On Mar 18, 2016, we issued an updated research report on Unum GroupUNM .
With respect to quarterly results, Unum Group's fourth-quarter 2015 earnings outperformed the Zacks Consensus Estimate and improved year over year on solid performance at Unum U.S. and Colonial Life.
Also, this Zacks Rank #3 (Hold) accident and health insurer delivered positive earnings surprise in two of the last four quarters with an average beat of 0.82%. The Zacks Consensus Estimate for 2016 and 2017 are currently pegged at $3.80 and $4.10, respectively. These translate to a year-over-year increase of 4.5% in 2016 and 7.9% in 2017.
Unum Group's conservative pricing and reservation practices have contributed to its overall profitability. Unum U.S. and Colonial Life, two of the largest operating segments of the company, have consistently reported operating income growth and the last reported quarter was also no exception. The company expects total operating earnings to grow 3-6% over the 2015 level.
Importantly, the company continues to witness premium growth in core businesses with better margins and stable benefits experience. These have been fuelling capital generation and strong financial flexibility, thereby aiding active capital deployment.
A solid operational performance has also supported Unum Group to consistently enhance shareholders' value through dividend increases and share buybacks. Last year, the company's board of directors authorized the share repurchase of up to $750 million through Nov 21, 2016. Moreover, a strong liquidity position bodes well.
Unum Group's investment strategy serves as an important component of its overall business. Its strong score with credit rating agencies depicts its creditworthiness and helps in retaining investors' confidence along with attracting new investors.
However, exposure to a low interest rate environment has adversely affected the results at Unum U.K. and continues to weigh on its earnings improvement. Moreover, the segmental underperformance of the Closed Block and Corporate segments remain concerns. Also, a tighter credit spread has been putting pressure on the insurer's profit margin by impacting net investment income yields.
Stocks to Consider
Some better-ranked stocks from the same space are Employers Holdings, Inc. EIG , Trupanion, Inc. TRUP and Hallmark Financial Services Inc. HALL . While both Employers Holdings and Hallmark Financial sport a Zacks Rank #1 (Strong Buy), Trupanion holds a Zacks Rank #2 (Buy).