Unum Group Reports First Quarter 2023 Results
- Net income of
$358.3 million $1.80 $372.6 million $1.87 - Full-year 2023 outlook increased following strong first quarter and underlying trends; Previous outlook of an increase in after-tax adjusted operating income per share of 8 percent to 12 percent increased to 20 percent to 25 percent when comparing to historically reported 2022 results, or an increase of 10 percent to 15 percent on a consistent basis under ASU 2018-12.
- Positive top-line trends with core operations sales growth of 18.9 percent and premium growth of nearly 4 percent on a constant currency basis.
- Solid balance sheet and liquidity with holding company liquidity of
$1.3 billion - Book value per common share of
$46.85 $62.88
Included in net income for the first quarter of 2023 are the after-tax amortization of the cost of reinsurance of
Effective January 1, 2023, the Company adopted Accounting Standards Update 2018-12 (ASU 2018-12) which amended the accounting and disclosure requirements for long-duration insurance contracts, with changes applied as of January 1, 2021. All prior period operating results and related metrics throughout this document have been adjusted for the impacts of the adoption.
"Our momentum from 2022 carried into the delivery of strong results in the first quarter, with increases in sales and premium across our core operations and performance of our group disability business. Our investments in digital capabilities continue to enable greater reach across employers and drive sustainable growth," said Richard P. McKenney, president and chief executive officer. "Our business thrives in today's environment, and given the strength of our balance sheet, we have flexibility to execute on our strategy of growth and return capital to shareholders."
RESULTS BY SEGMENT
We measure and analyze our segment performance on the basis of "adjusted operating income" or "adjusted operating loss", which differ from income before income tax as presented in our consolidated statements of income due to the exclusion of investment gains and losses, amortization of cost of reinsurance, and the impact of non-contemporaneous reinsurance. Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for income before income tax or net income.
Unum US Segment
Unum US reported adjusted operating income of
Within the Unum US operating segment, the group disability line of business reported a 132.0 percent increase in adjusted operating income to
The group life and accidental death and dismemberment line of business reported adjusted operating income of
The supplemental and voluntary line of business reported an increase of 9.1 percent in adjusted operating income to
Unum International Segment
The Unum International segment reported adjusted operating income of
The Unum
Colonial Life Segment
Colonial Life reported adjusted operating income of
Closed Block Segment
The Closed Block segment reported adjusted operating income of
The interest adjusted loss ratio for the long-term care line of business was 86.6 percent in the first quarter of 2023, compared to an interest adjusted loss ratio of 82.2 percent in the first quarter of 2022, driven primarily by higher claim incidence. The interest adjusted loss ratio for long-term care for the rolling twelve months ended March 31, 2023 was 84.7 percent.
Corporate Segment
The Corporate segment reported an adjusted operating loss of
OTHER INFORMATION
Shares Outstanding
The Company's weighted average number of shares outstanding, assuming dilution, was 199.5 million for the first quarter of 2023, compared to 203.5 million for the first quarter of 2022. Shares outstanding totaled 197.4 million at March 31, 2023. During the first quarter of 2023, the Company repurchased 1.3 million shares at a total cost of
Capital Management
At March 31, 2023, the weighted average risk-based capital ratio for the Company's traditional
Book Value
Book value per common share as of March 31, 2023 was
Effective Tax Rate
Effective tax rate on adjusted operating earnings was 20.6 percent in the first quarter of 2023.
Outlook
Full-year 2023 outlook increased following strong first quarter and underlying trends. Previous outlook of an increase in after-tax adjusted operating income per share of 8 percent to 12 percent when comparing historically reported 2022 results to expected 2023 results under ASU 2018-12, increased to 20 percent to 25 percent, or an increase of 10 percent to 15 percent on a consistent basis under ASU 2018-12.
NON-GAAP FINANCIAL MEASURES
We analyze our performance using non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measure of "after-tax adjusted operating income" differs from net income as presented in our consolidated operating results and income statements prepared in accordance with GAAP due to the exclusion of investment gains or losses, the amortization of the cost of reinsurance, and the impact of non-contemporaneous reinsurance as specified in the reconciliations in the Financial Highlights section below. Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. We believe after-tax adjusted operating income is a better performance measure and better indicator of the profitability and underlying trends in our business.
Investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation of investment gains or losses. Although we may experience investment gains or losses which will affect future earnings levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature, and we need to earn the interest rates assumed in calculating our liabilities.
