Chattanooga's Unum sees growth in core business; share price 'a disappointment' so far in 2018

Chattanooga's Unum sees growth in core business; share price 'a disappointment' so far in 2018

May 24th, 2018 by Mike Pare in Breaking News

Software engineer Billy Smith works in a half-cubicle at Unum headquarters in Chattanooga. (Staff File Photo by Doug Strickland)

Photo by Doug Strickland /Times Free Press.

This story was updated May 24, 2018, at 10:43 p.m. with more information.

“With the outstanding results generated by our core businesses in 2017, we entered 2018 better positioned than ever for the long term. There is tremendous opportunity to grow our company.”
Unum Group CEO Rick McKenney

Unum Group's chief executive said Thursday he expects the insurer's core operations to continue to grow in 2018, though investors will have to wait and see if its stock price rebounds.

"As we continue to move through the year, we'll see progress on the different pieces and we'll have to see how the stock reacts to that," said CEO Rick McKenney at the company's annual meeting in the city.

Unum steps

› Unum’s board of directors Thursday authorized the repurchase of up to $750 million of the company’s outstanding common stock through Nov. 24, 2019.

› The board also authorized an increase of 13 percent in the quarterly dividend paid on its common stock. The new rate of 26 cents per common share, or $1.04 per share on an annual basis, will be effective with the dividend expected to be paid in the third quarter 2018.

McKenney, who became CEO at Chattanooga's biggest locally based company in 2015, termed 2017 an "outstanding year" in which the insurer saw record revenues and net income.

The company that employs more than 2,500 people in Chattanooga posted revenues of $11.3 billion and paid nearly $7 billion in benefits last year. Unum reported earnings-per share-growth of more than 10 percent, net income of nearly $1 billion, and returned roughly $600 million in capital to shareholders in 2017.

"With the outstanding results generated by our core businesses in 2017, we entered 2018 better positioned than ever for the long term," said McKenney. "There is tremendous opportunity to grow our company."

But McKenney noted the recent fall in the company's share price, which has dropped from about $55 per share at the start of the year to closing at $38.53 per share Thursday, citing Unum's closed block of long-term care policies.

"We've always been vocal about how we are managing our closed block of legacy long-term care policies, and we have been very active in optimizing performance of this block over time," he said. "Let's be clear that this remains a challenging business. We have been taking the actions necessary to ensure that it doesn't detract from the solid performance of our core businesses, which continue to grow profitably."

Jack McGarry, Unum's executive vice president and chief financial officer, said that "without question, the performance of our stock price so far in 2018 has been a disappointment."

He said that Unum recently reported a higher claim incidence in its closed block of long-term claims. That report along with nervous market segments surrounding the long-term care industry resulted in the selling pressure on the company's stock, McGarry said.

But, he said, it's Unum's core franchise that drives the company.

Unum's portfolio includes disability, life, accident and critical illness, dental and vision coverage.

Unum CEO Rick McKenney

Unum CEO Rick McKenney

Photo by Staff File Photo /Times Free Press.

Jim Campbell, managing partner of Campbell Rooks Wealth Management, said Unum officials at the meeting "addressed the monkey in the room so to speak" with the long-term care portfolio and "reserves they may potentially make."

Campbell said the non-legacy operating business is "quite solid, but they need to get the long-term care policy business off their back before the stock actually performs."

He said that a recent debt offering by the company raised more than Unum originally intended.

"The debt market feels just fine about long-term care," Campbell said. "Over time the equity price will work itself out."

McKenney said that through its three principal businesses – Unum US, Unum UK and Colonial Life – the insurer "helps protect more than 35 million workers and their families in the event of illness or injury through our disability, life, accident and critical illness coverage."

He said that through the acquisition over the last two years of National Dental Plan in the U.K. and Starmount Life in the U.S., Unum has built the foundation to meet the growing demand for dental and vision insurance, which is a key component of its growth strategy.

McKenney said many of the people who received disability payments last year told Unum that they would have faced financial catastrophe had it not been for the insurer's disability coverage.

"More financial responsibility is shifting to individuals in other ways, too," he said.

McKenney said that in 2006, 4 percent of employees were in high-deductible health plans. Today, the number is 29 percent and that will continue to increase, he said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.


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