Unum Group Has Sharp Rise In Net Income

Unum Group (NYSE: UNM) reported net income of $253.5 million ($1.25 per diluted common share) for the first quarter of 2022, compared to net income of $153 million ($0.75 per diluted common share) for the first quarter of 2021.

Here is the full report:

Included in net income for the first quarter of 2022 are the after-tax amortization of the cost of reinsurance of $13.2 million ($0.06  per diluted common share) and a net after-tax investment loss on the Company's investment portfolio of $10.6 million ($0.05 per diluted common share).  Included in net income for the first quarter of 2021 are the net after-tax loss from the second phase of the Closed Block individual disability reinsurance transaction of $56.7 million ($0.27 per diluted common share), the after-tax amortization of the cost of reinsurance of $15.8 million ($0.08 per diluted common share), and a net after-tax  investment gain on the company's investment portfolio, excluding the net after-tax realized investment gain associated with the completion of the second phase of the Closed Block individual disability reinsurance transaction, of $13.5 million ($0.06 per diluted common share).  Excluding the items above, after-tax adjusted operating income was $277.3 million ($1.36 per diluted common share) in the first quarter of 2022, compared to $212.0 million ($1.04 per diluted common share) in the first quarter of 2021.

"The first quarter was an outstanding start to the year with strong performance across our business and lessening effects of COVID-19 impacting our customers" said Richard P.

McKenney, president and chief executive officer. "The current business environment is favorable for our company, with higher interest rates and a strong labor market resulting in an improved earnings outlook."

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 certain other items.  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 reported adjusted operating income of $171.6 million in the first quarter of 2022, an increase of 48.3 percent from $115.7 million in the first quarter of 2021.  Premium income increased 1.3 percent to $1,544.9 million in the first quarter of 2022, compared to $1,525.8 million in the first quarter of 2021.  Net investment income decreased 4.8 percent to $171.0 million in the first quarter of 2022, compared to $179.7 million in the first quarter of 2021.

Within the Unum US operating segment, the group disability line of business reported a 2.3 percent decrease in adjusted operating income to $62.6 million in the first quarter of 2022, compared to $64.1 million in the first quarter of 2021.  Premium income for the group disability line of business increased 1.9 percent to $685.5 million in the first quarter of 2022, compared to $672.9 million in the first quarter of 2021 due primarily to in-force block growth and higher sales across all product lines.  Net investment income decreased 7.3 percent to $90.3 million in the first quarter of 2022, compared to $97.4 million in the first quarter of 2021, driven by lower miscellaneous investment income and a decrease in the yield on invested assets.  The benefit ratio for the first quarter of 2022 was 73.8 percent, compared to 74.8 percent in the first quarter of 2021, due to lower claims incidence in the group short-term disability product line as well as favorable claim recoveries in the group long-term disability product line.  Group long-term disability sales were $40.6 million in the first quarter of 2022, an increase of 30.5 percent from $31.1 million in the first quarter of 2021.  Group short-term disability sales were $27.8 million in the first quarter of 2022, an increase of 15.4 percent from $24.1 million in the first quarter of 2021.  Persistency in the group long-term disability product line was 90.4 percent for the first quarter of 2022, compared to 90.7 percent for the first quarter of 2021.  Persistency in the group short-term disability product line was 89.2 percent for the first quarter of 2022, compared to 86.1 percent for the first quarter of 2021.

The group life and accidental death and dismemberment line of business reported an adjusted operating loss of $9.4 million in the first quarter of 2022, compared to an adjusted operating loss of $58.3 million in the first quarter of 2021.  Premium income for this line of business increased slightly to $454.7 million in the first quarter of 2022, compared to $451.4 million in the first quarter of 2021, driven by higher sales, partially offset by lower persistency.  Net investment income was $24.9 million in the first quarter of 2022, which was consistent with the first quarter of 2021.  The benefit ratio in the first quarter of 2022 was 87.9 percent, compared to 98.8 percent in the first quarter of 2021, due to lower mortality in the group life product line, resulting primarily from lessening impacts of COVID-19 on our insured population.  Sales of group life and accidental death and dismemberment products increased 11.3 percent in the first quarter of 2022 to $33.6 million, compared to $30.2 million in the first quarter of 2021.  Persistency in the group life product line was 89.0 percent for the first quarter of 2022, compared to 90.1 percent for the first quarter of 2021.  Persistency in the accidental death and dismemberment product line was 88.2 percent for the first quarter of 2022, compared to 89.7 percent for the first quarter of 2021.

