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Unum Group Posts Comparable 4Q 2012 Results

Unum Group has reported net income of $233.9 million ($0.85 per diluted common share) for the fourth quarter of 2012, compared to a net loss of $369.0 million ($1.26 per diluted common share) for the fourth quarter of 2011.

In a release on February 5, the company noted that included in the results for the fourth quarter of 2012 is a net after-tax gain of $8.9 million ($0.03 per diluted common share) resulting from the combined impact of net realized investment gains and the amortization of prior period actuarial losses on the Company's pension plan. This compares to a net after-tax loss of $0.3 million (less than a penny per diluted common share) in the fourth quarter of 2011. Results for the fourth quarter of 2011 also included net after-tax losses of $619.6 million ($2.12 per diluted common share) related to the actions taken by the Company related to its long- term care and individual disability closed blocks. Additionally, the results for the fourth quarter of 2011 include net tax benefits of $22.7 million ($0.08 per diluted common share) related to an IRS settlement, net of taxes related to subsidiary dividends.

Adjusting for these items, income on an after-tax basis was $225.0 million ($0.82 per diluted common share) in the fourth quarter of 2012, compared to $228.2 million ($0.78 per diluted common share) in the fourth quarter of 2011.

"I am pleased with the solid financial and operating results we produced in the fourth quarter and the growth in operating earnings per share for the full year 2012. We continued to generate solid results across much of the Company and showed modest improvement in those areas which had been operating below our expectations," said Thomas R. Watjen, president and chief executive officer. "While there are still challenges ahead, we are well positioned entering 2013 to create value for our shareholders by remaining disciplined, maintaining our financial flexibility, and continuing to return excess capital to our shareholders through share repurchases and dividend increases."

In the following segment financial data, "operating revenue" excludes net realized investment gains or losses. "Operating income" or "operating loss" excludes net realized investment gains or losses, non-operating retirement-related gains or losses, and income tax.

Unum US reported operating income of $212.2 million in the fourth quarter of 2012, an increase of 2.3 percent from $207.4 million in the fourth quarter of 2011. Premium income for the segment increased 3.2 percent to $1,117.6 million in the fourth quarter of 2012, compared to premium income in the fourth quarter of 2011 of $1,083.0 million.

Within the Unum US operating segment, the group disability line of business reported a 4.7 percent decline in operating income, with $73.5 million in the fourth quarter of 2012 compared to $77.1 million in the fourth quarter of 2011. Premium income in group disability increased 0.5 percent to $513.8 million in the fourth quarter of 2012, compared to $511.1 million in the fourth quarter of 2011, driven primarily by sales growth and stable premium persistency. The benefit ratio for the fourth quarter of 2012 was 84.5 percent, compared to 84.7 percent in the fourth quarter of 2011. Underlying these results were higher claim recoveries and lower claim incidence for group long-term disability, partially offset by the impact of a 50 basis point decrease in the reserve discount rate during the third quarter of 2012 for group long-term disability new claim incurrals. Group long-term disability sales increased 15.4 percent to $86.8 million in the fourth quarter of 2012, compared to $75.2 million in the fourth quarter of 2011. Group short-term disability sales increased 13.5 percent to $46.3 million in the fourth quarter of 2012, compared to $40.8 million in the fourth quarter of 2011. Premium persistency in the group long-term disability line of business was 90.7 percent for full-year 2012, compared to 90.2 percent for full-year 2011. Case persistency for this line was 88.8 percent for full-year 2012, compared to 89.0 percent for full-year 2011. Premium persistency in the group short- term disability line of business was 88.0 percent for full-year 2012, compared to 89.9 percent for full-year 2011. Case persistency for the short-term disability line was 88.2 percent for full-year 2012, compared to 88.0 percent for full-year 2011.

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The group life and accidental death and dismemberment line of business reported a 4.8 percent increase in operating income to $55.1 million in the fourth quarter of 2012, compared to $52.6 million in the fourth quarter of 2011. The increase was driven by favorable premium growth and a lower expense ratio, which offset an increase in the benefit ratio. Premium income for this line of business increased 5.5 percent to $326.1 million in the fourth quarter of 2012, compared to $309.0 million in the fourth quarter of 2011, reflecting higher recent sales and favorable premium persistency. The benefit ratio in the fourth quarter of 2012 was 72.5 percent, compared to 70.7 percent in the fourth quarter of 2011, reflecting higher claim incidence relative to the year-ago period. Sales of group life and accidental death and dismemberment products decreased 2.4 percent in the fourth quarter of 2012 to $94.8 million from $97.1 million in the fourth quarter of 2011. Premium persistency in the group life line of business was 90.6 percent for full-year 2012, compared to 88.0 percent for full-year 2011. Case persistency in the group life line of business for full- year 2012, at 88.3 percent, was down slightly from 88.6 percent for full-year 2011.

The supplemental and voluntary line of business reported a 7.6 percent increase in operating income to $83.6 million in the fourth quarter of 2012, compared to $77.7 million in the fourth quarter of 2011. The increase was driven by growth in both the individual disability - recently issued line of business and the voluntary benefits line of business. Premium income for this line of business increased 5.6 percent to $277.7 million in the fourth quarter of 2012, compared to $262.9 million in the fourth quarter of 2011, primarily reflecting higher sales in the voluntary benefits line of business. The interest adjusted loss ratio for the individual disability - recently issued line of business in the fourth quarter of 2012 increased slightly to 32.0 percent from 30.8 percent in the fourth quarter of 2011, due primarily to higher submitted claim incidence rates, partially offset by higher claim recoveries. The benefit ratio for voluntary benefits, at 52.0 percent in the fourth quarter of 2012, was up from 51.5 percent in the fourth quarter of 2011, reflecting higher claim incidence rates for certain of our voluntary product lines. Relative to the fourth quarter of 2011, sales in the voluntary benefits line of business increased 2.0 percent in the fourth quarter of 2012 to $41.1 million. Sales in the individual disability - recently issued line of business decreased 18.7 percent in the fourth quarter of 2012 to $12.2 million.

