Unum Group Reports Second Quarter 2022 Results

• Net income of $370.4 million ($1.83 per diluted common share) for the second quarter of 2022; after-tax adjusted operating income was $386.6 million ($1.91 per diluted common share).
• Results reflect improving trend in COVID-related mortality impacts, strong operating performance, and favorable sales and premium trends in core business segments.
• Strong balance sheet and liquidity with holding company liquidity of $1.2 billion and weighted average risk-based capital ratio of approximately 415 percent.
• Full-year 2022 outlook increased; after-tax adjusted operating income per share now expected to grow 40 percent to 45 percent relative to full-year 2021, compared to the previous outlook of an increase of 15 percent to 20 percent.
• Book value per common share of $48.47 declined 9.5 percent over the year-ago quarter; book value per common share excluding accumulated other comprehensive income (loss) (AOCI) grew 9.2 percent over the year-ago quarter to $57.32.

CHATTANOOGA, Tenn., Aug. 2, 2022 /PRNewswire/ -- Unum Group (NYSE: UNM) today reported net income of $370.4 million ($1.83 per diluted common share) for the second quarter of 2022, compared to net income of $182.9 million ($0.89 per diluted common share) for the second quarter of 2021.

Included in net income for the second quarter of 2022 are the after-tax amortization of the cost of reinsurance of $13.1 million ($0.06 per diluted common share) and a net after-tax investment loss on the Company's investment portfolio of $3.1 million ($0.02 per diluted common share).  Included in net income for the second quarter of 2021 are after-tax costs related to the early retirement of debt of $53.2 million ($0.26 per diluted common share), an after-tax impairment loss on the right-of-use (ROU) asset related to one of our operating leases for office space that we are no longer using to support our general operations of $11.0 million ($0.05 per diluted common share), the net tax expense related to a U.K. tax rate increase of $24.2 million ($0.12 per diluted common share), the after-tax amortization of the cost of reinsurance of $15.5 million ($0.08 per diluted common share), as well as a net after-tax investment gain on the Company's investment portfolio of $0.6 million ($0.01 per diluted common share).  Excluding the items above, after-tax adjusted operating income was $386.6 million ($1.91 per diluted common share) in the second quarter of 2022, compared to $286.2 million ($1.39 per diluted common share) in the second quarter of 2021.

"Our strong second quarter results were driven by continued growth in premium income across our core business segments and positive benefits experience," said Richard P. McKenney, president and chief executive officer. "The current business environment remains favorable, and our capital strength provides continued financial flexibility. These factors, combined with our team's consistent execution, enable us to increase our outlook for growth in 2022."

RESULTS BY SEGMENT

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 Segment

Unum US reported adjusted operating income of $295.4 million in the second quarter of 2022, an increase of 64.8 percent from $179.3 million in the second quarter of 2021.  Premium income increased 3.3 percent to $1,572.3 million in the second quarter of 2022, compared to $1,522.1 million in the second quarter of 2021.  Net investment income decreased 8.6 percent to $167.8 million in the second quarter of 2022, compared to $183.6 million in the second quarter of 2021.

Within the Unum US operating segment, the group disability line of business reported a 79.5 percent increase in adjusted operating income to $107.5 million in the second quarter of 2022, compared to $59.9 million in the second quarter of 2021.  Premium income for the group disability line of business increased 5.1 percent to $706.5 million in the second quarter of 2022, compared to $672.2 million in the second quarter of 2021 due primarily to in-force block growth, favorable persistency, and higher sales across all product lines.  Net investment income decreased 6.9 percent to $87.5 million in the second quarter of 2022, compared to $94.0 million in the second quarter of 2021, driven by lower miscellaneous investment income and a decrease in the yield on invested assets.  The benefit ratio for the second quarter of 2022 was 66.4 percent, compared to 74.7 percent in the second quarter of 2021, due primarily to favorable claim recoveries in the group long-term disability product line as well as lower claims incidence in both the group short-term and long-term disability product lines.  Group long-term disability sales were $63.2 million in the second quarter of 2022, an increase of 50.5 percent from $42.0 million in the second quarter of 2021.  Group short-term disability sales were $36.3 million in the second quarter of 2022, an increase of 16.3 percent from $31.2 million in the second quarter of 2021.  Persistency in the group long-term disability product line was 90.9 percent for the first half of 2022, compared to 90.1 percent for the first half of 2021.  Persistency in the group short-term disability product line was 89.2 percent for the first half of 2022, compared to 87.2 percent for the first half of 2021.

