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01/10 19:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A session reflect a mixed picture. Financial performance and guidance show stability with slight optimism, but there are concerns about morbidity and mortality assumptions and statutory reserving impacts. The Q&A reveals management's cautious approach and some uncertainties, particularly around capital deployment and reserve impacts. Without significant positive catalysts or strong negative indicators, the sentiment remains neutral, suggesting minimal stock price movement.
Premium Growth Year-to-date solid premium growth is up 4%. This growth is supported by high levels of persistency and sales growth of 12% in the quarter. The reasons for this growth include the strength of market position, value employers place on offerings, and success of key technology initiatives like HR Connect and Total Leave.
Earnings Per Share (EPS) Earnings per share of $2.09 fell below expectations, primarily due to volatility in the Closed Block. However, core businesses exceeded expectations and demonstrated healthy margins and strong returns.
Return on Equity (ROE) Return on equity for core operations continues to be near 20%, while aggregate ROE, including the Closed Block, is 11.3%. This reflects strong margins and expense discipline.
Capital Return to Shareholders Through the first 9 months of the year, nearly $1 billion was returned to shareholders, including $750 million in share repurchases and $230 million in dividends. This reflects a disciplined approach to building franchise value and delivering long-term returns.
Adjusted Operating Income (Unum US) Adjusted operating income for Unum US was $334.9 million for the third quarter of 2025, compared to $363.3 million a year ago. The decline was due to volatility in the Closed Block and other factors.
Group Disability Earnings Group disability produced adjusted operating earnings of $133.5 million in the quarter compared to $156.7 million a year ago. The benefit ratio was 61.3%, driven by continued strong recoveries.
Group Life and AD&D Earnings Adjusted operating income for Group Life and AD&D was $88.1 million, lower than last year's $94 million. The benefit ratio of 66% outperformed the outlook of approximately 70%, driven by lower overall incidents.
Supplemental and Voluntary Lines Adjusted operating income was $113.3 million, slightly above $112.6 million a year ago. Growth was driven by the voluntary benefits business despite the impact of ceded IDI business.
Colonial Life Premium Growth Premium grew 3.3% from the prior year, supported by persistency of 78.7%, which was 70 basis points higher than a year ago. Sales increased 3.1% in the quarter.
International Segment Premium Growth Premium growth was 9.5%, including 18.7% in Poland. Sales growth for the segment was 24.9%.
Closed Block Reserves Closed Block reserves increased $640.5 million, primarily due to long-term care. This included a $300 million increase from higher incidence assumptions and a $200 million decrease from elevated disabled claim mortality.
Investment Portfolio Performance The portfolio maintains an A- average rating with historically low exposure to below investment-grade securities. Alternative investment income in the quarter was $21.7 million, with an annualized yield of 6.5%.
HR Connect and Total Leave platforms: These technology initiatives are driving stronger engagement and retention by creating deep connections with employers and employees. They differentiate Unum in the market by offering a high-quality digital experience supported by AI tools and human expertise.
Core segment premium growth: Premium growth across core segments grew nearly 4.5%, with Unum US growing nearly 4%, Colonial Life up over 3%, and International delivering 10% growth. Persistency and sales growth of 12% in the quarter reflect strong market positioning.
International segment growth: The International segment showed premium growth of 9.5%, including 18.7% in Poland, and sales growth of 24.9%.
Capital returns to shareholders: Unum returned nearly $1 billion to shareholders in the first 9 months of 2025, including $750 million in share repurchases and $230 million in dividends. The company expects to return a total of $1.3 billion to shareholders in 2025.
Investment portfolio performance: The portfolio maintains an A- average rating with low exposure to below investment-grade securities. It generated after-tax net investment gains of $101.2 million in the quarter.
Long-term care reinsurance transaction: Unum ceded 20% of its LTC reserves to Fortitude Re, reducing risk and advancing its Closed Block strategy. Additional opportunities with third parties are being pursued to further remove this risk.
Discontinuation of new employee coverage in group LTC cases: Effective February 1, 2026, Unum will stop adding new employee coverage to existing group LTC cases, minimizing future risk and aligning with strategic priorities.
