Why Is Unum (UNM) Up 5.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Unum (UNM). Shares have added about 5.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Unum Group Q4 Earnings and Revenues Lag, Rise Y/Y
Unum's fourth-quarter 2022 operating net income of $1.43 per share missed the Zacks Consensus Estimate by 2.1% but came in line with our estimate. The bottom line increased 60.7% year over year.
The quarterly results reflected continued strong operating performance, core business premium trends nearing long-term growth expectations, improved core operations sales, stable persistency, premium growth and continued favorable benefits experience.
Operational Update
Total operating revenues of Unum Group were $3 billion, up 0.3% year over year, as higher premium income and other income were offset by lower net investment income. The top line missed the Zacks Consensus Estimate by 0.04% and was almost in line with our estimate.
Premium increased 1.5% from the prior-year quarter to $2.4 billion and was in line with our estimate.
Total benefits and expenses decreased 5.1% year over year to $2.6 billion, largely attributable to lower benefits and changes in reserves for future benefits.
Quarterly Segment Update
Unum U.S.: Premium income was $1.6 billion, up 3.4% year over year. The figure was almost in line with our estimate.
Adjusted operating income surged 181% year over year to $228.7 million, attributable to higher income in the group disability line as well as group life and accidental death and dismemberment line.
Unum International: Premium income of $178.3 million increased 0.5% year over year. This compares unfavorably with our estimate of $178.7 million. Adjusted operating income was $45 million, up 66.1% year over year.
The Unum U.K. line of business premium income was £132.1 million, up 15.4% from the year-ago quarter due to favorable sales and in-force block growth. Adjusted operating income, in local currency, of £37.7 million was up 101.6% from a year ago.
The benefit ratio was 76, which improved 540 basis points (bps) due to favorable experience in the group long-term disability product line driven by favorable recoveries. Sales increased 1.4%.
Persistency increased in group long-term disability, group life business and supplemental line of business.
Colonial Life: Premium income decreased 0.7% from the prior-year figure to $420.4 million on account of lower overall persistency, partially offset by higher prior period sales. The figure compared unfavorably with our estimate of $428.2 million.
Sales increased 2.3% from the year-ago figure to $170 million. Adjusted operating income increased 16.3% from the prior-year period to $93 million.
Persistency was 78%, which improved 130 bps year over year.
The benefit ratio improved 750 bps year over year to 45, driven by favorable claim experience across all product lines.
Closed Block: Premium income decreased 5.6% year over year to $230.9 million due to policy terminations, partially offset by rate increases. This compares unfavorably with our estimate of $237.3 million.
Adjusted operating income was $40.4 million, which decreased 47.3% year over year.
Corporate: The segment incurred an operating loss of $37.5 million, narrower than a loss of $45.1 million in the year-earlier quarter.
Full-Year Highlights
Operating net income of $6.21 per share missed the Zacks Consensus Estimate of $6.24 but was in line with our estimate. The bottom line increased 42.8% year over year.
Total operating revenues of Unum Group were $12 billion, up 0.6% year over year. The top line missed the Zacks Consensus Estimate by 0.08% and was almost in line with our estimate.
Premium increased 1.5% from the prior-year quarter to $9.6 billion and was in line with our estimate.
Capital Management
As of Dec 31, 2022, the weighted average risk-based capital ratio for Unum Group’s traditional U.S. insurance companies was approximately 420%.
Unum Group exited 2022 with liquidity worth $1.6 billion.
Book value per share was down 17.5% year over year to $46.51 as of Dec 31, 2022.
Unum Group bought back 1.6 shares for $62.6 million, taking the 2022 tally to 5.7 shares bought for $200.1 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, 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 quintile 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.
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 #2 (Buy). We expect an above average return from the stock in the next few months.
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Unum Group (UNM) : Free Stock Analysis Report