The supplemental and voluntary line of business reported an increase of 7.7 percent in adjusted operating income to $118.4 million in the first quarter of 2022, compared to $109.9 million in the first quarter of 2021.  Premium income for the supplemental and voluntary line of business increased slightly to $404.7 million in the first quarter of 2022, compared to $401.5 million in the first quarter of 2021, with growth in both the dental and vision and voluntary benefits product lines, partially offset by a decline in the individual disability product line.  Net investment income decreased 2.8 percent to $55.8 million in the first quarter of 2022, compared to $57.4 million in the first quarter of 2021, due to a decrease in the level of invested assets and lower miscellaneous investment income.  The benefit ratio for the voluntary benefits product line was 40.4 percent in the first quarter of 2022, compared to 39.3 percent for the first quarter of 2021, due to higher policy reserves driven by favorable persistency, partially offset by lower mortality within the life product line, resulting primarily from lessening impacts of COVID-19 on our insured population.  The benefit ratio for the individual disability product line was 42.5 percent for the first quarter of 2022, which was generally consistent with the first quarter of 2021.  The benefit ratio for the dental and vision product line was 73.4 percent for the first quarter of 2022, which was generally consistent with the first quarter of 2021.  Relative to the first quarter of 2021, sales in the voluntary benefits product line declined 6.6 percent in the first quarter of 2022 to $94.3 million.  Sales in the individual disability product line increased 19.4 percent in the first quarter of 2022 to $20.3 million.  Sales in the dental and vision product line totaled $9.2 million for the first quarter of 2022, an increase of 15.0 percent compared to the first quarter of 2021.  Persistency in the voluntary benefits product line was 75.9 percent for the first quarter of 2022, compared to 74.3 percent for the first quarter of 2021.  Persistency in the individual disability product line was 89.3 percent for the first quarter of 2022, compared to 90.2 percent for the first quarter of 2021.  Persistency in the dental and vision product line was 84.0 percent for the first quarter of 2022, compared to 87.4 percent for the first quarter of 2021. 

The Unum International segment reported adjusted operating income of $27.2 million in the first quarter of 2022, an increase of 3.0 percent from $26.4 million in the first quarter of 2021.  Premium income increased 7.7 percent to $187.8 million in the first quarter of 2022, compared to $174.4 million in the first quarter of 2021.  Net investment income was $34.5 million in the first quarter of 2022, compared to $26.0 million in the first quarter of 2021.  Sales increased 47.4 percent to $34.2 million in the first quarter of 2022, compared to $23.2 million in the first quarter of 2021.

The Unum UK line of business reported adjusted operating income, in local currency, of £19.2 million in the first quarter of 2022, an increase of 3.2 percent from £18.6 million in the first quarter of 2021.  Premium income was £122.7 million in the first quarter of 2022, an increase of 11.0 percent from £110.5 million in the first quarter of 2021, due to growth in the in-force blocks resulting from the impact of rate increases in the group long-term disability product line, higher overall persistency, and higher sales.  Net investment income was £24.2 million in the first quarter of 2022, an increase of 39.1 percent from £17.4 million in the first quarter of 2021, due to higher investment income from inflation index-linked bonds, partially offset by a lower yield on fixed-rate bonds.  The benefit ratio in the first quarter of 2022 was 80.7 percent, compared to 75.3 percent in the first quarter of 2021, due to higher inflation-linked experience in benefits, and timing of notifications and claims resolutions in the group long-term disability product line resulting from the ongoing effects of disruptions to health services that were caused by COVID-19.  Sales increased 55.2 percent to £22.2 million in the first quarter of 2022, compared to £14.3 million in the first quarter of 2021.  Persistency in the group long-term disability product line was 88.1 percent for the first quarter of 2022, compared to 87.0 percent for the first quarter of 2021.  Persistency in the group life product line was 88.0 percent for the first quarter of 2022, compared to 87.2 percent for the first quarter of 2021.  Persistency in the supplemental product line was 90.4 percent for the first quarter of 2022, compared to 88.2 percent for the first quarter of 2021.

