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Here's Why You Should Hold Unum Group (UNM) in Your Portfolio

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Unum Group (UNM - Free Report) is well-poised for growth on strong segmental performance, effective capital deployment and solid liquidity position.

Growth Projections

The Zacks Consensus Estimate for 2022 earnings per share is pegged at $5.38, indicating year-over-year increase of nearly 12.6%. The expected long-term earnings growth is pegged at 3.3%.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 0.4% and 0.2% north in the past seven days, reflecting analyst optimism.

Style Score

The company is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Zacks Rank & Price Performance

Unum Group currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 74.8%, outperforming the industry’s increase of 40%.

Business Tailwinds

Unum Group’s performance has been improving over the past several years, attributable to solid performance across its major segments, Unum U.S. and Colonial Life. Unum U.S. accounts for the lion’s share of the premium income of the company.

Banking on disciplined sales trends, strong persistency in group lines and growth of new product lines like dental and vision, Unum U.S. segment is well poised for growth.

The dental and vision business continue to gain from declining benefit ratio, which is driven by lower utilization.

Stable persistency, growth in premium income and favorable benefits experience are likely to drive the Colonial Life segment of the company.

Unum Group boasts strong financial position with healthy capital levels above its targets and holding company cash almost four times its target. In 2020, risk-based capital ratio for the traditional U.S. insurance companies was at approximately 365%.  and cash was at $1.5 billion. Both were above their targeted levels. Further, the leverage ratio declined to 26.2%.

It anticipates year end 2021 level of holding company cash and risk-based capital to be in line with the year-end 2020, which will provide a strong stable capital base.

Notably, Unum Group’s dividend payments have witnessed a CAGR of 10.1% in the past seven years (2014-2021) and currently yield 4.2%, which is better than the industry average of 2.6%. Thus, making the stock an attractive pick for yield- seeking investors.

Stocks to Consider

Some better-ranked stocks in the insurance space are Employers Holdings Inc. (EIG - Free Report) , Alleghany and James River Group Holdings, Ltd. (JRVR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Employers Holdings surpassed estimates in three of the last four quarters, with the average surprise being 98.07%.

Alleghany’s bottom line surpassed estimates in two of the last four quarters and missed in the other two, the average beat being 34.08%.

James River Group surpassed estimates in three of the last four quarters, with the average surprise being 11.63%.

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