Unum Group (UNM) has entered into an agreement with Goldman, Sachs & Co., an arm ofThe Goldman Sachs Group Inc. (GS), to buy back common shares worth $200 million. The number of shares to be bought back will be decided upon at the settlement of the transaction, which is expected on or before April 5, 2011.
Per the repurchase agreement, Unum Group may either receive or need to give an additional number of common shares of common stock based on the volume weighted average price of Unum Group common stock during the term of the agreement.
Any adjustment payable to Goldman, Sachs & Co. will be settled either in cash or shares while any adjustment where Goldman, Sachs & Co’s is required to deliver additional shares will be settled with shares of Unum Group.
Recently, with the announcement of fourth quarter and fiscal 2010 earnings results, the board of directors of Unum Group authorized the company to buy back upto $1 billion worth of common stock over the next 18 months. The $1 billion amount is in addition to $144.3 million remaining on its previous authorization. The continued share repurchases underline the strength of the company’s financial position.
During the forth quarter 2010, Unum Group bought back 1.2 million shares for $28.5 million. AFLAC Inc. (AFL), which competes with Unum group, repurchased 2.0 million shares of its common stock during the fourth quarter, with 30.4 million shares available for purchase under its share repurchase authorization as of December 31, 2010.
Unum Group’s fourth-quarter operating income of 66 cents came in 3 cents below the Zacks Consensus Estimate. Soft performance at Unum UK and Colonial Life attributed to the lower-than-expected results.
Unum Group expects operating income per share to grow in the range of 6% to 12% in 2011. The Zacks Consensus Estimate for first-quarter 2011 is 70 cents per share. For fiscal years 2011 and 2012, the Zacks Consensus Estimates are respectively, $2.96 per share and $3.30 per share.
We maintain our long-term Neutral recommendation on Unum Group. The quantitative Zacks #3 Rank (short-term Neutral rating) for the company indicates no clear directional pressure on the shares over the near term.
Headquartered in Chattanooga, Tennessee, Unum Group was created following the June 1999 merger of Provident Companies Inc. and Unum Corporation. Along with disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. Its major competitors are AFLAC, Lincoln National Corp. (LNC) and CIGNA Corporation (CI).
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UNUM GROUP (UNM): Free Stock Analysis Report
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