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Unum Group Poised for Growth Despite Low Interest Rates

On Jan 6, 2016 we issued an updated research report on Unum GroupUNM .

Unum Group continues to experience improvement in premiums in core businesses with better margins and a stable benefits experience. Conservative pricing and reservation practices have been contributing to its overall profitability. The company expects 2015 operating earnings to grow 2-5% from the 2014 level. The expected long-term earnings growth rate is currently pegged at 9%.

Unum U.S. and Colonial Life segments continue to act as catalysts to the company's strong performance. Hence, management expects continued persistency and sales improvement in existing client relationships to fuel operating income growth at Unum U.S. On the other hand, in the Colonial Life segment, management remains focused on maintaining a business mix with higher growth and stable margins.

Further, to deal with the low interest rate environment, Unum has consistently raised prices in product areas that are the worst affected by low rates. The company does not have any exposure to subprime mortgages, "Alt-A" loans or collateralized debt obligations in its asset-backed or mortgage-backed securities' portfolio.

A solid operational performance is supporting the company to engage in effective capital deployment leading to enhancement of shareholder value. To that end, the company regularly increases dividend and engages in share buyback.

However, exposure to a low interest rate environment and the soft performing Closed Block and Corporate segments raise concerns. Also, a tighter credit spread has been putting pressure on the profit margin by impacting net investment income yields.

Going by the surprise trend, this Zacks Rank #3 (Hold) accident & health insurer delivered positive surprises in two of the last four quarters, with an average beat of 0.58%. The Zacks Consensus Estimate for 2015 and 2016 is currently pegged at $3.61 and $3.82, respectively. These translate to a year-over-year increase of 1.6% in 2015 and 5.9% in 2016.

Stocks to Consider

Some better-ranked insurers are Hallmark Financial HALL , Aspen Insurance Holdings AHL and Heritage Insurance Holdings, Inc. HRTG . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

UNUM GROUP (UNM): Free Stock Analysis Report

HALLMARK FINL (HALL): Free Stock Analysis Report

ASPEN INS HLDGS (AHL): Free Stock Analysis Report

HERITAGE INSUR (HRTG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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