Unum Group Reports Fourth Quarter 2023 Results
- Robust margins and growth momentum
- Positive outlook for 2024 with expected premium and earnings growth
- Strong balance sheet and liquidity with holding company cash of $1.7 billion
- Book value per common share increased by 13.0% compared to the year-ago quarter
- None.
Insights
The reported net income of $330.6 million for the fourth quarter of 2023, alongside an after-tax adjusted operating income of $350.5 million, indicates a solid performance by the company, reflecting a favorable operating environment. The growth in core operations premium by 5.2 percent and a significant after-tax adjusted operating EPS growth of 23.3 percent year-over-year are strong indicators of the company's ability to leverage its market position and operational efficiency to drive profitability.
Investors should note the company's robust balance sheet, marked by $1.7 billion in holding company cash and a risk-based capital ratio of approximately 415 percent, which is well above the standard requirement for insurance companies, typically around 200-300 percent. This financial strength provides the company with significant resilience against potential market volatility and strategic flexibility for future investments or shareholder returns.
The increase in book value per common share by 13.0 percent and the exclusion of AOCI in the calculations suggest a stable growth in the company's intrinsic value, a metric often used by investors to gauge the company's true net worth. The positive outlook for 2024, with expected growth in premiums and earnings, is likely to be viewed positively by the market, potentially influencing the company's stock performance favorably.
The impressive growth in adjusted operating income within the Unum US Segment, particularly in the group disability line of business, signifies a robust demand for disability insurance products. This could be attributed to an increased awareness of financial protection among the working population and potentially favorable employment trends. The decline in net investment income across segments, however, could be a point of concern, reflecting the low interest rate environment or changes in the investment portfolio that may impact future earnings.
It is also important to highlight the increased sales in the group life and accidental death and dismemberment line of business by 60.7 percent, an indicator of strong product demand and effective sales strategies. The company's ability to maintain high persistency rates across product lines is a testament to customer satisfaction and retention, which is critical for long-term revenue stability.
The Unum International segment's performance, with a notable decrease in adjusted operating income despite increased premium income, raises questions about operational efficiencies and market dynamics outside the U.S. This could be due to currency fluctuations, differing market conditions, or competitive pressures, which may require targeted strategies to improve profitability in international operations.
The reported increase in the benefit ratio for the long-term care line of business to 93.5 percent in the fourth quarter of 2023, up from 85.1 percent in the same quarter of the previous year, indicates a rise in claim incidence and reserve assumption updates. This could reflect broader industry trends in long-term care, such as aging populations and increased utilization of services. The company's focus on this segment suggests an understanding of the growing demand for long-term care insurance, although the higher benefit ratio also points to the need for careful management of claim costs and underwriting standards.
Moreover, the reported favorable experience in the group long-term disability product line, with a lower benefit ratio, suggests effective claims management and underwriting practices. The reduction in average claim size for the individual disability product line further underscores the company's ability to manage its risk exposure effectively.
- Net income of
$330.6 million $1.69 $350.5 million $1.79 - Results for the full year and fourth quarter reflect robust margins and growth momentum, supported by the favorable operating environment; full year core operations premium growth of 5.2 percent on a constant currency basis and full year after-tax adjusted operating earnings per share growth of 23.3 percent when comparing to historically reported 2022.
- Positive business trends expected to continue into 2024 with outlook for core operations premium growth of 5 percent to 7 percent and after-tax adjusted operating earnings per share growth of 7 percent to 9 percent.
- Robust balance sheet and liquidity with holding company cash of
$1.7 billion - Book value per common share of
$49.91 $67.02
Included in net income for the fourth quarter of 2023 is 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.
"We closed 2023 with a solid fourth quarter and delivered another year of very strong performance in which we grew adjusted EPS by
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 or 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
Unum US Segment
Unum US reported adjusted operating income of
Within the Unum US operating segment, the group disability line of business reported a 47.7 percent increase in adjusted operating income to
The group life and accidental death and dismemberment line of business reported a 157.6 percent increase in adjusted operating income to
The supplemental and voluntary line of business reported an increase of 19.4 percent in adjusted operating income to
Unum International
The Unum International segment reported adjusted operating income of
The Unum
Colonial Life Segment
Colonial Life reported an 8.1 percent decrease in adjusted operating income to
Closed Block Segment
The Closed Block segment reported adjusted operating income of
The net premium ratio for the long-term care line of business increased to 93.5 percent in the fourth quarter of 2023, compared to 85.1 percent in the fourth quarter of 2022, driven primarily by the impact of the reserve assumption updates in the third quarter of 2023 and higher claim incidence. Compared to the third quarter of 2023, the net premium ratio increased from 93.4 percent, and overall claims experience was relatively consistent.
