SPY382.32+0.90 0.24%
DIA313.75+0.76 0.24%
IXIC12,985.16-12.59 -0.10%

Press Release: Unum Group Reports Fourth Quarter -2-

· 02/04/2021 16:15

The Unum International segment reported adjusted operating income of $20.7 million in the fourth quarter of 2020, a decrease of 13.4 percent from $23.9 million in the fourth quarter of 2019. Premium income was $165.7 million in the fourth quarter of 2020, which was generally consistent with the $165.6 million in the fourth quarter of 2019. Net investment income decreased 10.8 percent to $25.5 million in the fourth quarter of 2020, compared to $28.6 million in the fourth quarter of 2019. Sales decreased 33.1 percent to $18.8 million in the fourth quarter of 2020, compared to $28.1 million in the fourth quarter of 2019.

The Unum UK line of business reported adjusted operating income, in local currency, of GBP15.4 million in the fourth quarter of 2020, a decrease of 11.5 percent from GBP17.4 million in the fourth quarter of 2019. Premium income was GBP108.9 million in the fourth quarter of 2020, a decrease of 4.4 percent from GBP113.9 million in the fourth quarter of 2019, driven by lower persistency in both the group long-term disability and group life product lines as well as lower sales, partially offset by rate increases in the group long-term disability product line. Net investment income was GBP17.9 million in the fourth quarter of 2020, a decrease of 14.4 percent from GBP20.9 million in the fourth quarter of 2019, due to lower investment income from inflation index-linked bonds and a lower yield on fixed-rate bonds. The benefit ratio in the fourth quarter of 2020 was 75.6 percent, compared to 77.3 percent in the fourth quarter of 2019, primarily due to lower inflation-linked experience in benefits related to our group products. Sales decreased 39.7 percent to GBP11.4 million in the fourth quarter of 2020, compared to GBP18.9 million in the fourth quarter of 2019. Persistency in the group long-term disability product line was 88.2 percent for full year 2020, compared to 89.9 percent for full year 2019. Persistency in the group life product line was 81.8 percent for full year 2020, compared to 89.0 percent for full year 2019. Persistency in the supplemental product line was 90.7 percent for full year 2020, compared to 89.9 percent for full year 2019.

Colonial Life Segment

Colonial Life reported adjusted operating income of $71.2 million in the fourth quarter of 2020, a decrease of 18.8 percent from $87.7 million in the fourth quarter of 2019. Premium income decreased 1.4 percent to $418.8 million in the fourth quarter of 2020, compared to $424.9 million in the fourth quarter of 2019, primarily due to lower sales, partially offset by a higher level of persistency. Net investment income of $37.5 million in the fourth quarter of 2020, was generally consistent with $37.0 million in the fourth quarter of 2019. The benefit ratio was 56.6 percent in the fourth quarter of 2020, compared to the benefit ratio of 51.5 percent in the fourth quarter of 2019, driven primarily by unfavorable experience in the life and disability product lines, resulting from the impacts of COVID-19.

Sales decreased 26.5 percent to $154.2 million in the fourth quarter of 2020, compared to $209.7 million in the fourth quarter of 2019. Persistency in Colonial Life was 77.8 percent for full year 2020, compared to 77.0 percent for full year 2019.

Closed Block Segment

The Closed Block segment reported adjusted operating income of $104.2 million in the fourth quarter of 2020, which excludes the impacts from the Closed Block individual disability reinsurance transaction of $1,305.5 million, the amortization of cost of reinsurance related to the Closed Block individual disability reinsurance transaction of $2.6 million, the long-term care reserve increase of $151.5 million, and the reserve increase in group pension within the all other product line of $17.5 million, compared to $46.1 million in the fourth quarter of 2019. Premium income for this segment declined 1.4 percent in the fourth quarter of 2020, compared to the fourth quarter of 2019, due primarily to policy terminations and maturities, partially offset by premium rate increases on certain in-force business in the long-term care line of business. Net investment income was $356.7 million in the fourth quarter of 2020, which was generally consistent with $356.6 million in the fourth quarter of 2019, due primarily to improved net asset values on our private equity partnerships and a higher level of invested assets supporting the long-term care product line, mostly offset by a decrease in the yield on invested assets and a lower level of invested assets supporting individual disability product line resulting from the reinsurance transaction that closed in December 2020. In connection with the Closed Block individual disability reinsurance transaction, we recognized net realized investment gains of $1,302.3 million.

The interest adjusted loss ratio for the long-term care line of business, excluding the previously discussed reserve increase, was 60.2 percent in the fourth quarter of 2020 compared to 86.7 percent in the fourth quarter of 2019 driven primarily by higher claimant mortality. The interest adjusted loss ratio for the individual disability line of business, excluding the impacts from the reinsurance transaction that closed in December 2020, was 79.5 percent in the fourth quarter of 2020, compared to 74.7 percent in the fourth quarter of 2019, driven primarily by less favorable claims activity.

Corporate Segment

The Corporate segment reported an adjusted operating loss of $42.7 million in the fourth quarter of 2020, compared to an adjusted operating loss of $50.5 million in the fourth quarter of 2019, which excludes the cost related to the early retirement of debt of $2.1 million, primarily due to lower expenses.

OTHER INFORMATION

Shares Outstanding

The Company's weighted average number of shares outstanding, assuming dilution, was 204.1 million for the fourth quarter of 2020, compared to 205.7 million for the fourth quarter of 2019. Shares outstanding totaled 203.7 million at December 31, 2020. The Company did not repurchase shares during the fourth quarter of 2020.

Capital Management

At December 31, 2020, the weighted average risk-based capital ratio for the Company's traditional U.S. insurance companies was approximately 365 percent, and cash and marketable securities in the holding companies equaled $1,512.0 million.

Book Value

Book value per common share as of December 31, 2020 was $53.37, compared to $49.10 at December 31, 2019.

Outlook

Based on the year-end 2020 resurgence in COVID-19 related mortality and infection rates and the expectation for higher mortality rates in the first half of 2021, the Company expects a modest decline in after-tax adjusted operating income per share for full-year 2021 compared to full-year 2020. The Company also anticipates a strong recovery in after-tax adjusted operating income per share in the second half of 2021 as the expected impacts of the COVID-19 pandemic subside.

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 net realized investment gains and losses and amortization of cost of reinsurance as well as certain other items as specified in the reconciliations in the Financial Highlights section below. We believe after-tax adjusted operating income is a better performance measure and better indicator of the profitability and underlying trends in our business.

Realized 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 realized investment gains or losses. Although we may experience realized 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.

As previously discussed, we have essentially exited a substantial portion of our Closed Block individual disability product line through the reinsurance transaction that was executed in December 2020. As a result, we exclude the amortization of the cost of reinsurance that was recognized as a result of the exit of the business related to the ceded reserves for the cohort of policies on claim status. We believe that the exclusion of the amortization of the cost of reinsurance associated with an exited business 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.

(MORE TO FOLLOW) Dow Jones Newswires

February 04, 2021 16:15 ET (21:15 GMT)