Unum Group had a strong Q3 2024 with increased share repurchase plans.

From Investing.com: 2024-10-30 16:28:31

Unum Group reported a strong financial performance in Q3 2024, with an adjusted EPS of $2.13 and statutory earnings exceeding $300 million. The company is on track for 10-15% EPS growth for the year, despite a decrease in sales. Premium growth in core operations was 4.6% for the quarter.

The company’s strong balance sheet includes $1.4 billion in liquidity and a 12.5% return on equity. Unum Group plans approximately $1 billion in share repurchases for 2024, up from $250 million in 2023. The company anticipates 5-7% premium growth and 10-15% EPS growth for the year, with a focus on organic growth and acquisitions.

Unum Group executives expressed optimism for the company’s operational strategies and business trajectory during the earnings call. The company’s commitment to pricing stability, customer relationships, and cash flow generation was emphasized. The strong Q3 performance sets a positive tone as Unum Group moves towards the end of 2024 and into 2025 planning.

InvestingPro data supports Unum Group’s strong financial performance, with a low adjusted P/E ratio of 6.76 and revenue growth of 4.43% over the last twelve months. The company’s dividend policy, including a 15% increase earlier in the year, aligns with its commitment to shareholder returns. Unum’s profitability over the last twelve months further demonstrates its financial health and market position. In 2024, the company is on track to exceed EPS growth expectations, with adjusted EPS at $2.13 per share and statutory earnings surpassing $300 million for the quarter. The reported EPS was significantly higher due to assumption updates and reduced reserves, leading to over 10% growth in book value per share ex-OCI. Despite a slight decrease in sales, the company remains optimistic for the fourth quarter, expecting momentum in the U.S. and sustained growth in the U.K. Colonial Life is expected to remain flat for the year. The company credits its success to a team effort, investments in processes, and a focus on employee benefits. The macroeconomic environment, including strong employment and higher interest rates, also support the company’s resilient business model. Unum U.S. saw strong results in group insurance, particularly in Group Disability and Group Life insurance. Colonial Life continues to perform well, with premium growth of 2.5% in the third quarter and a focus on strategic initiatives to drive top-line growth. The GATHER platform has been successful in transforming benefits, enrollments, and administration, with premium sold on the platform nearly doubling year-over-year. The international business saw robust premium growth of over 10%, with the U.K. maintaining consistent underlying earnings. The company’s disciplined pricing and customer engagement efforts have resulted in solid product returns and attractive margins across all lines of business. The balance sheet remains strong, with after-tax adjusted operating earnings increasing by 4.3% from the previous year. Capital deployment priorities include investing in the business organically and inorganically, as well as returning capital to shareholders through dividends and share repurchase. The company’s capital position remains well above targets, providing flexibility for future investments and growth opportunities. We have decided to dissolve our pre-capitalized trust facility following the third quarter, redirecting proceeds for an additional $1 billion share repurchase in 2024. We have seen positive trends in operations and macro environment, achieving strength in the third quarter and positioning for continued growth into 2025.

In the third quarter, we saw strong operating performance, with margins and persistency above expectations, driving premium and earnings growth. Group Life and AD&D segment operating earnings increased by 80%, with Disability results showing strong underwriting performance. Sales were down in Unum U.S. but are expected to meet full-year growth targets.

Adjusted operating income for Unum U.S. increased slightly in the third quarter of 2024, driven mainly by favorable benefits experience in Group Life. Group Disability adjusted operating income decreased due to a higher benefit ratio, but results were favorable with continued claim recoveries. Unum U.S. supplemental and voluntary lines saw a decrease in adjusted operating income, driven by benefits experience. Persistency for total group business remained strong at 92.5%.

Unum International showed strong trends in underlying earnings power, with adjusted operating income increasing in the third quarter. Unum U.K. business improved, with a higher benefit ratio but steady premium growth. Poland operations also saw growth in premiums and sales. International sales increased in the U.K. and Poland, showcasing a positive outlook for future growth. Colonial Life’s adjusted operating income in the third quarter was $113.4 million, up from $102.9 million in 2023, driven by a benefit ratio of 47.6%. Premium income finished at $441.9 million, with sales slightly down at $120.9 million. The Closed Block segment saw consistent adjusted operating income at $34.2 million.

An annual GAAP assumption review resulted in a net decrease in reserves of $357.4 million, adding $1.53 to book value per share. Group Disability, Individual Disability, and Colonial Life businesses all saw favorable reserve changes. Long-term care reserves decreased by $174.1 million due to premium rate approval outpacing assumptions.

Investments saw new money yields above the earned portfolio yield of 4.41%, with alternative investments generating $72.6 million year-to-date. Strong statutory results led to after-tax operating income of $315.6 million, allowing for $202 million in share repurchases in the third quarter.

