Unum (UNM) Up 5.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Unum (UNM). Shares have added about 5.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Unum Group Q2 Earnings & Revenues Top, Guidance Raised

Unum Group’s second-quarter 2022 operating net income of $1.91 per share beat the Zacks Consensus Estimate by 55.3% and our estimate of $1.22. The bottom line increased about 37.4% year over year. The quarterly results reflected an improvement in COVID-related mortality impacts, strong operating performance, and favorable sales and premium trends in core business segments.

Operational Update

Total operating revenues of Unum Group were $3.1 billion, up 2% year over year due to higher premium income and other income. The top line beat the Zacks Consensus Estimate by 1.8% and was almost in line with our estimate. Premium increased 1.8% from the prior-year quarter to $2.4 billion and was in line with our estimate as well as the Zacks Consensus estimate.

Total benefits and expenses decreased 4.9% year over year to $2.6 billion, largely attributable to lower benefits and change in reserves for future benefits.

Quarterly Segment Update

Unum U.S.: Premium income was $1.6 billion, up 3.3% year over year. The figure was almost in line with our estimate as well as the Zack Consensus Estimate. Adjusted operating income was up 64.8% year over year to $295.4 million, attributable to higher income in the group disability line, group life and accidental death and dismemberment line as well as a supplemental and voluntary line of business.

Unum International: Premium income of $179.4 million increased 2.2% year over year.  This compares unfavorably with our estimate of $198 million and the Zacks Consensus Estimate of $183 million. Adjusted operating income was $24.9 million, up 0.4% year over year.

The Unum U.K. line of business’ premium income was £125 million, up 8.6% from the year-ago quarter due to in-force block growth. Adjusted operating income, in local currency, of £19.3 million was up 14.9% from a year ago.

The benefit ratio was 89.7, which improved 720 basis points (bps) due to higher inflation-linked experience in benefits, lower claim terminations in the group long-term disability product line, and higher claim incidence in the group critical illness product line.

Persistency increased in group long-term disability, group life business and supplemental line of business.

Colonial Life: Premium income increased 1.9% from the prior-year figure to $427.6 million on account of higher sales in prior periods and higher overall persistency. The figure was almost in line with our estimate as well as the Zack Consensus Estimate. Sales increased 6.4% from the year-ago figure to $118.2million. Adjusted operating income increased 5.5% from the prior-year period to $101.1 million.

Persistency was 78.6%, which improved 30 bps year over year. The benefit ratio improved 410 bps year over year to 47.6 driven by favorable claim experience across all products.

Closed Block: Premium income decreased 4.5 % year over year to $238 million due to policy terminations and maturities, partially offset by rate increases. This compares unfavorably with our estimate of $245 million. Adjusted operating income was $79.3 million, which decreased 28.7% year over year.

Corporate: The segment incurred an operating loss of $36.9 million, narrower than a loss of $48.5 million in the year-earlier quarter.

Capital Management

As of Jun 30, 2022, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 415%. Unum Group exited the quarter with liquidity worth $1.2 billion. Book value per share was down 9.5% year over year to $48.47 as of Mar 31, 2022.

Ups Guidance

Unum Group expects positive operating trends in core business in 2022, with solid premium growth and improving claim experience as impacts from COVID-19 lessen. Unum Group projects an increase in after-tax adjusted operating income per share of 40% to 45% year over year, up from an increase of 15% to 20%, guided earlier. The improved expectation reflects the insurer's strong first-half performance and an improved guidance for the remainder of 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 10.59% due to these changes.

VGM Scores

Currently, Unum has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Unum has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Unum belongs to the Zacks Insurance - Accident and Health industry. Another stock from the same industry, Aflac (AFL), has gained 0.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

Aflac reported revenues of $5.4 billion in the last reported quarter, representing a year-over-year change of -3%. EPS of $1.46 for the same period compares with $1.59 a year ago.

For the current quarter, Aflac is expected to post earnings of $1.22 per share, indicating a change of -20.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.3% over the last 30 days.

Aflac has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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