Tuesday, life and disability insurer Unum Group (UNM) said its fourth-quarter profit quadrupled, mainly on the absence of a $257 million investment loss recorded in the prior-year quarter. Reported earnings of Unum came in above consensus estimates, while revenues fell short.
The Chattanooga, Tennessee-based company's fourth-quarter net income jumped to $199.4 million or $0.60 per share from $41.8 million or $0.13 per share a year ago.
Excluding special items, fourth-quarter income on an after-tax basis increased to $218.3 million or $0.66 per share from $209.4 million or $0.63 per share in the fourth quarter of 2008. On average, 16 analysts polled by Thomson Reuters estimated earnings of $0.64 per share for the quarter. Analysts' estimates typically exclude special items.
The company had net realized investment losses of $25.9 million, compared to losses of $257.7 million in the comparable quarter last year. Fourth quarter losses included net realized after-tax investment losses of $18.9 million or $0.06 per share, compared to $167.6 million or $0.50 per share in the prior-year quarter; and an after-tax gain of $22.7 million from changes in fair value of an embedded derivative in a modified coinsurance contract, compared to an after-tax loss of $120.1 million in the fourth quarter of 2008. Also included in the fourth-quarter investment losses was a net realized after-tax investment loss of $41.6 million related to sales and write-downs of investments, compared to $47.5 million in the fourth quarter of 2008.
Revenues for the fourth quarter increased to $2.50 billion from $2.32 billion in the year-earlier quarter. Analysts expected revenues of $2.56 billion for the quarter.
Thomas Watjen, chief executive officer of Unum, said, "The Company had another solid quarter and we closed the year well positioned for the year ahead. While we believe that the general business and economic environment will continue to pose challenges, the actions we have taken the past several years have positioned us well and provide us with significant operating and financial flexibility."
Unum's rival, Aflac Inc. (AFL), Tuesday posted fourth-quarter net income of $251 million or $0.53 per share, compared to $197 million or $0.42 per share a year ago. Revenues for the quarter grew to $4.6 billion from $4.3 billion last year.
Segmental Performance
Segment wise, premium income from Unum U.S. Segment declined 3.1% to $1.21 billion. Within the U.S. Segment, premium income in group disability business declined 5.9% to $535.6 million due to increased competition. Along with soft economic conditions, the company's ongoing commitment to disciplined pricing, renewals, and risk selection also contributed to the decline in premium income.
Benefit ratio of the U.S. segment for the fourth quarter declined to 84.6% from 88.7% in the comparable quarter of 2008, reflecting a consistent rate of claim recoveries and net favorable claims experience in the group long-term disability line of business as compared to the fourth quarter of 2008.
During the fourth quarter, sales of fully insured group long-term disability products decreased 2.6% to $75.4 million while sales of fully insured group short-term disability products increased 12.3% to $34.8 million in the fourth quarter.
In the group life and accidental death and dismemberment line of business, premium income declined 2.6% to $289.4 million in the fourth quarter, with the same conditions affecting group disability premium income.
Sales of group life and accidental death and dismemberment products declined 8.2 % to $84.3 million when compared to the year-earlier quarter.
In the supplemental and voluntary lines of business, premium income increased 0.7% to $382.9 million in the fourth quarter. Relative to the fourth quarter of 2008, sales in the voluntary benefits line of business increased 12.6% while sales in the individual disability line decreased 10.4%, and group long-term care sales decreased 28.0%.
In the Unum U.K. segment, premium income decreased 1.3% to $180.0 million in the fourth quarter. In local currency, premium income decreased 4.8% to GBP110.2 million. Sales increased 55.6% to $42.0 million in the fourth quarter of 2009, aided in part by the exit of another large insurance provider from the U.K. group risk market. In local currency, sales increased 47.7% to GBP25.7 million.
In the U.K. Segment, benefit ratio for the fourth quarter declined to 59.6% from 63.0% in the comparable quarter of 2008. The lower benefit ratio reflects net favorable claims experienced in the group long-term disability line, which was partially offset by higher paid claims in the group life line.
In the Colonial Life segment, premium income for the fourth quarter increased 3.3% to $257.4 million. Sales increased 3.7% to $119.7 million in the fourth quarter of 2009, driven primarily by a strong level of sales in the public sector market. New accounts increased 17.9% during the fourth quarter, and average weekly producers increased 7.9% when compared to the fourth quarter of 2008.
Benefit ratio of the Colonial Life segment in the fourth quarter was 48.5%, compared to 48.3% in the same period in 2008. The benefit ratio in the accident, sickness, and disability line was slightly lower in the fourth quarter, while the benefit ratios in the life and cancer and critical illness lines were both higher than the year-ago quarter due to higher claims.
The Individual Disability - Closed Block segment reported operating income of $5.8 million in the fourth quarter of 2009, compared to $7.1 million in the fourth quarter of 2008. The interest adjusted loss ratio for the segment was 81.6%, compared to 82.6% a year ago.
At the end of the fourth quarter, combined risk-based capital for the traditional U.S. insurance companies was 382%, with leverage of 20.5%, and holding company capital at $915 million.
For full year 2009, Unum's net income increased to $852.6 million or $2.57 per share from $553.2 million or $1.62 per share last year. Revenue for the year increased to $10.09 billion from $9.98 billion in 2008.
Looking forward, the company said it is maintaining its previously stated outlook for full year 2010 and anticipates operating earnings growth for the year to be in a range of 4% to 6%.
UNM closed Tuesday's regular trading at $20.67, up $0.57 or 2.84%, on a volume of 3.30 million shares on the New York Stock Exchange.
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