It has been about a month since the last earnings report for Unum (UNM). Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Unum due for a pullback? 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 Q3 Earnings and Revenues Miss Estimates
Unum Group’s third-quarter 2019 operating net income of $1.36 per share missed the Zacks Consensus Estimate and fell short of the year-ago quarter earnings by 0.7%.
Unum U.S. and Unum International results were soft. However, the company generated top line growth and recorded solid profit margins.
Total operating revenues of Unum Group were nearly $3 billion, up 2.2% year over year on higher premiums and increase in other income, partially offset by lower investment income. The top line however missed the Zacks Consensus Estimate by 0.8%.
Total benefits and expenses decreased 19.5% year over year to $2.7 billion. Lower benefits and a change in reserves for future benefit attributed to lower costs.
Quarterly Segment Update
Unum U.S.: Premium income was $1.5 billion, up 3.9% year over year. Adjusted operating income was down 3.5% year over year to $261.4 million, attributable to soft performance at Unum US as well as supplemental and voluntary line of business.
Unum International: Premium income grew 10.4% year over year to $152.3 million. Adjusted operating income was $24.2 million, down 7.3% year over year.
Unum UK line of business reported adjusted operating income, in local currency, of £18.7 million, down 6.5%. Premium income was £109 million, up 2.8%, driven by higher overall persistency, sales growth, and the impact of premium rate increases in the group long-term disability product line.
Benefit ratio was 73.4%, down 80 basis points (bps), reflecting favorable claims incidence in the group critical illness product line and lower inflation-linked increases in benefits, partially offset by unfavorable claim terminations in group long-term disability. Persistency increased in group long-term disability and group life business.
Colonial Life: Premium income increased 5% year over year to $419.9 million driven by growth in in-force block resulting from prior-year period sales growth. Sales decreased 0.2% to $120.6 million. Adjusted operating income increased 3.6% to $87.2 million.
Benefit ratio improved 10 bps year over year to 51.4% attributable to favorable experience in the life line of business, mostly offset by unfavorable experience in cancer and critical illness lines of business.
Closed Block: Premium income decreased 3.9% year over year primarily due to policy terminations and maturities. Adjusted operating income was $26.9 million, down 16.4% year over year.
Corporate: The segment incurred an operating loss of $48.9 million, wider than operating loss of $47.1 million in the year-earlier quarter.
As of Sep 30, 2019, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 368%.
Unum Group exited the quarter with cash and marketable securities worth $1 billion.
Book value per share of Unum Group increased 19.9% year over year to $46.70 as of Sep 30, 2019.
The company bought back 3.4 million shares for $100 million in the third quarter.
Unum Group affirmed 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 estimates revision.
At this time, Unum has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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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