Unum earnings up in quarter after big reserve

Chattanooga-based insurer Unum Group on Wednesday posted third quarter after-tax adjusted operating income that was up on heightened performance in its core business.

Operating income after adjustments was $300.6 million, or $1.37 per diluted common share, in the quarter compared to $246.1 million, or $1.09 per diluted common share, a year ago, the company reported after the close of the stock market.

The company’s results beat analysts’ expectations of $1.29 per share.

But Unum reported a net loss of $284.7 million, or $1.30 per diluted common share, for the quarter versus net income of $252.3 million, $1.12 per diluted common share, for the quarter a year ago.

Included in the net loss is an after-tax reserve increase of $593.1 million, or $2.71 per diluted common share, in the longterm care product line of its Closed Block segment.

“Overall, we are pleased with the third quarter and particularly the performance of our core businesses,” said Richard P. McKenney, Unum’s president and chief executive officer. “Looking beyond the impact of the long-term care reserve strengthening, we continue to see solid premium growth and stable benefits experience, which drive strong overall performance and significant financial flexibility for our company.”

In September, Unum unveiled plans to boost its long-term care reserves in the third quarter by $750 million before tax and $590 million after tax.

Unum shares plunged by more than 17 percent in May when the insurer first announced higher-than-expected claims experience in its longterm care line. In an environment of relatively low interest yields of reserves investments, long-term care has hurt Unum and most other such providers.

Unum, which is one of Chattanooga’s largest employers with nearly 3,000 workers, hasn’t sold individual long-term care coverage since 2009 nor such group policies since 2011.

On Wednesday, Unum’s stock closed at $34 per share on the New York Stock Exchange, down $2.23, or 6.16 percent.

For the third quarter, the company’s Unum US segment reported adjusted operating income of

$270.9 million, an increase of 4.8 percent. Premium income for the segment increased 6.3 percent, according to the company.

The insurer’s Colonial Life segment reported a 3.1 percent increase in adjusted operating income to $84.2 million in the third quarter. Premium income for the quarter rose 5.6 percent to $400 million.

The Closed Block segment reported a loss before income taxes and net realized investment gains and losses of $718.6 million in the quarter. Excluding the before-tax reserve increase of $750.8 million for the long-term care business, the Closed Block segment reported adjusted operating income of $32.2 million in the quarter.

Concerning its outlook, Unum continues to expect after-tax adjusted operating income growth per share, excluding the impact from the increase in long-term care reserves, for full-year 2018 to be within the range of 17 percent to 23 percent.