Unum Group

Thank you, Savannah.

Good morning, everyone, and welcome to the first quarter 2020 earnings conference call for Unum. Our remarks today will include forward-looking statements, which are statements that are not of current or historical fact. As a result, actual results might differ materially from results suggested by these forward-looking statements. Information concerning factors that could cause results to differ appears in our filings with the Securities and Exchange Commission and are also located in the sections titled Cautionary Statement Regarding Forward-Looking Statements and Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and subsequent filings. Our SEC filings can be found in the investor section of our website at unum.com. I remind you that statements in today's call speak only of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements. And a presentation of the most directly comparable GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation can be found in our statistical supplement on our website in the investor section. So yesterday afternoon, Unum reported first quarter 2020 net income of $161 million or $0.79 per diluted common share compared to $280.9 million or $1.31 per diluted common share in the first quarter of 2019. Net income for the first quarter of 2020 included a net after-tax realized investment loss of $113.1 million. Net income in the year-ago first quarter included net after-tax realized investment gain of $0.6 million. As a reminder, net realized investment gains and losses include changes in the fair value of an embedded derivative in a modified coinsurance arrangement, which resulted in an after-tax realized loss of $68.7 million in the first quarter of 2020 and an after-tax realized gain of $4.4 million in the year-ago quarter. Therefore, the after-tax net realized investment loss from sales and credit losses totaled $44.4 million in the first quarter of 2020. So excluding these items, after-tax adjusted operating income in the first quarter of 2020 was $274.1 million or $1.35 per common diluted share compared to $280.3 million or $1.31 per diluted common share in the year-ago quarter. Participating in this morning's conference call are Unum's President and CEO Rick McKenney, Chief Financial Officer Steve Zabel, and Chief Operating Officer Mike Simons, as well as Peter O'Donnell who heads our international business and Tim Arnold who heads our colonial life business. And now I'll turn the call over to Rick for his opening comments.