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 195.5 million for the fourth quarter of 2023, compared to 200.9 million for the fourth quarter of 2022. Shares outstanding totaled 193.4 million at December 31, 2023. During the fourth quarter of 2023, the Company repurchased 1.8 million shares at a cost of
Capital Management
At December 31, 2023, the weighted average risk-based capital ratio for the Company's traditional
Book Value
Book value per common share as of December 31, 2023 was
Effective Tax Rate
Effective tax rate on adjusted operating earnings was 22.8 percent in the fourth quarter of 2023, and 21.7 percent for full year 2023. Long-term adjusted effective tax rate expected to be between 21.5 percent to 22.0 percent.
Outlook
Full-year 2024 outlook of an increase in after-tax adjusted operating income per share of seven percent to nine percent when comparing full-year 2023.
NON-GAAP FINANCIAL MEASURES
We analyze our performance using non-GAAP financial measures which exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We believe the following non-GAAP financial measures are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
- After-tax adjusted operating income or loss, which excludes investment gains or losses, amortization of the cost of reinsurance, non-contemporaneous reinsurance, and reserve assumption updates, as well as certain other items, as applicable;
- Book value per common share, which is calculated excluding AOCI.
Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. Investment gains or losses and unrealized gains or losses on securities depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments. Book value per common share excluding AOCI provides a more comparable and consistent view of our results, as AOCI tends to fluctuate depending on market conditions and general economic trends.
Cash flow assumptions used to calculate our liability for future policy benefits are reviewed at least annually and updated, as needed, with the resulting impact reflected in net income. While the effects of these assumption updates are recorded in the reporting period in which the review is completed, these updates reflect experience emergence and changes to expectations spanning multiple periods. We believe that by excluding the impact of reserve assumption updates we are providing a more comparable and consistent view of our quarterly results.
We 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, January 31, 2024, at 8:00 a.m. Eastern Time to discuss the results of operations for the fourth 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 1-888-210-4821 for callers in the
In conjunction with today's earnings announcement, the Company's Statistical Supplement for the fourth 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 2023, Unum reported revenues of
For more information, connect with us on Facebook (www.facebook.com/unumbenefits), Twitter (www.twitter.com/unumnews) 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 and core operations premium growth, 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 resulting 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) disruptions to our business or our ability to leverage data caused by the use and reliance on third-party vendors, including vendors providing web and cloud-based applications; (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 FINANCIAL HIGHLIGHTS (Unaudited)
| |||||||
($ in millions, except share data) | |||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenue | |||||||
Premium Income | $ 2,551.7 | $ 2,410.2 | $ 10,046.0 | $ 9,616.5 | |||
Net Investment Income | 530.8 | 524.4 | 2,096.7 | 2,122.2 | |||
Net Investment Gain (Loss) | (6.0) | 6.6 | (36.0) | (15.7) | |||
Other Income | 68.6 | 63.6 | 279.2 | 261.1 | |||
Total Revenue | 3,145.1 | 3,004.8 | 12,385.9 | 11,984.1 | |||
Benefits and Expenses | |||||||
Policy Benefits Including Remeasurement Loss or Gain | 1,820.1 | 1,778.8 | 7,257.1 | 6,994.6 | |||
Commissions | 300.4 | 267.3 | 1,170.1 | 1,086.4 | |||
