Unum Group UNM is well-poised for growth on strong segmental performance, improved operational efficiency and robust liquidity position.
The company’s VGM Score of B also bodes well. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors. Unum Group has a decent surprise history of beating estimates in two of the trailing four quarters, the average beat being 0.73%.
Moreover, the company’s operating income has been consistently growing over the past few years due to strong performance in two of its largest operating segments — Unum U.S. and Colonial Life. Unum U.S. continues to benefit from disciplined sales trends, strong persistency in group lines, and growth of new product lines like dental and vision in 2019.Colonial Life’s sales increased 0.8% in 2019. Solid segmental performance is expected to boost premium growth for the company, resulting in top-line growth.
Furthermore, conservative pricing and reservation practices have been benefitting Unum Group’s operating results and overall profitability for the past few years. In 2019, operating income per share grew 4.6%. After delivering impressive fourth-quarter 2019 results, the company affirmed after-tax operating income growth per share projection between 4% and 7% for 2020.
Additionally, Unum Group consistently enhanced shareholders’ value in forms of dividend hikes and share repurchases. In July 2019, its board approved a quarterly dividend hike of 9.6%, marking the 11th consecutive year of a dividend hike. The dividend yield of the company stands at 3.8%, higher than the industry's average of 2.2%. Unum Group also has been actively engaged in share buybacks, utilizing its excess capital to add shareholder value. This reflects the company’s strong liquidity position.
However, a low interest rate environment along with stricter credit spread continues to weigh on its operations. This has put a strain on its profit margins by impacting net investment income yields. In 2019, the metric dipped 0.7% year over year. Also, a higher-debt level has been increasing interest expenses.
Shares of the Zacks Rank #3 (Hold) company has gained 11.3% in the past six months compared with its industry’s growth of 1.9%.
Stocks to Consider
Some better-ranked stocks in the insurance space are CNA Financial Corporation CNA, Markel Corporation MKL and American Financial Group, Inc. AFG. While CNA Financial currently sports a Zacks Rank #1 (Buy), Markel and American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CNA Financial beat the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.4%. American Financial surpassed estimates in three of the trailing four quarters, the average beat being 5%. Markel surpassed the same in two of the last four quarters, the average beat being 23.14%.
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