Unum Group Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Core operations achieved ROE >20%, premium growth >4%, $350M statutory earnings, strong capital metrics. Despite solid execution, EPS $2.04 due to higher disability claims.
• Long-term care reinsurance transactions in Feb reduced risk, released capital. Statutory earnings strong, capital position boosted with $2.2B holding company liquidity and RBC 460%.
• Plan to repurchase ~$200M in shares in Q1, aim for at least that in Q2. Committed to dividend increases, announced in May shareholder meeting.

Segment Performance

• Unum U.S.: Adjusted operating income decreased to $329.1 million in Q1 2025 from $385.2 million in Q1 2024. Premium growth 4.3% due to natural growth (2%-3%) and total group persistency of 89.3%. Sales up ~1% YOY driven by voluntary benefits.
• Unum International: Adjusted operating income increased to $38.7 million from $37.4 million. Premium income up 7% YOY, with Unum Poland growing 18%. Persistency >90% in U.K. and Poland offset lower sales.
• Colonial Life: Adjusted operating income increased to $115.7 million from $113.7 million. Premium income $457.3 million, growth 2.3%. Sales up 2.2% YOY, persistency 78.1%.
• Closed Block: Adjusted operating income $24.4 million, lower due to lower alternative asset returns (5.1% annualized vs. 8.10% target). LTC net premium ratio 94.7% at quarter end.

Guidance

• Full year growth outlook 6%-10%.
• Statutory earnings expected $1.3B-$1.6B.
• Capital targets met, with RBC expected 425%-450% and holding company liquidity >$2.5B by year end. Plan to continue share repurchases and dividend increases.

Risks

• Higher disability claims impacted EPS.
• Economic uncertainty could lead to increased disability incidents and claim denials.
• LTC block exposure and lower alternative asset returns pose risks to earnings.

Q: Can you give more color on disability incidents and normalization during the quarter, and if it continued into April?

A: Steve Zabel said elevated incidents in Jan, came down during the quarter, no update on April. Recoveries close to expectations.

Q: How would you characterize the economic sensitivity of disability claims?

A: Rick McKenney said submitted incidents rise in recessions but not all turn to paid claims. Long-term disability policies not economically sensitive.

Q: Reaffirmed 6%-10% growth guide, what are the drivers?

A: Steve Zabel cited group disability loss ratio improving, yield on alternative assets, operating expenses decreasing, organic growth, and share repurchases as drivers.

Q: On persistency, what percentage of Unum U.S. book uses tech initiatives?

A: Chris Pyne said significant new business tied to tech, migration strategy in place, persistency to increase over time.

Q: On disability incidence and recoveries vs pre-pandemic?

A: Steve Zabel said incidence levels back to historical norms, recoveries improved, recovery rates increased post-pandemic.