UnumProvident Falls Short

The company says it has made changes in its group income protection operation.
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UnumProvident

(UNM) - Get Report

posted a softer-than-expected fourth-quarter profit, citing weak results in its group income protection business.

The Chattanooga, Tenn., insurer made $138 million, or 43 cents a share, compared with $135 million, or 45 cents a share, a year earlier. Excluding net realized after tax investment gains and losses, earnings rose to 43 cents a share from 39 cents a year earlier but missed the Thomson First Call estimate by 2 cents. Revenue was flat at $2.66 billion.

"Although our results this quarter were slightly below our expectations, most of our businesses and product lines are performing well," said CEO Thomas Watjen. "The results from our U.S. Brokerage -- group income protection line were disappointing, but we have made organizational changes and are taking other actions to restore this business to appropriate levels of profitability. This underperformance does not cause us to change our long-term financial goals, though we do expect a slower rate of earnings growth in 2006 as a result. Looking back on 2005, I am very encouraged by the significant progress we made in many areas of the company and while challenges remain, our confidence in our future is growing."

Premium income in group income protection declined 4% to $629.7 million, reflecting lower sales in recent quarters as the company has focused on improving the profitability of the business. Sales of fully insured group long-term income protection products in the fourth quarter of 2005 declined 14.7% to $68.1 million, compared to $79.8 million in the year-ago quarter, and sales of fully insured group short-term income protection products in the fourth quarter of 2005 increased 14.0% to $32.6 million, compared to $28.6 million in the year-ago quarter. For both of these lines, sales in the core small and mid-sized markets improved significantly relative to the year-ago quarter while sales in the large case market declined. Premium persistency in the group long-term income protection line of business was 84.8% for both the full year 2005 and 2004.

The U.S. Brokerage segment's group life and accidental death and dismemberment lines of business reported operating income of $43.5 million in the fourth quarter of 2005, compared to operating income of $62.1 million in the fourth quarter of 2004. The decline in earnings primarily reflects a decline in revenue in both the group life and accidental death and dismemberment lines and a higher benefit ratio in the AD&D line. The benefit ratio in the group life line in the fourth quarter of 2005 was stable relative to the fourth quarter of 2004. Premium income for these lines of business declined 8.3% to $366.1 million in the fourth quarter of 2005, compared to $399.4 million in the fourth quarter of 2004, reflecting lower sales and persistency in recent quarters as the company has focused on improving the profitability of the business in a competitive market environment.

Sales of group life products in the fourth quarter of 2005 declined 7.8% to $64.2 million, compared to $69.6 million in the year-ago quarter, with a decline in large case sales offsetting increased sales in the core small and mid-sized markets. Premium persistency in the group life line of business was 78.3% for the full year 2005, compared to 84.0% for full year 2004. The decline in persistency was due to higher terminations of some larger cases which had been targeted for significant rate increases.