More, please: Workers say benefits aren’t enough coverage - Steven Wevodau
- Press Release
- Source: Unum
- On 2:00 pm EDT, Tuesday September 1, 2009
CHATTANOOGA, Tenn.–(BUSINESS WIRE)–A recent study commissioned by employee benefits leader Unum (NYSE: UNM - News) shows that most employees do not feel their employer-provided benefits would provide sufficient financial protection if they missed work because of illness or injury. The survey also reveals that nearly 60 percent of workers would consider buying more coverage through work, if they were offered the chance.
“Employers invest a lot of time and money in building the right benefits package to help their workforce stay financially stable and help protect them from the financial fallout of illness and injury,” said Neiciee Durrence, vice president, Voluntary Practice Leader for Unum. “As we head into the fall benefits enrollment season, this survey offers a strong message to employers about the need to offer ways to cover gaps in those benefits plans.”
Only 32 percent of employees surveyed said the non-medical benefits they receive through work would provide adequate financial resources for them and their families should they become unable to work due to injury, illness or maternity.
Fifty-three percent say they would not have enough money to meet their basic needs if they were unable to work for an extended time, and another 15 percent were unsure if they could weather an extended period of missed work.
If their employer offered them the opportunity, 59 percent of employees indicate they would consider purchasing additional insurance to cover themselves financially.
The survey also found that:
- Even employees with higher annual incomes ($100,000 or more) felt unsure about their ability to withstand the loss of income, with 41 percent indicating that they would not be adequately protected by the benefits they received from their employer.
- Among younger employees (21-29), 63 percent say they would consider purchasing more coverage if it were offered through work. Among older employees, (45-64) 54 percent would consider purchasing more coverage.
As economic realities prompt businesses to trim budgets and benefits, voluntary coverages that employees can choose at work and fund themselves will play a growing role in filling the financial gaps, Durrence said.
During the Society for Human Resource Management conference in June, Unum asked human resources professionals whether they think employee interest in voluntary benefits will change in the next few years, Durrence said.
“About 63 percent surveyed said they expect employees to become more interested in voluntary coverages,” she said.
About Unum
Unum (www.unum.com) is one of the leading providers of employee benefits products and services, and the largest provider of group and individual disability insurance, in the United States. Through its subsidiaries, Unum paid $6 billion in total benefits to customers in 2008.
About the survey
Unum participated in a multi-sponsor online survey conducted by Invoke Solutions between June 17-23, 2009. The results are based on a sample of 311 consumers between the ages of 21-64 who are employed full time.
Contact:
Unum MC Guenther or Mary Fortune, 423-294-6300 Toll free: 866-750-8686
POSTED BY STEVEN WEVODAU
Simply Unum Adds New Disability Coverage and ‘Benefit Credits’ - posted by Steven Wevodau
- Press Release
- Source: Unum
- On 2:00 pm EDT, Tuesday October 13, 2009
CHATTANOOGA, Tenn.–(BUSINESS WIRE)–The Simply Unum employee benefits platform now includes new voluntary disability coverage, and offers employer-funded Benefit CreditsSM that employees can apply to the cost of the coverage they choose.
“These new products on Simply Unum are great enhancements to a flexible and streamlined benefits platform that helps small and mid-sized businesses offer broad choice, effective education and cost control,” said Mike Simonds, Unum (NYSE: UNM - News) senior vice president. “Simply Unum was originally developed in response to the clear need for an integrated approach to benefits for smaller businesses, and these new products really extend our offering.”
Offering funding choices that include employer-paid, a range of shared funding and employee-paid coverage, these new disability products are also the first on the Simply Unum platform to use the Benefit Credits approach. With Benefit Credits, employers can offer a fixed dollar credit amount to employees, who then apply the credit to the coverage they choose.
“Employers and their advisors are looking for creative solutions to provide meaningful benefits while managing costs in the face of rising health care premiums,” Simonds said. “Now, with Simply Unum’s enhanced disability offering, customers can get simple administration and breadth of product choice at competitive pricing along with best-in-class enrollment and communication support.”
The new voluntary disability coverage and Benefit Credits launched Monday in Colorado, Utah, Wyoming, Arkansas, Texas, Oklahoma, Michigan, Ohio and West Virginia. The products will be expanded nationally in 2010.
“By offering these products that help our customers predict budgets and increase employee choice, we have new ways to help them cost-effectively offer the benefits their employees need and want,” Simonds said.
Simply Unum launched nationwide in April 2008. Now, more than 3,000 companies are Simply Unum customers across the country, and the benefits solution is available in 47 states.
Created specifically for employers with fewer than 500 employees, Simply Unum provides a base of group disability and life insurance coupled with voluntary benefits. With more than 28,000 product combinations possible, an employer can offer benefit options that best meet the specific needs of their workforce. The platform simplifies administration of benefits for employers, as Simply Unum operates on a single technology, creating one path from benefit package design to enrollment to ongoing billing and administration.
About Unum
Unum (www.unum.com) is one of the leading providers of employee benefits products and services, and the largest provider of group and individual disability insurance, in the United States. Through its subsidiaries, Unum paid $6 billion in total benefits to customers in 2008.
Contact:
Unum Media: MC Guenther or Mary Fortune, 423-294-6300 Toll free: 866-750-8686
POSTED BY STEVEN WEVODAU
Assurant Reports Q3 2009 Net Operating Income of $126.2 Million, or $1.07 Per Diluted Share
Net Income of $144.7 Million, or $1.22 Per Diluted Share
- Press Release
- Source: Assurant, Inc.
- On 5:00 pm EDT, Wednesday October 28, 2009
NEW YORK, Oct. 28 /PRNewswire-FirstCall/ — Assurant, Inc. (”Assurant”) (NYSE: AIZ - News), a premier provider of specialized insurance and insurance-related products and services, today reported results for the third quarter and first nine months of 2009.
Third Quarter Results
Net income in the third quarter 2009 was $144.7 million, or $1.22 per diluted share, versus a net loss of $111.4 million, or ($0.94) per diluted share, in the third quarter 2008. Quarterly results benefited from a $12.9 million after-tax realized gain in the investment portfolio versus a $194.5 million after-tax loss in the third quarter 2008. In addition, there were no reportable catastrophe losses compared to $94.8 million after-tax of reportable catastrophe losses and reinstatement premiums in the third quarter 2008.
Net operating income(1) for the third quarter 2009 was $126.2 million, or $1.07 per diluted share, compared to third quarter 2008 net operating income of $83.1 million, or $0.70 per diluted share. The improvement reflects the absence of reportable catastrophe losses at Assurant Specialty Property and increased profitability at Assurant Solutions. Less favorable results at Assurant Employee Benefits and a loss at Assurant Health partially offset the increase.
“The third quarter 2009 was good on several fronts as we grew our capital position, increased book value per share and generated a consolidated annualized operating ROE(2) of 10.7 percent,” said Robert B. Pollock, Assurant’s president and chief executive officer.
“Assurant Specialty Property delivered excellent results while Assurant Solutions continued to show improved performance. Assurant Health and Assurant Employee Benefits are managing through an especially challenging landscape. Both were affected by economic pressures on consumers and small businesses.”
Net earned premiums in the third quarter 2009 were $1.9 billion, a 6 percent decrease from $2.0 billion in the same 2008 period, declining across all Assurant businesses driven primarily by the difficult economic environment.
Net investment income in the third quarter 2009 decreased 10 percent to $172.9 million compared to $192.3 million in the third quarter 2008 due to lower average invested assets and lower yields.
Nine-Month Results
Net income in the first nine months of 2009 was $418.6 million, or $3.54 per diluted share, an increase of 58 percent compared to $265.4 million, or $2.22 per diluted share, for the first nine months of 2008. The increase reflects $217.6 million fewer after-tax realized losses in the investment portfolio, $83.5 million of after-tax income from a legal settlement, and no reportable catastrophe losses in 2009. Nine-month results in 2008 included $94.8 million of net after-tax reportable catastrophe losses and reinstatement premiums.
Net operating income for the first nine months of 2009 decreased 25 percent to $363.3 million, or $3.07 per diluted share, from $483.7 million, or $4.06 per diluted share, for the first nine months of 2008. The decrease was driven primarily by net operating losses at Assurant Health and lower operating earnings at Assurant Employee Benefits.
