A month has gone by since the last earnings report for Unum (UNM Quick QuoteUNM - Free Report) . Shares have lost about 6.1% 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 drivers.

Unum Group Q3 Earnings Top, Revenues Lag Estimates

Unum Group’s third-quarter 2022 operating net income of $1.51 per share beat the Zacks Consensus Estimate by 7.9% and our estimate of $1.41. The bottom line increased about 46.6% year over year.

The quarterly results reflected continued strong operating performance, core business premium trends nearing long-term growth expectations, improved core operations sales, premium growth and continued favorable benefits experience.

Operational Update        

Total operating revenues of Unum Group were $3 billion, flat year over year as higher premium income and other income were offset by lower net investment income. The top line missed the Zacks Consensus Estimate by 0.7% and was almost in line with our estimate.

Premium increased 1.6% from the prior-year quarter to $2.4 billion and was in line with our estimate. Total benefits and expenses decreased 4.4% year over year to $2.4 billion, largely attributable to lower benefits and changes in reserves for future benefits.

Quarterly Segment Update

Unum U.S.: Premium income was $1.6 billion, up 3.9% year over year. The figure was almost in line with our estimate. Adjusted operating income was up more than threefold year over year to $275 million, attributable to higher income in the group disability line as well as group life and accidental death and dismemberment line.

Unum International: Premium income of $173.3 million decreased 4.6% year over year.  This compares unfavorably with our estimate of $193 million. Adjusted operating income was $29.9 million, up 9.1% year over year. The Unum U.K. line of business’ premium income was £129.4 million, up 12.1% from the year-ago quarter due to in-force block growth and higher sales in the group life product line. Adjusted operating income, in local currency, of £23.6 million was up 28.3% from a year ago.

The benefit ratio was 78.6, which improved 60 basis points (bps) primarily due to inflation-linked experience for its group life and group long-term disability products, partially offset by higher claim incidence in its supplemental product line. Persistency increased in group long-term disability, group life business and supplemental line of business.

Colonial Life: Premium income increased 0.6% from the prior-year figure to $423.3 million on account of higher sales in prior periods, partially offset by lower overall persistency. The figure compared unfavorably with our estimate of $428.4 million.

Sales increased 3.2% from the year-ago figure to $115.9 million. Adjusted operating income increased 12.9% from the prior-year period to $90.4 million.

Persistency was 78.3%, which improved 60 bps year over year.

The benefit ratio improved 910 bps year over year to 46.8, driven by favorable claim experience across all products.

Closed Block: Premium income decreased 6% year over year to $235.5 million due to policy terminations and maturities, partially offset by rate increases. This compares unfavorably with our estimate of $247.3 million. Adjusted operating income was $34.1 million, which decreased 68.9% year over year.

Corporate: The segment incurred an operating loss of $49.5 million, wider than a loss of $45.4 million in the year-earlier quarter.

Capital Management

As of Sep 30, 2022, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 415%.
Unum Group exited the quarter with liquidity worth $1.1 billion.

Book value per share was down 20% year over year to $43.49 as of Sep 30, 2022.
Unum Group bought back 1.2 shares for $$42.6 million, taking the year-to-date tally to 4.2 shares bought for $137.5 million.

Guidance Retained

Unum Group expects positive operating trends in core business in 2022, with solid premium growth and improving claim experience as impacts from COVID-19 lessen. Unum Group projects an increase in after-tax adjusted operating income per share of 40% to 45%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Unum has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Unum has a Zacks Rank #2 (Buy). We expect an above average 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 Quick QuoteAMSF - Free Report) , has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Amerisafe reported revenues of $74.88 million in the last reported quarter, representing a year-over-year change of +1.4%. EPS of $0.73 for the same period compares with $1.02 a year ago.