4Q Earnings: Unum, Aflac, Lincoln Beat the Street

Fourth-quarter earnings season kicked off Wednesday on a high note as three insurers operating in distinct segments of the life and annuity market delivered better-than-expected earnings.

The good news from Unun Group, Aflac and Lincoln Financial, however, came in the wake of revelations Monday that MetLife would increase reserves by $525 million to $575 million to make up for “material weakness” discovered in the reporting of its group annuity reserves.

MetLife’s fourth-quarter and full year 2017 conference call, previously scheduled for this week, was rescheduled for Feb. 14, the company said.

Here is a roundup of earnings releases from Unum, Aflac and Lincoln published after market close on Wednesday.

Unum Group

Disability insurer Unum Group reported fourth-quarter profit of $266.9 million, the company said.

The Chattanooga, Tenn.-based company reported profit of $1.19 per share. Earnings, adjusted for one-time gains and costs, were $1.13 per share.

The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1.08 per share.

The insurance company posted revenue of $2.84 billion in the period. Its adjusted revenue was $2.83 billion, falling short of forecasts. Three analysts surveyed by Zacks expected $2.85 billion.

For the year, the company reported profit of $994.2 million, or $4.37 per share. Revenue was reported as $11.25 billion.

Unum shares are down 3 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed 6 percent.

Aflac

Aflac, a major player in the supplemental and voluntary insurance market, reported fourth-quarter net income of $2.35 billion.

The Columbus, Ga.-based company had net income of $5.95 per diluted share. Earnings, adjusted for pretax gains and non-recurring gains, were $1.60 per share.

The results beat Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1.55 per share.

The insurer posted revenue of $5.42 billion in the period.

For the year, the company reported profit of $4.37 billion, or $10.96 per share. Revenue was reported as $21.67 billion.

Aflac shares have risen almost 1 percent since the beginning of the year.

Lincoln

Lincoln National, a big seller of life insurance and annuities, reported fourth-quarter net income of $816 million.

The Radnor, Pa.-based company reported net income of $3.67 per share. Earnings, adjusted for one-time gains and costs, came to $1.98 per share.

The results surpassed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.94 per share.

The insurance and retirement business posted revenue of $3.78 billion in the period.

For the year, the company reported profit of $2.09 billion, or $9.22 per share. Revenue was $14.59 billion.

Lincoln National shares have increased nearly 8 percent since the beginning of the year.

MetLife’s Nasty Surprise

MetLife executives can expect a hefty grilling from analysts after the company said it would bolster reserves by as much as $575 million to make up for unrecorded pension liabilities as part of its pension risk transfer and group annuity business.

The announcement is expected to have an impact on fourth-quarter net income of as much as $165 million, the company said.

MetLife expects to report fourth-quarter net income of about $2 billion, the company said.

“In our view, this announcement likely further erodes investor confidence in the company,” wrote Nigel Dally, an analyst with Morgan Stanley, in a note to clients.

“The persistent nature of charges at this company over several years has been an ongoing source of frustration, with this latest charge further eroding confidence,” Dally wrote.

In December, MetLife told analysts it was undertaking a review of practices and procedures used to estimate reserves related to some Retirement and Income Solutions group annuitants who have been “unresponsive or missing over time.”

The credit rating issued to MetLife and its subsidiaries was left unchanged following the announcement because the New York-based insurer and its subsidiaries “have sufficient earnings capacity to absorb this change,” A.M. Best said.

The issue pension liability remains confined to MetLife’s pension risk transfer business segment “and not indicative of broader control risks throughout other business lines,” the rating company said.

“However, future disclosures relating to broader material weakness in its internal controls could result in a negative rating action, as would additional charges that materially impact MetLife’s level of risk-adjusted capitalization,” A.M. Best said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].