Unum UK reported operating income of $35.0 million in the fourth quarter of 2012, a decrease of 32.6 percent from $51.9 million in the fourth quarter of 2011. In local currency, operating income for the fourth quarter of 2012 decreased 34.1 percent, to GBP21.8 million from GBP33.1 million in the fourth quarter of 2011.

Premium income increased 3.7 percent to $175.5 million in the fourth quarter of 2012, compared to $169.2 million in the fourth quarter of 2011. In local currency, premium income increased 1.6 percent to GBP109.3 million in the fourth quarter of 2012, compared to GBP107.6 million in the fourth quarter of 2011. The benefit ratio in the fourth quarter of 2012 was 76.2 percent, compared to 69.1 percent in the comparable quarter in 2011. The higher benefit ratio in the fourth quarter of 2012 reflects unfavorable group life risk experience relative to the year ago quarter, partially offset by favorable risk experience in the group long-term disability line of business. The unfavorable risk experience in group life resulted from a higher average claim size and higher claim volumes in the fourth quarter of 2012 relative to the fourth quarter of 2011. The favorable risk experience in group disability resulted from improved claim recoveries and incidence levels.

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Persistency in the group long-term disability line of business was 84.0 percent for full-year 2012, compared to 86.6 percent for full-year 2011. Persistency in the group life line of business was 82.5 percent for full-year 2012, compared to 89.3 percent for full- year 2011. Sales decreased 40.7 percent to $22.3 million in the fourth quarter of 2012, compared to $37.6 million in the fourth quarter of 2011. In local currency, sales for the fourth quarter of 2012 decreased 41.8 percent to GBP13.9 million, compared to GBP23.9 million in the fourth quarter of 2011, reflecting a significant decline in group life sales due to our price increases and scaling back sales in certain market sectors as well as a moderate decline in sales in the group long-term disability line of business.

Colonial Life reported a 5.1 percent increase in operating income to $68.3 million in the fourth quarter of 2012, compared to $65.0 million in the fourth quarter of 2011.

Premium income for the fourth quarter of 2012 increased 4.4 percent to $301.9 million, compared to $289.2 million in the fourth quarter of 2011. The benefit ratio in the fourth quarter of 2012 was 52.5 percent, consistent with the fourth quarter of 2011, as higher benefit costs in the life line of business offset favorable experience in the cancer and critical illness and accident, sickness, and disability lines of business.

Sales increased 0.2 percent to $126.6 million in the fourth quarter of 2012 from $126.4 million in the fourth quarter of 2011, as a slight increase in sales to existing accounts more than offset a slight decline in new account sales. Sales in the public sector were higher in the fourth quarter of 2012 compared with the same period of 2011, while commercial market sales were lower.

The Closed Block segment reported operating income of $28.8 million in the fourth quarter of 2012, compared to $30.8 million in the fourth quarter of 2011, excluding the previously discussed charges during the fourth quarter of 2011. This decrease was driven by a decline in income in the long-term care line of business, partially offset by higher income from the individual disability line of business.

Premium income for this segment declined slightly in the fourth quarter of 2012 compared to the comparable year-ago quarter, primarily reflecting the expected run-off of this block of business. The interest adjusted loss ratio for the individual disability line of business was 83.7 percent in the fourth quarter of 2012, compared to 84.8 percent in the fourth quarter of 2011, excluding the reserve charge, reflecting higher claim recovery rates. The interest adjusted loss ratio for the long-term care line of business increased to 89.9 percent in the fourth quarter of 2012 from 86.4 percent in the fourth quarter of 2011, excluding the reserve charge, due to higher claim incidence rates and higher average new claim size.

The Corporate segment reported an operating loss of $34.6 million in the fourth quarter of 2012, compared to a loss of $18.8 million in the fourth quarter of 2011. The higher operating loss in the fourth quarter of 2012 was driven primarily by lower net investment income and slightly higher interest expense due to the issuance of $250 million of debt during the third quarter of 2012. Net investment income was lower in the fourth quarter of 2012 compared to the fourth quarter of 2011 due to lower asset levels, a lower proportion of assets invested at long-term interest rates, and a decrease in investment income attributable to tax-credit partnerships. However, the negative impact on net investment income from the tax-credit partnerships was offset by a lower income tax rate due to the tax benefits recognized as a result of these investments.

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The Company's average number of shares outstanding, assuming dilution, was 273.6 million for the fourth quarter of 2012, compared to 292.6 million for the fourth quarter of 2011. Shares outstanding totaled 270.2 million at December 31. During the fourth quarter of 2012, the Company repurchased approximately 4.9 million shares at a cost of $100.1 million.

At December 31, the weighted average risk-based capital for the Company's traditional US insurance companies was approximately 396 percent; leverage was 25.3 percent; and cash and marketable securities in the holding companies equaled $805 million.

Leverage is measured as total debt to total capital, which the Company defines as 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, and Northwind Holdings, and the short-term debt arising from securities lending agreements.

Book value per common share as of December 31, was $31.87, compared to $27.91 at December 31, 2011.

The Company anticipates growth in after-tax operating income per share for full-year 2013 to be in the range of zero percent to six percent, including the effect of expected share repurchases.

Unum is a provider of employee benefits products and services and a provider of disability insurance products in the United States and the United Kingdom.

((Comments on this story may be sent to health@closeupmedia.com))

Copyright:  (c) 2013 ProQuest Information and Learning Company; All Rights Reserved.
Source:  Proquest LLC
Wordcount:  2205


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