Unum cuts long-term care risk, returns cash, and beats on Q2 profit
Long-term care risk cut by $3.8B reinsurance deal Unum shifted $3.8 billion of long-term care reserves to Fortitude Re, cutting total exposure 40% since early last year. This frees capital and reduces the risk that old long-term care policies surprise the company with losses, which supports the stock.
The reinsurance deal is the biggest new event and directly lowers UNM's risk profile.
Analysts raise price targets after reinsurance deal Jefferies, Barclays and Evercore all lifted their UNM price targets, and one analyst said the deal makes Unum a stronger takeover candidate. Higher targets can pull more buyers in, though the stock dipped on the announcement day, showing some investors wanted more.
Analyst target hikes are a direct new reaction to the reinsurance deal and affect investor expectations.
Q2 profit beat and new $1B buyback Unum's second-quarter earnings per share rose to $2.16 and beat estimates, helped by strong Colonial Life results. The board then authorized a new $1 billion stock buyback, which shrinks the number of shares and returns cash to owners, both supporting the price.
The earnings beat and buyback are fresh, concrete positives that directly affect UNM's value.
One report shows revenue down 12.3% A later industry roundup reported Unum's quarterly revenue at $2.96 billion, down 12.3% and below expectations. This conflicts with the earlier upbeat earnings report and is a reminder that revenue can be uneven, which could weigh on the stock if the weakness continues.
This is the main counterweight in the period and warns readers not to see only good news.