Net earned premiums for the first nine months of 2009 were $5.6 billion, a 5 percent decrease from $5.9 billion in the first nine months of 2008, declining across all Assurant businesses due primarily to the difficult economic conditions.
Net investment income for the first nine months of 2009 decreased 11 percent to $526.3 million, from $591.3 million in the first nine months of 2008, primarily due to decreases in average invested assets and investment yields.
The following chart provides a reconciliation of net operating income to net income for Assurant:
For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
(UNAUDITED)
(amounts in millions, net of tax)
Assurant Solutions $31.6 $20.4 $89.8 $100.3
Assurant Specialty
Property 103.2 30.9 299.1 286.7
Assurant Health (4.8) 30.2 (0.5) 95.2
Assurant Employee
Benefits 11.5 21.5 30.6 56.4
Corporate and other (9.8) (14.8) (39.3) (39.5)
Amortization of
deferred gains on
disposal of
businesses 4.4 4.8 13.2 14.4
Interest expense (9.9) (9.9) (29.6) (29.8)
---- ---- ----- -----
Net operating
income 126.2 83.1 363.3 483.7
Adjustments:
Net realized gains
(losses) on
investments 12.9 (194.5) (27.3) (244.9)
Tax benefit realized
from the sale of an
inactive subsidiary - - - 26.6
Change in tax
valuation allowance 7.0 - (0.9) -
Legal settlement and
related expenses (1.4) - 83.5 -
---- -- ---- --
Net income
(loss) $144.7 $(111.4) $418.6 $265.4
====== ======= ====== ======
A schedule of disclosed items that affected Assurant’s quarterly results by segment for the last seven quarters can be found in the Company’s financial supplement on page 20.
Assurant Solutions
Assurant Solutions third quarter 2009 net operating income was $31.6 million, a 55 percent increase from third quarter 2008 net operating income of $20.4 million. Results for the third quarter of 2008 included a charge of $7.7 million after-tax related to the acquisition of GE’s Warranty Management Group. Results for the quarter improved as the domestic combined ratio benefited from favorable underwriting in the service contract business. Net operating income for the first nine months was $89.8 million, down 10 percent from $100.3 million in 2008. Lower investment income and an increase in the international combined ratio due to continued unfavorable credit insurance loss experience in the United Kingdom drove the decrease.
Third quarter 2009 net earned premiums decreased 5 percent to $669.3 million, versus $707.1 million in 2008. Nine-month net earned premiums decreased 5 percent to $2.0 billion. Decreases for the quarter and nine months were primarily driven by the application of universal life insurance accounting to new preneed business sold in 2009 and the unfavorable impact of foreign exchange. Absent these two factors, net earned premiums for the third quarter of 2009 would have increased 4 percent and premiums for the first nine months of 2009 would have increased 5 percent.
Assurant Specialty Property
Assurant Specialty Property third quarter 2009 net operating income was $103.2 million, an increase from third quarter 2008 net operating income of $30.9 million. Net operating income for the first nine months of 2009 was $299.1 million, up 4 percent from $286.7 million in 2008. Improvements for the third quarter and first nine months of 2009 were primarily the result of no reportable catastrophe losses. This compares to $94.8 million of reportable catastrophe losses and reinstatement premiums in the third quarter and nine months of 2008. The third quarter 2009 results benefited from a $5.9 million after-tax subrogation reimbursement related to the 2007 California wildfires.
Third quarter 2009 net earned premiums decreased 7 percent, to $478.7 million, as compared to $513.2 million in 2008. Nine-month net earned premiums decreased 5 percent to $1.5 billion. Lower premium from real estate-owned policies, less premium from loans lost due to servicer consolidation and higher reinsurance costs caused the declines.
Assurant Health
Assurant Health reported a net operating loss for the third quarter 2009 of $4.8 million, compared to third quarter 2008 net operating income of $30.2 million. The net operating loss for the first nine months of 2009 was $0.5 million, compared to net operating income of $95.2 million in 2008. Declines for the quarter and nine months reflect high utilization of medical services. The third quarter 2009 results include a charge of $8.1 million after-tax for an unfavorable ruling in a lawsuit.
Third quarter 2009 net earned premiums decreased 3 percent to $470.4 million, compared to $486.7 million in 2008. Nine-month net earned premiums decreased 4 percent to $1.4 billion. Individual medical premiums decreased less than 1 percent for the third quarter and the first nine months, while small group premiums decreased 11 percent for the quarter and 13 percent for the nine-month period. The premium decreases for the quarter and nine months were caused primarily by a continued high level of policy lapses.
Assurant Employee Benefits
Assurant Employee Benefits third quarter 2009 net operating income was $11.5 million, a 47 percent decrease from $21.5 million in third quarter 2008. Net operating income for the nine-month period was $30.6 million, down 46 percent from $56.4 million for the same period in 2008. Less favorable loss experience and lower investment income resulted in the declines.
Third quarter 2009 net earned premiums decreased 8 percent versus 2008, to $256 million. The first nine months net earned premiums decreased 6 percent to $782 million. Nine-month results for 2008 included $5.5 million in single premiums from a closed block of business. Premium decreases for the quarter and first nine months of 2009 reflect economic pressures in the small business sector and previously disclosed client losses in the alternative distribution channel.
Corporate and Other
Corporate and other net operating loss for the third quarter of 2009 was $9.8 million compared to a loss of $14.8 million in 2008. Third quarter 2008 results were negatively affected by a $4 million increase in tax liabilities. The net operating loss for the first nine months of 2009 was $39.3 million compared to a loss of $39.5 million in 2008.
Financial Position
Stockholders’ equity, excluding accumulated other comprehensive income (”AOCI”) increased to $4.8 billion at Sept. 30, 2009. Book value per diluted share, excluding AOCI, increased 9 percent to $40.57 from $37.16 at Dec. 31, 2008 and was up 3 percent from June 30, 2009. AOCI improved by $793.3 million from Dec. 31, 2008, of which $696.9 million was the result of improvements in the investment portfolio. In the third quarter of 2009, Assurant repurchased more than 1.1 million shares for $31.9 million. The annualized operating ROE(2) was 10.7 percent for the quarter and 10.6 percent for the first nine months of 2009. As of Sept. 30, 2009, total assets were $25.7 billion. The ratio of debt to total capital, excluding AOCI, improved to 17.0 percent versus 18.3 percent at Dec. 31, 2008.
“In summary, results demonstrate that at our core, Assurant’s business model is fundamentally strong and actions to improve performance are taking hold,” said Pollock.
Earnings Conference CallAssurant will host a conference call Thursday, Oct. 29, 2009, at 8:00 a.m. ET, with access available via Internet and telephone. Investors and analysts may participate in the live conference call by dialing 888-364-3111 (toll-free domestic), or 719-325-2317 (international); passcode: 1633488. Please call to register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting at approximately 11:00 a.m. ET, Oct. 29, 2009 and can be accessed at 888-203-1112 (toll-free domestic,) or 719-457-0820 (international); passcode: 1633488. The webcast will be archived on Assurant’s Web site.
About Assurant
Assurant is a premier provider of specialized insurance products and related services in North America and selected other international markets. The four key businesses — Assurant Solutions; Assurant Specialty Property; Assurant Health; and Assurant Employee Benefits — have partnered with clients who are leaders in their industries and have built leadership positions in a number of specialty insurance market segments in the U.S. and selected international markets. The Assurant business units provide debt protection administration; credit-related insurance; warranties and service contracts; pre-funded funeral insurance; creditor-placed homeowners insurance; manufactured housing homeowners insurance; individual health and small employer group health insurance; group dental insurance; group disability insurance; and group life insurance.
Assurant, a Fortune 500 company and a member of the S&P 500, is traded on the New York Stock Exchange under the symbol AIZ. Assurant has more than $25 billion in assets and $8 billion in annual revenue. Assurant has approximately 15,000 employees worldwide and is headquartered in New York’s financial district. www.assurant.com.
Safe Harbor Statement
Some of the statements included in this press release and its exhibits, particularly those anticipating future financial performance, business prospects, growth and operating strategies and similar matters, are forward-looking statements that involve a number of risks and uncertainties. You can identify these statements by the fact that they may use words such as “will,” “anticipate,” “expect,” “estimate,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” or the negative versions of those words and terms with a similar meaning. Our actual results may differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements in this earnings release or the exhibits as a result of new information or future events or developments.