Colonial Life reported a 22.9 percent increase in adjusted operating income to $90.1 million in the first quarter of 2022, compared to $73.3 million in the first quarter of 2021.  Premium income increased slightly to $430.7 million in the first quarter of 2022, compared to $426.4 million in the first quarter of 2021.  Net investment income increased slightly to $38.1 million in the first quarter of 2022 compared to $37.7 million in the first quarter of 2021 due to an increase in the level of invested assets, partially offset by a decrease in the yield on invested assets.  The benefit ratio was 49.3 percent in the first quarter of 2022, compared to 55.4 percent in the first quarter of 2021, with favorable claims experience across all products, partially resulting from lower mortality in the life product line due to lessening impacts of COVID-19 on our insured population.

Sales increased 15.3 percent to $104.0 million in the first quarter of 2022, compared to $90.2 million in the first quarter of 2021.  Persistency in the Colonial Life segment was 78.7 percent for the first quarter of 2022, compared to 78.4 percent for the first quarter of 2021.

The Closed Block segment reported adjusted operating income of $94.1 million in the first quarter of 2022, which excludes the amortization of cost of reinsurance related to the Closed Block individual disability reinsurance transaction of $16.7 million, compared to $97.0 million in the first quarter of 2021, which excludes the impacts from the second phase of the Closed Block individual disability reinsurance transaction of $139.3 million and the amortization of cost of reinsurance related to the reinsurance transaction of $20.0 million.  Premium income for this segment decreased 4.7 percent to $239.9 million in the first quarter of 2022, compared to $251.7 million in the first quarter of 2021, due to policy terminations and maturities, partially offset by rate increases in the long-term care product line.  Net investment income decreased 7.5 percent to $274.8 million in the first quarter of 2022, compared to $297.2 million in the first quarter of 2021, due to a decline in the yield on invested assets and lower miscellaneous investment income, partially offset by an increase in the level of invested assets. 

The interest adjusted loss ratio for the long-term care line of business was 70.2 percent in the first quarter of 2022, compared to an interest adjusted loss ratio of 77.7 percent in the first quarter of 2021, driven primarily by lower claim incidence.  The interest adjusted loss ratio for long-term care for the rolling twelve months ended March 31, 2022, excluding the reserve increase of $2.1 million related to the assumption updates in the third quarter of 2021, was 75.5 percent which is significantly below our long-term expected range.  The interest adjusted loss ratio for the individual disability line of business, excluding the reserve recognition impact from the reinsurance transaction in the first quarter of 2021, was 78.7 percent in the first quarter of 2022, compared to 68.9 percent in the first quarter of 2021 due primarily to volatility as a result of the relatively small amount of business retained.

The Corporate segment reported an adjusted operating loss of $40.4 million in the first quarter of 2022 compared to an adjusted operating loss of $38.9 million in the first quarter of 2021, due primarily to increased employee-related costs and interest and debt expenses.

The company's weighted average number of shares outstanding, assuming dilution, was 203.5 million for the first quarter of 2022, compared to 204.7 million for the first quarter of 2021.  Shares outstanding totaled 201.9 million at March 31, 2022.  During the first quarter of 2022, the Company executed a $50.0 million accelerated share repurchase agreement.

At March 31, 2022, the weighted average risk-based capital ratio for the company's traditional U.S. insurance companies was approximately 400 percent, and the holding companies had available holding company liquidity of $1,269 million.

Book value per common share as of March 31, 2022 was $52.62, compared to $51.77 at March 31, 2021.  Book value per common share excluding AOCI as of March 31, 2022 was $55.50, compared to $51.89 at March 31, 2021.

The company expects positive operating trends in our core business during 2022, with solid premium growth and improving claim experience as impacts from COVID-19 lessen.  The Company also anticipates an increase in after-tax adjusted operating income per share of 15 percent to 20 percent relative to full-year 2021, compared to its previous outlook of an increase of 4 percent to 7 percent.  The increased expectation reflects the Company's strong first quarter performance and an improved outlook for the balance of 2022.