Unum's (UNM) Premium Growth Trajectory Continues To Shine
Zacks Investment Research | Dec 13, 2018 10:19PM ET
Unum Group (NYSE:UNM) , a market leader in offering comprehensive insurance solutions to its clients globally, has been maintaining a sustained operational performance over the past many years. The company’s continued focus on conservative pricing and reservation practices has led to its overall profitability.
The Accident and Health insurer’s growth trajectory pertaining to premium income can be primarily attributable to its steady improvement in the same across the company’s line of businesses. With the metric witnessing a four-year CAGR of 3.1%, we expect the momentum to be alive in the near term on the back of the aforementioned driving factor.
Additionally, Unum’s largest operating segments, namely Unum U.S. and Colonial Life have been crucial in boosting the insurer’s overall performance over a considerable period of time. Better-than-expected performance at these two business lines has been contributing to higher premiums.
Moreover, a constant persistency across the segment’s business lines coupled with higher sales volumes benefited Unum U.S. and Colonial Life to a large extent, thereby resulting in operating income growth.
Gradual improvement in interest rates has been driving the company’s investment results and we expect better investment income in the future on the back of higher level of invested assets and miscellaneous investment income. However, a possible decline in the yield on invested assets might affect the metric.
Riding on the strength of premium growth and improved investment results, the insurer has been witnessing top-line growth in the last few years (with the metric growing 2.1% over the last four years). In fact, the Zacks Consensus Estimate for current-year revenues is pegged at $11.7 billion, reflecting an increase of 3.6% on a year-over-year basis while for 2019, the consensus mark stands at $12.1 billion, representing a 3.4% rise.
With respect to adding shareholder value, the company has been indulging in shareholder-friendly moves like share buybacks and dividend hikes. In relation to share repurchase, the insurer resumed to buying back shares worth $100 million (quarterly rate) in the fourth quarter and this will help lower its share count that can bolster earnings in the future.
In fact, for this Zacks Rank #2 (Buy) Accident and Health insurer, the Zacks Consensus Estimate for current-year earnings is pegged at $5.22, indicating a year-over-year increase of 21.7% and for 2019, the consensus estimate for the same stands at $5.50, depicting a 5.4% year-over-year rise. Notably, the insurer projects operating earnings to grow between 17% and 23% in 2018.
Regarding dividend hikes, the company approved the same with the metric witnessing a 10-year CAGR of 11%. Such measures reflect the company’s strong liquidity position and this initiative not only retains investor confidence in the stock but also attracts new ones.
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Even though the company’s shares have lost 44.8% year to date, much wider than the Zacks Investment Research
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