We have exited a substantial portion of our Closed Block individual disability product line through the two phases of the reinsurance transaction that were executed in December 2020 and March 2021. As a result, we exclude the amortization of the cost of reinsurance that we recognized upon the exit of the business related to the policies on claim status as well as the impact of non-contemporaneous reinsurance that resulted from the adoption of ASU 2018-12. Due to the execution of the second phase of the reinsurance transaction occurring after January 1, 2021, the transition date of ASU 2018-12, in accordance with the provisions of the ASU related to non-contemporaneous reinsurance, we were required to establish the ceded reserves using an upper-medium grade fixed-income instrument as of the reinsurance transaction date in March 2021, which resulted in higher ceded reserves compared to that which was reported historically. However, the direct reserves for the block reinsured in the second phase were calculated using the original discount rate utilized as of the transition date. Both the direct and ceded reserves are then remeasured at each reporting period using a current discount rate reflective of an upper-medium grade fixed-income instrument, with the changes recognized in other comprehensive income (loss). While the total equity impact is neutral, the different original discount rates utilized for direct and ceded reserves result in disproportionate earnings impacts. The impact of non-contemporaneous reinsurance will fluctuate depending on the magnitude of reserve changes during the period. We believe that the exclusion of these items provides a better view of our results from our ongoing businesses.
We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.
CONFERENCE CALL INFORMATION
Members of Unum Group senior management will host a conference call on Wednesday, May 3, 2023, at 8:00 a.m. (Eastern Time) to discuss the results of operations for the first quarter of 2023. Topics may include forward-looking information, such as the Company's outlook on future results, trends in operations, and other material information.
The dial-in number for the conference call is 1-833-470-1428 for
In conjunction with today's earnings announcement, the Company's Statistical Supplement for the first quarter of 2023 is available on the "Investors" section of the Company's website.
ABOUT UNUM GROUP
Unum Group (NYSE: UNM), an international provider of workplace benefits and services, has been helping workers and their families for 175 years. Through its Unum and Colonial Life brands, the company offers disability, life, accident, critical illness, dental, vision and stop-loss insurance; leave and absence management support and behavioral health services. In 2022, Unum reported revenues of
For more information, connect with us on Facebook (www.facebook.com/unumbenefits) and LinkedIn (www.linkedin.com/company/unum).
SAFE HARBOR STATEMENT
Certain information in this news release constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those not based on historical information, but rather relate to our outlook, future operations, strategies, financial results, or other developments and speak only as of the date made. These forward-looking statements, including statements about anticipated growth in after-tax adjusted operating income per share, are subject to numerous assumptions, risks, and uncertainties, many of which are beyond our control. The following factors, in addition to other factors mentioned from time to time, may cause actual results to differ materially from those contemplated by the forward-looking statements: (1) fluctuation in insurance reserve liabilities and claim payments due to changes in claim incidence, recovery rates, mortality and morbidity rates, and policy benefit offsets due to, among other factors, the rate of unemployment and consumer confidence, the emergence of new diseases, epidemics, or pandemics, new trends and developments in medical treatments, the effectiveness of our claims operational processes, and changes in governmental programs; (2) sustained periods of low interest rates; (3) unfavorable economic or business conditions, both domestic and foreign, that may result in decreases in sales, premiums, or persistency, as well as unfavorable claims activity or unfavorable returns on our investment portfolio; (4) the impact of pandemics and other public health issues, including COVID-19, on our business, financial position, results of operations, liquidity and capital resources, and overall business operations; (5) changes in, or interpretations or enforcement of, laws and regulations; (6) our ability to hire and retain qualified employees; (7) a cyber attack or other security breach could result in the unauthorized acquisition of confidential data; (8) the failure of our business recovery and incident management processes to resume our business operations in the event of a natural catastrophe, cyber attack, or other event; (9) investment results, including, but not limited to, changes in interest rates, defaults, changes in credit spreads, impairments, and the lack of appropriate investments in the market which can be acquired to match our liabilities; (10) increased competition from other insurers and financial services companies due to industry consolidation, new entrants to our markets, or other factors; (11) changes in our financial strength and credit ratings; (12) our ability to develop digital capabilities or execute on our technology systems upgrades or replacements; (13) actual experience in the broad array of our products that deviates from our assumptions used in pricing, underwriting, and reserving; (14) ineffectiveness of our derivatives hedging programs due to changes in forecasted cash flows, the economic environment, counterparty risk, ratings downgrades, capital market volatility, changes in interest rates, and/or regulation. (15) availability of reinsurance in the market and the ability of our reinsurers to meet their obligations to us; (16) ability to generate sufficient internal liquidity and/or obtain external financing; (17) damage to our reputation due to, among other factors, regulatory investigations, legal proceedings, external events, and/or inadequate or failed internal controls and procedures; (18) the use and reliance on third-party vendors, including vendors providing web and cloud-based applications, may disrupt our business, and impact our ability to leverage data; (19) recoverability and/or realization of the carrying value of our intangible assets, long-lived assets, and deferred tax assets; (20) effectiveness of our risk management program; (21) contingencies and the level and results of litigation; (22) fluctuation in foreign currency exchange rates; and (23) our ability to meet environmental, social, and governance standards and expectations of investors, regulators, customers, and other stakeholders
For further discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Part 1, Item 1A "Risk Factors" of our annual report on Form 10-K for the year ended December 31, 2022. The forward-looking statements in this news release are being made as of the date of this news release, and we expressly disclaim any obligation to update or revise any forward-looking statement contained herein, even if made available on our website or otherwise.
