Unum Group Reports Second Quarter 2017 Results
After-tax operating income, which excludes net after-tax realized investment gains and losses on the Company’s investment portfolio, was
“Our second quarter results were very strong, with a good balance of top line growth, solid earnings growth, and return of capital to shareholders,” said
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 certain other items. 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
Within the Unum US operating segment, the group disability line of business reported a 24.2 percent increase in operating income to
The group life and accidental death and dismemberment line of business reported operating income of
The supplemental and voluntary line of business reported a decline of 1.5 percent in operating income to
Unum
Unum
Premium income declined by 9.9 percent to
Sales increased by 9.6 percent to
Colonial Life Segment
Colonial Life reported a 5.0 percent increase in operating income to
Premium income for the second quarter of 2017 increased 7.1 percent to
Sales increased 7.5 percent to
Closed Block Segment
The Closed Block segment reported operating income of
Premium income for this segment declined 3.0 percent in the second quarter of 2017 compared to the second quarter of 2016, primarily 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 declined 0.3 percent to
Corporate Segment
The Corporate segment reported an operating loss of
The Company previously excluded the amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for the Company’s pension and other postretirement benefit plans, from the results of the Corporate segment. Effective
OTHER INFORMATION
Shares Outstanding
The Company’s weighted average number of shares outstanding, assuming dilution, was 228.2 million for the second quarter of 2017, compared to 237.3 million for the second quarter of 2016. Shares outstanding totaled 226.1 million at
Capital Management
At
Book Value
Book value per common share as of
Outlook
The Company’s expectation for after-tax operating income growth per share for full-year 2017 is increased to be within a range of five percent to eight percent, from the previous 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 as specified in the reconciliations in the Financial Highlights section 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.
We previously excluded the amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pension and other postretirement benefit plans. Effective
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.
Information reconciling the Company’s outlook on after-tax operating income growth per share to the comparable GAAP financial measure is not provided. The only amounts excluded from after-tax 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
The dial-in number for the conference call is (888) 203-7337, for
In conjunction with today’s earnings announcement, the Company’s Statistical Supplement for the second quarter of 2017 is available on the “Investors” section of the Company’s website.
ABOUT
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
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
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
| |
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| FINANCIAL HIGHLIGHTS | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| ($ in millions, except share data) | ||||||||||||||||||||
| Three Months Ended |
Six Months Ended |
|||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Revenue | ||||||||||||||||||||
| |
$ | 2,142.2 | $ | 2,081.6 | $ | 4,285.1 | $ | 4,169.1 | ||||||||||||
| Net Investment Income | 620.5 | 623.3 | 1,222.9 | 1,229.7 | ||||||||||||||||
| Net Realized Investment Gain (Loss) | 8.1 | 5.3 | 19.1 | (15.2 | ) | |||||||||||||||
| Other Income | 51.2 | 51.1 | 101.4 | 103.1 | ||||||||||||||||
| Total Revenue | 2,822.0 | 2,761.3 | 5,628.5 | 5,486.7 | ||||||||||||||||
| Benefits and Expenses | ||||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 1,752.0 | 1,733.5 | 3,501.0 | 3,463.3 | ||||||||||||||||
| Commissions | 261.3 | 255.0 | 531.5 | 514.9 | ||||||||||||||||
| Interest and Debt Expense | 39.9 | 42.4 | 79.7 | 81.0 | ||||||||||||||||
| Deferral of Acquisition Costs | (153.2 | ) | (146.7 | ) | (315.3 | ) | (299.2 | ) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 138.3 | 126.2 | 279.8 | 258.4 | ||||||||||||||||
| Other Expenses | 422.1 | 410.7 | 859.9 | 823.9 | ||||||||||||||||
| Total Benefits and Expenses | 2,460.4 | 2,421.1 | 4,936.6 | 4,842.3 | ||||||||||||||||
| Income Before Income Tax | 361.6 | 340.2 | 691.9 | 644.4 | ||||||||||||||||
| Income Tax | 116.5 | 103.4 | 216.9 | 197.0 | ||||||||||||||||
| Net Income | $ | 245.1 | $ | 236.8 | $ | 475.0 | $ | 447.4 | ||||||||||||
| PER SHARE INFORMATION | ||||||||||||||||||||
| Net Income Per Common Share | ||||||||||||||||||||
| Basic | $ | 1.08 | $ | 1.00 | $ | 2.08 | $ | 1.88 | ||||||||||||
| Assuming Dilution | $ | 1.07 | $ | 1.00 | $ | 2.07 | $ | 1.87 | ||||||||||||
| Weighted Average Common Shares - Basic (000s) | 227,454.4 | 236,892.8 | 228,437.0 | 238,254.3 | ||||||||||||||||
| Weighted Average Common Shares - Assuming Dilution (000s) | 228,178.7 | 237,318.8 | 229,273.8 | 238,622.8 | ||||||||||||||||
| Outstanding Shares - (000s) | 226,102.1 | 235,011.3 | ||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||
| (in millions) | per share * | (in millions) | per share * | |||||||||||||||||
| Net Income | $ | 245.1 | $ | 1.07 | $ | 236.8 | $ | 1.00 | ||||||||||||
| Excluding: | ||||||||||||||||||||
| Net Realized Investment Gain (net of tax expense of |
4.7 | 0.02 | 3.8 | 0.02 | ||||||||||||||||
| After-tax Operating Income | $ | 240.4 | $ | 1.05 | $ | 233.0 | $ | 0.98 | ||||||||||||
| * Assuming Dilution | ||||||||||||||||||||
| |
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| 2017 | 2016 | |||||||||||||||||||
| (in millions) | per share | (in millions) | per share | |||||||||||||||||
| Total Stockholders' Equity (Book Value) | $ | 9,316.6 | $ | 41.21 | $ | 9,157.0 | $ | 38.96 | ||||||||||||
| Excluding: | ||||||||||||||||||||
| Net Unrealized Gain on Securities | 558.2 | 2.47 | 661.1 | 2.81 | ||||||||||||||||
| |
304.5 | 1.35 | 343.6 | 1.46 | ||||||||||||||||
| Subtotal | 8,453.9 | 37.39 | 8,152.3 | 34.69 | ||||||||||||||||
| Excluding: | ||||||||||||||||||||
| Foreign Currency Translation Adjustment | (297.1 | ) | (1.31 | ) | (279.4 | ) | (1.19 | ) | ||||||||||||
| Subtotal | 8,751.0 | 38.70 | 8,431.7 | 35.88 | ||||||||||||||||
| Excluding: | ||||||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs | (460.7 | ) | (2.04 | ) | (385.5 | ) | (1.64 | ) | ||||||||||||
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 9,211.7 | $ | 40.74 | $ | 8,817.2 | $ | 37.52 | ||||||||||||
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