The group life and accidental death and dismemberment line of business reported an adjusted operating income of $67.3 million in the second quarter of 2022, compared to $5.2 million in the second quarter of 2021.  Premium income for this line of business increased 1.5 percent to $463.4 million in the second quarter of 2022, compared to $456.6 million in the second quarter of 2021 driven by in-force block growth, partially offset by lower persistency.  Net investment income decreased 7.4 percent to $24.9 million in the second quarter of 2022, compared to $26.9 million in the second quarter of 2021, due to lower miscellaneous investment income, partially offset by a higher level of invested assets.  The benefit ratio in the second quarter of 2022 was 70.7 percent, compared to 85.2 percent in the second quarter of 2021, largely 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 20.7 percent in the second quarter of 2022 to $77.0 million, compared to $63.8 million in the second quarter of 2021.  Persistency in the group life product line was 89.4 percent for the first half of 2022, compared to 90.1 percent for the first half of 2021.  Persistency in the accidental death and dismemberment product line was 88.2 percent for the first half of 2022, compared to 89.6 percent for the first half of 2021.

The supplemental and voluntary line of business reported an increase of 5.6 percent in adjusted operating income to $120.6 million in the second quarter of 2022, compared to $114.2 million in the second quarter of 2021.  Premium income for the supplemental and voluntary line of business increased 2.3 percent to $402.4 million in the second quarter of 2022, compared to $393.3 million in the second quarter of 2021, with growth across all product lines due primarily to generally favorable persistency and higher sales.  Net investment income decreased 11.6 percent to $55.4 million in the second quarter of 2022, compared to $62.7 million in the second quarter of 2021, due primarily to lower miscellaneous investment income, a decline on yield on invested assets, and a decrease in the level of invested assets.  The benefit ratio for the voluntary benefits product line was 40.8 percent in the second quarter of 2022, compared to 44.2 percent for the second quarter of 2021, due primarily to favorable claims experience in the critical illness product line.  The benefit ratio for the individual disability product line was 41.3 percent for the second quarter of 2022, compared to 48.4 percent for the second quarter of 2021, due primarily to lower claims activity.  The benefit ratio for the dental and vision product line was 72.9 percent for the second quarter of 2022, compared to 77.1 percent for the second quarter of 2021, due primarily to lower claims incidence.  Relative to the second quarter of 2021, sales in the voluntary benefits product line increased 23.6 percent in the second quarter of 2022 to $54.0 million.  Sales in the individual disability product line increased 25.5 percent in the second quarter of 2022 to $18.7 million.  Sales in the dental and vision product line totaled $12.9 million for the second quarter of 2022, a decrease of 0.8 percent compared to the second quarter of 2021.  Persistency in the voluntary benefits product line was 75.8 percent for the first half of 2022, compared to 74.5 percent for the first half of 2021.  Persistency in the individual disability product line was 89.4 percent for the first half of 2022, compared to 89.0 percent for the first half of 2021.  Persistency in the dental and vision product line was 82.0 percent for the first half of 2022, compared to 86.6 percent for the first half of 2021. 

