It has been about a month since the last earnings report for Unum (UNM). Shares have lost about 9.2% 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 catalysts.
Unum Group Q1 Earnings Match Estimates, Revenues Beat
Unum Group’s first-quarter 2019 operating net income of $1.31 per share was in line with the Zacks Consensus Estimate. The bottom line however improved 5.6% year over year.
The quarter witnessed good premium growth and stable benefits experience, which led to solid margin and cash flow.
Total operating revenues of Unum Group were nearly $3 billion, up 2.9% year over year on 3.9% higher premiums and a 7.3% increase in other income, partially offset by 1.3% lower investment income. The top line beat the Zacks Consensus Estimate by 0.9%.
Total benefits and expenses increased about 3% year over year to $2.6 billion. Rise in benefits and a change in reserves for future benefits, commission, interest and debt expense, amortization of deferred acquisition costs plus other expenses resulted in an overall increase in costs.
Quarterly Segment Update
Unum U.S.: Premium income was $1.5 billion, up 4.4% year over year. Adjusted operating income was up 3.4% year over year to $252.3 million.
Solid performance at group life and accidental death and dismemberment line of business and supplemental and voluntary line of business drove the upside.
Unum International: Premium income grew 10.3% year over year to $154 million driven by addition of Unum Poland in the fourth quarter of 2018. Sales improved 32.2% to $22.6 million. Adjusted operating income was $29.1 million, down 2.3% year over year.
Benefit ratio was 70.2%, an improvement of 170 basis points (bps), reflecting the favorable impact of inflation-linked decreases in benefits related to its group products. Persistency increased in group long-term disability and group life business.
Colonial Life: Premium income increased 5.3% year over year to $419.3 million on sales growth. Sales improved 4.9% to $108.8 million driven by growth in existing customer account sales and the expansion of dental and vision products. Adjusted operating income rose 5.2% to $85.2 million.
Benefit ratio improved 50 bps year over year to 51.1%. Persistency declined 170 bps to 77.3%
Closed Block: Premium income decreased 3.6% from the year-ago quarter’s level. This decline stemmed from policy terminations and maturities. Adjusted operating income was $31 million, up 7.3% year over year.
Corporate: The segment incurred an operating loss of $45.4 million, wider than operating loss of $40.3 million in the year-earlier quarter attributable to lower net investment income, increase in expenses resulting from a higher level of outstanding debt, a higher overall rate of interest, and higher pension costs.
As of Mar 31, 2019, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 360%. Unum Group exited the quarter with cash and marketable securities worth $594 million.
Book value per share of Unum Group fell 0.6% year over year to $42.68 as of Mar 31, 2019.
The company bought back 2.7 million shares for $100 million in the first quarter.
Unum Group projects after-tax operating income growth per share between 4% and 7%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Unum has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
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.
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