The following risk factors could cause our actual results to differ materially from those currently estimated by management: (i) failure to maintain significant client relationships, distribution sources and contractual arrangements; (ii) failure to attract and retain sales representatives; (iii) deterioration in the Company’s market capitalization compared to its book value that could impair the Company’s goodwill; (iv) negative impact on our business and negative publicity due to unfavorable outcomes in litigation and regulatory investigations (including the potential impact on our reputation and business of a negative outcome in the ongoing SEC investigation); (v) current or new laws and regulations that could increase our costs or limit our growth; (vi) general global economic, financial market and political conditions (including difficult conditions in financial, capital and credit markets, the global economic slowdown, fluctuations in interest rates, mortgage rates, monetary policies, unemployment and inflationary pressure); (vii) inadequacy of reserves established for future claims losses; (viii) failure to predict or manage benefits, claims and other costs; (ix) losses due to natural and man-made catastrophes; (x) increases or decreases in tax valuation allowances; (xi) fluctuations in exchange rates and other risks related to our international operations; (xii) unavailability, inadequacy and unaffordable pricing of reinsurance coverage; (xiii) diminished value of invested assets in our investment portfolio (due to, among other things, the recent volatility in financial markets, the global economic slowdown, credit and liquidity risk, other than temporary impairments, environmental liability exposure and inability to target an appropriate overall risk level); (xiv) inability of reinsurers to meet their obligations; (xv) insolvency of third parties to whom we have sold or may sell businesses through reinsurance or modified co-insurance; (xvi) credit risk of some of our agents in Assurant Specialty Property and Assurant Solutions; (xvii) a further decline in the manufactured housing industry; (xviii) a decline in our credit or financial strength ratings (including the risk of ratings downgrades in the insurance industry); (xix) failure to effectively maintain and modernize our information systems; (xx) failure to protect client information and privacy; (xxi) failure to find and integrate suitable acquisitions and new insurance ventures; (xxii) inability of our subsidiaries to pay sufficient dividends; (xxiii) failure to provide for succession of senior management and key executives; and (xxiv) significant competitive pressures in our businesses and cyclicality of the insurance industry. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to, our 2008 Annual Report on Form 10-K, as filed with the SEC.
Non-GAAP Financial Measures
Assurant uses the following non-GAAP financial measures to analyze the Company’s operating performance for the periods presented in this press release. Because Assurant’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing Assurant’s non-GAAP financial measures to those of other companies.
- Assurant uses net operating income as an important measure of the Company’s operating performance. As shown in the chart on page 3, net operating income equals net income excluding net realized gains (losses) on investments and other unusual and/or infrequent items. The Company believes net operating income provides investors a valuable measure of the performance of the Company’s ongoing business, because it excludes both the effect of realized gains (losses) on investments that tend to be highly variable from period to period, and those events that are unusual and/or unlikely to recur.
- Assurant uses annualized operating ROE as an important measure of the Company’s operating performance. Annualized operating ROE equals year-to-date net operating income divided by average stockholders’ equity for the year-to-date period, excluding AOCI, and then the return is annualized. The Company believes annualized operating ROE provides investors a valuable measure of the performance of the Company’s ongoing business, because it excludes the effect of realized gains (losses) on investments that tend to be highly variable and those events that are unusual and/or unlikely to recur. The comparable GAAP measure for this included measure would be annualized GAAP return on equity, defined as the annualized return of net income divided by average stockholders’ equity for the period. Consolidated annualized GAAP ROE for the three and nine months ended Sept. 30, 2009 was 12.5 percent and 13.0 percent, respectively, as shown in the reconciliation table below.
For the Three For the Nine
Months Ended Months Ended
September 30, 2009 September 30, 2009
------------------ ------------------
Annualized operating
return on average equity
(excluding AOCI) (2) 10.7% 10.6%
Net realized gains (losses)
on investments 1.1% -0.8%
Change in tax valuation
allowance 0.6% -
Legal settlement and related
expenses -0.1% 2.4%
Change due to effect of
including AOCI 0.2% 0.8%
--- ---
Annualized GAAP return on
average equity (2) 12.5% 13.0%
==== ====
Please see page 20 of the financial supplement, which is available on Assurant’s Web site at www.assurant.com, for a summary of net operating income disclosed items.
Assurant, Inc.
Consolidated Statement of Operations (unaudited)
Three and Nine Months Ended Sept. 30, 2009 and 2008
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
(in thousands except number of shares and per
share amounts)
Revenues
Net earned premiums
and other
considerations $1,874,398 $1,984,136 $5,624,843 $5,921,069
Net investment
income 172,924 192,314 526,335 591,299
Net realized gains
(losses) on investments 19,866 (299,205) (41,965) (376,922)
Amortization of deferred
gains on disposal of
businesses 6,802 7,379 20,354 22,085
Fees and other income 82,883 69,911 388,792 223,089
------ ------ ------- -------
Total revenues 2,156,873 1,954,535 6,518,359 6,380,620
--------- --------- --------- ---------
Benefits, losses and
expenses
Policyholder benefits 941,145 1,095,048 2,890,889 3,030,715
Selling, underwriting,
general and
administrative
expenses 991,502 1,007,817 2,933,510 2,932,318
Interest expense 15,160 15,190 45,509 45,765
------ ------ ------ ------
Total benefits,
losses and
expenses 1,947,807 2,118,055 5,869,908 6,008,798
--------- --------- --------- ---------
Income (loss) before
provision (benefit)
for income taxes 209,066 (163,520) 648,451 371,822
Provision (benefit)
for income taxes 64,336 (52,091) 229,818 106,467
------ ------- ------- -------
Net income (loss) $144,730 $(111,429) $418,633 $265,355
======== ========= ======== ========
Net income (loss) per
share (1):
Basic $1.22 $(0.94) $3.54 $2.25
Diluted $1.22 $(0.94) $3.54 $2.22
Dividends per share $0.15 $0.14 $0.44 $0.40
Share Data:
Basic weighted
average shares
outstanding 118,184,367 117,985,882 118,187,358 118,132,393
Diluted weighted
average shares
outstanding (2) 118,291,841 117,985,882 118,261,464 119,275,251
(1) Net income (loss) per basic and diluted share have been prepared in
accordance with guidance provided on participating securities and the
two class method in ASC Topic 260, Earnings Per Share. Prior period
amounts have been adjusted to reflect this new guidance. For further
information, please see our previously filed second quarter 2009 Form
10-Q and our upcoming third quarter 2009 Form 10-Q.
(2) In compliance with ASC Topic 260, Earnings Per Share, there is no
dilutions of shares when calculating earnings per share due to a net
loss position for the three months ended September 30, 2008.
Assurant, Inc.
Consolidated Condensed Balance Sheets
At Sept. 30, 2009 (unaudited) and Dec. 31, 2008
September 30, December 31,
------------- ------------
2009 2008
---- ----
(in thousands)
Assets
Investments and cash and cash equivalents $14,373,844 $13,107,476
Reinsurance recoverables 4,083,681 4,010,170
Deferred acquisition costs 2,555,762 2,650,672
Goodwill 1,009,089 1,001,899
Assets held in separate accounts 1,940,283 1,778,809
Other assets 1,702,919 1,965,560
--------- ---------
Total assets 25,665,578 24,514,586
========== ==========
Liabilities
Policyholder benefits and claims payable 10,610,271 10,398,376
Unearned premiums 5,154,685 5,407,859
Debt 972,032 971,957
Mandatorily redeemable preferred stock 8,160 11,160
Liabilities related to separate accounts 1,940,283 1,778,809
Accounts payable and other liabilities 2,076,698 2,236,920
--------- ---------
Total liabilities 20,762,129 20,805,081
Stockholders' equity
Equity, excluding accumulated other
comprehensive income (loss) 4,781,088 4,380,451
Accumulated other
comprehensive income (loss) 122,361 (670,946)
------- --------
Total stockholders' equity 4,903,449 3,709,505
--------- ---------
Total liabilities and
stockholders' equity $25,665,578 $24,514,586
=========== ===========
Unum Group Reports Third Quarter 2009 Results
- Press Release
- Source: Unum Group
- On 4:00 pm EST, Tuesday November 3, 2009
CHATTANOOGA, Tenn.–(BUSINESS WIRE)–Unum Group (NYSE: UNM - News) today reported net income of $221.1 million ($0.66 per diluted common share) for the third quarter of 2009, compared to net income of $108.0 million ($0.32 per diluted common share) for the third quarter of 2008.
