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Unum (UNM) Rides on Premium Growth, Firm Financial Standing

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Unum Group (UNM - Free Report) has been gaining on the back of consistent revenue growth from solid contribution of its largest operating segment Unum U.S. and by Unum International. Its strong capital position enables investment in business as well as dividend payment and share repurchases, which in turn, creates shareholders’ wealth.  

Unum’s premiums and earnings per share witnessed a three-year CAGR of 5% and 13%, respectively.

The company’s U.S segment benefits from its disciplined approach to sales, continued sturdy persistency in group lines and growth from new product lines, such as dental and vision.  The company is thriving on a favorable macroeconomic environment characterized by low unemployment and wage inflation, which drove demand for its employee benefits products. Also, the Federal Reserve’s stance to keep interest rates on hold bodes well for the company’s investment portfolio.

In order to address the headwinds from low interest rates, the company is resorting to new business pricing and renewal activity for 2020.

The company is investing heavily in digital transformation by expanding its digital self-service capabilities and utilizing analytics, which should ramp up operational efficiency and reduce costs.

Its International business witnessed premium growth from the acquisition of Pramerica Zycie in Poland during 2018. Also, Unum UK’s contributes contribution robustly with good persistency results and effective in-force block management.

Along with its growing top line, the company managed to keep its cost under check, thereby aiding margin growth.

In the past three months, the stock has gained 6.5% compared with its industry’s growth of 3.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Management maintained the company’s financial flexibility, backed by its healthy capital position. There has been a continuous hike in the dividend rate approved by the company and we expect this trend to remain. It has a dividend yield of 3.92%, higher than the industry average of 2.2%. Thus, the stock makes a good investment option for dividend-seeking investors.

For 2020, the company expects core premium growth in the 4-6% range, the mid-point being in line with its past three-year premium CAGR.   

Currently, the stock carries a Zacks Rank of #3 (Hold). Some better-ranked stocks in the same space are Trupanion, Inc. TRUP, Chubb Limited CB and Markel Corporation MKL. While Trupanion sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy).  Each of these stocks’ earnings surpassed estimates in the last reported quarter by 200%, 2.27% and 84.77%, respectively.

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