Closed Block Volatility: Earnings per share fell below expectations due to volatility in the Closed Block, which includes legacy long-term care policies. This volatility necessitated an increase in reserves by $378 million after-tax, reflecting ongoing challenges in managing this legacy business.
Long-Term Care (LTC) Risks: The company increased reserves by $640.5 million for the Closed Block, primarily due to long-term care. Elevated incidence rates and modeling uncertainties led to the removal of morbidity and mortality improvement assumptions, adding $850 million to reserves. Additionally, discontinuing new employee coverage on existing group LTC cases increased reserves by $200 million.
Investment Portfolio Risks: Alternative investment income underperformed expectations, with a yield of 6.5% compared to an 8% outlook. This underperformance impacted Closed Block earnings and overall financial results.
Persistency and Sales Growth Challenges: While persistency and sales growth were strong, persistency for total group declined from 92.5% to 89.8% year-over-year, which could impact future premium growth.
Regulatory and Rate Increase Risks: The company expanded its premium rate increase program for long-term care, reducing reserves by $525 million. However, achieving these rate increases may face regulatory hurdles and customer pushback.
Strategic Execution Risks: The decision to discontinue new employee coverage on existing group LTC cases, while reducing future risk, also removes profitable margins, potentially impacting long-term financial performance.
Core Business Growth: The company expects continued growth in core operations into 2026, supported by strong persistency and sales growth. Premium growth is projected to exceed 4%, driven by favorable operating trends and market-leading positions.
Capital Management: Unum plans to maintain robust capital metrics, including holding company liquidity above $2 billion and an RBC ratio above 425% by year-end 2025. The company expects to return approximately $1.3 billion to shareholders in 2025 through share repurchases and dividends.
Long-Term Care (LTC) Strategy: The company has implemented strategic actions to derisk its LTC block, including discontinuing new employee coverage on existing group LTC cases effective February 2026. It has also removed morbidity and mortality improvement assumptions, increasing reserves by $850 million. No future capital contributions are expected for LTC reserves.
Investment Portfolio: The investment portfolio is positioned for future market cycles, maintaining an A- average rating and low exposure to below investment-grade securities. Alternative investments have produced long-term returns of 9% since inception.
Sales and Premium Growth: Sales growth in core operations is expected to remain strong, with a 12.2% increase in the third quarter providing momentum for the fourth quarter. Full-year core operations sales are expected to be consistent with the previous year.
Return on Equity (ROE): Core operations are expected to maintain a return on equity near 20%, with sustainable margins and disciplined expense management.
Dividends paid in 2025: $230 million
Expected dividends for 2025: Approximately $300 million
Share repurchases in 2025: $750 million
Expected share repurchases for 2025: At the top end of the $500 million to $1 billion range
The earnings call summary and Q&A session reflect a mixed picture. Financial performance and guidance show stability with slight optimism, but there are concerns about morbidity and mortality assumptions and statutory reserving impacts. The Q&A reveals management's cautious approach and some uncertainties, particularly around capital deployment and reserve impacts. Without significant positive catalysts or strong negative indicators, the sentiment remains neutral, suggesting minimal stock price movement.
The earnings call summary presents a mixed outlook. Financial performance and shareholder return plans seem stable, with increased buybacks and strong capital generation. Product development shows some growth, but challenges in Long-Term Care and unclear management responses create uncertainties. The Q&A section indicates stable disability insurance and limited medical cost impact, but the complex LTC risk transfer and reserve concerns could weigh on sentiment. Overall, the sentiment leans neutral due to the balance of positive shareholder actions against uncertainties in LTC and management's vague responses.
The earnings call highlights strong EPS growth, increased dividends, and significant share repurchases, which are positive for stock price. Despite some supply chain challenges and LTC risks, the company's stable financial performance, high ROE, and optimistic outlook for group disability and risk transfer indicate a positive sentiment. The Q&A session supports this with stable pricing and improved recovery trends. Overall, the positive financial metrics and shareholder returns outweigh the potential risks, suggesting a stock price increase in the short term.
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