Included in the results for the third quarter of 2009 are net realized after-tax investment gains of $9.5 million ($0.02 per diluted common share), compared to net realized after-tax investment losses of $108.9 million ($0.32 per diluted common share) in the third quarter of 2008. Net realized after-tax investment gains for the third quarter of 2009 include an after-tax gain of $28.9 million resulting from changes in the fair value of an embedded derivative in a modified coinsurance contract, compared to an after-tax loss of $44.1 million in the third quarter of 2008. Also included in net realized after-tax investment gains for the third quarter of 2009 is a net realized after-tax investment loss of $19.4 million related to sales and write-downs of investments, compared to a net after-tax investment loss of $64.8 million in the third quarter of 2008.
Adjusting for these items, income on an after-tax basis was $211.6 million ($0.64 per diluted common share) in the third quarter of 2009, compared to $216.9 million ($0.64 per diluted common share) in the third quarter of 2008.
“I am pleased with our results for the third quarter, as well as our continued strong position in our markets, in what remains a challenging economic environment,” said Thomas R. Watjen, president and chief executive officer. “While we expect the environment will remain challenging, we are well positioned to profitably grow our business as general business conditions improve and, in the meantime, continue to generate solid results and maintain a strong balance sheet and capital position.”
RESULTS BY SEGMENT
In the following discussions of the Company’s operating segment results, “operating revenue” excludes net realized investment gains and losses. “Operating income” or “operating loss” excludes income tax and net realized investment gains and losses.
Effective with the fourth quarter of 2008, we made slight modifications to our reporting segments to better align the debt of our securitizations with the business segments and to align the allocation of capital for Unum UK similar to that of Unum US and Colonial Life. Financial results by segment for 2008, as previously reported, have been revised to reflect these reclassifications.
Unum US Segment
Unum US reported operating income of $197.1 million in the third quarter of 2009, an increase of 14.9 percent from $171.6 million in the third quarter of 2008. Premium income for the segment declined by 1.9 percent to $1,215.2 million in the third quarter of 2009; premium income in the third quarter of 2008 was $1,239.1 million.
Within the Unum US operating segment, the group disability line of business reported operating income of $75.0 million in the third quarter of 2009, compared to operating income of $54.6 million in the third quarter of 2008. The benefit ratio for the third quarter of 2009 was 85.3 percent compared to 89.3 percent in the third quarter of 2008. Improvement in the benefit ratio in the third quarter reflects a generally consistent rate of claim recoveries and net favorable claims experience in the group long-term disability line of business as compared to the third quarter 2008. Results for the group disability line also continue to reflect the on-going strategic shift for the line, from a large case concentration to a balanced mix of business with a focus on increasing exposure to the core market (employee groups with fewer than 2,000 lives); maintenance of pricing discipline, specifically as it relates to the large case market; and the implemented improvements in the claims management process. Premium income in group disability declined 4.4 percent to $537.4 million in the third quarter of 2009, compared to $562.4 million in the third quarter of 2008. Increasing competition, along with softening economic conditions and the Company’s on-going commitment to disciplined pricing, renewals, and risk selection, were contributing factors to the decline in the current premium. Sales of fully insured group long-term disability products in the third quarter of 2009 decreased by 34.1 percent to $20.7 million compared to $31.4 million in the third quarter of 2008. Sales of fully insured group short-term disability products increased by 29.0 percent to $13.8 million in the third quarter of 2009, compared to $10.7 million in the third quarter of 2008. Premium persistency in the group long-term disability line of business was 87.3 percent for the first nine months of 2009, compared to 87.9 percent in the first nine months of 2008. Case persistency for this line was 87.2 percent for the first nine months of 2009, compared to 89.3 percent for the comparable period in 2008. Premium persistency in the group short-term disability line of business was 88.5 percent for the first nine months of 2009, compared to 82.1 percent for the comparable period in 2008. Case persistency for the short-term disability line was 86.2 percent for the first nine months of 2009, comparable to 88.1 percent for the first nine months of 2008.
The group life and accidental death and dismemberment line of business reported a 1.8 percent decrease in operating income to $50.0 million in the third quarter of 2009, compared to $50.9 million in the third quarter of 2008. Premium income for this line of business declined 2.3 percent to $293.4 million in the third quarter of 2009, compared to $300.3 million in the third quarter of 2008, reflecting the Company’s ongoing disciplined approach to pricing, renewals, and risk selection, and softening economic conditions. Sales of fully insured group life products increased by 63.7 percent in the third quarter of 2009 to $28.0 million; in the third quarter of 2008 sales were $17.1 million. Premium persistency in the group life line of business was 86.8 percent in the first nine months of 2009, compared to 84.3 percent for the comparable period in 2008. Case persistency in the group life line of business for the first nine months of 2009 was 86.9 percent compared to 88.9 percent for the comparable period in 2008.
The Unum US supplemental and voluntary lines of business reported a 9.1 percent increase in operating income to $72.1 million in the third quarter of 2009, compared to $66.1 million in the third quarter of 2008. Premium income for supplemental and voluntary lines increased 2.1 percent to $384.4 million in the third quarter of 2009, compared to $376.4 million in the third quarter of 2008. Relative to the third quarter of 2008, sales in the voluntary benefits line of business decreased by 17.8 percent in the third quarter of 2009, sales in the individual disability – recently issued line decreased by 19.2 percent, and long-term care sales decreased 47.9 percent.
Unum UK Segment
Unum UK reported operating income of $58.7 million in the third quarter of 2009, a decrease of 36.5 percent from $92.5 million in the third quarter of 2008. Results for the quarter, when translated into dollars, have been impacted by continuing volatility in the exchange rate of the dollar to British pound sterling. In local currency, operating income for the third quarter of 2009 decreased 26.9 percent, to £35.8 million from £49.0 million in the third quarter of 2008.
The benefit ratio in the third quarter 2009 was 50.2 percent, compared to 52.4 percent in the comparable quarter in 2008. The lower benefit ratio for the current quarter is reflective of the impact of lower general inflation on claim reserves associated with group long-term disability policies containing an inflation-linked benefit increase feature as well as a decline in the level of claim incidence in the group long-term disability line. Premium income decreased 24.5 percent to $169.7 million in the third quarter of 2009, compared to $224.7 million in the third quarter of 2008. In local currency, premium income decreased 12.8 percent to £103.4 million in the third quarter of 2009, compared to £118.6 million in the third quarter of 2008. In local currency, net investment income in the quarter declined by 43.2 percent compared to the third quarter of 2008 due primarily to the impact of lower inflation which resulted in lower returns on inflation-indexed bonds. These bonds match the claim reserves associated with certain group long-term disability policies that provide for inflation-linked increases in disability benefits. Premium persistency in the group long-term disability line of business was 87.7 percent for the first nine months of 2009, compared to 87.0 percent for the comparable period in 2008. Premium persistency in the group life line of business was 78.2 percent for the first nine months of 2009, compared to 74.8 percent for the 2008 comparable period. Sales increased 40.2 percent to $32.1 million in the third quarter of 2009, compared to $22.9 million in the third quarter of 2008. In local currency, sales for the third quarter of 2009 increased 63.3 percent to £19.6 million, compared to £12.0 million in the third quarter of 2008.
Colonial Life Segment
Colonial Life reported a 6.3 percent increase in operating income to $70.4 million in the third quarter of 2009, compared to $66.2 million in the third quarter of 2008. The benefit ratio in the third quarter of 2009 was 48.2 percent, compared to 47.5 percent for the same period in 2008. The increase in the benefit ratio for the quarter was attributable to a higher level of paid claims in the cancer and critical illness line of business. Premium income for the third quarter of 2009 increased by 3.4 percent to $253.5 million compared to $245.2 million in the third quarter of 2008. Sales increased 3.4 percent to $78.5 million in the third quarter of 2009 from $75.9 million in the third quarter of 2008, as sales growth in the public sector market offset a slight decline in the commercial market segment. New accounts increased 16.7 percent in the third quarter of 2009 compared to the third quarter of 2008 and average weekly producers increased 7.6 percent compared to the third quarter of 2008.
