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Unum Group (UNM): A Resilient Insurer Delivering Consistent Growth and Strong Returns
Published on September 24, 2024 | Ticker: UNM

Unum Group, a leading provider of financial protection benefits in the United States and the United Kingdom, has demonstrated its resilience and ability to deliver consistent growth and strong returns for its shareholders. With a diverse portfolio of products, including disability, life, accident, critical illness, dental and vision insurance, the company has navigated various economic environments and emerged as a trusted partner for employers and their employees.

Financials

In the fiscal year 2023, Unum Group reported annual net income of $1,283.8 million, annual revenue of $12,385.9 million, annual operating cash flow of $1,202.8 million, and annual free cash flow of $1,068.0 million. These impressive financial results underscore the company's disciplined approach to underwriting, prudent capital management, and its ability to capitalize on market opportunities.

The first quarter of 2024 was a strong start to the year, with the company reporting net income of $395.2 million, a 10.3% increase compared to the same period in the prior year. Revenue for the quarter was $3,200.3 million, a 5.4% increase from the first quarter of 2023. Operating cash flow and free cash flow for the quarter were $298.3 million and $268.2 million, respectively.

Business Overview

Unum's diverse business segments have all contributed to the company's success. The Unum US segment, which includes group disability, group life and accidental death and dismemberment, and supplemental and voluntary lines of business, reported adjusted operating income of $385.2 million in the first quarter of 2024, a 23.3% increase compared to the same period in 2023. This strong performance was driven by higher premium income, favorable benefits experience, and disciplined pricing.

The Unum International segment, which includes operations in the United Kingdom and Poland, reported adjusted operating income of $37.4 million in the first quarter of 2024, a slight decrease from the same period in 2023 due to lower net investment income, partially offset by higher premium income and favorable benefits experience. The company's Unum UK line of business continues to be a strong contributor, with adjusted operating income of £28.2 million in the first quarter of 2024.

The Colonial Life segment, which provides accident, sickness, disability, life, and cancer and critical illness products, reported adjusted operating income of $113.7 million in the first quarter of 2024, a 21.1% increase compared to the same period in 2023. This growth was driven by higher premium income and favorable benefits experience.

The Closed Block segment, which consists of group and individual long-term care and other insurance products no longer actively marketed, reported adjusted operating income of $24.3 million in the first quarter of 2024, a decrease from the $58.2 million reported in the same period of 2023. This decline was primarily due to lower net investment income from the company's alternative asset portfolio.

Liquidity

Unum's strong financial performance is underpinned by its disciplined approach to risk management and capital allocation. The company's risk-based capital (RBC) ratio for its traditional U.S. insurance subsidiaries was approximately 440% at the end of the first quarter of 2024, well above regulatory requirements and the company's internal targets. Additionally, Unum Group and its intermediate holding companies had available holding company liquidity of $1,406 million at the end of the first quarter of 2024, providing the company with ample financial flexibility to support its growth initiatives and shareholder returns.

The company's capital management strategy includes a balanced approach to deploying capital, with a focus on organic growth, strategic acquisitions, and returning capital to shareholders. In the first quarter of 2024, Unum repurchased 2.5 million shares of its common stock at a cost of $123.0 million, and the company also announced a 15% increase in its quarterly dividend, effective in the third quarter of 2024.

Outlook

Looking ahead, Unum Group's management team remains optimistic about the company's prospects. The company has provided guidance for the full year 2024, expecting to generate adjusted operating earnings per share in the range of $8.15 to $8.35, representing a year-over-year increase of approximately 3% to 5%. The company also expects to generate statutory earnings in the range of $1.2 billion to $1.4 billion, which would support the company's strong capital position and provide flexibility for future growth and shareholder returns.

Conclusion

Unum Group's success can be attributed to its diversified product portfolio, disciplined underwriting and pricing, strong risk management practices, and its commitment to innovation and customer service. As the company continues to navigate the evolving insurance landscape, investors can take comfort in Unum's proven track record of delivering consistent growth and shareholder value.

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