011 compared
with net income of 71 cents per share in the year-ago quarter.
Full year operating income came in at $2.95 per share, 2 cents
above the Zacks Consensus Estimate and 26 cents above the year-ago
earnings. Operating income in 2011 increased 1.8% over 2010.
Including impairment and reserve charges for Long-term Care
Closed Block of $1.85 per share, reserve charge for Individual
Disability Closed Block of 39 cents, tax Reduction from IRS
Settlement of 14 cents, tax Related to U.K. Repatriation of 6 cents
and net realized investment loss of 1 cent, Unum Group reported net
income of 78 cents per share in 2011compared with net income of
$2.71 in the prior year.
Total revenue in the fourth quarter was $2.6 billion, up 0.5%
year over year. Top line fell short of the Zacks Consensus
Estimate.
Full year revenue increased 0.8% over 2010 to gross $10.3
billion. Results were in line with the Zacks Consensus
Estimate.
Segment Update
Unum US Segment: Segment premium in
the fourth quarter was $1.083 billion, up 2.1% year over year.
Operating income increased 7.5% year over year to $208.6 million
in the fourth quarter of 2011.
Unum UK Segment:Premium decreased 0.8%
year over year to $169.2 million in the fourth quarter of 2011. In
local currency, premium decreased 4.8% year over year to £107.6
million.
Segment operating income was $53.7 million inthe fourth quarter
of 2011, up 11.6% year over year.
The benefit ratio was 69.1% in fourth-quarter 2011, down from
71.7% in the prior-year quarter. The lower benefit ratio resulted
from favorable mortality experience in the group life line of
business and continued progress on implementing the new claim
management processes.
Colonial Life Segment:Premium in the
quarter increased 5.7% year over year to $289.2 million.
Operating income increased 11.2% year over year to $67.6 million
in the reported quarter.
The benefit ratio was 52.5% compared with 53.4% in the year-ago
period. The decrease was a result of better risk experience in the
accident, sickness, and disability line.
Closed Block Segment: The segment now
includes the results of the closed blocks of individual disability,
long-term care and other closed blocks, previously reported in the
Corporate and Other segment.
Premium decreased 4.6% year over year to $347.1 million in
fourth-quarter 2011.
The segment reported an operating loss of $1.015 billion
compared with a profit of $29.0 million.
Corporate and Other Segment: Operating
loss of $26.7 million in the reported quarter was wider than the
loss of $23.9 million a year ago.
Financial Update
Unum Group ended 2011 with a debt of $1.94 billion, down from
$2.93 billion as of September 30, 2011.
The debt-to-capital ratio was 22.4%, up 120 basis points from
21.2% as of September 30, 2011.
Book value as of December 31, 2011, was $29.30 per share, up
3.7% from $28.25 as of December 31, 2010.
Share Repurchase
Unum Group spent $619.9 million to buy back 25.4 million shares
during 2011.
Business Restructuring
Following the strategic review of the long-term care business,
Unum Group decided to discontinue new sales of group long-term care
contracts during the first quarter of 2012 and reclassify the
long-term care line of business to the Closed Block segment from
the Unum US unit.
Looking at 2012
Unum Group expects operating income per share to grow in the
range of 6% to 12%.
The company expects to spend $500 million to buy back
shares.
Weighted average risk-based capital for traditional US insurance
companies for year-end 2012 is expected to be in the band of 375% –
400%.
Unum Group estimates cash and marketable securities to come in a
band of $500 million to $800 million.
Peer Comparison
AFLAC Inc's (AFL) fourth-quarter 2011 operating
earnings per share of $1.48 came in triple pennies below the Zacks
Consensus Estimate of $1.51 but were comfortably higher than $1.33
reported in the year-ago quarter. A stronger yen/dollar
exchange rate helped increase operating earnings per share by 6
cents.
Zacks Rank
We maintain our long-term “Neutral” recommendation on Unum
Group. The quantitative Zacks #3 Rank (short-term Hold rating) for
the company indicates no clear directional pressure on the shares
over the near term.
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UNUM GROUP (UNM): Free Stock Analysis Report
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