DES MOINES, Iowa (AP) — Shares of specialty insurer Unum Group fell Wednesday a day after the employee benefits and disability insurance provider reported its third-quarter profit fell and it missed analyst expectations by a penny per share.
THE SPARK: Unum Group, which provides disability insurance, group life insurance and other benefits, saw its profit fall on investment losses and lower income in its group disability business. Premiums fell and it paid out more in claims.
THE BIG PICTURE: The Chattanooga, Tenn., company said price competition and the weak employment situation contributed to the declines in its disability business. Premiums in its group life and accidental death and dismemberment business rose, while claims fell slightly. In the United Kingdom, higher disability claims caused income to fall. Sales of new policies fell sharply, the company said. Higher claims also hurt operating income in its Colonial Life segment.
THE ANALYSIS: FBR Capital Markets analyst Randy Binner expressed concern about higher benefit payouts particularly in long- and short-term disability. The increases have kept him from more strongly recommending the stock. Binner maintains the shares rating of "Market Perform" and a price target of $28.
He cited weak results in the United Kingdom in part due to long-term disability payouts and falling new sales.
He continues to expect 2011 earnings of $2.96 per share and a 2012 result of $3.25 per share. Analysts surveyed by FactSet now expect $2.96 for this year and $3.28 for next year.
Sterne Agee Group analyst John Nadel said the company's operating profit of 74 cents for the quarter missed his expected 75 cents per share, which was also the average expectation of analysts surveyed by FactSet.
He reduced his 2011 earnings-per-share estimate to $2.92 from $2.95 and 2012 to $3.32 from $3.37. He retained his $27 price target.
"Given weakness in underwriting results and relatively low-quality offsets, we expect some relative weakness in the shares," he said. His rating remains "Neutral" on the company.
SHARE ACTION: Unum shares fell $1.19, or 5.2 percent, to $21.62. It's off 10.7 percent so far this year. It has traded as high as $27.16 in the past 52 weeks.
There are no comments yet