Unum Group’s UNM third-quarter 2017 operating net income of $1.09 per share beat the Zacks Consensus Estimate of $1.04. The bottom line also improved 11.2% year over year.

Unum Group Price, Consensus and EPS Surprise

Unum Group Price, Consensus and EPS Surprise | Unum Group Quote

Strong performance at Unum U.S. and Colonial Life segments was partially offset by weakness at Unum U.K. business.

The company’s sustained performance is driven by strong top-line growth, overall decent benefits experience and a good expense management. In the reported quarter, the company displayed growth and disciplined execution of strategy. It also efficiently returned capital to its shareholders.

Including after-tax realized investment gains of 3 cents, net income improved 10.9% year over year to $1.12 per share.

Total operating revenues of Unum Group was $2.8 billion, up 2.1% year over year. Revenues were in line with the Zacks Consensus Estimate. Premium income improved, whereas net investment income declined, both on a year-over-year basis.

Total benefits and expenses inched up 0.9% year over year to $2.5 billion. Rise in benefits and change in reserves for future benefits, commissions and amortization of deferred acquisition costs led to an overall increase in costs.

Quarterly Segment Update

Unum U.S.: Premium income was $1.4 billion, up 3.5% year over year. Operating income climbed 11.9% year over year to $258.4 million.

Unum U.K.: Premium income grew 3.3% year over year to $131.5 million. In local currency, premium rose 3.6% year over year to £100.4 million. This was mainly owing to growth in the in-force block, resulting from prior-period sales and stable persistency.

Operating income was $26.5 million, down 6% year over year. In local currency, the figure declined 6% year over year to £20.2 million.

Benefit ratio was 74.9%, up 310 basis points (bps). This was owing to higher claim incidence and unfavorable claim resolutions in the group long-term disability product line and the impact of inflation-linked increases in benefits. Also, lower discount rate implemented in the first quarter of 2017 across several products of the company added to this downside. However, a lower average claim size in the group life product line partially offset the downside.

Colonial Life: Premium income increased 6.9% year over year to $378.7 million on sales growth in recent quarters and stable persistency. Operating income grew 3.4% to $81.7 million.

Benefit ratio deteriorated 20 bps year over year to 51.8%.

Closed Block: Premium income decreased 3.6% from the year-ago quarter. This decline stemmed from expected policy terminations and maturities for the individual disability line of business. Nonetheless, improvement in premium income for the long-term care line of business owing to premium rate increases on certain in-force policies, limited the downside.

Operating income was $26.6 million, falling nearly 7% year over year.

Corporate: The segment incurred an operating loss of $36.2 million, narrower than the operating loss of $45.7 million in the year-ago quarter. This was mainly driven by reduced operating expenses and decrease in interest expense owing to a lower level of outstanding debt, partially offset by a higher overall rate of interest.

Capital Management

As of Sep 30, 2017, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 410%. Unum Group exited the quarter with cash and marketable securities worth $771 million.

Book value per share of Unum Group increased 4.4% year over year to $42.11 as of Sep 30, 2017.

The company spent around $100 million to buy back about 2 million shares in the quarter.

Guidance Tweaked

Unum Group projects 2017 operating earnings per share to grow between 5% and 8% or slightly above the upper end of the range.

Zacks Rank

Unum Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other firms from the insurance industry that have reported third-quarter earnings so far, the bottom line at The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI surpassed their respective Zacks Consensus Estimate.

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