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Unum Rides on Solid Segmental Show, Expense Woes Linger

Zacks Equity Research
·2 mins read

Unum Group UNM is well-poised for growth on solid segmental performance and strong capital position. The company boasts being the leading disability income writer and the second-largest writer of voluntary business in the United States.

This company has a decent history of delivering earnings surprise with the four-quarter average beat being 0.66%.

Favorable benefits experience, conservative pricing and reservation practices should continue contributing to its overall profitability. Unum Group estimates premium income of core business segments to be flat to up slightly in 2020.

Two of the largest operating segments of Unum — Unum U.S. and Colonial Life — should continue to deliver solid performance. While disciplined sales trends, strong persistency in group lines and growth of new product lines like dental and vision should drive Unum U.S., and sales growth. Stable persistency should drive Colonial Life. Management remains focused on moving on to a mix of businesses with higher growth and stable margins.

Based on operational excellence, Unum Group boasts a solid capital position. Sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility. Strong statutory earnings might provide an impetus to strong dividend capacity. The company has increased its dividend for 11 straight years.  

However, Unum Group has been witnessing a rise in total benefits and expenses for the past few years inducing margin contraction. Increasing debt level inducing deterioration in leverage ratio and poor times interest earned concern. A still low interest rate environment is also a headwind.

Key Players

Key players from the Accident and Health Insurance industry include Employers Holdings Inc. EIG, AMERISAFE Inc AMSF and Aflac Incorporated AFL

Employers Holdings delivered positive surprise of 157.58% in the last-reported quarter.

AMERISAFE delivered positive surprise of 47.06% in the last-reported quarter.

Aflac delivered positive surprise of 24.27% in the last-reported quarter.

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