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Unum Group (UNM) Rises 70.4% in a Year: What's Driving It?

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Shares of Unum Group (UNM - Free Report) have gained 70.4% in a year compared with the industry's increase of 53.5%. The Zacks S&P 500 composite has rallied 39.8% in the said time frame. With a market capitalization of $5.7 billion, average volume of shares traded in the last three months was 1.9 million.


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The rally was largely driven by improved claim recoveries, better performance in the group critical illness line and improving benefit ratio.

The expected long-term earnings growth is pegged at 5.2%, which betters the industry average of 5.1%.

Will the Bull Run Continue?

The Unum International segment has witnessing strong improvement on the back of improved results in Unum U.K. Strong performance in the group income protection line due to improved claim recoveries and higher levels of mortality, and improved performance in the group critical illness line are expected to benefit this segment going forward.

Though the insurer witnessed adverse experience in the group life line, due to COVID-19 pandemic, it expects to see a solid recovery in its results through the balance of 2021.

Solid sales and persistency and improving benefit ratio are expected to boost Unum US group disability line, while continued favorable incidence and mortality trends in the block are likely to drive Unum US supplemental and voluntary lines.

The Colonial Life segment is likely to gain on the back of improving benefit ratio and lower expense ratio as well as favorable persistency trends and higher sales trends. The company expects further improvement in sales momentum for the remaining 2021.

In June 2021, the ratings and outlook of Unum Group and its units were upgraded by the rating agency, AM Best. It is likely to play an important role in retaining investor confidence as well as maintaining creditworthiness of the stock.

Moreover, the solvency position of this Zacks Rank #3 (Hold) insurer looks strong. The risk-based capital ratio for traditional U.S. insurance companies remained above the targets at 370% and holding company cash was $1.7 billion at the end of the first quarter. Also, leverage ratio dropped to 26%, indicating more flexibility. Additionally, it has access to two unsecured revolving credit facilities that enable it to borrow up to $600 million. It has no upcoming debt maturities until 2024.

In May 2021, its board of directors hiked its quarterly cash dividend by 5.3%, reflecting the 12th consecutive year of dividend increase at Unum Group. Its current dividend yield of 4.1% is higher than the industry average of 2.4%. This leading disability income writer and the second-largest writer of voluntary business in the United States’ dividend witnessed an 8-year (2013-2021) CAGR of 8.8%.

Stocks to Consider

Some better-ranked players in the insurance industry are Old Republic International Corporation (ORI - Free Report) , Assurant, Inc. (AIZ - Free Report) and Horace Mann Educators Corporation (HMN - 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.

Old Republic surpassed bottom-line estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 53.01%, on average.

Assurant surpassed bottom-line estimates in three of the last four quarters and missed in one. It has a trailing four-quarter earnings surprise of 21.71%, on average.

Horace Mann Educators surpassed bottom-line estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 33.43%, on average.

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