Key Takeaways
- Expanded digital investments and strategic reinsurance actions are enhancing client retention, stabilizing earnings, and enabling greater focus on profitable core business lines.
- Rising demand for employee and supplemental benefits is driving cross-selling and new market penetration, supporting sustainable premium growth and recurring revenues.
- Elevated benefit ratios, ongoing long-term care headwinds, flat sales growth, reduced investment income, and rising competition threaten Unum's earnings stability and long-term revenue prospects.
Catalysts
About Unum Group- Provides financial protection benefit solutions in the United States, the United Kingdom, and Poland.
- Unum's ongoing investment in digital capabilities-exemplified by integration of platforms like HR Connect and recent tech acquisitions-has boosted customer persistency and improved client retention, supporting stable premium growth and expanding net margins over time.
- The expanding focus among employers on employee and voluntary benefits, along with increasing awareness of supplemental products driven by a competitive labor market, is allowing Unum to cross-sell more solutions and penetrate new market segments, underpinning premium and recurring revenue growth.
- Favorable demographic trends, including an aging population and rising life expectancy in the U.S. and Europe, are structurally increasing demand for disability, life, and supplemental health insurance, expanding Unum's addressable market and supporting longer-term top line expansion.
- Strategic derisking of the legacy long-term care (LTC) block through external reinsurance transactions is freeing up capital, reducing earnings volatility, and allowing management to focus on more profitable and capital-efficient core businesses, supporting steadier net income and increased share repurchases.
- Strong capital generation and excess liquidity (including an anticipated holding company cash position of $2–2.5 billion) position Unum to sustain elevated levels of shareholder returns through dividends and share buybacks, providing a pathway for EPS growth and continued financial flexibility.
Unum Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Unum Group's revenue will grow by 4.0% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 11.8% today to 10.8% in 3 years time.
- Analysts expect earnings to reach $1.6 billion (and earnings per share of $10.2) by about August 2028, up from $1.5 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.9x on those 2028 earnings, up from 7.9x today. This future PE is lower than the current PE for the US Insurance industry at 14.1x.
- Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.88%, as per the Simply Wall St company report.
Unum Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Persistent elevated benefit ratios in group disability and group life insurance-driven by higher than expected claim sizes and lower recoveries-create uncertainty around the sustainability of current net margins and could lead to future earnings pressure.
- Ongoing headwinds in the Closed Block of long-term care (LTC), including adverse claims experience and variability in claimant mortality, expose Unum to continued earnings volatility and potential need for future reserve strengthening, putting pressure on statutory capital and net income.
- Flat sales growth outlook for core operations in 2025, despite strong persistency, raises concerns about dependence on in-force business for premium growth; if labor force participation rates decline or demand for employer-sponsored benefits wanes, future revenue growth could stagnate.
- Lower-than-targeted alternative investment yields and possible continuation of a low interest rate environment reduce investment income, a significant contributor to profits and capital generation, negatively impacting earnings and capital adequacy.
- Intensifying competition in the group benefits market-combined with industry-wide shifts toward gig economy and non-traditional employment arrangements-may challenge Unum's reliance on employer-sponsored platforms, potentially leading to revenue compression and weaker earnings growth over the long term.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $93.538 for Unum Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $108.0, and the most bearish reporting a price target of just $85.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.5 billion, earnings will come to $1.6 billion, and it would be trading on a PE ratio of 9.9x, assuming you use a discount rate of 6.9%.
- Given the current share price of $70.49, the analyst price target of $93.54 is 24.6% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.