Here's Why Investors May Consider Retaining Unum (UNM) Stock
Unum Group UNM remains well poised for growth on higher persistency, improved underlying benefits experience, upbeat guidance and effective capital deployment.
Optimistic Growth Projections
The Zacks Consensus Estimate for Unum Group’s 2022 earnings is pegged at $4.75, indicating a 9.2% increase from the year-ago reported figure on 0.9% higher revenues of $12.1 billion. The consensus estimate for 2023 earnings is pegged at $5.76, indicating a 21.1% increase from the year-ago reported figure on 2.6% higher revenues of $12.4 billion.
The expected long-term earnings growth rate is 11.9%, which is higher than the industry average of 8.4%.
Earnings Surprise History
Unum Group has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in the other one, the average beat being 22.06%.
Zacks Rank & Price Performance
UNM currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 13.3% against the industry’s decline of 1.4%.
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Business Tailwinds
The Unum U.S. segment contributes a major share of premium income to Unum Group. The segment stands to gain from improving employment levels along with rising wages. The group life, and accidental death and dismemberment (AD&D) line of this segment should gain from higher persistency, favorable trends and natural growth.
Strong sales growth in both voluntary benefits and the individual disability lines, an increase in dental and vision premium income, and strong improvement in persistency in the voluntary benefits line are expected to drive the Unum U.S. segment.
The Unum International segment remains well-poised for growth on improved underlying benefits experience, particularly in the group lifeline, growth in the in-force block and a higher exchange rate.
Sales in both Unum UK and Unum Poland are likely to boost the international business segment of Unum Group.
Stable persistency, growth in premium income, higher net investment income owing to higher income from bond calls and favorable benefits experience are likely to drive the Colonial Life segment.
Unum Group boasts a strong balance sheet and liquidity with a holding company liquidity of $1.3 billion. The weighted average risk-based capital ratio for the insurer’s traditional U.S. insurance companies was approximately 400%.
Banking on operational excellence, Unum Group has increased dividends, which witnessed an eight-year CAGR (2015-2022) of 8.6%. The dividend yield is currently 3.4%, better than the industry average of 2.7%. This makes the stock an attractive pick for yield-seeking investors. Unum Group executed a $50 million accelerated share agreement and expects to repurchase approximately $200 million of shares for 2022.
Upbeat Guidance
Unum Group expects positive operating trends in core business in 2022, with solid premium growth and improving claim experience as impacts from COVID-19 lessen.
Unum Group projects an increase in after-tax adjusted operating income per share of 15% to 20% relative to 2021, compared with its guidance of an increase of 4% to 7%. The improved expectation reflects the insurer's strong first-quarter performance and improved guidance for the remainder of 2022.
Stocks to Consider
Some better-ranked stocks from the insurance industry are W.R. Berkley Corporation WRB, HCI Group, Inc. HCI and RLI Corp. RLI. While W.R. Berkley and HCI Group sport a Zacks Rank #1 (Strong Buy), RLI Corp. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 33.7%.
The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 4.9% and 4.1% north, respectively, in the past 30 days.
The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 17.4%.
The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.
RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 9.5%.
The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.
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