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Here's Why You Should Add Unum (UNM) Stock to Your Portfolio

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Unum Group (UNM - Free Report) is poised to grow on disciplined sales trends, strong persistency, an improving rate environment, favorable risk experience and a solid capital position. These, coupled with optimistic growth projections, make UNM stock worth adding to one’s portfolio.

Unum Group has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results have shown that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy), offer better returns.

Zacks Rank & Price Performance

Unum currently carries a Zacks Rank #2. In a year, the stock has rallied 47.2% compared with the industry’s growth of 11.7%.

Zacks Investment Research
Image Source: Zacks Investment Research

Growth Projections

The Zacks Consensus Estimate for 2023 earnings indicates an improvement of 1% from the year-ago reported figure on 2.62% higher revenues.

The expected long-term earnings growth is pegged at 12.6%, outperforming the industry average of 8.6%.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2023 has moved 2 cents north in the past 30 days, reflecting analyst optimism.

Business Tailwinds

Unum is the leading disability income writer and the second-largest writer of voluntary business in the United States. Solid operational performance, favorable benefits experience as well as solid top-line growth in the core businesses should continue to fuel growth. UNM estimates 45-55% growth in adjusted operating EPS by 2024. Management remains focused on moving on to a mix of businesses with higher growth and stable margins.

While Unum U.S. continues to benefit from disciplined sales trends, strong persistency in group lines and growth of new product lines like dental and vision, improving premium income and favorable risk results should aid Colonial Life. Unum U.S. and Colonial Life are two of the largest operating segments of Unum.

Insurers are direct beneficiaries of an improving interest rate environment. The Fed raised interest rates seven times in 2022, with more on the horizon this year. At its December meeting, the Fed indicated taking the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. Thus, an improving interest rate environment should aid net investment income.

Its sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility.

Banking on operational excellence, the insurer increased dividends at a nine-year CAGR (2014-2022) of 8%. The dividend yield is currently 3.3%, better than the industry average of 2.3%. UNM also has $200 million worth of shares buyback authorization for the year.

Attractive Valuation

UNM shares are trading at a discount than the industry average. Its price-to-book value of 0.95X is lower than the industry average of 1.6X. Before the valuation expands, it is preferable to take a position in the stock.

Unum Group has an impressive Value Score of A. Value stocks have a long history of showing superior returns

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are Root, Inc. (ROOT - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and First American Financial Corporation (FAF - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Root delivered a trailing four-quarter average earnings surprise of 22.44%. In the past year, ROOT has lost 91.4%.

The Zacks Consensus Estimate for ROOT’s 2023 earnings indicates a year-over-year increase of 23.9%.

Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average being 15.16%. In the past year, KNSL has gained 22%.

The Zacks Consensus Estimate for KNSL’s 2023 earnings implies a year-over-year rise of 22.6%.

First American has a solid track record of beating earnings estimates in each of the last six quarters. In the past year, FAF has lost 28.6%.

The Zacks Consensus Estimate for FAF’s 2023 earnings has moved 3.9% north in the past 60 days. 

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