Interest and Debt Expense | 49.2 | 47.2 | 194.8 | 188.5 | |||
Cost Related to Early Retirement of Debt | — | — | — | 4.2 | |||
Deferral of Acquisition Costs | (164.7) | (137.8) | (632.2) | (556.9) | |||
Amortization of Deferred Acquisition Costs | 122.7 | 108.1 | 481.4 | 421.1 | |||
Other Expenses | 588.7 | 567.7 | 2,274.6 | 2,096.2 | |||
Total Benefits and Expenses | 2,716.4 | 2,631.3 | 10,745.8 | 10,234.1 | |||
Income Before Income Tax | 428.7 | 373.5 | 1,640.1 | 1,750.0 | |||
Income Tax Expense | 98.1 | 84.3 | 356.3 | 342.8 | |||
Net Income | $ 330.6 | $ 289.2 | $ 1,283.8 | $ 1,407.2 | |||
PER SHARE INFORMATION | |||||||
Net Income Per Common Share | |||||||
Basic | $ 1.70 | $ 1.45 | $ 6.53 | $ 7.01 | |||
Assuming Dilution | $ 1.69 | $ 1.44 | $ 6.50 | $ 6.96 | |||
Weighted Average Common Shares - Basic (000s) | 194,723.8 | 198,825.4 | 196,659.7 | 200,647.2 | |||
Weighted Average Common Shares - Assuming Dilution (000s) | 195,476.2 | 200,904.1 | 197,602.0 | 202,109.4 | |||
Outstanding Shares - (000s) | 193,372.1 | 197,755.0 | |||||
Reconciliation of Non-GAAP Financial Measures | |||||||
Three Months Ended December 31 | |||||||
2023 | 2022 | ||||||
(in millions) | per share * | (in millions) | per share * | ||||
Net Income | $ 330.6 | $ 1.69 | $ 289.2 | $ 1.44 | |||
Excluding: | |||||||
Net Investment Gain (Loss) (net of tax expense (benefit) of | (4.6) | (0.02) | 4.9 | 0.02 | |||
Amortization of the Cost of Reinsurance (net of tax benefit of | (8.7) | (0.04) | (9.3) | (0.04) | |||
Non-Contemporaneous Reinsurance (net of tax benefit of | (6.6) | (0.04) | (8.1) | (0.04) | |||
After-tax Adjusted Operating Income | $ 350.5 | $ 1.79 | $ 301.7 | $ 1.50 | |||
Year Ended December 31 | |||||||
2023 | 2022 | ||||||
(in millions) | per share * | (in millions) | per share * | ||||
Net Income | $ 1,283.8 | $ 6.50 | $ 1,407.2 | 6.96 | |||
Excluding: | |||||||
Net Investment Loss (net of tax benefit of | (28.2) | (0.14) | (12.2) | (0.07) | |||
Amortization of the Cost of Reinsurance (net of tax benefit of | (34.8) | (0.18) | (39.7) | (0.20) | |||
Non-Contemporaneous Reinsurance (net of tax benefit of | (27.5) | (0.14) | (27.2) | (0.13) | |||
Reserve Assumption Updates (net of tax expense (benefit) of | (139.3) | (0.70) | 192.1 | 0.96 | |||
After-tax Adjusted Operating Income | $ 1,513.6 | 7.66 | $ 1,294.2 | 6.40 | |||
* Assuming Dilution | |||||||
December 31 | |||||||
2023 | 2022 | ||||||
(in millions) | per share | (in millions) | per share | ||||
Total Stockholders' Equity (Book Value) | $ 9,651.4 | $ 49.91 | $ 8,735.0 | $ 44.17 | |||
Excluding: | |||||||
Net Unrealized Loss on Securities | (1,919.1) | (9.92) | (3,028.4) | (15.31) | |||
Effect of Change in Discount Rate Assumptions on the Liability for Future | (648.4) | (3.35) | 313.9 | 1.59 | |||
Net Unrealized Loss on Hedges | (73.7) | (0.39) | (9.6) | (0.05) | |||
Subtotal | 12,292.6 | 63.57 | 11,459.1 | 57.94 | |||
Excluding: | |||||||
Foreign Currency Translation Adjustment | (321.1) | (1.66) | (390.1) | (1.98) | |||
Subtotal | 12,613.7 | 65.23 | 11,849.2 | 59.92 | |||
Excluding: | |||||||
Unrecognized Pension and Postretirement Benefit Costs | (345.7) | (1.79) | (334.1) | (1.69) | |||
Total Stockholders' Equity, Excluding Accumulated Other | $ 12,959.4 | $ 67.02 | $ 12,183.3 | $ 61.61 | |||
Year Ended | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Premium | Premium | Weighted | Premium | |||||
Unum International | ||||||||
Unum | $ 706.9 | £ 509.2 | 1.244 | $ 633.4 | ||||
Unum Poland | 118.3 | zł 399.0 | 0.239 | 95.4 | ||||
Total | 825.2 | 728.8 | ||||||
Unum US | 6,579.2 | $ 6,251.4 | 6,251.4 | |||||
Colonial Life | 1,726.1 | $ 1,702.0 | 1,702.0 | |||||
Core Operations | $ 9,130.5 | $ 8,682.2 | ||||||
1 | Premium income shown in millions of pounds for Unum |
2 | Exchange rate is calculated using the average foreign currency exchange rates for the most recent period, applied to the comparable prior period. |
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SOURCE Unum Group
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