Shares of Unum Group (UNM Quick QuoteUNM - Free Report) gained 31.96% in 2016, significantly outperforming the Zacks categorized Accident & Health industry’s growth of 20.43%. We expect the stock to retain the momentum on the back of a number of positives.

Unum Group is currently an industry-leading disability income writer as well as the second-largest writer of voluntary business in the U.S. Despite the volatility in the U.S. economy, the company managed to deliver favorable operating results across the majority of its insurance entities in the past few years.

Notably, Unum Group’s full-year 2016 operating earnings grew nearly 7.7% year over year to $3.92 – a new record for the company. In fact, full-year operating earnings were above the higher end of 3–6% target growth rate. Unum Group also anticipates 2017 operating income per share to grow between 3% and 6%. This apart, the company’s conservative pricing and reservation practices have contributed to its profitability over a considerable period of time.

Unum U.S. and Colonial Life, which are two of the largest operating segments of Unum Group, have been witnessing operating income growth over the last few years. This has been primarily supported by improving premium income and favorable risk results. Interestingly, the company displayed considerable increase in sales in 2016, which also marked the fourth consecutive year-over-year growth, despite a challenging economic environment. Moreover, the company expects sales growth at Colonial Life to continue in 2017 and beyond.

This apart, Unum Group has been displaying solid capital generation and strong financial flexibility. This has been enabling the company to undertake effective capital deployment activities. Notably, the company bought back shares worth $3.9 billion since the fourth quarter of 2007. The company’s continuous efforts to reduce share count should bolster earnings going forward.

Also, a robust capital position enabled the company to purchase Starmount Life Insurance Company on Aug 1, 2016. Unum Group expects this buyout to help it capitalize on the growth opportunities in the dental market, which is part of the company’s strategy to focus more on employee benefits business. Starmount has now become the fourth brand under Unum Group. Unum Dental and Unum Vision products will be underwritten by Starmount and released in the market in 2017. Colonial Life Dental and Vision will be launched in 2018.

Stocks that Warrant a Look

Investors interested in the insurance industry may consider American Financial Group, Inc. (AFG Quick QuoteAFG - Free Report) , Argo Group International Holdings, Ltd. and Selective Insurance Group, Inc. (SIGI Quick QuoteSIGI - Free Report) .

American Financial offers P&C insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.

Argo Group International Holdings underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.

Selective Insurance provides insurance products and services in the United States. The company delivered a positive surprise in one of the last four quarters but with an average negative surprise of 4.53%.

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