We have retained our Neutral recommendation on
). Overall growth in premium income and favorable expense
management will likely be offset by soft results in the Unum U.K.
and the Closed Block segments. Continued low interest rate
environment is also expected to affect the results adversely. The
accident and health insurance provider carries a Zacks Rank # 3
Although Unum Group's operating income revived from a significant
deterioration in 2011, the Unum U.K. and the Closed Block segment
reported a decline in operating income in 2012. Moreover, the
company reported a decline in operating revenues in its Colonial
Life segment in 2012. Sales in the Unum U.K. segment were also a
drag for the company.
Benefit ratio of the Unum U.K. segment and the Colonial Life
segment deteriorated as well. Adverse risk results in group life
and slightly less favorable group disability risk results led to
a deterioration of the benefit ratio of the U.K. segment in 2012.
On the other hand less favorable risk results in the life, cancer
and critical illness lines of business led to the deterioration
in the Colonial Life segment.
Although the company has sound investment strategy, net
investment income suffered due to low asset levels, lower
proportion of assets invested at long-term interest rates and
Counting on the positives, Unum's major operating segments - Unum
U.S. and Colonial Life reported solid numbers in 2012, raising
the company expectation to 0-6% for full year 2013.
Further, Unum continues to increase shareholder value through
dividend payouts and share repurchases. In 2012, Unum Group
bought back 23.6 million shares for $500.6 million according to
its expectation of deploying $500 million for share buybacks that
year. This totaled to a deployment of $2 billion for share
repurchases over the past 5 years. Additionally, the board
approved a dividend payment of 13 cents per share in Apr 2013
representing a 23.8% hike year over year. The company also scores
strongly with the credit rating agencies.
However, competitive pricing environment in U.K. coupled with
premium rate increases and a difficult macroeconomic situation
will likely weigh on premium growth in the U.K. segment.
Additionally, the company's operations are expected to be
affected adversely by the low interest rate environment and the
ongoing unemployment scenario.
Other Stocks to Consider
Among others from the industry,
) carries a favorable Zacks Rank #1 (Strong Buy) while
Employers Holdings Inc.
Stancorp Financial Group Inc.
) carry a Zacks Rank #2 (Buy).
AMERISAFE INC (AMSF): Free Stock Analysis
EMPLOYERS HLDGS (EIG): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
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