Capital metrics remained strong, with a weighted average risk-based capital ratio of approximately 470% and robust holding company liquidity at $1.4 billion. The dissolution of a pre-capitalized trust facility raised the leverage ratio slightly and brought $270 million of assets onto the balance sheet, to be used for share repurchases totaling around $1 billion for 2024. The first nine months of the year have shown strong performance across various aspects of the business, with top-line growth and robust earnings. Statutory earnings have surpassed $1 billion, putting the company on track to generate $1.4 to $1.6 billion in holding company cash. Capital outcomes are robust, with an RBC ratio exceeding targets and plans to repurchase $1 billion in stock.

The third quarter was positive, setting up for a strong fourth quarter and 2025. The team has done an excellent job running a balanced, customer-focused company. An actuarial review, particularly in LTC, has led to adjustments in premium increases and persistency, impacting earnings and statutory reserves. Strong cash flow and liquidity allow for flexible capital deployment, with a focus on core growth and investments in the business. The company is focused on organic growth but is open to acquisitions to accelerate progress. Share repurchases have increased steadily, with a one-time event boosting deployment. Holding company cash is expected to increase by year-end, meeting targets set at Investor Day. Group disability operations are performing well, with a sustainable benefit ratio of around 60%. Long-term care incidents have slowed down, aligning with expectations.

In group business, competitive renewal rates are being balanced with fair pricing and customer stability. The company’s execution and capabilities are driving positive results, with a focus on long-term relationships. Despite market pressures, disciplined rate adjustments are being made to maintain profitability. Customers are responding well to the company’s offerings and pricing strategies. The team at the company is focused on achieving fair returns through new business and renewal pricing strategies. They are working hard to ensure a successful combination of factors.

The decision to increase buybacks in the fourth quarter is driven by confidence in cash flow generation and optimization of the balance sheet. The dissolution of PCAPs reflects a shift towards a more efficient capital structure.

Sales growth challenges at Colonial Life are attributed to existing sales, which have been down 3%. New sales show promise with a 6.7% increase, particularly in the large case commercial market. The appointment of a new Senior Vice President of Sales aims to address execution issues and drive growth in 2025.

Elevated benefit ratios in the supplemental and voluntary business are attributed to period-to-period volatility across various product lines. The company is focused on determining a sustainable earnings run rate for this segment. In a recent earnings call, it was noted that the results for voluntary benefits in the dental business were at the lower end of the range. Historical run rates suggest around $120 million per quarter is a good indicator for the business, despite period-to-period volatility.

Unum U.S. Sales is on track to achieve 5% to 10% sales growth for the full year. An uptick in quality RFPs and capabilities around leave management and HCM connectivity are contributing to high close ratios. The fourth quarter, being the biggest of the year, will focus on larger end business opportunities.

Persistency in renewals has been strong in the U.S., although there has been increased market activity in 2024. The company is working through the pressure on their book and remains confident in the overall story. ’24 is proving to be a different year compared to ’23 and ’22.

Industry studies on long-term care have not impacted Unum’s assumptions for the fourth quarter. The company feels confident in their current data set and assumptions. Any new industry data that may come out will be reviewed for potential implications on their book of business.

Unum remains interested in risk transfer for long-term care and continues to have active dialogues with multiple counterparties. The market for counterparties interested in these types of business blocks remains deep, with multiple options for potential deals being explored. We are actively pursuing risk transfer deals to manage our long-term care book, which is expected to run off over multiple decades. Our focus on HR Connect and leave management systems is winning business in the large case market. We continue to invest in tech connectivity to enhance our offerings and remain competitive. U.S. growth has been steady at just over 3%, with natural growth influencing our trajectory. International growth remains strong due to our quality proposition and broker relationships. Our disability business has seen strong margins, and we are confident in maintaining this trend in the near term. The discussion focused on group disability benefit ratios and the sustainable recovery levels of getting people back to work. Pricing perspective and long-term stability were emphasized, highlighting the importance of a balanced approach for future success.

The conversation shifted to broader customer relationships, emphasizing the importance of solving challenges and offering long-term value. Price adjustments in challenging times were discussed, along with the need for a balanced approach to pricing strategies for sustainable growth.

Concerns were raised about long-term care charges and net premium ratios. The impact of higher claims incidents on the group persistency adjustment was highlighted, showing the need to monitor reserve adequacy and financial movements for the business.

Questions from analysts touched on the confidence in robust results for Group Life and the factors influencing future performance. The unpredictability of the product nature was acknowledged, with a focus on monitoring benefit ratio metrics for planning and guidance purposes.

The conference concluded with appreciation for participants and a focus on the fourth quarter and beyond. The positive third-quarter results set the stage for continued success into 2025, with a commitment to ongoing communication with stakeholders.



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