Unum Group offered no surprises on Tuesday in its fourth quarter financial report, as Chattanooga's biggest company revealed that it had met Wall Street analysts' best guess for its net income of 84 cents per share.
"We continued to generate solid results within our core operating business segments and saw improving sales trends throughout most of the company," said Tom Watjen, president and CEO of Unum Group.
Unum's earnings per share remained strong thanks to surprising growth in its Unum UK segment and U.S. citizens' longer lifespans, in addition to a massive stock buyback program and dividend increases. But despite the promising signs of future growth, much of the disability insurer's business was flat to down during the quarter, reflecting continued trepidation among the insurer's corporate customers, low interest rates and one-time charges.
After-tax operating income fell slightly to $223.8 million, down from $225 million in the fourth quarter of 2012. Revenue also dipped down during the quarter to $2.58 billion from $2.63 billion in the fourth quarter of 2012.
But during the year, Unum repurchased about 11.2 million shares at a cost of $319 million, and the company expects growth in after-tax operating earnings per share for 2014 to be in the range of 5 percent to 10 percent.
For all of 2013, revenue slipped to $10.35 billion from $10.5 billion in 2012, and after tax operating income inched down to $882.5 million from $887.5 million. But even as the insurance giant continued to shrink gracefully, after-tax operating income per share grew to a healthy $3.32 per share, up from $3.15 per share in 2012.
Unum's disciplined underwriting process and the company's mantra of avoiding sales for the sake of sales could pay off if the economy heats up in 2014. Since Unum signs deals with employers, not individual employees, the natural growth of the economy -- and the businesses in it -- will naturally lead to organic, rapid growth in Unum's revenue, and especially earnings.
"Although profitably growing our business remains a challenge, I'm very encouraged by the sales momentum we built in the second half of the year," Watjen wrote in a letter to employees. "This growth is coming without sacrificing the solid profitability and returns we've worked so hard to achieve. Looking ahead, I am confident that we are doing all the right things to assure we make this upcoming year another successful one."
Unum US boasted another year-over-year increase of operating income thanks, in part, to an increase in premium income to $1.12 billion. The division reported operating income of $226.7 million compared to $212.2 million in the fourth quarter of 2012.
Unum turned around its ailing operations in the United Kingdom thanks to improved results in its group life business there, reporting operating income of $35.9 million in the fourth quarter compared to $35 million during the same period in 2012.
Though Colonial Life's bottom line suffered due to an adjustment to its reserves, an increase in premium income and stable risk levels led the company to grow operating income excluding the adjustment to $69.4 million, up from $68.3 million in the fourth quarter of 2012.
In total, the company increased its reserves by $95.5 million after a number of state regulators began requiring insurers to cross-check specified insurance policies with the Social Security Administration's death master file to determine if benefits were due.
Unum's closed block segment, which reflects policies the company no longer sells, reported operating income of $26.8 million compared to $28.8 million in the fourth quarter of 2012, reflecting the expected run-off in the number of active customers.
"We enter 2014 with strong positions in our markets, a solid financial base which gives us tremendous financial flexibility to support our businesses, while also returning capital to our shareholders, and a commitment to maintaining the discipline which has been at the heart of our past success," Watjen said.
Contact staff writer Ellis Smith at email@example.com, or 423-757-6315.