Unum Group's (UNM) operating earnings of 87 cents per share in the third quarter of 2014 missed the Zacks Consensus Estimate by 3.3%. Earnings, however, improved 2.4% year over year. The improvement was fuelled by a strong sales momentum, accelerating premium growth, and favorable risk results.
Total revenue of Unum Group improved 1.6% year over year to $2.61 billion. The top line was almost in line the Zacks Consensus Estimate.
Quarterly Segment Update
Unum U.S.: Premium income was $1.2 billion, up 3.4% year over year. Operating income was $214.3 million, down 2.5% year over year.
Unum U.K.: Premium income increased 11.1% year over year to $152.6 million. In local currency, the income decreased 3.5% year over year to £91.5 million.
Operating income was $33.5 million, up 7% year over year. In local currency, the figure came in at £20.1 million, flat year over year.
Benefit ratio was 70.8%, up 20 basis points (bps) from 70.6% in the year-ago quarter. The higher benefit ratio reflects a less favorable claim recovery experience in the group's long-term disability line and a higher average claim size in group life.
Colonial Life: Premium income increased 3.3% year over year to $319.4 million driven by sales growth and stable persistency. Operating income improved 3.2% to $71.2 million.
Benefit ratio improved 40 bps year over year to 52.7% as an improved claims experience in the cancer and critical illness, and accident, sickness, and disability product lines was partially offset by a less favorable experience in the life product line.
Closed Block: Premium income fell 4.2% from the year-ago quarter. The decline was due to the expected policy terminations and maturities.
Operating income came in at $26.2 million, up 2% year over year.
Corporate: The segment reported an operating loss of $32.9 million, flat year over year.
Capital Management
As of Sep 30, 2014, the weighted average risk-based capital for Unum's traditional U.S. insurance companies was nearly 400%, down from 405% as of 2013. Unum exited the quarter with cash and marketable securities of $720 million, up 40% from $514 million at 2013 end.
During the quarter, Unum repurchased 2.9 million shares for $100 million.
Book value per share of Unum increased 10.5% year over year to $36.69 as of Sep 30, 2014.
2014 Guidance Reiterated
Unum expects operating earnings to grow in the range of 5–10% over the 2013 level.
Zacks Rank
Unum presently carries a Zacks Rank #3 (Hold).
Performance of Other Insurers
The bottom line at Aflac Inc. (AFL), Reinsurance Group of America Inc. (RGA) and ACE Limited (ACE) has outperformed each of their Zacks Consensus Estimate in the third quarter.
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