Tags: Unum | Group | coverage | UNM

Unum Group Sees Mandated Private Coverage as Public Sector Recedes

By    |   Sunday, 24 June 2012 11:22 AM

Unum Group (UNM) could turn out to be a play on declining government involvement in safety net finances. While the trend toward a diminished role for public finance of disability insurance seems clear, it remains to be seen if private sector coverage will be affordable and, as Unum management suggests, will be mandated as a replacement.

Unum Group operates in the United States, the United Kingdom, and, to a limited extent, in certain other countries around the world. The principal operating subsidiaries in the United States are Unum Life Insurance Company of America (Unum America), Provident Life and Accident Insurance Company (Provident), The Paul Revere Life Insurance Company (Paul Revere Life), and Colonial Life & Accident Insurance Company

In the United Kingdom, the company operates as Unum Limited. It is the largest provider of disability insurance products in the United States and the United Kingdom. The company also provides a complementary portfolio of other insurance products, including employer- and employee-paid group benefits, life insurance, and other related services.

“The unfortunate reality is that most lower- and middle-income workers in the U.S. and the U.K. lack financial protection for themselves and their families should something unexpected occur, a need that has been made even more apparent following the recent financial crisis,” management said in a recent filing.

“Additionally, governments in the U.S. and U.K., and throughout the world, are struggling to address growing deficit problems, limiting their ability to offer some of the financial protections that they have provided in the past. As a result, we anticipate governments will likely require citizens to take more responsibility for their own financial security.”

Unum Group has a market cap of $5.51 billion in a sector, insurance, where the average company size is $12.13 billion. Its trailing 12-month P/E ratio is 26.75 and its five-year projected price-to-earnings-growth (PEG) ratio is 3.06, compared to 3.57 for the sector.

Its projected earnings per share growth for the coming year is 10.03 percent, compared to a sector average of 12.86 percent.

Continued weakness

Few analysts are positive on UNM; most are neutral. Buy or outperform calls are in from Citigroup Investment Research and JP Morgan.

“We believe UNM will experience modest growth in overall premiums and sales, which should offset the continued weakness we see in its group disability business. We view positively UNM's early 2012 decision to discontinue selling group long-term care insurance,” Standard & Poor’s Equity Research analysts wrote in early May.

“We believe the company maintains a conservative investment portfolio, and we think its strong capital position will be a competitive advantage that should enable the company to gain market share in some businesses.”

Unum Group next reports on Aug. 1.

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