Unum International

The Unum International segment reported adjusted operating income of $24.9 million in the second quarter of 2022, an increase of 0.4 percent from $24.8 million in the second quarter of 2021.  Premium income decreased 2.2 percent to $179.4 million in the second quarter of 2022, compared to $183.5 million in the second quarter of 2021.  Net investment income increased 42.3 percent to $50.8 million in the second quarter of 2022, compared to $35.7 million in the second quarter of 2021.  Sales increased 8.2 percent to $35.8 million in the second quarter of 2022, compared to $33.1 million in the second quarter of 2021.  For the second quarter of 2022, Unum International results were unfavorably impacted by fluctuations in the British pound sterling to U.S. dollar exchange rate relative to the second quarter of 2021.

The Unum UK line of business reported adjusted operating income, in local currency, of £19.3 million in the second quarter of 2022, an increase of 14.9 percent from £16.8 million in the second quarter of 2021.  Premium income was £125.0 million in the second quarter of 2022, an increase of 8.6 percent from £115.1 million in the second quarter of 2021, due to in-force block growth.  Net investment income was £39.2 million in the second quarter of 2022, an increase of 61.3 percent from £24.3 million in the second quarter of 2021, due primarily to higher investment income from inflation index-linked bonds.  The benefit ratio in the second quarter of 2022 was 89.7 percent, compared to 82.5 percent in the second quarter of 2021, due to higher inflation-linked experience in benefits, lower claim terminations in the group long-term disability product line, and higher claim incidence in our group critical illness product line.  Sales increased 20.3 percent to £25.5 million in the second quarter of 2022, compared to £21.2 million in the second quarter of 2021.  Persistency in the group long-term disability product line was 87.4 percent for the first half of 2022, compared to 89.4 percent for the first half of 2021.  Persistency in the group life product line was 88.1 percent for the first half of 2022, compared to 84.3 percent for the first half of 2021.  Persistency in the supplemental product line was 91.5 percent for the first half of 2022, compared to 89.2 percent for the first half of 2021.

Colonial Life Segment

Colonial Life reported a 5.5 percent increase in adjusted operating income to $101.1 million in the second quarter of 2022, compared to $95.8 million in the second quarter of 2021.  Premium income increased 1.9 percent to $427.6 million in the second quarter of 2022, compared to $419.7 million in the second quarter of 2021, due to higher sales in prior periods and higher overall persistency.  Net investment income decreased 7.0 percent to $38.7 million in the second quarter of 2022, compared to the $41.6 million in the second quarter of 2021, due to lower miscellaneous investment income and a decline in the yield on invested assets, partially offset by an increase in the level of invested assets.  The benefit ratio was 47.6 percent in the second quarter of 2022, compared to 51.7 percent in the second quarter of 2021, due primarily to favorable claim experience across all products.

Sales increased 6.4 percent to $118.2 million in the second quarter of 2022, compared to $111.1 million in the second quarter of 2021.  Persistency in Colonial Life was 78.6 percent for the first half of 2022, compared to 78.3 percent for the first half of 2021.

Closed Block Segment

The Closed Block segment reported adjusted operating income of $79.3 million in the second quarter of 2022, compared to $111.2 million in the second quarter of 2021.  Excluded from adjusted operating income for the second quarter of 2022 and 2021 is the amortization of the cost of reinsurance related to the Closed Block individual disability reinsurance transaction of $16.6 million and $19.7 million, respectively.  Premium income for this segment decreased 4.5 percent to $238.0 million in the second quarter of 2022, compared to $249.1 million in the second quarter of 2021, due to policy terminations and maturities, partially offset by rate increases.  Net investment income decreased 1.1 percent to $291.5 million in the second quarter of 2022, compared to $294.7 million in the second 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 85.9 percent in the second quarter of 2022, compared to an interest adjusted loss ratio of 74.6 percent in the second quarter of 2021, driven by lower claim terminations.  The interest adjusted loss ratio for long-term care for the rolling twelve months ended June 30, 2022, excluding the reserve increase of $2.1 million related to the assumption updates in the third quarter of 2021, was 78.3 percent which is below our long-term expected range.  The interest adjusted loss ratio for the individual disability line of business was 79.5 percent in the second quarter of 2022, compared to 69.6 percent in the second quarter of 2021, due primarily to volatility as a result of the relatively small amount of business retained.

