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Unum (UNM) Down 14.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Unum (UNM - Free Report) . Shares have lost about 14.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Unum Group Q3 Earnings Miss, Revenues Beat Estimates

Unum Group’s third-quarter 2021 operating net income of $1.03 per share missed the Zacks Consensus Estimate by 11.2%. The bottom line decreased 14.9% year over year.

Third-quarter results were affected by higher COVID-related mortality, partially offset by growth in sales and premium, and continued strong returns in the alternative invested asset portfolio.

Operational Update         

Total operating revenues of Unum Group were nearly $3 billion, down 0.7% year over year owing to lower net investment income. The top line however beat the Zacks Consensus Estimate by 0.2%.

Premium increased 1.5% from the prior-year quarter to $2.4 billion. Investment income declined 10.3% year over year to $550.2 million.

Total benefits and expenses decreased 5.1% year over year to $2.6 billion, largely attributable to lower benefit, interest and debt expense.

Quarterly Segment Update

Unum U.S.: Premium income was $1.5 billion, up 1.2% year over year.

Adjusted operating income was down 53% year over year to $88.5 million, attributable to lower income in the group disability line of business and loss in group life and supplemental and voluntary lines of business.

Unum International: Premium income of $181.6 million increased 9.8% year over year. Adjusted operating income was $27.4 million, up 28% year over year.

The Unum U.K. line of business’ premium income was £115.4 million, up 2.9% from the year-ago quarter, driven by growth in the in-force block, resulting from the impact of rate increases in the group long-term disability product line and higher overall persistency. Adjusted operating income, in local currency, of £18.4 million was up 21.1% from a year ago.

The benefit ratio was 79.2, down 210 basis points year over year attributable to higher inflation-linked experience in benefits and a higher average claim size in the group life product lines.

Persistency increased in group long-term disability and group life business but declined in the supplemental line of business.

Colonial Life: Premium income increased 0.2% from the prior-year figure to $420.8 million, driven by higher overall persistency and higher year-to-date sales. Sales increased 28.6% from the year-ago figure to $112.3 million. Adjusted operating income decreased 13.1% from the prior-year period to $80.1 million.

The benefit ratio deteriorated 370 bps year over year to 55.9, primarily due to an unfavorable experience in the life product line resulting from the impacts of COVID-19.

Closed Block: Premium income of $250.5 million was flat year over year as rate increases on certain in-force businesses in the long-term care line of business were mostly offset by policy terminations and maturities. Adjusted operating income was $109.8 million, which increased 55.1% year over year.

Corporate: The segment incurred an operating loss of $45.4 million, narrower than the loss of $54.1 million in the year-earlier quarter.

Capital Management

As of Sep 30, 2021, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 380.

Unum Group exited the quarter with cash and marketable securities worth $1.6 billion.

Book value per share increased 1.7% year over year to $54.39 as of Sep 30, 2021.

On Oct 25, 2021, the board of directors authorized a repurchase program of $250 million worth of shares through Dec 31, 2022. The company intends to execute an accelerated stock repurchase agreement to repurchase $50 million worth of shares in the fourth quarter of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -21.91% due to these changes.

VGM Scores

Currently, Unum has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 B. 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. It's no surprise Unum has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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