Individual Disability – Closed Block Segment
The Individual Disability – Closed Block segment reported operating income of $7.2 million in the third quarter of 2009, compared to $2.5 million in the third quarter of 2008. The interest adjusted loss ratio for the segment was 81.6 percent in the third quarter of 2009, compared to 81.5 percent in the third quarter of 2008. Risk results in this segment remained generally consistent with the trends of the past several quarters. Net investment income for the segment declined 2.6 percent, to $184.4 million in the third quarter of 2009 from $189.3 million in the third quarter of 2008.
Corporate and Other Segment
The Corporate and Other segment reported an operating loss of $13.7 million in the third quarter 2009, compared to $7.2 million in the third quarter of 2008, primarily due to a decrease in net investment income resulting from lower levels of assets and lower interest rates on short-term investments as well as an increase in pension costs.
OTHER INFORMATION
Investor Meeting
The Company will hold its annual Investor Meeting on November 9, 2009 at the New York Palace Hotel in New York City. The meeting will begin at 10:00 A.M. (Eastern Time) and will conclude at noon. A live videocast of the meeting, which will also include the meeting presentation, will be accessible from the “Investors” section of the Company’s website, www.investors.unum.com. For additional information on the event, see “Investors” section of the Company’s website, www.investors.unum.com.
Capital Management
At the end of the third quarter of 2009, consolidated risk-based capital was approximately 340 percent for the traditional US insurance companies; leverage was 21.1 percent; and holding company liquidity equaled $864 million.
The holding company liquidity includes the proceeds from the Company’s debt offering of $350 million on September 30, 2009. Leverage is measured as total debt to total capital, which the Company defines as total long-term and short-term debt plus stockholders’ equity, excluding the net unrealized gain or loss on securities and the net gain or loss on cash flow hedges. Leverage also excludes the non-recourse debt and associated capital of Tailwind Holdings, LLC and Northwind Holdings, LLC.
Shares Outstanding
The Company’s average number of shares (000s) outstanding, assuming dilution was 332,622.1 for the third quarter of 2009, compared to 337,912.8 for the third quarter of 2008.
Book Value
Book value per common share as of September 30, 2009 was $24.86 compared to $20.22 at September 30, 2008. Excluding the net unrealized gains and losses on securities and the net gain on cash flow hedges, book value per common share at September 30, 2009 was $22.61, compared to $21.46 at September 30, 2008.
OUTLOOK
The Company is maintaining its previously stated guidance for full year 2009 and anticipates operating earnings per share for the year to be in a range of $2.50 and $2.60 per diluted common share.
NON-GAAP RECONCILIATION
The Company analyzes its performance using non-GAAP financial measures which exclude certain items and the related tax thereon from net income. The Company believes operating income or loss, excluding realized investment gains and losses, which are recurring, is a better performance measure and a better indicator of the profitability and underlying trends in its business. Realized investment gains and losses are primarily dependent on market conditions and general economic events and are not necessarily related to decisions regarding the Company’s underlying business. The Company believes leverage and book value per common share excluding unrealized gains and losses on securities and the net gain or loss on cash flow hedges, which also tend to fluctuate depending on market conditions and general economic trends, are important measures. For reconciliation to the most directly comparable GAAP measures, refer to the attached digest of earnings.
CONFERENCE CALL INFORMATION
Members of Unum Group senior management will host a conference call on Wednesday, November 4, 2009 at 9:00 A.M. (Eastern Time) to discuss the results of operations for the third quarter. Topics may include forward-looking information such as guidance on future results, trends in operations, and other material information.
The dial-in number for the conference call is (888) 213-3710 for U.S. and Canada. For International, the dial-in number is (913) 312-0656. 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 fifteen minutes prior to the start of the call. A replay of the call will be available by telephone and on the Company’s website through Wednesday, November 11, 2009.
In conjunction with today’s earnings announcement, the Company’s Statistical Supplement for the third quarter of 2009 is available on the “Investors” section of the Company’s website.
ABOUT UNUM GROUP
Unum (www.unum.com) is one of the leading providers of employee benefits products and services and the largest provider of disability insurance products in the United States and the United Kingdom.
SAFE HARBOR STATEMENT
Statements in this press release that are not historical facts, such as the Company’s earnings per share guidance, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on management’s expectations, plans and beliefs concerning future developments. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include such matters as (1) unfavorable economic or business conditions, both domestic and foreign, including the continued financial market disruption; (2) investment results, including but not limited to, realized investment losses resulting from impairments that differ from our assumptions and historical experience; (3) rating agency actions, state insurance department market conduct examinations and other inquiries, other governmental investigations and actions, and negative media attention; (4) changes in interest rates, credit spreads, and securities prices; (5) currency exchange rates; (6) changes in our financial strength and credit ratings; (7) changes in claim incidence and recovery rates 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, and the effectiveness of claims management operations; (8) increased competition from other insurers and financial services companies due to industry consolidation or other factors; (9) legislative, regulatory, or tax changes, both domestic and foreign, including the effect of potential legislation and increased regulation in the current political environment; (10) effectiveness of our risk management program; (11) the level and results of litigation; (12) effectiveness in supporting new product offerings and providing customer service; (13) actual experience in pricing, underwriting, and reserving that deviates from our assumptions; (14) lower than projected persistency and lower sales growth; (15) fluctuation in insurance reserve liabilities; (16) ability and willingness of reinsurers to meet their obligations; (17) changes in assumptions related to intangible assets such as deferred acquisition costs, value of business acquired, and goodwill; (18) ability of our subsidiaries to pay dividends as a result of regulatory restrictions; (19) events or consequences relating to terrorism and acts of war, both domestic and foreign; (20) changes in accounting standards, practices, or policies; and (21) ability to recover our systems and information in the event of a disaster or unanticipated event.
For further information about risks and uncertainties that could affect actual results, see the Company’s filings with the Securities and Exchange Commission, including information in the sections titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and any subsequently filed Forms 10-Q. The forward-looking statements in this press release are being made as of the date of this press release, and the Company expressly disclaims any obligation to update or revise any forward-looking statement contained herein, even if made available on our website or otherwise.
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DIGEST OF EARNINGS |
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(Unaudited) |
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Unum Group (UNM:NYSE) |
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and Subsidiaries |
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| ($ in millions, except share data) | |||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| Operating Revenue by Segment | $ | 2,502.6 | $ | 2,608.5 | $ | 7,556.8 | $ | 7,866.8 | |||||||
| Net Realized Investment Gain (Loss) | 14.9 | (165.8 | ) | 37.6 | (208.2 | ) | |||||||||
| Total Revenue | $ | 2,517.5 | $ | 2,442.7 | $ | 7,594.4 | $ | 7,658.6 | |||||||
| Operating Income by Segment | $ | 319.7 | $ | 325.6 | $ | 958.8 | $ | 979.7 | |||||||
| Net Realized Investment Gain (Loss) | 14.9 | (165.8 | ) | 37.6 | (208.2 | ) | |||||||||
| Income Tax | 113.5 | 51.8 | 343.2 | 260.1 | |||||||||||
| Net Income | $ | 221.1 | $ | 108.0 | $ | 653.2 | $ | 511.4 | |||||||
| PER SHARE INFORMATION | |||||||||||||||
| Net Income Per Common Share | |||||||||||||||
| Basic | $ | 0.67 | $ | 0.32 | $ | 1.97 | $ | 1.48 | |||||||
| Assuming Dilution | $ | 0.66 | $ | 0.32 | $ | 1.97 | $ | 1.48 | |||||||
| Weighted Average Common Shares - Basic (000s) | 331,411.2 | 337,236.4 | 331,132.6 | 344,440.3 | |||||||||||
| Weighted Average Common Shares - Assuming Dilution (000s) | 332,622.1 | 337,912.8 | 331,850.6 | 345,111.9 | |||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||
| 2009 | 2008 | |||||||||||||||
| (in millions) |
per share* |
(in millions) |
per share* |
|||||||||||||
| After-tax Operating Income | $ | 211.6 | $ | 0.64 | $ | 216.9 | $ | 0.64 | ||||||||
| Net Realized Investment Gain (Loss), Net of Tax | 9.5 | 0.02 | (108.9 | ) | (0.32 | ) | ||||||||||
| Net Income | $ | 221.1 | $ | 0.66 | $ | 108.0 | $ | 0.32 | ||||||||
|
* Assuming Dilution |
||||||||||||||||
| September 30 | ||||||||||||||||
| 2009 | 2008 | |||||||||||||||
| (in millions) | per share | (in millions) | per share | |||||||||||||
| Total Stockholders’ Equity (Book Value) | $ | 8,243.0 | $ | 24.86 | $ | 6,735.9 | $ | 20.22 | ||||||||
| Net Unrealized Gain (Loss) on Securities | 385.7 | 1.17 | (665.0 | ) | (2.00 | ) | ||||||||||
| Net Gain on Cash Flow Hedges | 359.1 | 1.08 | 254.5 | 0.76 | ||||||||||||
| Total Stockholders’ Equity, As Adjusted | $ | 7,498.2 | $ | 22.61 | $ | 7,146.4 | $ | 21.46 | ||||||||
| September 30 | ||||||||||||||||
| 2009 | ||||||||||||||||
| (in millions) | ||||||||||||||||
| Debt, As Reported | $ | 2,580.2 | ||||||||||||||
| Exclude Non-recourse Debt | 815.8 | |||||||||||||||
| Debt, As Adjusted | $ | 1,764.4 | ||||||||||||||
| Total Stockholders’ Equity, As Reported | $ | 8,243.0 | ||||||||||||||
|
Exclude Net Unrealized Gain on Securities and Net Gain on Cash Flow Hedges |
744.8 | |||||||||||||||
| Exclude Northwind and Tailwind Capital | 904.7 | |||||||||||||||
| 6,593.5 | ||||||||||||||||
| Debt, As Adjusted | 1,764.4 | |||||||||||||||
| Total Capital, As Adjusted | $ | 8,357.9 | ||||||||||||||
| Debt to Capital Ratio | 21.1 | % | ||||||||||||||
Contact:
Unum Group Investors: Thomas A. H. White, 423-294-8996 or Madhavi Venkatesan, 423-294-1630
POSTED BY STEVEN WEVODAU
Aflac Lands on List of 100 Best Corporate Citizens
Posted by Steven Wevodau
The 2009 100 Best Corporate Citizens List® methodology is based solely on publicly-available data, putting a premium on companies with high levels of public disclosure and transparency. All members of the Russell 1000 Index were considered for the honor.
