Should You Add Unum Group (UNM) Stock To Your Portfolio?

Unum Group (NYSE:UNM) has successfully fulfilled the ever-changing demands and expectations of its clients, building a solid service and product portfolio over the years. The company remains firm on its target to maintain this goodwill and push its limits further to enhance results.

Unum Group is currently an industry-leading disability income writer as well as the second-largest writer of voluntary business in the United States. Despite the country’s challenging economic situation, the company managed to deliver favorable operating results across majority of its insurance entities in the past few years. Therefore, it expects to continue with such a sustained performance in the near term as well.

Also, the company’s operating earnings have been displaying a substantial improvement in last few years and the first half of 2017 was no exception. Unum Group also anticipates 2017 operating income per share to rise between 5-8% over the level at 2016. This apart, the company’s conservative pricing and reservation practices have contributed to profitability over a considerable period of time.

Further, Unum U.S. and Colonial Life, two of the largest operating segments of Unum Group, have been witnessing operating income growth over the past few years. This has been primarily supported by improving premium income and favorable risk results. Hence, Unum Group awaits a better performance from these segments in the near term to add to the company’s bottom line.

Interestingly, the company projects sales growth at Colonial Life to continue in 2017 and beyond. Further, management remains committed toward shifting to a mix of businesses, which has potential to result in higher growth and stable margins.

This Zacks Rank #2 (Buy) Accident and Health insurer has been displaying solid capital generation and a strong financial flexibility, thus enabling the company to undertake effective capital deployment activities. In fact, the company has been consistently boosting shareholders’ value through dividend increases and share buybacks. It makes a continuous effort to reduce share count, thereby expecting to bolster earnings going forward.

Shares of Unum Group have surged 39.63% in a year’s time, significantly outperforming the industry’s 15.85% increase. We expect both bottom-line and top-line growth, solid performance at Unum U.S. and Colonial Life segments and a robust capital position to drive the stock higher in the near term as well.

However, the company has been displaying weak performances at its Closed Block and Corporate segments over a considerable period of time and it does not hope to see any better results from these segments in the short term. Additionally, Unum Group has been incurring higher expenses in the past few years, hampering the company’s overall results in turn.

Nonetheless, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.17 over a year’s period, a 4.9% discount to the industry average of 1.23.

Furthermore, the company’s expected long-term earnings growth is pegged at impressive decent 7.00%, better than the industry average of 6.00%.

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are American Financial Group, Inc. (NYSE:AFG) , CNO Financial Group, Inc. (NYSE:CNO) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial provides property and casualty insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 17.03%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

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