Insurance Stocks

Unum Group Valuation – February 2019 $UNM

Company Profile (excerpt from Reuters): Unum Group, incorporated on March 22, 1995, is a provider of financial protection benefits in the United States and the United Kingdom. The Company’s products include disability, life, accident, critical illness, dental and vision, and other related services. Its segments include Unum US, Unum UK, Colonial Life, Closed Block and Corporate. Its Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment products, and supplemental and voluntary lines of business. Its Unum UK segment includes insurance for group long-term disability, group life, and supplemental lines of business, which include dental, individual disability and critical illness products. Its Colonial Life segment includes insurance for accident, sickness, and disability products, life products, and cancer and critical illness products issued primarily by Colonial Life & Accident Insurance Company and marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agency sales force and brokers. Its Closed Block segment consists of other insurance products. Its 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, and in the United Kingdom, Unum Limited.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNM – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,623,067,828 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.32% Pass
5. Moderate PEmg Ratio PEmg < 20 8.85 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.02
MG Growth Estimate 7.24%
MG Value $92.24
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $58.22
MG Value based on 0% Growth $34.13
Market Implied Growth Rate 0.17%
Current Price $35.53
% of Intrinsic Value 38.52%

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $68.83
PEmg 8.85
PB Ratio 0.90
Dividend Yield 2.76%
TTM Dividend $0.98
Number of Consecutive Years of Dividend Growth 10

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $2,971,300,000
Total Assets $61,875,600,000
Intangible Assets $350,300,000
Total Liabilities $53,253,800,000
Shares Outstanding (Diluted Average) 217,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.24
Dec2018 $2.38
Dec2017 $4.37
Dec2016 $3.95
Dec2015 $3.50
Dec2014 $1.57
Dec2013 $3.19
Dec2012 $3.17
Dec2011 $0.94
Dec2010 $2.69
Dec2009 $2.57
Dec2008 $1.62
Dec2007 $1.91
Dec2006 $1.23
Dec2005 $1.64
Dec2004 -$0.86
Dec2003 -$1.31
Dec2002 $1.66
Dec2001 $2.21
Dec2000 $2.22
Dec1999 -$0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2018 $3.32
Dec2017 $3.63
Dec2016 $3.20
Dec2015 $2.71
Dec2014 $2.31
Dec2013 $2.63
Dec2012 $2.30
Dec2011 $1.89
Dec2010 $2.24
Dec2009 $1.94
Dec2008 $1.46
Dec2007 $1.09
Dec2006 $0.61
Dec2005 $0.43
Dec2004 $0.14
Dec2003 $0.69

Recommended Reading:

Other ModernGraham posts about the company

5 Low P/E Companies In The S&P 500 – August 2018
Best Stocks Below Their Graham Number – August 2018
10 Low PE Stock Picks for the Defensive Investor – August 2018
Best Stocks Below Their Graham Number – June 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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