On Sep 16, Zacks Investment Research upgraded Unum Group (UNM) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Unum Group has witnessed rising earnings estimates on the back of strong second-quarter results. Moreover, this accident and health insurer delivered positive earnings surprises in the last four quarters, with an average beat of 2.9%.
Riding on the strength of its core business and a lower share count, second-quarter earnings of 91 cents at Unum Group surpassed the Zacks Consensus Estimate by 4.6% and were 14.6% higher than the year-ago figure. Top line not only improved year over year but was almost in line with the Zacks Consensus Estimate.
In addition, group disability benefit ratio of Unum US improved 200 basis points on stable claim incidence and consistent claim recovery. Unum Group expects solid group disability earnings along with improving benefit ratio and premium growth.
With respect to returning value to shareholders Unum Group repurchased shares worth $100 million in the last quarter. A lower share count, by virtue of share repurchases, gave a boost to the bottom line. The company expects to buy back shares worth $300 million to $600 million in 2014. In addition, the board of directors also approved a 14.5% hike in its dividend.
Unum Group continues to expect 2014 operating earnings to grow 5–10% from the 2013 level.
The strong performance prompted a rise in the Zacks Consensus Estimate for 2014 and 2015 in the last 60 days. It increased 1.4% to $3.59 in 2014 as 11 of 13 estimates moved up while the same moved up 0.5% to $3.86 for 2015 as 5 of 13 estimates moved north. The expected long-term growth rate for the stock is 8.8%.
Other Stocks to Consider
Investors interested in the insurance industry may also consider Employers Holdings, Inc. (EIG), Amerisafe, Inc. (AMSF) and AmTrust Financial Services, Inc. (AFSI). While Employers Holdings sports a Zacks Rank #1 (Strong Buy), Amerisafe and AmTrust Financial carry a Zacks Rank #2.
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