Unum Reiterated at Neutral - Analyst Blog
April 14 2011 - 5:45AM
Zacks
Owing to unemployment and sluggish
economic recovery that are expected to delay new business accrual
and exert pressure on premium growth coupled with low interest
rates that are
expected to impact investment income and reserving
practices, we reiterate out Neutral recommendation on Unum
Group (UNM).
Unum’s fourth quarter earnings
lagged the Zacks Consensus Estimate due to soft performance at Unum
UK and Colonial Life.
Unum's U.S. segment,
which accounts for a major portion of the company’s premium income,
recession unfavorably affected premium growth in 2009. During the
most recent quarter premium income witnessed a decline though
modest.
Due to the slow economic recovery
and continued pricing discipline, we expect only a slight increase
in enrollments which will restrict the premium growth. Also, at
Colonial Life, we expect a moderate premium growth in the near
future due to slower sales trends.
Counting on the positives, despite
the ongoing turmoil in the U.S. economy, Unum reported favorable
operating results across the majority of its insurance entities in
2010. Over the past few years, the company’s conservative pricing
and reserving practices have contributed to its improved overall
profitability. Its return on equity has remained above the industry
median for the past couple of years.
Also, a solid balance sheet and
adequate liquidity have helped Unum to increase dividend and
repurchase shares. The company’s annualized dividend yield of 1.41%
is substantially higher than its nearest peers and higher than the
industry average of 1.12% as well.
With the fourth quarter earning
release, Unum proposed a $1 billion share buyback. This amount is
in addition to the remaining balance of $144.3 million on its
previous share repurchase authorization. During the fourth quarter,
the company had bought back 1.2 million shares for $28.5
million.
Looking ahead, Unum Group expects
operating income per share in 2011 to grow in the range of 6% to
12%. The Zacks Consensus Estimate for 2011 is $2.96.
Over the last 7 and 30 days, none of the
analysts covering the stock raised their estimates for the first
quarter of 2011. However, 1 out of 15 analysts covering the stock
nudged the estimate downward for the same periods.
Over the last 7 as well as
30 days, none of the analysts covering the stock revised the
estimates for 2011. For 2012, over the last 30 days, 1 out of 24
analysts covering the stock raised the estimate. None of them
inched up the estimate for 2012.
The quantitative Zacks #3 Rank
(short-term Neutral rating) for the company indicates no clear
directional pressure on the shares over the near term.
Headquartered in Chattanooga,
Tennessee, Unum Group was created following the June 1999 merger of
Provident Companies Inc. and Unum Corporation. Along with
disability insurance, the company provides long-term care
insurance, life insurance, employer- and employee-paid group
benefits and related services. Its major competitors are
AFLAC Inc. (AFL), Lincoln National
Corp. (LNC) and CIGNA Corporation
(CI).
AFLAC INC (AFL): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
UNUM GROUP (UNM): Free Stock Analysis Report
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