Unum's (UNM) Q1 Earnings & Revenues Miss Estimates, Rise Y/Y

Unum Group’s UNM first-quarter 2020 operating net income of $1.35 per share missed the Zacks Consensus Estimate by 2.2%. However, the figure improved 3.1% year over year.

The quarter witnessed strong results at Unum U.S. However, Unum International, Colonial Life and Closed Block reported soft numbers.

Operational Update

Total operating revenues of Unum Group were nearly $3 billion, up 0.9% year over year on higher premium income. The top line however missed the Zacks Consensus Estimate by 1.4%.

Total benefits and expenses rose 1.3% year over year to $2.7 billion due to higher benefits and change in reserves for future benefits, interest and debt expense, amortization of deferred acquisition costs and other expenses.

Unum Group Price, Consensus and EPS Surprise

Unum Group Price, Consensus and EPS Surprise

Unum Group price-consensus-eps-surprise-chart | Unum Group Quote

Quarterly Segment Update

Unum U.S.: Premium income was $1.5 billion, up 1.7% year over year. Adjusted operating income was up 3.8% year over year to $261.8 million, driven by strong life and accidental death and dismemberment line of business and supplemental and voluntary line of business, partially offset by soft results at the group disability line of business.

Unum International: Premium income grew 6.9% year over year to $164.6 million. Adjusted operating income was $19.4 million, down 33.3% year over year.

Unum UK line reported adjusted operating income of £13.7 million in local currency, down 36.6%. Premium income was £113.8 million, up 8.4%, driven by sales growth, higher overall persistency, and the impact of rate increases in the group long-term disability product line.

Benefit ratio of 80.5 deteriorated 1030 basis points year over year due to higher claims incidence in the group critical illness product line and lower claim resolutions in the group long-term disability product line due to disruption in claims processes related to COVID-19.  The deterioration also was due to higher inflation-linked increases in benefits related to group products.  Sales increased 12.2% year over year.

Persistency improved in group long-term disability product line and group life product line but deteriorated in supplemental product line.

Colonial Life: Premium income increased 3.7% year over year to $434.7 million, driven by growth in in-force block resulting from prior period sales growth, offset partially by lower persistency. Sales decreased 8.7% to $99.3 million. Adjusted operating income decreased 4.8% to $81.1 million.

Benefit ratio improved 50 bps year over year to 76.8%.

Closed Block: Premium income decreased 7.2% year over year, primarily attributable to a one-time reinsurance cost related to a small block of policies and continued policy terminations and maturities in the individual disability line of business, partially offset by premium rate increases on certain in-force business in the long-term care line of business. Adjusted operating income was $29.7 million, down 4.2% year over year.

Corporate: The segment incurred an operating loss of $45.9 million, wider than operating loss of $45.4 million in the year-earlier quarter.

Capital Management

As of Mar 31, 2020, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 365%. Adjusted operating statutory income was $326.1 million for the first quarter of 2020.

Unum Group exited the quarter with cash and marketable securities worth $$1.025 billion.

Book value per share increased about 13% year over year to $48.21 as of Mar 31, 2020.

State of Maine regulator required additional statutory funding for long-term care to be phased over seven years. Initial year-end 2020 funding is estimated in the range of $200 million to $250 million.

Capital Deployment Outlook

Unum Group has suspended its current share repurchase authorization and decided not to buy back shares in 2020. However, the company intends to continue to pay out dividend at the current rate.

Guidance Update

Unum Group withdrew its financial guidance for the remainder of 2020 due to the uncertain economic environment caused by the COVID-19 pandemic.

Zacks Rank

Unum Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported first-quarter earnings so far, the bottom line of Brown & Brown, Inc. BRO beat the Zacks Consensus Estimate while that of RLI Corp. RLI and Travelers Companies TRV missed the same.

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