Unum (UNM) Down 0.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Unum (UNM). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Unum due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Unum Group Q3 Earnings Top Estimates on Higher Premium
Unum Group’s third-quarter 2023 operating net income of $1.94 per share beat the Zacks Consensus Estimate by 1%. The bottom line increased 17.6% year over year. The quarterly results reflected continued strong operating performance, favorable claim incidence, premium growth and increased sales in the Colonial Life segment, partially offset by higher expenses.
Operational Update
Total operating revenues of Unum Group were $3.1 billion, up 5.4% year over year, driven by higher premium income, other income and improved net investment income. The top line beat the Zacks Consensus Estimate by 0.7%.
Premium increased 5.7% from the prior-year quarter to $2.5 billion, which matched our estimate as well as the Zacks Consensus Estimate.
Total benefits and expenses increased 22.1% year over year to $2.8 billion, largely attributable to higher policy benefits, commissions, interest and debt expense, amortization of deferred acquisition costs and other expenses. Our estimate for the same was also $2.6 billion.
Quarterly Segment Update
Unum U.S.: Premium income was $1.6 billion, up 6.5% year over year.
Adjusted operating income rose 27.4% year over year to $357.8 million. The Zacks Consensus Estimate was pegged at $325 million. Unum International: Premium income of $210.6 million increased 21.5% year over year. Adjusted operating income was $36.8 million, up 47.8% year over year. The Zacks Consensus Estimate was pegged at $38.59 million.
The Unum U.K. line of business premium income was £142.2 million, up 9.9% from the year-ago quarter due primarily to in-force block growth. Adjusted operating income, in local currency, of £28.4 million was up 21.9% from a year ago. The benefit ratio, excluding the reserve assumption updates, was 67.4%, which improved 1,130 basis points (bps) due to favorable claim incidence, favorable claim resolutions and higher discount rates on new claims in the group long-term disability product line and lower inflation-linked experience in benefits. It was partially offset by higher incidence in the supplemental product line. Sales decreased 41.1%. Persistency increased in the group long-term disability but decreased in the group life business and supplemental product line of business.
Colonial Life: Premium income increased 1.9% from the prior-year figure to $431.2 million, driven by higher sales in prior periods, partially offset by lower persistency. Sales increased 4.7% from the year-ago figure to $121.3 million. Adjusted operating income decreased 12.7% from the prior-year period to $102.9 million. The Zacks Consensus Estimate was pegged at $117 million.
Persistency was 77.9% in the first nine months of 2023, which contracted 40 bps year over year. The benefit ratio, excluding the reserve assumption updates, deteriorated 40 bps year over year to 49.1%, primarily due to higher incidence in the life product line.
Closed Block: Adjusted operating income was $34.2 million, which decreased 18.7% year over year.
Corporate: The segment incurred an adjusted operating loss of $41.5 million, narrower than the year-ago quarter’s loss of $49.5 million.
Capital Management
As of Jun 30, 2023, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 470%.
Unum Group exited the third quarter with holding company liquidity worth $1.2 billion. Book value per share grew 16.8% year over year to $49.32 as of Sep 30, 2023.
UNM bought back 1.5 shares for $74.8 million. The board has approved a share repurchase program that authorizes Unum Group to repurchase up to $500 million of shares beginning on Jan 1, 2024.
2023 Guidance
UNM expects after-tax adjusted operating income per share to increase 20% to 25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Unum has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Unum has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Unum belongs to the Zacks Insurance - Accident and Health industry. Another stock from the same industry, Amerisafe (AMSF), has gained 2.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Amerisafe reported revenues of $74.82 million in the last reported quarter, representing a year-over-year change of -0.1%. EPS of $0.61 for the same period compares with $0.73 a year ago.
Amerisafe is expected to post earnings of $0.67 per share for the current quarter, representing a year-over-year change of -20.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.7%.
Amerisafe has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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