Unum Group (UNM)

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Unum Group (UNM)

Q4 2010 Earnings Call

February 3, 2011; 09:00am ET


Tom Watjen - President & CEO

Rick McKenney - Executive Vice President & CFO

Kevin McCarthy - Executive Vice President, President & Chief Executive Officer - Unum US

Randy Horn - Executive Vice President, President & Chief Executive Officer - Colonial Life

Jack McGarry - Chief Executive Officer - Unum UK

Tom White - Senior Vice President of Investor Relations


Darin Arita - Deutsche Bank

Bob Glasspiegel - Langen-McAlenney

Mark Hughes - Sun Trust

Mark Finkelstein - Macquarie

Colin Devine - Citigroup Investment Research

Jimmy Bhuller - JP Morgan

Chris Giovanni - Goldman Sachs

Sean Darken - Wells Fargo

Stephen Schwartz - Raymond James

Randy Binner - FBR Capital Markets

Jeff Schuman - KBW



Good day and welcome to the Unum Group fourth quarter 2010 earnings results conference call. Today’s call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to the Senior Vice President of Investor Relations, Mr. Tom White. Please go ahead, sir.

Tom White

Great. Thank you Gwen. Good morning everyone and welcome to Unum’s fourth quarter 2010 analyst and investor conference call.

Our remarks this morning will include forward-looking statements, which are statements that are not of current or historical fact. As a result, actual results might differ materially from results suggested by these forward-looking statements.

Information concerning factors that could cause results to differ appears in our filings with the Securities and Exchange Commission and are also located in the section titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10K for the fiscal year ended December 31, 2009, and also in any subsequently file Form 10Q. Our SEC filings can be found in the Investor Section of our website at www.unum.com.

Also remind you that statements in today’s call speak only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements. A presentation of the most directly comparable GAAP measures and reconciliation’s of any non-GAAP financial measures included in today’s presentation can be found on our website in the Investor Section.

Participating in this morning’s conference call are Rick McKenney, Executive Vice President and CFO; and our business segment President’s Kevin McCarthy, Randy Horn, and Jack McGarry.

And now I’ll turn the call over to Unum’s President and CEO, Tom Watjen. Tom.

Tom Watjen

Thank you Tom and good morning. Not withstanding the short fall we experienced in the Colonial Life segment, I’m pleased with our fourth quarter operating and finical results. Unum US posed another strong quarter with solid risk experience and we are seeing encouraging signs of satiability and progress in our Unum UK operation.

The short fall this quarter in result to Colonial Life relative to our expectations was clearly disappointing, but given its growth prospects, strong profit margins and healthy cash flows, we continue to maintain a very positive outlook for this business. Rick will provide more detail on Colonial Life fourth quarter experience and outlook in his commentary.

Now let me make a few comments about the quarter. First, while we reported flat operating earnings per share of $0.66, our largest business Unum US continued to produce strong financial results with stable risk results.

Second our financial results and strong investment performance has allowed us to build a very strong capital position. Our weighted average risk based capital ration ended 2010 at approximately 398%, which is at the upper end of our target range and our holding company cash and marketable securities position exceeds 1.2 billion, which is over four times the annual need of servicing both our interest and our common stock dividends. With the strength of our capital position and the confidence in our future, our board has authorized an additional $1 billion for share repurchase over the next 18 months.

Third, while we saw very little change in the competitive environment this quarter, we did see some marginal improvement in the economic environment. After several quarters of declining natural growth of our business, that was less of a drain in this past quarter and we expect to see some continued benefit coming from slightly better employment - a slightly better employment outlook and perhaps some future wage inflation.

Fourth, we continue to see good growth in our target markets, especially the voluntary benefit market place. Our Unum US voluntary benefit business sales grew 10% in the fourth quarter and 15.6% for the full year. In Colonial Life commercial sales grew 5.3% for the quarter and 8.2% for the full year.

We expect growth in these markets will continue and with it you will continue to see our mix of business continue to shift to higher growth or stable margin businesses. And finally our investment portfolio remains in excellent shape. Our credit quality remains strong and although new money rates remain challenging, we are managing very effectively through this low interest rate environment.

In summary, as we wrap up that was a strong 2010. Our outlook going into 2011 is a very positive one, which I think was frankly reflected in some of the decisions or the decision by A.M. Best last week to upgrade our financial strength rate. We have a solid business plan in place and the commitment to maintaining a disciplined approach to our market.

The consistent predictable operating cash flow as we expect to generate will continue to provide us with tremendous financial flexibility. That financial flexibility remains an asset, both to support our business needs, allow us to capitalize on opportunities in the market place and also take steps like we announced yesterday to return excess capital to our shareholders. This will continue to be our playbook in 2011 and we have great confidence it will continue great value for our shareholders.

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