HomeMost PopularInvestingUnum Group (UNM) Rises 22.4% YTD: More Room for Growth?

Unum Group (UNM) Rises 22.4% YTD: More Room for Growth?

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Shares of Unum Group (UNM) have experienced a solid 22.4% growth year to date, outperforming the overall insurance industry’s rise of 5.9%. Meanwhile, the Zacks S&P 500 composite saw a 13.7% increase during the same period. With a market capitalization of $9.82 billion and an average trading volume of 1 million shares in the past three months, Unum Group is positioning itself as a favorable investment opportunity in the financial market.

The company’s impressive performance can be attributed to its favorable growth estimates, strong persistency in group lines, expansion of new product lines, improved premium income, prudent capital deployment, and solid capital position.

As a Zacks Rank #3 (Hold) insurer, Unum Group has a consistent track record of beating earnings estimates, delivering positive results in six of the last seven quarters. The company also boasts a favorable VGM Score of A, indicating attractive value, strong growth potential, and promising momentum.

What’s Next for Unum Group?

Analysts predict that Unum Group’s earnings per share for 2023 will reach $7.73, representing a 24.4% increase from the previous year, with revenues of $12.36 billion, up 2.9%. The consensus estimate for 2024 earnings is $7.96 per share, showing a 2.9% increase from the previous year, with revenues of $12.79 billion.

Moreover, Unum Group’s expected long-term earnings growth rate stands at 7.3%, higher than the industry average of 6.4%.

In the second quarter of 2023, the company’s return on equity (ROE) expanded by 520 basis points to 15.1%, reflecting its efficient use of shareholders’ funds.

The company’s solid operational performance, favorable benefits experience, and strong top-line growth in core businesses are expected to drive further growth, enabling Unum Group to achieve its targeted goals. Management remains focused on growing businesses with higher growth potential and stable margins.

Unum Group has set ambitious targets for 2023, including sales growth of 8-12%, premium growth of 3-5%, and adjusted operating ROE of 17-19% from core business. The company predicts a 20-25% bottom-line increase and a 45-55% growth in adjusted operating earnings per share by 2024. These goals demonstrate Unum Group’s commitment to sustainable growth and financial success.

Unum Group’s strength lies in its disciplined sales trends, strong persistency in group lines, and the successful expansion of new product lines, such as dental and vision, which contribute to increased premium income.

The positive outlook extends to the Colonial Life segment, which is expected to benefit from improved premium income, favorable risk results, lower operating expenses, and favorable benefits. The company projects positive adjusted operating income growth with sales growth in this segment, driven by healthy agent recruiting and productive small case sales.

In terms of capital position, Unum Group maintains a solid level of statutory earnings and capital, ensuring financial flexibility. As of June 30, 2023, the company’s traditional U.S. insurance companies had a weighted average risk-based capital ratio of 450% and holding companies had available holding company liquidity of $1,072 million. The company expects the risk-based capital ratio to exceed 350% in the long term and reach 400% by the end of 2023.

Unum Group is committed to creating value for its shareholders through dividend hikes and share buybacks. The company has $150 million remaining under its current share repurchase program and plans to increase the run rate of share repurchases by 50% in the upcoming quarter, as well as raise dividends by 10%.

Analysts have also shown optimism regarding Unum Group, with estimates for 2023 and 2024 increasing by nearly 2.9% and 1.6% respectively in the past 60 days.

Other Stocks to Consider

For investors seeking additional opportunities in the property and casualty insurance industry, Axis Capital Holdings Limited (AXS), Aflac Incorporated (AFL), and Cincinnati Financial Corporation (CINF) are worth considering. Axis Capital holds a Zacks Rank #1 (Strong Buy), while Aflac and Cincinnati Financial carry a Zacks Rank #2 (Buy) at present.

Axis Capital has a track record of beating earnings estimates in three of the last four quarters and has gained 7% year to date. The company’s 2023 and 2024 earnings per share are expected to increase by 44.7% and 10.7% respectively.

Aflac has consistently outperformed earnings estimates over the past four quarters, with a year-to-date gain of 6.7%. The company’s estimated earnings per share for 2023 and 2024 are projected to increase by 12.2% and 2.9% respectively.

Cincinnati Financial has an impressive average earnings surprise of 25.25% over the last four quarters, with a year-to-date gain of 4.1%. The company’s estimated earnings per share for 2023 and 2024 are expected to increase by 17.9% and 17.6% respectively.

For the complete list of today’s top-ranked stocks, you can check out the Zacks #1 Rank stocks list here.

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Disclaimer: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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