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Unum Group (UNM) Benefits From Solid Segmental Performance

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·4 min read
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Unum Group UNM should continue to benefit from its strong segmental performance, effective capital deployment, and solid liquidity position.

Growth Projections

The Zacks Consensus Estimate for 2022 earnings per share is pegged at $5.1, indicating growth of 16.6% year over year. The expected long-term earnings growth rate is 8.2%, which is higher than the industry average of 6.6%.

Estimate Revision

Estimates for 2022 have moved up nearly 0.6% in the past 30 days, reflecting investors’ optimism.

Earnings Surprise History

Unum has a decent earnings surprise history. It beat estimates in two of the last four quarters and missed in the other two, with the average beat being 3.64%.

Zacks Rank & Price Performance

Unum Group currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 10.1%, compared with the industry’s increase of 27.3%.

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Zacks Investment Research

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Business Tailwinds

Unum Group continues to witness a positive trend in premium growth across its three operating segments, Unum U.S., Unum International and Colonial Life. Unum U.S. accounts for the lion’s share of the premium income of the company.

Riding on higher income in the group disability line of business and group life and supplemental and voluntary line of business as well as an increase in accidental death and dismemberment line of business, the Unum U.S. segment is likely to improve in the future. Also, strong persistency in group lines and growth of new product lines like dental and vision should benefit the segment. Increased new sales for Unum US also provide support.

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. Also, it witnessed sequential improvement in the other lines, accident, sickness and disability and cancer and critical illness, which continue to drive strong earnings for this segment.

The Unum International segment has witnessed a consistent increase in income over the past several quarters. Banking on improved underlying benefits experience, particularly in the group life line, growth in the in-force block, owing to the impact of rate increases in the group long-term disability product line, higher persistency and higher exchange rate, the Unum International segment remains well poised for growth.

Unum Group boasts a strong capital position with substantial financial flexibility. The risk-based capital ratio for the traditional U.S. insurance companies improved to 380%, well above the targeted levels.

Such tailwinds enable the insurer to return more value to shareholders. Per the deployment strategy, the board has authorized to repurchase up to $250 million of shares through 2022. The insurer intended to begin this program with the execution of accelerated share repurchase of $50 million in the fourth quarter of 2021.

Stocks to Consider

Some better-ranked stocks in the insurance space are Fidelity National Financial FNF, AMERISAFE, Inc. AMSF and Aflac Incorporated AFL. While Fidelity National sports a Zacks Rank #1 (Strong Buy), AMERISAFE and Aflac carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average beat being 38.18%. In the past year, FNF has gained 33.2%. The Zacks Consensus Estimate for 2022 earnings has moved 4.6% north in the past 30 days.

AMERISAFE carries a Zacks Rank #2. AMSF delivered a four-quarter average earnings surprise of 34.7%. In the past year, the stock has lost 6.9%. AMERISAFE has an impressive Value Score of B that reflects the attractive valuation of the stock.

Aflac carries a Zacks Rank #2. The Zacks Consensus Estimate for 2022 earnings has moved up 0.2% in the past 60 days. AFL delivered a four-quarter average earnings surprise of 18.32%. In the past year, Aflac has gained 32.9%. The expected long-term earnings growth rate is 5%.


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