Unum profits up, but long-term care reserves may have to be adjusted

July 30--This story was updated July 30, 2018, at 6:10 p.m.

Unum Group boosted its second quarter earnings by nearly 24 percent from a year ago to beat Wall Street expectations, but the Chattanooga-based insurer said Monday it is still studying whether it needs to set aside more reserves for its long-term care block of business.

"During the quarter, we accelerated our reserve studies for our long-term care block of business," Unum CEO Rick McKenney said in the company's earnings announcement. "Given the current market sentiment around this line of business throughout our industry, we will look to finalize this work in the third quarter to provide greater clarity to our shareholders."

Unum warned three months ago the company may need to boost reserves to cover potential losses in the company's long term care policies written in the past. In response to the uncertainty about such reserve changes, the company's stock fell in early May to a 2-year low and has yet to rebound due to investor concerns about the impact of long-term care costs on the company's earnings.

Unum said its adjusted earnings in the second quarter rose to $287.6 million, or $1.30 per share, on revenues of $2.22 billion. In the same period a year earlier, Unum's adjusted earnings totaled $240.4 million, or $1.05 per share, on revenues of $2.14 billion.

The quarterly results beat analysts forecasts by 4 cents per share.

Unum said it expects after-tax adjusted operating income per share to grow in all of 2018 by 17 to 23 percent, excluding any impact from an increase of its long-term care reserves.

The insurer said in its earnings announcement Monday that the company "accelerated the work on its long-term care annual reserve analysis, which is now anticipated to be completed in the third quarter of 2018.

Unum said the cost is not likely to exceed $750 million after-tax charge and will not deter its capital spending or stock repurchase plans.

Unum said it currently intends to resume share repurchases of approximately $100 million per quarter beginning in the fourth quarter of 2018 and continuing into 2019.

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