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Can Unum Group's Colonial Life Sustain Its Earnings Momentum?
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Key Takeaways
UNM's Colonial Life adjusted operating income rose 11.9%, while premium income increased 3.3% to $477.4M.
Sales grew 6%, while a lower 46.7% benefit ratio reflected favorable claims in key products.
Colonial Life's 19.4% ROE and higher investment income support its role as an earnings growth engine.
Unum Group’s (UNM - Free Report) Colonial Life could remain an important growth and earnings engine, though the pace of growth will likely depend on sustained sales momentum, persistency and favorable claims experience.
In the second quarter of 2026, Colonial Life’s adjusted operating income rose 11.9%, while premium income increased 3.3% to $477.4 million. Sales grew 6%, providing a healthy pipeline for future premium growth. The segment also benefited from a lower 46.7% benefit ratio, down from 48.3% a year earlier, due to favorable claims experience in life, cancer and critical illness products.
Another positive is investment income. Colonial Life’s net investment income jumped 17.6% to $50.1 million, helped by higher yields and increased allocation of investment income. Adjusted operating ROE reached 19.4%, highlighting the segment's strong profitability.
Technology and distribution could provide additional support. Management said more than 70% of Colonial Life's 12,000-plus agents use Agent Assist, its proprietary agent productivity platform. Greater adoption could improve agent productivity and help support sales growth. However, investors should watch persistency, which was 78.2% in the first half of 2026 versus 78.5% a year earlier. The relatively modest premium growth also suggests that stronger sales will need to translate into sustained in-force growth to keep Colonial Life's earnings trajectory intact.
Colonial Life currently has several favorable ingredients—solid sales growth, strong claims experience, higher investment income, stable persistency and high ROE. If UNM can maintain these trends, Colonial Life can remain a key contributor to earnings growth and help offset pressure from weaker International results and the Closed Block.
What About Its Peers?
Aflac Incorporated’s (AFL - Free Report) U.S. benefits business has the potential to become a more important growth contributor, supported by expanding demand for group voluntary benefits, dental and vision products. In the second quarter of 2026, earned premiums from group products, including group life, absence and disability, dental and vision, and group voluntary benefits, increased 13%, highlighting solid demand. Management expects U.S. net earned premiums to witness a 3-6% CAGR from 2025 to 2027, although 2026 growth is expected to come in slightly below that range. With employers increasingly using voluntary benefits to enhance employee offerings while controlling benefit costs, Aflac's broad distribution network and supplemental products could support steady organic growth.
MetLife, Inc.’s (MET - Free Report) Group Benefits business is emerging as a key growth and earnings contributor, supported by solid premium growth, favorable underwriting trends and improving business volumes. In the second quarter of 2026, Group Benefits adjusted earnings increased strongly, aided by higher premiums and improved underwriting performance. Continued demand for employer-sponsored life, disability and dental benefits, along with higher enrollment and strong customer retention, could support further growth. Investors, however, will want to assess whether favorable claims experience can be sustained as pricing conditions evolve and whether premium growth can translate into durable earnings expansion.
UNM’s Price Performance
Shares of UNM have gained 18.6% in the year-to-date period, outperforming the industry.
Image Source: Zacks Investment Research
UNM’s Undervaluation
The stock is undervalued compared with its industry. Its forward price-to-book value of 1.37X is lower than the industry average of 1.66X. It carries a Value Score of B.
Image Source: Zacks Investment Research
Estimate Movement for UNM
The Zacks Consensus Estimate for UNM’s third-quarter and fourth-quarter 2026 EPS has both moved down 0.9% in the past 60 days. The same for the full-year 2026 and 2027 EPS has moved up 0.2% and down 0.9%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The consensus estimate for UNM’s 2026 and 2027 EPS and revenues indicates year-over-year increases.
UNM stock currently carries a Zacks Rank #4 (Sell).
View the Zacks #1 Rank List
Image: Bigstock
Can Unum Group's Colonial Life Sustain Its Earnings Momentum?
Key Takeaways
Unum Group’s (UNM - Free Report) Colonial Life could remain an important growth and earnings engine, though the pace of growth will likely depend on sustained sales momentum, persistency and favorable claims experience.
In the second quarter of 2026, Colonial Life’s adjusted operating income rose 11.9%, while premium income increased 3.3% to $477.4 million. Sales grew 6%, providing a healthy pipeline for future premium growth. The segment also benefited from a lower 46.7% benefit ratio, down from 48.3% a year earlier, due to favorable claims experience in life, cancer and critical illness products.
Another positive is investment income. Colonial Life’s net investment income jumped 17.6% to $50.1 million, helped by higher yields and increased allocation of investment income. Adjusted operating ROE reached 19.4%, highlighting the segment's strong profitability.
Technology and distribution could provide additional support. Management said more than 70% of Colonial Life's 12,000-plus agents use Agent Assist, its proprietary agent productivity platform. Greater adoption could improve agent productivity and help support sales growth.
However, investors should watch persistency, which was 78.2% in the first half of 2026 versus 78.5% a year earlier. The relatively modest premium growth also suggests that stronger sales will need to translate into sustained in-force growth to keep Colonial Life's earnings trajectory intact.
Colonial Life currently has several favorable ingredients—solid sales growth, strong claims experience, higher investment income, stable persistency and high ROE. If UNM can maintain these trends, Colonial Life can remain a key contributor to earnings growth and help offset pressure from weaker International results and the Closed Block.
What About Its Peers?
Aflac Incorporated’s (AFL - Free Report) U.S. benefits business has the potential to become a more important growth contributor, supported by expanding demand for group voluntary benefits, dental and vision products. In the second quarter of 2026, earned premiums from group products, including group life, absence and disability, dental and vision, and group voluntary benefits, increased 13%, highlighting solid demand. Management expects U.S. net earned premiums to witness a 3-6% CAGR from 2025 to 2027, although 2026 growth is expected to come in slightly below that range. With employers increasingly using voluntary benefits to enhance employee offerings while controlling benefit costs, Aflac's broad distribution network and supplemental products could support steady organic growth.
MetLife, Inc.’s (MET - Free Report) Group Benefits business is emerging as a key growth and earnings contributor, supported by solid premium growth, favorable underwriting trends and improving business volumes. In the second quarter of 2026, Group Benefits adjusted earnings increased strongly, aided by higher premiums and improved underwriting performance. Continued demand for employer-sponsored life, disability and dental benefits, along with higher enrollment and strong customer retention, could support further growth. Investors, however, will want to assess whether favorable claims experience can be sustained as pricing conditions evolve and whether premium growth can translate into durable earnings expansion.
UNM’s Price Performance
Shares of UNM have gained 18.6% in the year-to-date period, outperforming the industry.
Image Source: Zacks Investment Research
UNM’s Undervaluation
The stock is undervalued compared with its industry. Its forward price-to-book value of 1.37X is lower than the industry average of 1.66X. It carries a Value Score of B.
Image Source: Zacks Investment Research
Estimate Movement for UNM
The Zacks Consensus Estimate for UNM’s third-quarter and fourth-quarter 2026 EPS has both moved down 0.9% in the past 60 days. The same for the full-year 2026 and 2027 EPS has moved up 0.2% and down 0.9%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The consensus estimate for UNM’s 2026 and 2027 EPS and revenues indicates year-over-year increases.
UNM stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.