Unum Group | |||
($ in millions, except share data) | |||
Three Months Ended March 31 | |||
2023 | 2022 | ||
As Adjusted | |||
Revenue | |||
Premium Income | $ 2,459.3 | $ 2,401.4 | |
Net Investment Income | 508.8 | 527.2 | |
Net Investment Gain (Loss) | 0.1 | (13.8) | |
Other Income | 67.9 | 65.8 | |
Total Revenue | 3,036.1 | 2,980.6 | |
Benefits and Expenses | |||
Policy Benefits Including Remeasurement Loss or Gain | 1,736.4 | 1,914.2 | |
Commissions | 293.9 | 273.2 | |
Interest and Debt Expense | 48.1 | 46.9 | |
Deferral of Acquisition Costs | (157.7) | (141.8) | |
Amortization of Deferred Acquisition Costs | 115.9 | 103.6 | |
Other Expenses | 548.2 | 488.8 | |
Total Benefits and Expenses | 2,584.8 | 2,684.9 | |
Income Before Income Tax | 451.3 | 295.7 | |
Income Tax Expense | 93.0 | 55.3 | |
Net Income | $ 358.3 | $ 240.4 | |
PER SHARE INFORMATION | |||
Net Income Per Common Share | |||
Basic | $ 1.81 | $ 1.19 | |
Assuming Dilution | $ 1.80 | $ 1.18 | |
Weighted Average Common Shares - Basic (000s) | 198,111.2 | 202,628.8 | |
Weighted Average Common Shares - Assuming Dilution (000s) | 199,520.1 | 203,504.3 | |
Outstanding Shares - (000s) | 197,365.3 | 201,866.7 | |
Reconciliation of Non-GAAP Financial Measures | |||||||
Three Months Ended March 31 | |||||||
2023 | 2022 | ||||||
(in millions) | per share * | (in millions) | per share * | ||||
Net Income | $ 358.3 | $ 1.80 | $ 240.4 | $ 1.18 | |||
Excluding: | |||||||
Net Investment Gain (Loss), Other (net of tax benefit | 0.1 | — | (10.6) | (0.05) | |||
Amortization of the Cost of Reinsurance (net of tax | (8.7) | (0.04) | (10.6) | (0.05) | |||
Non-Contemporaneous Reinsurance (net of tax | (5.7) | (0.03) | (9.8) | (0.05) | |||
After-tax Adjusted Operating Income | $ 372.6 | $ 1.87 | $ 271.4 | $ 1.33 | |||
* Assuming Dilution | |||||||
March 31 | |||||||
2023 | 2022 | ||||||
(in millions) | per share | (in millions) | per share | ||||
Total Stockholders' Equity (Book Value) | $ 9,247.4 | $ 46.85 | $ 6,887.8 | $ 34.12 | |||
Excluding: | |||||||
Net Unrealized Gain (Loss) on Securities | (2,205.2) | (11.17) | 1,120.6 | 5.55 | |||
Effect of Change in Discount Rate Assumptions on the | (260.0) | (1.33) | (4,912.6) | (24.33) | |||
Net Gain on Hedges | 7.8 | 0.04 | 51.4 | 0.25 | |||
Subtotal | 11,704.8 | 59.31 | 10,628.4 | 52.65 | |||
Excluding: | |||||||
Foreign Currency Translation Adjustment | (365.4) | (1.85) | (306.1) | (1.52) | |||
Subtotal | 12,070.2 | 61.16 | 10,934.5 | 54.17 | |||
Excluding: | |||||||
Unrecognized Pension and Postretirement Benefit | (339.5) | (1.72) | (391.8) | (1.94) | |||
Total Stockholders' Equity, Excluding Accumulated | $ 12,409.7 | $ 62.88 | $ 11,326.3 | $ 56.11 | |||
Three Months Ended | ||||||||
March 31, 2023 | March 31, 2022 | |||||||
Premium Income | Premium Income | Weighted Average | Premium Income | |||||
Unum International | ||||||||
Unum | $ 162.7 | £ 122.7 | 1.215 | $ 149.1 | ||||
Unum Poland | 25.9 | zł 95.6 | 0.228 | 21.8 | ||||
Total | 188.6 | 170.9 | ||||||
Unum US | 1,609.6 | $ 1,543.0 | 1,543.0 | |||||
Colonial Life | 429.5 | $ 430.7 | 430.7 | |||||
Core Operations | $ 2,227.7 | $ 2,144.6 | ||||||
1Premium income shown in millions of pounds for Unum |
2Exchange rate is calculated using the average foreign currency exchange rates for the most recent period, applied to the comparable prior period.4 |
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SOURCE Unum Group