“At Aflac we believe that transparency with shareholders and the public is good for business,” Aflac Chairman and CEO Dan Amos said. “We are proud to receive this recognition, which focuses on our company’s enthusiasm for disclosing information and demonstrating strong corporate ethics.”
“In good times, checkbook citizenship can win the day. But in tough times, strong reputations and transparency pack as much punch as a strong balance sheet. In today’s deep recession, human capital and financial capital seek safety — and companies like Aflac that are on the 100 Best Corporate Citizens List® are today’s safest harbors,” said CRO magazine publisher Jay Whitehead.
The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership.
About Aflac:
For more than 50 years, Aflac products have given policyholders the opportunity to direct cash where it is needed most when a life-interrupting medical event causes financial challenges. As the number one provider of guaranteed-renewable insurance in the United States and the number one insurance company in terms of individual insurance policies in force in Japan, Aflac insurance products provide protection to more than 40 million people worldwide. Aflac has been recognized by Ethisphere magazine as one of the World’s Most Ethical Companies for two consecutive years and was also named by the Reputation Institute as the Most Respected Company in the Global Insurance Industry in 2008. In 2009 Fortune magazine recognized Aflac as one of the 100 Best Companies to Work For in America for the eleventh consecutive year. Aflac appears on Hispanic Enterprise magazine’s list of the 50 Best Companies for Supplier Diversity and on Black Enterprise magazine’s list of the 40 Best Companies for Diversity. Aflac was also named by Forbes magazine as America’s Best-Managed Company in the Insurance category. Aflac Incorporated is a Fortune 500 company listed on the New York Stock Exchange under the symbol AFL. To find out more about Aflac, visit aflac.com.
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
Media Contacts: Analyst and Investor Contact:
Laura Kane Kenneth S. Janke Jr.
Aflac Incorporated Aflac Incorporated
706.596.3493 1.800.235.2667, Option 3; Fax: 706.324.6330
lkane@aflac.com kjanke@aflac.com
Jon A. Sullivan
Aflac Incorporated
706.763.4813
jsullivan@aflac.com
Source: Aflac Incorporated
A.M. Best Comments on the Ratings of Eastern Alliance Insurance Group, Its Members and Eastern Life and Health Insurance Company - Steven Wevodau
The magnitude of the reserve strengthening action requires a reallocation of capital within the organization to replenish capital at Eastern Re. The required capital will be sourced through both EAIG and ELH, each of which maintains sufficient capital relative to their current ratings to source this requirement.
Despite the significant deterioration in EIHI’s 2008 operating results following the required reserve strengthening at Eastern Re during fourth quarter 2008, EAIG and ELH continue to record strong operating results and solid capitalization, while, in particular, EAIG maintains an excellent underwriting performance, which outperforms its peers by a wide margin.
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
Contact:
A.M. Best Co. Analysts: Gordon McLean, 908-439-2200, ext. 5304 gordon.mclean@ambest.com or Michelle Baurkot, 908-439-2200, ext. 5507 michelle.baurkot@ambest.com or Public Relations: Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow, 908-439-2200, ext. 5378 rachelle.morrow@ambest.com
Source: A.M. Best Co.
Posted by Steven Wevodau
Conseco Announces Annual Meeting Date - Posted by Steven Wevodau
Source: Conseco, Inc.
Posted by Steven Wevodau
Triple-S Management Corporation Reschedules Fourth Quarter and 2008 Earnings Release and Webcast - Posted by Steven Wevodau
About Triple-S Management Corporation
Triple-S Management Corporation is an independent licensee of the Blue Cross/Blue Shield Association. It is the largest managed care company in Puerto Rico, serving approximately 1.2 million members, or about 30% of the population, and has the exclusive right to use the Blue Shield name and mark throughout the country. With more than 50 years of experience in the industry, Triple-S Management offers a broad portfolio of managed care and related products in the commercial, Medicare, and Reform markets under the Blue Shield brand. In addition to its managed care business, Triple-S Management provides non-Blue Shield branded life and property and casualty insurance in Puerto Rico. The Company is the largest provider of life, accident, and health insurance and the fourth largest provider of property and casualty insurance in its market.
For more information about Triple-S Management, visit http://www.triplesmanagement.com or email waller_kathleen@yahoo.com.
Source: Triple-S Management Corporation
Posted by Steven Wevodau
Eastern Insurance Holdings, Inc. Announces Fourth Quarter 2008 Results
Posted by Steven Wevodau
Eckert added, “We again experienced investment declines as indicated by after-tax net realized losses of $5.0 million for the three months ended December 31, 2008, the majority of which relates to other-than-temporary impairments on our equity portfolio. We also recorded an after-tax loss on our limited partnership portfolio of $1.4 million, which was not recorded as an other-than-temporary decline, but rather in accordance with an accounting convention that requires changes in the market value of limited partnership investments be recorded in the statement of operations.”
Eckert continued, “The most significant disappointment, which occurred not only in the fourth quarter, but throughout 2008, was the performance of our run-off specialty reinsurance segment, which was placed in run-off at mid-year. The reserves for losses and loss adjustment expenses in this segment were increased by $13.9 million during the fourth quarter of 2008 due to claim issues identified during the annual audit of the ceding company’s claim records, which was conducted in January 2009. The poor results in our run-off specialty reinsurance segment were exacerbated by the write-off of its deferred tax asset due to the lack of projected future taxable income in this segment to utilize current net operating losses. We have already begun to identify future tax planning strategies to utilize the net operating losses in future periods; however, we expect that any recognition of these tax benefits would occur over a significant period of time.”
