Unum Group’s UNM subsidiary, Unum Life Insurance Company of America (“Unum America”), has agreed to enter into an agreement with Fortitude Reinsurance Company Ltd. (“Fortitude Re”), on a coinsurance basis, to reinsure statutory long-term care (LTC) reserves and cede multi-life individual disability insurance (IDI) business. Pending regulatory approvals and satisfaction or waiver of other customary closing conditions, the deal is expected to see light during 2025.

Per the deal, Unum America will cede to Fortitude Re individual LTC insurance policies that represent 19% of UNM's total LTC block as well as a quota share of IDI policies reinsured from an affiliate representing 20% of Unum's total in-force IDI premium, effective Jan. 1, 2025. Following the deal, Unum America will cede $3.4 billion of individual LTC reserves and approximately $120 million of IDI in-force premium to Fortitude Re, who will then retrocede biometric risk to a highly rated global reinsurer. 

The transaction is likely to perk Unum Group with an estimated $100 million capital benefit, comprised of a $200 million capital impact related to the reinsured LTC block and a $300 million capital benefit related to the reinsured IDI block. UNM will continue to provide service and administration for the reinsured business. 

The Closed Block segment of Unum Group comprises group and individual long-term care and other insurance products that are no longer actively marketed. UNM discontinued offering individual long-term care in 2009 and group long-term care in 2012. Long-term care insurance pays a benefit upon the loss of two or more activities of daily living and the insured's requirement of standby assistance or cognitive impairment. Payment is made on an indemnity basis, up to a lifetime maximum, regardless of expenses incurred. Premium rate increases, persistency, investment returns, mortality and other claims experience, and the level of administrative expenses adversely affected the profitability. 

In 2024, the Closed Block segment’s adjusted operating income decreased 16.4% year over year, primarily due to unfavorable benefits experience in long-term care. Despite continued anticipated premium rate increases in the long-term care business, Unum Group expects overall premium income and adjusted operating revenues to decline over the long term. The profitability of individual disability insurance is also affected by persistency, investment returns, claims experience, and the level of administrative expenses.

With this transaction with Fortitude Re, UNM looks forward to lessening its exposure to the legacy long-term care business and emerging as a leading employee benefits business. The recent deal has thus enabled UNM to shift its focus toward more capital efficient, higher-returning core businesses and reduce the imprint of the closed block.

UNM’s Price Performance

Shares of this Zacks Rank #3 (Hold) accident and health insurer have gained 65.6% in the past year compared with the industry’s growth of 33.6%. The stock has outperformed the Finance sector and Zacks S&P 500 composite’s growth of 21.7% and 18.5%, respectively.

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Stocks to Consider

Investors interested in the insurance industry may look at some better-ranked players like Palomar Holdings, Inc. PLMR, Root, Inc. ROOT and Marsh & McLennan Companies, Inc. MMC. While Palomar Holdings and Root sport a Zacks Rank #1 (Strong Buy) each, Marsh & McLennan carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Palomar Holdings’ 2025 earnings per share and revenues implies year-over-year growth of 28.4% and 36.2%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 16.64%. In the past year, shares of PLMR have rallied 63%.

The Zacks Consensus Estimate for Root’s 2025 earnings per share and revenues implies year-over-year growth of 99.2% and 147.9%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 127.2%. In the past year, shares of ROOT have rallied 342.7%.

The Zacks Consensus Estimate for Marsh & McLennan’s 2025 earnings per share and revenues implies year-over-year growth of 9.2% and 9.9%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 3.1%. In the past year, shares of MMC have rallied 13.8%.

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