A month has gone by since the last earnings report for Unum (UNM). Shares have lost about 23.5% 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's Q4 Earnings Surpass Estimates, Increase Y/Y
Unum Group’s fourth-quarter 2019 operating net income of $1.41 per share beat the Zacks Consensus Estimate by 2.2%. Moreover, the figure improved 8.5% year over year on the back of higher revenues.
Total operating revenues of Unum Group were nearly $3 billion, up 3.5% year over year on higher premium income, net investment income and net realized investment gain. The top line also beat the Zacks Consensus Estimate by 0.5%.
Total benefits and expenses rose 3.3% year over year to $2.7 billion due to higher benefits, amortization of deferred acquisition costs and other expenses.
Quarterly Segment Update
Unum U.S.: Premium income was $1.5 billion, up 5.1% year over year. Adjusted operating income was up 5.8% year over year to $263.1 million.
Unum International: Premium income grew 8.7% year over year to $165.6 million. Adjusted operating income was $23.9 million, down 21.4% year over year.
Unum UK line of business reported adjusted operating income of £17.4 million in local currency, down 21.6%. Premium income was £113.9 million, up 8.6%, driven by higher overall persistency, sales growth and the impact of premium rate increases on the group long-term disability product line.
Benefit ratio of 77.3% was down 270 basis points (bps) due to an unfavorable claims experience in both the group long-term disability and group life product lines. However, the same was offset by lower inflation-linked increases in benefits.
Colonial Life: Premium income inched up 3.6% year over year to $424.9 million, driven by growth in the prior-year period sales. Sales increased 2.6% to $209.7 million. Adjusted operating income rose 2.7% to $87.7 million.
Benefit ratio contracted 10 bps year over year to 51.5%.
Closed Block: Premium income decreased 4.5% year over year, primarily due to policy terminations and maturities. Adjusted operating income was $46.1 million, up 32.5% year over year.
Corporate: The segment incurred an operating loss of $50.5 million, wider than the operating loss of $48.2 million in the year-earlier quarter.
As of Dec 31, 2019, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 365%.
Unum Group exited the quarter with cash and marketable securities worth $863 million.
Book value per share was up 22.2% year over year to $49.10 as of Dec 31, 2019.
The company bought back 3.3 million shares for $100.1 million in the fourth quarter.
Operating income for the year came in at $5.44 per share, up 4.6% year over year. Revenues for the year totaled $11.99 billion, up 3.5% year over year.
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.
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 has been net zero. 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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