Watjen to retire; sales up 21% for year

Tom Watjen, who has led Unum since 2003, is retiring as CEO of Unum Group on May 21, the date of the company’s annual shareholder meeting in Chattanooga. He will become non-executive chairman of Unum’s board of directors.

Rick McKenney, executive vice president and CFO since 2009, will assume the role of president on April 1 and join the board. He will officially succeed Watjen as CEO on May 21.

“What an honor it has been to serve this great company, and to have had the opportunity to work with such remarkable people,” Watjen said. “Rick’s deep involvement with the business at all levels gives me tremendous confidence that Unum will continue to thrive under his leadership.”

Jack McGarry, president and CEO of the Closed Block, will succeed McKenney as chief financial officer.

Earnings exceed estimates

Unum capped a strong 2014 with the release of fourth quarter financial results that exceeded Wall Street estimates and included increased sales and premium growth at levels not seen for some time.

The company reported fourth quarter operating income of $228.8 million after taxes, or 90¢ per share, compared with $223.8 million, or 85¢ per share, in the fourth quarter of 2013. For the full year, operating earnings grew nearly 7 percent to $3.55 per share, our highest level ever.

As we announced in December, we increased our Long Term Care reserves during the quarter to better reflect today’s extremely low interest rates. This move resulted in a net loss of $279.1 million, or $1.11 per share, for the quarter.

Unum US total sales increased 25 percent in the quarter and 21 percent for the full year, the highest they have been in more than a decade. Operating income declined slightly to $212.4 million as our strong premium growth of almost 6 percent and generally solid risk results were offset by the effects of lower interest rates.

In addition to Unum US results, here are some other highlights from the quarter:

Unum UK: Operating income was $38.2 million (£24.1 million) for the quarter, up more than 6 percent from last year and almost 9 percent in local currency. Sales grew by nearly 28 percent and premium increased 10 percent as persistency was much better than expected.
Colonial Life: Operating income increased by more than 7 percent in the quarter to $74.3 million and closed at a record $300.2 million. Sales in the quarter increased by 16 percent, with good balance across all of the company’s market segments. For the year, sales increased almost 12 percent to $410 million, also a record for the company.
Closed Block: Excluding the impact of the reserve charge, the Closed Block had operating earnings of $30 million for the quarter, up slightly from last year. Risk results were generally in line with our long-term expectations for this block.
Investment portfolio: The credit quality of our portfolio remains very strong, but the lower interest rates we’ve been seeing for some time now (and expect to persist) continue to negatively impact our investment income.
Our capital position also remains very strong, and we exceeded most of our capital-related targets for the year. This continues to provide us with significant financial flexibility to both support the needs of the businesses and return capital to shareholders.

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Highlights of the quarter ›

Unum US: Total sales increased 25 percent in the quarter and 21 percent for the full year. Operating income declined slightly to $212.4 million.
Unum UK: Operating income was $38.2 million (£24.1 million) for the quarter, up more than 6 percent from last year and almost 9 percent in local currency. Sales grew by nearly 28 percent.
Colonial Life: Operating income increased by more than 7 percent in the quarter to $74.3 million and closed at a record $300.2 million. Sales in the quarter increased by 16 percent.
Closed Block: Excluding the impact of the reserve charge, the Closed Block had operating earnings of $30 million for the quarter, up slightly from last year.
Investment portfolio: The credit quality of our portfolio remains very strong, but lower interest rates continue to negatively impact our investment income.
Our capital position also remains very strong, and we exceeded most of our capital-related targets for the year. This continues to provide us with significant financial flexibility to both support the needs of the businesses and return capital to shareholders.