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Unum Group (UNM) Offers 4.125% $600 Million Senior Notes

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Unum Group UNM has completed an offering of $600 million senior notes. The notes carry an interest rate of 4.125% and are scheduled to mature on 2051.

The company plans to deploy the net proceeds to redeem 4.500% senior notes due 2025. These noted will be redeemed in June 2021. The remaining amount would be utilized for general corporate purposes include working capital requirements and strategic investments.

Given a sustained low interest rate environment, companies across sectors are issuing senior notes to procure funds and enhance financial flexibility without affecting liquidity. Recently, Assurant AIZ issued 2.650% $350 million Senior Notes due 2032 to capitalize on the low-rate environment.

By capitalizing on the low interest rate environment, Unum Group is also attempting to reduce its interest burden, thus facilitating margin expansion. Interest and debt expenses declined 2.8% year over year in the first quarter of 2021. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.

Unum Group’s debt level has been increasing in the past few years. As of Mar 31, 2021, the company’s long-term debt was $3.3 billion, up 0.02% from the 2020-end level. Total debt/total capital ratio of 24 was higher than 23.5 at fourth-quarter end. On the other hand, as of Mar 31, 2021, Unum Group’s cash and bank deposits increased nearly three-fold from the 2020 end level.

Recently, AM Best reiterated the Long-Term Issuer Credit Ratings (Long-Term ICR) of "bbb" (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) while upgrading the outlook to stable from negative, reflecting a strong balance sheet, sustained solid operating performance, favorable business mix and prudent enterprise risk management.

Shares of this Zacks Rank #3 (Hold) accident and health insurer have rallied 31.6% year to date, outperforming the industry’s increase of 22.4%. Disciplined sales trends, strong persistency, conservative pricing and favorable benefit experience driving operating results across majority of its insurance entities should help it retain the momentum.

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Stocks to Consider

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Aflac delivered 27.50% earnings surprise in the last reported quarter.

Employers Holdings delivered 15.91% earnings surprise in the last reported quarter.

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