Chattanooga-based Unum Group beat Wall Street estimates in the second quarter by three cents per share, posting after-tax operating income of $225.3 million, or 79 cents per share.
Some of the per-share gains were from a $1 billion stock buyback during the year, which boosted the price of shares even as earnings slipped by $10 million from the second quarter of 2011.
Those declines stemmed from higher claims throughout Unum's big business units, according to the company's earnings release.
Bolstered by the success of its stock buyback program which was set to expire, the world's biggest disability insurer announced it would spend another $750 million from its war chest to purchase additional stock through Jan. 31, 2014.
That's in addition to a 24 percent dividend increase announced during the quarter.
"If you take a look at everything except for the U.K., the line items were very much in line," said Steven Schwartz, an analyst with Raymond James. "I thought things were pretty good, actually."
For the six months ending June 30, revenue at Unum Group increased $101.6 million to $5.23 billion over the same period the prior year, but higher payouts forced net income down for the period to $430.3 million from $451.2 million the prior year.
Tom Watjen, president and CEO of Unum Group, wrote in a letter to employees that the quarter was positive overall, "but included some mixed results."
Those results forced the insurer to lower it outlook for the year.
Unum now expects after-tax operating income to fall slightly below the range of 6 percent to 12 percent - even including the expected stock-enhancing effects of the stock buyback.
"Given the weakness we are seeing primarily in our U.K. business, though, we are slightly lowering our operating earnings per share outlook for the year," Watjen wrote to employees.
While income at the Unum UK unit continued its downward trend, gains in Unum's larger units made up for some of the decline.
"I am generally pleased with our performance around the company," Watjen said, "and while Unum UK results continue to fall below expectations, I am confident that we will improve the performance in this important business."
Operating income for the UK unit tumbled 46 percent to $30 million, which was only partially offset by single-digit gains elsewhere in the company.
In local currency, premium income at Unum UK actually rose 1.5 percent, though converting British Pounds to U.S. dollars turns that into a 1.5 percent decline to $173.2 million for the quarter.
The big losses came from new claims from customers, and a big jump in the company's benefit ratio in the second quarter to 85.4 percent, up from 69.8 percent in the second quarter of 2011.
That's "not pretty," said Schwartz.
"The disappointment in the UK, that's been bad and got worse," Schwartz said.
While Unum's UK segment has struggled through the recession, the Unum U.S. unit saw operating operating income jump to $212.7 million in the second quarter, up 3.5 percent from the second quarter of 2011.
Group disability operating income fell by $8.3 million to $70.4 million, but that was offset by a combined $15.4 million increase in operating income for the group life and accidental death and dismemberment line of business and supplemental and voluntary line of business, according to an earnings release.
At Colonial Life, operating income declined 6 percent to $67.6 million from higher claims payouts, even as premiums increased 5.3 percent to $296.9 million.
Unum's stock portfolio was battered by the global slump and reported an operating loss of $25.9 million in the second quarter, compared to a loss of $17 million in the second quarter of 2011.
Unum's stock closed down 1.54 percent at $18.60, down 29 cents, in Wednesday's trading ahead of the quarterly earnings report. The stock has trended down since May, and is trading within 32 cents of its 52-week low.