Consolidated highlights for the fourth quarter include:
- Revenue for the fourth quarter of 2008 decreased $8.0 million to $30.1 million, compared to $38.1 million for the same period in 2007. The decrease in revenue is due primarily to a decrease in net investment income and an increase in net realized investment losses and losses from limited partnerships, partially offset by an increase in earned premium. Net premiums earned increased during the fourth quarter despite a $2.8 million earned premium reduction from the fourth quarter of 2007 compared to the same period in 2008 in the run-off specialty reinsurance segment;
- Net premiums earned increased $2.1 million to $36.4 million in the fourth quarter of 2008 from $34.3 million during the same period in 2007. Consolidated net premiums earned increased 6.1 percent due primarily to the organic growth in workers’ compensation premium and the acquisition of Employers Security Insurance Company partially offset by the termination of the reinsurance treaty effective July 1, 2008 that comprised the run-off specialty reinsurance segment;
- Net investment income decreased $600,000 to $2.2 million ($1.6 million after-tax) for the three months ended December 31, 2008, compared to $2.8 million ($2.0 million after-tax) for the same period in 2007. The decrease in net investment income is due primarily to a decrease in overall invested assets;
- The change in equity interest in other long-term investments decreased $2.3 million to a loss of $2.0 million ($1.4 million after-tax) for the three months ended December 31, 2008, compared to income of $346,000 ($225,000 after-tax) for the same period in 2007;
- Net realized investment losses increased $7.5 million to $6.9 million ($5.0 million after-tax) for the three months ended December 31, 2008, compared to net realized investment gains of $567,000 ($417,000 after-tax) for the same period in 2007. Net realized investment losses for 2008 include $6.0 million ($4.4 million after-tax) of other-than-temporary impairments, primarily on equity securities;
- No favorable loss reserve development on prior accident years was recorded in the workers’ compensation insurance segment for the three months ended December 31, 2008, compared to $3.9 million ($2.5 million after-tax) for the same period in 2007;
- The reserves for losses and loss adjustment expense in the run-off specialty reinsurance segment were increased $13.9 million ($13.9 million after-tax) during the fourth quarter of 2008 due to claim issues identified during the annual audit of the ceding company’s claim records. During its January 2009 ceding company claims audit, EIHI identified that the recent unfavorable loss reserve development on its underground storage tank business was primarily the result of states requiring quicker and more extensive remediation of sites in order to better preserve the environment, increased construction costs in the ceding company’s underwriting territories and in litigated cases, the courts appear to be ruling more in favor of environmental protection than enforcing coverage issues under the ceding company’s insurance policies. The claim audit results were communicated to and corroborated by the ceding company. The $13.9 million increase in the reserves for losses and loss adjustment expenses represents the estimated impact that the aforementioned identified issues may have on the remaining claim inventory;
- After-tax intangible asset amortization expense of $253,000 was recorded for the three months ended December 31, 2008, compared to $283,000 for the fourth quarter of 2007; and
- The net deferred tax asset in the run-off specialty reinsurance segment was reduced to zero, which negatively impacted results by $2.1 million. The run-off specialty reinsurance business resides at Eastern Re Ltd., SPC, a foreign corporation, and the deferred tax asset primarily relates to net operating loss carryforwards. Foreign net operating loss carryforwards cannot be used to offset income generated by United States corporations. Accordingly, the run-off specialty reinsurance business must demonstrate that it can generate sufficient future foreign income in the foreseeable future to utilize the foreign net operating losses. Considering recent historical losses, management believes it is unlikely Eastern Re will generate sufficient taxable income in the foreseeable future, which is generally defined as within the next year. We have already begun to identify future tax planning strategies that may permit us to utilize the net operating losses in future periods.
Weighted average fully diluted shares considered outstanding used to calculate diluted earnings per share for the three months ended December 31, 2008 and 2007 consisted of the following:
2008 2007
Shares from stock offering, net of
ESOP shares 6,727,500 6,727,500
Shares issued to EHC shareholders 3,876,048 3,876,048
Weighted average ESOP shares 180,934 105,981
Weighted average restricted stock
shares (1) 49,335 38,213
Weighted average treasury shares
purchased (2,069,000) (951,811)
Stock warrants(1) - 306,099
Total 8,764,818 10,102,030
(1) Stock warrants of 306,099 and restricted stock of 11,099 were
anti-dilutive to diluted earnings per share and, accordingly,
were excluded from the calculation.
Segment Operating Results
Workers’ Compensation Insurance
EIHI’s workers’ compensation insurance segment reported net income of $356,000 for the fourth quarter of 2008, compared to $5.9 million for the fourth quarter of 2007. Highlights for the fourth quarter include:
- The combined ratio was 81.3 percent for the fourth quarter of 2008, compared to 51.3 percent for the same period last year;
- Direct written premiums increased to $18.8 million for the three months ended December 31, 2008, compared to $13.1 million for the same period in 2007, an increase of 43.5 percent;
- Net premiums earned increased to $20.0 million for the fourth quarter of 2008, compared with $15.4 million for the fourth quarter of 2007, an increase of 29.9 percent;
- Audit premium, which results from an examination of the policyholders’ payroll and other records, resulted in the Company recording additional premium of $475,000 for the fourth quarter of 2008, compared to $495,000 for the same period in 2007;
- Net investment income was $1.0 million for the fourth quarter of 2008, compared to $1.1 million for the same period in 2007;
- The change in equity interest in other long-term investments decreased $1.3 million to a loss of $1.1 million for the three months ended December 31, 2008, compared to income of $202,000 for the same period in 2007;
- After-tax net realized investment losses of $2.2 million were recorded for the three months ended December 31, 2008, compared to after-tax net realized investment gains of $34,000 for the same period in 2007;
- The accident year loss and LAE ratio was 60.0 percent for the three months ended December 31, 2008 and 2007. For the three months ended December 31, 2008, no favorable loss reserve development on prior accident years was recorded, compared to favorable loss reserve development on prior accident years of $3.9 million in the fourth quarter of 2007, which decreased the 2007 loss ratio by 25.3 percentage points; and
- The expense ratio was 20.8 percent for the three months ended December 31, 2008, compared to 14.5 percent for the same period in 2007. The increase in the expense ratio is primarily due to start-up costs associated with EIHI’s expansion into the Southeast and the Company’s state licensing initiatives. Furthermore, EIHI did not receive an assessment from the Pennsylvania Workers’ Compensation Security Fund in 2007, which lowered the 2007 workers’ compensation expense ratio by 6.0 points.
Segregated Portfolio Cell Reinsurance
The segregated portfolio cell reinsurance segment added two new programs for the year ended December 31, 2008, bringing the total number of active programs to fifteen. Activity in this segment has increased despite current economic trends, largely as a result of our expansion into the Southeast and Midwest markets.
Group Benefits Insurance
EIHI’s group benefits insurance segment reported a net loss of $1.0 million for the three months ended December 31, 2008, compared to net income of $1.6 million for the same period in 2007. Highlights for the fourth quarter include:
- The combined ratio was 93.7 percent for the fourth quarter of 2008, compared to 86.8 percent for the same period last year;
- Net premiums earned were $9.2 million for the fourth quarter of 2008, compared to $9.3 million in 2007;
- Net investment income was $554,000 for the fourth quarter of 2008, compared to $763,000 for the fourth quarter of 2007. The decrease in net investment income is due primarily to a decrease in the invested asset base;
- The change in equity interest of other long-term investments decreased $600,000 to a loss of $567,000 for the three months ended December 31, 2008, compared to income of $111,000 for the same period in 2007;
- After-tax net realized investment losses of $1.4 million were recorded for the three months ended December 31, 2008, compared to after-tax net realized investment gains of $120,000 for the same period in 2007;
- The calendar year loss and LAE ratio was 62.5 percent for the three months ended December 31, 2008, compared to 59.8 percent for the same period in 2007; and
- The expense ratio was 31.2 percent for the three months ended December 31, 2008, compared to 26.9 percent for the same period in 2007.
Run-Off Specialty Reinsurance
Prior to July 1, 2008, business in the run-off specialty reinsurance segment was assumed through participation in a reinsurance treaty with an unaffiliated ceding company related to an underground storage tank insurance program, referred to as “EnviroGuard,” and a non-hazardous waste transportation product, referred to as “EIA Liability.” Effective July 1, 2008, EIHI terminated the reinsurance treaty that comprised the run-off specialty reinsurance segment.
EIHI’s run-off specialty reinsurance segment reported a net loss of $16.6 million for the fourth quarter of 2008, compared to net income of $271,000 for the same period last year. Highlights for the fourth quarter include:
- Net premiums earned were $932,000 for the fourth quarter of 2008, compared to $3.7 million in 2007. The decrease in net premiums earned is due to the July 1, 2008 termination of the reinsurance treaty that comprised the run-off specialty reinsurance segment;
- Net investment income was $308,000 for the three months ended December 31, 2008, compared to $372,000 for the same period last year;
- The change in equity interest of other long-term investments decreased $368,000 to a loss of $335,000 for the three months ended December 31, 2008, compared to income of $33,000 for the same period in 2007; and
- After-tax net realized investment losses of $473,000 were recorded for the three months ended December 31, 2008, compared to net realized investment gains of $12,000 for the same period in 2007.