Corporate Segment   

The Corporate segment reported an adjusted operating loss of $36.9 million in the second quarter of 2022, compared to an adjusted operating loss of $48.5 million in the second quarter of 2021, which excludes the before-tax cost related to the early retirement of debt of $67.3 million and the before-tax impairment loss on the ROU asset of $13.9 million.

OTHER INFORMATION

Shares Outstanding

The Company's weighted average number of shares outstanding, assuming dilution, was 202.4 million for the second quarter of 2022, compared to 205.3 million for the second quarter of 2021.  Shares outstanding totaled 200.2 million at June 30, 2022.  During the second quarter of 2022, the final settlement of the accelerated share repurchase agreement executed in the first quarter of 2022 was completed with the delivery to us of approximately 0.4 million shares at a cost of $12.5 million.  In addition, the Company repurchased approximately 1.4 million shares in open market transactions at a cost of approximately $44.9 million.  For the first half of 2022, the Company has repurchased approximately 3.1 million shares at a cost of $94.9 million.

Capital Management

At June 30, 2022, the weighted average risk-based capital ratio for the Company's traditional U.S. insurance companies was approximately 415 percent, and the holding companies had available holding company liquidity of $1,177.0 million.

Book Value

Book value per common share as of June 30, 2022 was $48.47, compared to $53.57 at June 30, 2021.  Book value per common share excluding AOCI as of June 30, 2022 was $57.32, compared to $52.49 at June 30, 2021.

Outlook 

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 40 percent to 45 percent relative to full-year 2021, compared to its previous outlook of an increase of 15 percent to 20 percent.  The increased expectation reflects the Company's strong first half performance and an improved outlook for the balance of 2022.

NON-GAAP FINANCIAL MEASURES

We analyze our performance using non-GAAP financial measures.  A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.  The non-GAAP financial measure of "after-tax adjusted operating income" differs from net income as presented in our consolidated operating results and income statements prepared in accordance with GAAP due to the exclusion of investment gains or losses and the amortization of the cost of reinsurance as well as certain other items as specified in the reconciliations in the Financial Highlights section below.  Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives.  We believe after-tax adjusted operating income is a better performance measure and better indicator of the profitability and underlying trends in our business.

Investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments.  Our investment focus is on investment income to support our insurance liabilities as opposed to the generation of investment gains or losses.  Although we may experience investment gains or losses which will affect future earnings levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature, and we need to earn the interest rates assumed in calculating our liabilities.

We have exited a substantial portion of our Closed Block individual disability product line through the two phases of the reinsurance transaction that were executed in December 2020 and March 2021, respectively.  As a result, we exclude the amortization of the cost of reinsurance that was recognized upon the exit of the business related to the ceded reserves for the cohort of policies on claim status.  We believe that the exclusion of the amortization of the cost of reinsurance provides a better view of our results from our ongoing businesses.

We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.

CONFERENCE CALL INFORMATION

Members of Unum Group senior management will host a conference call on Wednesday, August 3, at 8:00 a.m. (Eastern Time) to discuss the results of operations for the second quarter.  Topics may include forward-looking information, such as the Company's outlook on future results, trends in operations, and other material information.  

The dial-in number for the conference call is 1-844-200-6205 for callers in the U.S. (access code 573667).  For callers in Canada the dial-in is 1-833-950-0062 (access code 573667). For all other callers, the dial-in number is 1-929-526-1599 (access code 573667).  A live webcast of the call will also be available at www.investors.unum.com in a listen-only mode.  It is recommended that webcast viewers access the Investors section of the Company's website and opt-in to the webcast approximately 10 minutes prior to the start of the call.  A replay of the webcast will be available on the Company's website, and will be available through Wednesday, August 10 by dialing 1-866-813-9403 (U.S.), 1-226-828-7578 (Canada), 0204-525-0658 (U.K. local), or +44-204-525-0658 (All Other Locations) - access code 951720.

