• Earnings Per Share (EPS) Growth: 10% growth in 2024, exceeding initial expectations of 7% to 9%.
• Return on Equity (ROE): Over 20% for core operations in 2024.
• Dividend Increase: Raised by 15% in 2024.
• Share Repurchases: Approximately $1 billion in 2024, with $700 million excluding one-time repurchases.
• Holding Company Cash: $2 billion at year-end 2024.
• Risk-Based Capital (RBC) Ratio: 430% at year-end 2024.
• Free Cash Flow Expectation for 2025: $1.3 billion to $1.6 billion.
• Sales Growth: 6.1% in Unum International, 6.5% in Unum US, and down 1.4% in Colonial Life for 2024.
• Premium Growth: 3.6% in Q4 2024, 5% for the full year.
• Disability Benefit Ratio: 59% for the full year 2024, 60.4% in Q4.
• Group Life and AD&D Benefit Ratio: 66.3% for the full year 2024, 66.7% in Q4.
• Adjusted Operating Income: $1.6 billion for 2024.
• Adjusted Operating Earnings Per Share: $8.44 for 2024, representing 10.2% growth over 2023.
• Unum US Earned Premium: Grew 4.6% to $6.9 billion in 2024.
• Unum International Premium Growth: 9.4% in the UK, 24.2% in Poland for 2024.
• Colonial Life Adjusted Operating Earnings: $466.7 million for 2024, up 16.6% over 2023.
• Closed Block Adjusted Operating Earnings: $137.8 million for 2024.
• Capital Returned to Shareholders in 2024: $1.3 billion through share repurchases and dividends.
• 2025 EPS Growth Expectation: 8% to 12%.
• 2025 Share Repurchase Plan: $500 million to $1 billion.

• Warning! GuruFocus has detected 7 Warning Sign with UNM.

Release Date: February 05, 2025

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

Positive Points

• Unum Group (NYSE:UNM) reported a 10% growth in earnings per share for 2024, surpassing initial expectations of 7% to 9%.
• The company achieved a return on equity (ROE) of over 20% in 2024, indicating strong financial performance.
• Unum Group (NYSE:UNM) raised its dividend by 15% and repurchased approximately $1 billion of shares in 2024, demonstrating a commitment to returning capital to shareholders.
• The company reported strong sales growth in Unum US, with a nearly 20% increase in the fourth quarter, marking it as the largest sales quarter of the year.
• Unum Group (NYSE:UNM) expects to generate between $1.3 billion and $1.6 billion of free cash flow in 2025, providing significant capital flexibility and strategic optionality.

Negative Points

• Sales in Colonial Life were down 1.4% for the full year, indicating challenges in this segment.
• The supplemental and voluntary lines experienced pressure in the fourth quarter, which the company views as transitory but still a concern.
• The net premium ratio for the long-term care (LTC) block increased slightly, indicating potential volatility in this segment.
• The company anticipates a slight increase in the expense ratio in 2025 due to continued investments, which could impact margins.
• Persistency in Unum US is expected to normalize in 2025, which may affect premium growth compared to the strong persistency seen in 2024.

Q & A Highlights

Q: Can you explain why you expect group disability to remain favorable over the midterm, despite concerns it might revert to the mean? A: Steven Zabel, CFO, explained that the favorable outlook is due to stable incidence levels and improved claim recoveries, which have been a decade-long trend. The company has embedded these improvements into its claims management process, making them sustainable. Christopher Pyne, EVP of Group Benefits, added that the competitive environment remains, but the focus on high-quality coverage and connectivity with human capital management platforms helps maintain pricing stability.

Q: How do you view the market for long-term care risk transfer, especially in light of recent transactions by peers? A: Richard McKenney, CEO, noted that recent transactions indicate a developing market for LTC risk transfer. The company is actively exploring opportunities but emphasizes that these transactions are complex and must make strategic sense for Unum. The goal is to eventually transfer LTC risk to focus on core business growth.

Q: With strong capital generation, why is the share buyback range conservative? Are you considering M&A? A: Richard McKenney, CEO, stated that the company prioritizes organic growth and M&A to enhance capabilities and distribution. The wide buyback range of $500 million to $1 billion allows flexibility to respond to market conditions and potential M&A opportunities. The company remains committed to returning capital to shareholders through dividends and buybacks.

Q: What caused the weaker results in the voluntary benefits segment in Q4, and what is the outlook for 2025? A: Steven Zabel, CFO, explained that the volatility in the voluntary benefits segment was due to unfavorable claims experience in various product lines. However, these impacts are viewed as transitory, and the company expects earnings to return to normal levels in 2025, with quarterly earnings around $121 million.

Q: Can you discuss the pricing trends for Unum US renewals in 2025, particularly in group disability and group life? A: Christopher Pyne, EVP of Group Benefits, noted that the company experienced strong persistency in 2024 due to its capabilities and stable pricing. While the market remains competitive, the focus on providing value and solving customer challenges helps maintain pricing stability. The company expects to continue this approach in 2025.

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