Corporate and Other
The corporate and other segment primarily includes corporate expenses and EIHI’s third party administration business. The corporate and other segment recorded a net loss of $1.2 million for the three months ended December 31, 2008, compared to a net loss of $117,000 for the same period in 2007. The 2007 net loss included a tax-related purchase accounting adjustment of $836,000, which decreased the net loss in 2007.
Financial Condition
Total assets were $377.3 million as of December 31, 2008. Shareholders’ equity was $138.1 million as of December 31, 2008. During the fourth quarter of 2008, the Company repurchased 39,203 common shares at a total cost of $347,553, representing a weighted average price of $8.87 per share. As of December 31, 2008, EIHI’s book value per share and diluted book value per share were $14.52 and $14.13, respectively. Outstanding shares used to calculate book value per share and diluted book value per share were 9,512,366 and 10,467,653, respectively, as of December 31, 2008. The basic book value per share calculation includes the impact of restricted stock awards of 251,675 shares. The diluted book value per share calculation includes the additional impact of warrants to purchase 306,099 common shares, which have an exercise price of $1.63 per share and stock options to purchase 649,188 common shares, which have a weighted average exercise price of $14.36.
Conference Call with Investors
EIHI will hold a conference call with investors beginning at 10:00 a.m. Eastern Time on Friday, February 13, 2009 to review the Company’s 2008 fourth quarter results. The conference call will be available via a live webcast accessed through the Investor Relations section of www.easterninsuranceholdings.com. The dial-in numbers for the conference call are as follows:
Live Call
---------
800-860-2442 (Domestic)
412-858-4600 (International)
A replay of the conference call will be available through February 23, 2009, at 877-344-7529 (domestic) and 412-317-0088 (international). The replay passcode for the conference call is 427503. An online archive of the webcast will be available on the Investor Relations section of www.easterninsuranceholdings.com for one year following the call.
Consolidated Financial Results
Set forth in the tables below are the unaudited consolidated balance sheets as of December 31, 2008 and December 31, 2007 and unaudited results of operations for the three months and years ended December 31, 2008 and 2007.
EASTERN INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share data)
December 31, December 31,
2008 2007
ASSETS
Investments:
Fixed income securities, at estimated fair
value (amortized cost, $180,102; $202,039) $183,136 $205,785
Convertible bonds, at estimated fair value
(amortized cost, $13,783; $14,232) 12,346 15,478
Equity securities, at estimated fair value
(cost, $22,287; $19,578) 17,162 20,541
Other long-term investments at estimated
fair value (cost, $10,586; $10,386) 9,519 11,317
Total investments 222,163 253,121
Cash and cash equivalents 52,875 45,940
Accrued investment income 2,058 2,290
Premiums receivable (net of allowance, $581;
$558) 29,615 26,846
Reinsurance recoverable on paid and unpaid
losses and loss adjustment expenses 29,637 26,303
Deferred acquisition costs 5,760 6,257
Deferred income taxes, net 6,281 1,229
Federal income taxes recoverable 16 846
Intangible assets 9,179 6,372
Goodwill 10,752 7,992
Other assets 8,975 8,322
Total assets $377,311 $385,518
LIABILITIES
Reserves for unpaid losses and loss
adjustment expenses $159,117 $129,788
Unearned premium reserves 42,365 39,826
Advance premium 1,594 1,380
Accounts payable and accrued expenses 13,136 8,422
Ceded reinsurance balances payable 6,886 6,762
Benefit plan liabilities 497 334
Segregated portfolio cell dividend payable 13,140 13,168
Loan payable 2,439 -
Junior subordinated debentures - 8,007
Total liabilities 239,174 207,687
Commitments and contingencies
SHAREHOLDERS' EQUITY
Series A preferred stock, par value $0,
auth. shares-5,000,000; no shares issued
and outstanding - -
Common capital stock, par value $0, auth.
shares-20,000,000; issued-11,602,723 and
11,597,723, respectively;
outstanding-9,512,366 and 10,580,858,
respectively - -
Unearned ESOP compensation (5,606) (6,354)
Additional paid in capital 111,772 110,166
Treasury stock, at cost (2,090,357 and
1,016,865 shares, respectively) (32,655) (15,589)
Retained earnings 66,492 86,363
Accumulated other comprehensive (loss)
income, net (1,866) 3,245
Total shareholders' equity 138,137 177,831
Total liabilities and shareholders' equity $377,311 $385,518
EASTERN INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF INCOME
(Unaudited, in thousands, except share and per share data)
Three Months Ended Years Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
Revenue:
Net premiums
earned $36,444 $34,269 $135,807 $129,495
Net investment
income 2,224 2,755 9,631 11,669
Change in equity
interest in
other long-term
investments (2,005) 346 (3,970) 759
Net realized
investment
(losses) gains (6,904) 567 (11,117) 2,888
Other revenue 331 166 853 683
Total revenue 30,090 38,103 131,204 145,494
Expenses:
Losses and loss
adjustment
expenses
incurred 36,258 15,620 99,188 73,588
Acquisition and
other
underwriting
expenses 4,694 3,809 18,918 17,056
Other expenses 6,225 5,805 25,338 21,801
Amortization of
intangible
assets 389 435 1,373 1,738
Policyholder
dividends 298 194 551 543
Segregated
portfolio
dividend expense (447) 2,250 2,155 ` 4,423
Total expenses 47,417 28,113 147,523 119,149
(Loss) income
before income
taxes (17,327) 9,990 (16,319) 26,345
Income tax
expense 1,044 2,333 1,064 7,662
Net (loss) income $(18,371) $7,657 $(17,383) $18,683
Earnings per
share (EPS):
Basic shares
outstanding 8,764,818 9,757,718 8,954,097 10,264,369
Basis EPS $(2.10) $0.78 $(1.94) $1.82
Diluted shares
outstanding 8,764,818 10,102,030 8,954,097 10,604,349
Diluted EPS $(2.10) $0.76 $(1.94) $1.76
Cautionary Statement
Some of the statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “project,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms or other terminology. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, therefore no assurance can be given that management’s expectations, beliefs or projections will occur or be achieved or accomplished. Factors that could affect the Company’s actual results include, among others, the fact that our loss reserves are based on estimates and may be inadequate to cover our actual losses; the uncertain effects of emerging claim and coverage issues on our business; the geographic concentration of our business; an inability to obtain or collect on our reinsurance protection; a downgrade in the A.M. Best rating of our insurance subsidiaries; the impact of extensive regulation of the insurance industry and legislative and regulatory changes; a failure to realize our investment objectives; the effects of intense competition; the loss of one or more principal employees; the inability to acquire additional capital on favorable terms; a failure of independent insurance brokers to adequately market our products; and the effects of acts of terrorism or war. More information about these and other factors that potentially could affect our financial results is included in our Form S-1 Registration Statement, filed with the U.S. Securities and Exchange Commission and in our other public filings with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update any forward-looking statements. This press release also does not constitute an offer to sell, or a solicitation of an offer to buy, EIHI securities. Such an offer will be made only by means of a prospectus.
Source: Eastern Insurance Holdings, Inc.
Assurant President and CEO Robert B. Pollock to Present at Merrill Lynch Insurance Investor Conference on Feb. 24 - Posted by Steven Wevodau
Access to Mr. Pollock’s presentation will be available through Assurant’s Web site at www.assurant.com. After connecting to the home page, click on Investor Relations, then Events, to access the Merrill Lynch Insurance Investor Conference webcast. Slides of the presentation will be posted on the company’s Web site for viewing shortly before the presentation begins. The webcast presentation will be archived for 14 days.
Assurant is a premier provider of specialized insurance products and related services in North America and selected international markets. Its four key businesses — Assurant Solutions, Assurant Specialty Property, Assurant Health, and Assurant Employee Benefits — have partnered with clients who are leaders in their industries and have built leadership positions in a number of specialty insurance market segments worldwide.
Assurant, a Fortune 500 company and a member of the S&P 500, is traded on the New York Stock Exchange under the symbol AIZ. Assurant has over $24 billion in assets and $8 billion in annual revenue. www.assurant.com
Source: Assurant, Inc.
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