Shares of Unum Group UNM have gained 22.4% year to date, outperforming the industry's rise of 5.9%. The Zacks S&P 500 composite has increased 13.7% in the said time frame. With a market capitalization of $9.82 billion, average volume of shares traded in the last three months was 1 million.
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The rally was largely driven by favorable growth estimates, strong persistency in group lines and the growth of new product lines, improved premium income, prudent capital deployment and a solid capital position.
This Zacks Rank #3 (Hold) insurer has a solid track record of beating earnings estimates in six of the last seven quarters, while missing in one.
Unum Group has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Will the Bull Run Continue?
The Zacks Consensus Estimate for Unum Group’s 2023 earnings is pegged at $7.73 per share, indicating a 24.4% increase from the year-ago reported figure on 2.9% higher revenues of $12.36 billion. The consensus estimate for 2024 earnings is pegged at $7.96 per share, indicating a 2.9% increase from the year-ago reported figure on 3.5% higher revenues of $12.79 billion.
The expected long-term earnings growth rate is 7.3%, which is higher than the industry average of 6.4%.
In the second quarter of 2023, the company’s trailing 12-month return on equity (ROE) expanded 520 basis points to 15.1%. ROE reflects the insurer’s efficiency in using shareholders’ funds.
Solid operational performance, favorable benefits experience as well as strong top-line improvement in the core businesses should continue to fuel growth and help UNM achieve its targeted growth. Management remains focused on moving on to a mix of businesses with higher growth and stable margins.
In 2023, Unum Group expects sales growth in the range of 8-12%, premium growth in the range of 3-5% and adjusted operating ROE in the range of 17-19% from core business. UNM estimates 2023 bottom line to grow 20-25%. The insurer also estimates 45-55% growth in adjusted operating earnings per share by 2024. It expects adjusted operating income per share to increase 20-25% for 2023.
Unum U.S. continues to benefit from disciplined sales trends, strong persistency in group lines and the growth of new product lines like dental and vision, which improve premium income.
The Colonial Life segment of the insurer should gain from improved premium income and favorable risk results, lower operating expenses and favorable benefits. In 2023, the company expects positive adjusted operating income growth with sales growth. Healthy agent recruiting and productive small case sales are likely to benefit the sales.
The insurer boasts a solid capital position. Sustained solid operating results have been driving a solid level of statutory earnings and capital, cushioning financial flexibility. The weighted average risk-based capital ratio for the company's traditional U.S. insurance companies was 450% as of Jun 30, 2023, and the holding companies had available holding company liquidity of $1,072 million. Over the long term, UNM expects risk-based capital ratio of more than 350% and by the end of 2023, the ratio is expected to be 400%.
Unum Group has consistently enhanced shareholders’ value through dividend hikes and share buybacks. Currently, the remaining repurchase amount under the current share repurchase program was $150 million. UNM expects to increase the run rate of share repurchase by 50% in the upcoming quarter and pay a 10% higher dividend.
Estimates for 2023 and 2024 have moved up nearly 2.9% and 1.6%, respectively, in the past 60 days, reflecting investors’ optimism.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited AXS, Aflac Incorporated AFL and Cincinnati Financial Corporation CINF. While Axis Capital sports a Zacks Rank #1 (Strong Buy), Aflac and Cincinnati Financial carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. Year to date, AXS has gained 7%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Aflac has a solid track record of beating earnings estimates in each of the last four quarters, the average being 7.76%. Year to date, AFL has gained 6.7%.
The Zacks Consensus Estimate for AFL’ 2023 and 2024 earnings per share is pegged at $5.98 and $6.16, indicating a year-over-year increase of 12.2% and 2.9%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. Year to date, CINF has gained 4.1%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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