Unum Group (UNM)

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Unum Group (UNM)

Q2 2011 Earnings Call

August 03, 2011 9:00 am ET

Executives

Jack McGarry - Executive Vice President, Chief Executive Officer of Unum UK and President of Unum UK

Thomas White - Senior Vice President of Investor Relations

Randall Horn - Executive Vice President, Chief Executive Officer of Colonial Life and President of Colonial Life

Kevin McCarthy - Executive Vice President, Chief Executive Officer of Unum US and President of Unum US

Richard McKenney - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Thomas Watjen - Chief Executive Officer, President and Director

Analysts

Thomas Gallagher - Crédit Suisse AG

John Nadel - Sterne Agee & Leach Inc.

Robert Glasspiegel - Langen McAlenney

Jamminder Bhullar - JP Morgan Chase & Co

Mark Hughes - SunTrust Robinson Humphrey, Inc.

Steven Schwartz - Raymond James & Associates, Inc.

Eric Berg - Lehman Brothers

Robert Glasspiegel - Janney Montgomery Scott LLC

Christopher Giovanni - Goldman Sachs Group Inc.

Colin Devine - Citigroup Inc

Presentation

Operator

Good day, and welcome to the Unum Group Second Quarter 2011 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Senior Vice President of Investor Relations, Mr. Tom White. Please go ahead.

Thomas White

Great, thank you, Tim. Good morning, everyone, and welcome to the second quarter 2011 analyst and investor call for Unum Group. 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 sections titled Cautionary Statement Regarding Forward-looking Statements and Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2010, and in our subsequently filed Form 10-Q. Our SEC filings can be found in the Investors section of our website at www.unum.com.

I remind you that the 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 reconciliations of any non-GAAP financial measures included in today's presentation can be found on our website also in the Investors section.

Participating in this morning conference call are Tom Watjen, President and CEO; and Rick McKenney, Executive Vice President and CFO; and also our business segment presidents, Kevin McCarthy for Unum U.S; Randy Horn for Colonial Life; and Jack McGarry for Unum U.K.

And now I'll turn the call over to Tom Watjen.

Thomas Watjen

Thank you, Tom, and good morning. The second quarter was another good quarter for Unum. And before I turn things back over to Rick and Tom to cover more extensive remarks, let me touch on just a few highlights I think I took -- actually a [ph] take away from the quarter.

First driven by slightly higher operating earnings in our core operating segment and a lower share count, as a result of our share repurchase program, we reported a 9% growth in our operating earnings per share for the quarter, which I think is a very good result in this environment. Second, we continue to see modest growth in most of our target markets. With, as expected, the majority of that coming from our U.S. businesses. Unum U.S. posted 9% growth in new sales this quarter including 19% growth in group LTD sales and 12% growth in our Group Life and AD&D sales. While Unum U.S. Voluntary Benefit sales declined by 14% this quarter, we were up against a very tough comparison from the same quarter last year.

At Colonial, new sales grew approximately 2% this past quarter following a slight decline in the first quarter. The primary driver was stronger sales in the public sector which have been lagging a bit this year. Not surprisingly, sales in Unum U.K. declined by 34% in local currency this quarter due to our pricing actions in that market. We did, however, see an increase in sales to existing customers which is certainly a very good signs to our continued grip in that marketplace. And as usual Kevin, Randy and Jack are here to answer any questions you may have about their operations, but also the market conditions in each of their markets in the Q&A session.

Third, despite the low-interest rate environment and the global economic concerns, our investment portfolio remains in excellent shape, with strong credit quality, minimal realized investment losses and generally stable portfolio yield that served to protect our reserve position. While we would certainly like to see interest rates rise, we are well-positioned if this trend continues.

Fourth is a result of our strong financial results and investment performance. We continue to maintain a very solid capital position. Our weighted-average risk-based capital ratio has 394% at quarter end, and our holding company's cash and marketable securities position is over $925 million, providing the company, as you can imagine, enormous financial flexibility. And finally, we continued our stock buyback activity with a total of $146 million of stock repurchase this quarter. Over the past 5 quarters, we have repurchased $726 million of stock and reduced our share count by 9% while this [ph] earlier also maintaining a very solid balance sheet.

In summary, over the past several years, we have built our business plan around a focus on discipline in all that we do: Trading growth for maintaining solid margin. This is not surprisingly led to more consistent financial results that we produced over the last several years, as well as a strong financial position we enjoy today. We are certainly looking for opportunities for accelerated growth and in ROE expansion, but we will continue to do so in a disciplined manner.

And now I'll turn things back over to Tom Watjen for his remarks

Thomas Watjen

Great, thank you, Tom. Net income for the second quarter, as you see, was $229.8 million or $0.75 per diluted common share. This compares to net income of $209.7 million or $0.63 per diluted common share last year. Included in the results for the second quarter of 2011, our net realized after-tax investment losses of $2.2 million or less than $0.01 per diluted common share compared to net realized after-tax investment losses of $18.9 million or $0.06 per diluted common share in the second quarter of 2010.

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