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Unum Group (UNM) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and Strategic ...

GuruFocus Research
·4-min read

  • EPS Growth: 13.6% increase to $2.12 per share.

  • Statutory Earnings: $350 million.

  • Core Operations Premium Growth: 6.6% increase.

  • Capital Metrics: Well above targets.

  • Group Product Persistency: Exceeds 90%, with long-term disability at 93%.

  • Voluntary Benefits Growth: Top line and bottom line growth at 7.6% and 11.8%, respectively.

  • Colonial Life Premium Growth: Over 4% increase.

  • Unum International Premium Growth: Nearly 17% increase.

  • Holding Company Liquidity: $1.4 billion.

  • RBC: 440%.

  • Share Repurchases: Approximately $500 million per year, doubled from previous year.

  • Dividend Increase: 15% starting Q3 2024, with a payout ratio around 20%.

Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Unum Group reported a 13.6% growth in EPS to $2.12 per share, indicating strong financial performance.

  • Premium growth in core operations increased by 6.6%, with Unum International experiencing nearly 17% premium growth.

  • Group product persistency exceeded 90%, with long-term disability at 93%, showcasing strong customer retention.

  • Capital metrics exceeded targets, with holding company liquidity at $1.4 billion and RBC at 440%, providing financial flexibility.

  • Strategic initiatives like HR Connect and Total Leave have strengthened client relationships and enhanced service offerings.

Negative Points

  • Sales in supplementary and voluntary lines did not meet expectations in the first quarter.

  • The Closed Block segment reported adjusted operating income below expectations due to lower alternative asset yields.

  • Long-term care incidents remained elevated, although they are expected to normalize throughout 2024.

  • Group sales in Unum US were lower by approximately 1% year-over-year in the first quarter of 2024.

  • The effectiveness of new initiatives and technologies, such as Gathr in Colonial Life, remains uncertain in driving expected sales growth.

Q & A Highlights

Q: Can you discuss the competitive environment in group pricing and the implications for persistency and profitability? A: (Richard Paul McKenney - President, CEO & Director, Unum Group) The market remains competitive, but Unum maintains a disciplined approach to pricing. High sales results and persistency levels, combined with consistent pricing strategies, contribute to a strong performance mix. (Christopher Wallace Pyne - EVP of Group Benefits) The focus on capabilities like Total Leave and HR Connect shifts discussions with employers away from price, enhancing business relationships and underwriting discipline.

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Q: What trends are you observing in long-term care incidents, and how do they align with your expectations? A: (Steven Andrew Zabel - Executive VP & CFO, Unum Group) Elevated incidents have been noted for over a year, with expectations that they will abate throughout 2024. The first quarter showed higher incidents typical of the season, aligning with the anticipated normalization pattern.

Q: How does the Closed Block's full-year earnings target account for the lower-than-expected alternative investment income in Q1? A: (Steven Andrew Zabel - Executive VP & CFO, Unum Group) The full-year guidance incorporates a return to the normal yield range of 8% to 10% for alternative investments, despite the lower performance in Q1.

Q: Given the underperformance in supplementary and voluntary sales in Q1, how do you plan to achieve the full-year sales growth target? A: (Richard Paul McKenney - President, CEO & Director, Unum Group) Despite slower sales in some areas, the overall strategy remains robust, and efforts are ongoing to meet the annual targets. The focus will be on addressing specific underperformances and leveraging strengths in other areas.

Q: Can you elaborate on the group disability benefit ratio trends and the expectations for pricing adjustments? A: (Steven Andrew Zabel - Executive VP & CFO, Unum Group) The favorable benefit ratio in Q1 was driven by better-than-expected claims incidents. The full-year expectation remains in the low 60s, reflecting stable recovery trends and pricing strategies. (Christopher Wallace Pyne - EVP of Group Benefits) Pricing discussions emphasize long-term stability and comprehensive service offerings, aligning with customer needs for predictable costs.

Q: What impact does the adoption of HR Connect and Total Leave products have on client persistency? A: (Christopher Wallace Pyne - EVP of Group Benefits) Enhanced capabilities significantly improve client retention, shifting the focus from pricing to value-added services. This strategic approach fosters long-term partnerships and aligns with Unum's underwriting principles.

These highlights from the Q&A session of Unum Group's earnings call provide insights into the company's strategic responses to competitive pressures, operational performance, and financial expectations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.