Unum released its third quarter earnings report on Wednesday, with results that reflect a solid quarter. The positive trends the company started to see earlier last year for sales and premium growth, along with continued strong risk performance (underwriting, pricing, etc.), drove its results for the quarter. Despite the challenges of unusually low interest rates, the company had another quarter of solid profitability and maintained a very strong capital position.
After-tax operating income for the quarter was $221.1 million, or 87¢ per share, compared to $224.6 million, or 85¢ per share, in the third quarter of 2013. Although this is slightly below Wall Street estimates, the company’s operating earnings per share for the first nine months of 2014 increased by nearly 7 percent, consistent with the 5-10 percent range for the year it provided investors. Net income for the quarter was $221.1 million, or 87¢ per share, compared to net income of $205.7 million, or 78¢ per share, a year ago.
More details, including a reconciliation of non-GAAP financial measures, can be found in the company’s earnings announcement, but in the meantime here are some highlights for the quarter:
- Unum US operating earnings, due largely to pressure on our investment income, were down slightly from last year to $214.3 million. The company continued to see stronger than expected premium growth and solid risk results. In addition, sales for Unum US increased by 13 percent in the quarter, with a good portion of that growth coming from additional coverage’s being sold to existing customers – a key area of focus in Unum’s growth strategy.
- Operating earnings for Unum UK rose slightly to $33.5 million, but were flat in local currency (£20.1 million). The company tends to experience some adverse seasonality in the U.K. in the third quarter, and this year was no exception. Risk results were in line with its plan and sales increased 15 percent over last year.
- Colonial Life generated another strong quarter, with operating earnings up slightly to $71.2 million. The business continued to see solid premium growth and strong risk results, and sales were up 13%, with strong results across most market segments.
- Unum’s Closed Block generated operating income of $26.2 million, up modestly from last year. This represents a block of legacy policies which Unum no longer sells, but still services. This block of business will show volatility from quarter to quarter, but these results were within the company’s expectations.
- The quality of Unum’s investment portfolio remains in excellent shape. As mentioned earlier, today’s extremely low interest rates are negatively impacting the company’s investment income, an important contributor to its operating results and profitability.
- Lastly, Unum’s capital position remains very strong, enabling it to continue to support the needs in its businesses while returning capital to shareholders. The company repurchased another $100 million of stock during the quarter, which brings its total for the year to $300 million and to $2.8 billion for the last seven years.
“Overall, I am pleased with our performance this quarter, particularly the continued strong sales and premium growth and the solid risk results we are seeing across much of the company,” said President and CEO Tom Watjen. “While I expect low interest rates to be with us for a while, I know that we will continue to take the steps needed to respond to these conditions, as we’ve done in the past. Our focus hasn’t changed: continue to profitably grow our business, maintain strong margins through disciplined pricing and underwriting, and deliver on our commitment to customers, which drives the kind of results we see today.”