Unum (UNM) Down 21.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Unum (UNM). Shares have lost about 21.6% 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 catalysts.
Unum Group Q2 Earnings and Revenues Beat, Up Y/Y
Unum Group’s second-quarter 2019 operating net income of $1.36 per share beat the Zacks Consensus Estimate by 1.5%. The bottom line improved 4.6% year over year.
Good premium growth and stable benefits experience led to solid margin and cash flow.
Total operating revenues of Unum Group were nearly $3 billion, up 4.5% year over year on 5.5% higher premiums, 0.2% higher investment income and a 15.9% increase in other income. The top line beat the Zacks Consensus Estimate by 1.2%.
Total benefits and expenses increased 5.1% year over year to $2.7 billion. Rise in benefits and a change in reserves for future benefits, commission, interest and debt expense, amortization of deferred acquisition costs plus other expenses resulted in an overall increase in costs.
Quarterly Segment Update
Unum U.S.: Premium income was $1.5 billion, up 6.2% year over year. Adjusted operating income was up 1.3% year over year to $254.3 million.
Solid performance at group disability line of business, and supplemental and voluntary line of business drove the upside.
Unum International: Premium income grew 14.2% year over year to $158.6 million. Adjusted operating income was $30.7 million, up 11.2% year over year.
Unum UK line of business reported adjusted operating income, in local currency, of £22.7 million, up 11.3%. Premium income was £109.6 million, up 7.3%, driven by higher overall persistency, sales growth, and the impact of premium rate increases in the group long-term disability product line.
Benefit ratio was 85.6%, up 890 basis points (bps), reflecting unfavorable mortality experience and a reduction in claim reserve discount rate to recognize the impact on future portfolio yields from the higher-than-normal level of bond calls. Persistency increased in group long-term disability, group life business and supplemental line of business.
Colonial Life: Premium income increased 6.4% year over year to $420.9 million driven by growth in in-force block resulting from prior year period sales growth. Sales decreased 4.2% to $126.9 million. Adjusted operating income declined 0.2% to $84.4 million.
Benefit ratio deteriorated 40 bps year over year to 51.4%.
Closed Block: Premium income decreased 4.2% year over year primarily due to policy terminations and maturities. Adjusted operating income was $33.7 million, up 13.9% year over year.
Corporate: The segment incurred an operating loss of $43.84 million, wider than operating loss of $35.5 million in the year-earlier quarter.
As of Jun 30, 2019, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 365%. Unum Group exited the quarter with cash and marketable securities worth $977 million.
Book value per share of Unum Group fell 4.4% year over year to $45.11 as of Jun 30, 2019.
The company bought back 2.9 million shares for $100 million in the second quarter.
Unum Group affirmed after-tax operating income growth per share between 4% and 7%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Unum has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Unum has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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