Unum (UNM) Up 6.2% Since Last Earnings Report: Can It Continue?
Unum (UNM) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
It has been about a month since the last earnings report for Unum (UNM). Shares have added about 6.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Unum due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Unum Group Q2 Earnings, Revenues Top, Guidance Up
Unum Group’s second-quarter 2021 operating net income of $1.39 per share beat the Zacks Consensus Estimate by 23%. The bottom line increased 13% year over year, attributable to soft performance across Unum International and Colonial Life segments.
Second-quarter results benefited from improving trend in mortality, strong returns in alternative invested asset portfolio and economic recovery.
Total operating revenues of Unum Group were nearly $3 billion, up 0.2% year over year driven by higher premiums. The top line beat the Zacks Consensus Estimate by 1.7%.
Premium increased 0.2% from the prior-year quarter to $2.4 billion. Investment income declined nearly 1% year over year to $$563.5 million.
Total benefits and expenses increased 1.7% year over year to $2.7 billion, largely attributable to cost related to early retirement of debt and rise in other expense.
Quarterly Segment Update
Unum U.S.: Premium income was $1.5 billion, almost flat year over year.
Adjusted operating income was down 22.7% year over year to $179.3 million, attributable to lower income in the group disability line of business and group life and supplemental and voluntary line of business as well as decline in accidental death and dismemberment line of business.
Unum International: Premium income of $183.5 million increased 16.8% year over year. Adjusted operating income was $24.8 million, up 64.2% year over year.
Unum U.K. line of business’ premium income was £115.1 million, up 3% from the year-ago quarter, attributable to growth in the in-force block, resulting from the impact of rate increases in the group long-term disability product line and higher overall persistency. Adjusted operating income, in local currency, of £16.8 million was up 66.3% from a year ago.
Benefit ratio was 82.5, flat year over year as improved experience in the group long-term disability product line and lower claims incidence in the group life product line was offset by higher inflation-linked experience in benefits.
Persistency increased in group long-term disability and group life business but declined in supplemental line of business.
Colonial Life: Premium income declined 4.3% from the prior-year figure to $419.7 million on account of lower sales. Sales increased 53.7% from the year-ago figure to $111.1 million. Adjusted operating income increased 5.4% from the prior-year period to $95.8 million. Persistency was 78.3%, which improved 80 bps year over year.
Benefit ratio deteriorated 100 bps year over year to 51.7 due to unfavorable experience in the accident, sickness, and disability product line, partially offset by improved experience in the life product line.
Closed Block: Premium income decreased 0.5% year over year attributable to due to policy terminations mostly offset by rate increases on certain in-force business in the long-term care line of business. Adjusted operating income was $111.2 million, which increased more than threefold year over year.
Corporate: The segment incurred an operating loss of $48.5 million, narrower than the loss of $58.1 million in the year-earlier quarter.
As of Jun 30, 2021, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 375.
Unum Group exited the quarter with cash and marketable securities worth $1.7 billion.
Book value per share improved 3.2% year over year to $53.57 as of Jun 30, 2021.
Unum Group expects 1-3% decline in operating income per share, an improvement from 5-6% decline expected earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
Currently, Unum has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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