In conjunction with today's earnings announcement, the Company's Statistical Supplement for the second quarter of 2022 is available on the Investors section of the Company's website.

ABOUT UNUM GROUP

Unum Group (www.unum.com) an international provider of workplace benefits and services, has been helping workers and their families for more than 170 years. Through its Unum and Colonial Life brands, the company offers disability, life, accident, critical illness, dental, vision and stop-loss insurance; leave and absence management support and behavioral health services. In 2021, Unum reported revenues of $12.0 billion and paid $8.2 billion in benefits. The Fortune 250 company is one of the 2022 World's Most Ethical Companies, recognized by Ethisphere®.

For more information, connect with us on Facebook (www.facebook.com/unumbenefits), Twitter (www.twitter.com/unumnews) and LinkedIn (www.linkedin.com/company/unum).

SAFE HARBOR STATEMENT

Certain information in this news release constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are those not based on historical information, but rather relate to our outlook, future operations, strategies, financial results, or other developments and speak only as of the date made.  These forward-looking statements, including statements about anticipated growth in after-tax adjusted operating income per share, are subject to numerous assumptions, risks, and uncertainties, many of which are beyond our control.  The following factors, in addition to other factors mentioned from time to time, may cause actual results to differ materially from those contemplated by the forward-looking statements: (1) the impact of COVID-19 on our business, financial position, results of operations, liquidity and capital resources, and overall business operations; (2) sustained periods of low interest rates; (3) fluctuation in insurance reserve liabilities and claim payments due to changes in claim incidence, recovery rates, mortality and morbidity rates, and policy benefit offsets due to, among other factors, the rate of unemployment and consumer confidence, the emergence of new diseases, epidemics, or pandemics, new trends and developments in medical treatments, the effectiveness of our claims operational processes, and changes in governmental programs; (4) unfavorable economic or business conditions, both domestic and foreign, that may result in decreases in sales, premiums, or persistency, as well as unfavorable claims activity; (5) changes in, or interpretations or enforcement of laws and regulations; (6) our ability to hire and retain qualified employees; (7) a cyber attack or other security breach could result in the unauthorized acquisition of confidential data; (8) the failure of our business recovery and incident management processes to resume our business operations in the event of a natural catastrophe, cyber attack, or other event; (9) investment results, including, but not limited to, changes in interest rates, defaults, changes in credit spreads, impairments, and the lack of appropriate investments in the market which can be acquired to match our liabilities; (10) increased competition from other insurers and financial services companies due to industry consolidation, new entrants to our markets, or other factors; (11) changes in our financial strength and credit ratings; (12) our ability to develop digital capabilities or execute on our technology systems upgrades or replacements; (13) actual experience in the broad array of our products that deviates from our assumptions used in pricing, underwriting, and reserving; (14) availability of reinsurance in the market and the ability of our reinsurers to meet their obligations to us; (15) ability to generate sufficient internal liquidity and/or obtain external financing; (16) damage to our reputation due to, among other factors, regulatory investigations, legal proceedings, external events, and/or inadequate or failed internal controls and procedures; (17) recoverability and/or realization of the carrying value of our intangible assets, long-lived assets, and deferred tax assets; (18) effectiveness of our risk management program; (19) contingencies and the level and results of litigation; (20) ineffectiveness of our derivatives hedging programs due to changes in the economic environment, counterparty risk, ratings downgrades, capital market volatility, changes in interest rates, and/or regulation; (21) fluctuation in foreign currency exchange rates; and (22) our ability to meet environment, social, and governance standards and expectations of investors, regulators, customers, and other stakeholders.

For further discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Part 1, Item 1A "Risk Factors" of our annual report on Form 10-K for the year ended December 31, 2021.  The forward-looking statements in this news release are being made as of the date of this news release, and we expressly disclaim any obligation to update or revise any forward-looking statement contained herein, even if made available on our website or otherwise.

SOURCE Unum Group

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