Rick? Thank you, Tom. Good morning. As we talk to you today, we find ourselves in unprecedented times. We have the backdrop of a good quarter while we are seeing the emergence of the COVID-19 pandemic and the resulting dramatic contraction of the economy. The current environment has created multiple uncertainties for the world. As we work through it, it reinforces the importance of Unum's corporate purpose, helping the working world thrive throughout life's moments. While we are in one of those life's moments, I am very confident the UDEM team is fulfilling our purpose in these times and providing excellent service to people at time of need. It is a powerful differentiator for our company. We have built a reputation of providing best-in-class service, which only grows in importance in challenging times like these. I could not be more proud of the way our teams have responded and are performing on behalf of our customers. We think we are still in the early stages of the lifecycle of this pandemic, and we don't yet have the full picture of how the expected recovery will unfold. Scenario planning including stress testing of our portfolio is part of our standard practices and ensures we have a roadmap in place to take decisive action. We have a strong financial position, a seasoned management team which has successfully managed through stress scenarios in the past and a business with the resilience to weather the storm and emerge stronger on the other side. We have much to cover with you this morning in addition to first quarter results. will provide an update on the impact COVID-19 is having on our business, both in terms of what we saw in the first quarter and how we see potential impacts playing out throughout the year. This provides the basis for how we are positioning ourselves to manage through a variety of scenarios. We'll also cover in detail the main Bureau of Insurance requirements to increase statutory reserves in our long-term care block over the next several years, a move that will build additional margin over our best estimate assumptions and should address some of the market's uncertainty related to this block. But let me begin by discussing the health of our franchise and the important role that we play. We are focused on delivering social value with the financial protection products and services we provide to employers and their employees in the time of need. Quality providers of employee benefits play a vital role at times like this, providing financial benefits to millions of families at difficult times in their lives. The competitive differentiators we have outlined for you in the past are more important than ever today and will remain important as we emerge from this crisis. These advantages include our excellent reputation with employee benefit decision makers, superior and consistent distribution reach, technology connections with digital capabilities from the front-end origination of new business to the servicing of claims and leaves, a disciplined risk management approach to pricing and claims, and our people and culture, which have proven time and again to demonstrate unwavering customer focus. In addition, given our leadership role and employee benefits, our business is well diversified by geography, industry and case size. These advantages are backed by our strong balance sheet, our capital position and liquidity, which we'll cover in more detail this morning. All this translates to strong core businesses with a track record of generating capital. We will continue to build on these advantages by investing in the service capabilities, digital enhancements, and organizational structure which underscore our commitment to our customers. Turning to the real-time view of our business, the COVID-19 pandemic has necessitated many changes to our workflows and processes over the past several weeks. Our emergency preparedness plans have served us well and we've successfully made the transition to working remotely for almost 99% of our people within the first week of instituting a work from home policy. I'm proud of the commitment, professionalism, and resilience of our employees who have maintained consistent service levels for our customers and the can-do attitude of our teams throughout this transition has been great to see. As other companies who are our customers have gone home and adjusted their workforce, one implication is that generating top line growth will be challenging. While the depth and duration of the pandemic is still not yet known, we are planning for multiple scenarios, drawing insights from previous stress situations, including the 2008 to 2009 recession. As part of our ongoing risk management planning process, we have analyzed the potential impacts that a pandemic and resulting economic slowdown could have on our business. As an employee benefits and voluntary benefits provider, the level of employment and wages are the building blocks on which we provide protections and in turn generate premium levels. As a leader for many years in employee benefits, we have a well-diversified business profile. While we expect pressure from declining GDP and rising unemployment, these headwinds are buffered by the fact that we have limited exposure to part-time workers and lower exposure to highly impacted sectors like discretionary retail, oil and gas, and restaurants and entertainment. One additional headwind to near-term growth comes from the difficulty in getting in front of benefits decision-makers and their ability to engage when most businesses are at home. From a risk perspective, trends in new claim activity can vary by product line, with more pressure expected in short-term disability and leave management and lower levels of utilization in dental and vision. Sadly, in this environment, we also need to think of elevated mortality rates, potentially negative for group life depending on impacted age ranges, contrasted by claim cessation in long-term care and closed-block disability. From what we see in external data, even though younger people do get sick, they generally recover at a much greater rate. This environment could also affect claim processing activity where disruptions can occur as customers navigate the current state of the healthcare systems. This potentially impacts the flow of documentation required to file new claims, to gather support for people to return to work, and to receive the level of care required for some claim payments. Given the overall dynamics, we have moved quickly to reallocate our resources and people to areas we expect higher volumes, such as short-term disability claims and leave management, while maintaining excellent service. The last area to explore is the impact from a rapidly slowing economy and actions of the federal government, particular to how they impact our investment portfolio overall. The declining interest rates we have seen continue to pressure portfolio yields and evaluations of discount rates. This latest move down in rates impacts segments of our business in varying ways. We have historically managed our group blocks over time with our pricing strategies, although our immediate focus is to work with customers to retain them through this sharp downturn. Over time, we will return to our approach of managing interest rates through pricing. Additionally, we actively manage and monitor the profile of our investment portfolio, which is comprised largely of corporate credit. Over many years and different credit cycles, we have consistently shown favorable default rates compared to industry averages and have maintained a generally consistent overall credit rating. There are pressures on many corporate issuers at the moment, but as we evaluate name by name, we see the portfolio continuing to perform in this environment. Based on these trends, our expectation is that the second quarter could be challenging, with most stay-at-home orders remaining in place through May. As these orders lift, we expect the environment to begin to slowly normalize. However, we simply do not know today when that will occur or how long full recovery will take. Steve will discuss with you our view of how all these influences will impact our earnings and capital plan over the course of the year. Given the volatility all around us, we are not continuing to provide our outlook for the year. But today we will give you more color on the trends that we're seeing in recent weeks that we could see going forward as well, which should help give you a sense of how we see the year playing out. Bringing you back to the first quarter, our results were solid and generally consistent with our overall expectations. We did see some pressure from the current environment later in the quarter, which will likely continue into the second quarter. We'll highlight those trends throughout our discussion this morning. For the first quarter, after-tax adjusted operating earnings per share was $1.35 compared to $1.31 in the year-ago quarter. and increase of 3%. These results were driven by an increase in before tax adjusted operating income of almost 4% from Unum US, which offsets slightly lower earnings in Colonial and weaker results in Unum International. Additionally, and on a positive note, after tax statutory adjusted operating earnings and important driver of cash flow were favorable at $326 million, an increase of 46% over the year-ago quarter. Our results also reflect after-tax net realized investment losses from sales and credit losses of $44 million, which Steve will cover in greater detail. Looking at premiums, while we did experience year-over-year growth in premium income in our core business segments of 2.5% in the first quarter, that is a slowdown from the pace we had seen in previous quarters, which had been in the 4% to 5% range. With the exception of Unum UK, we saw marginal declines in premium persistency as well as lower sales trends in our core businesses. Sales trends were clearly more challenged in the month of March, and we anticipate this continuing into the second quarter. Our anticipation is that persistency going forward will be stable on a case basis in traditional Group, but challenged in our voluntary benefits lines in smaller case business. Given all of this, we anticipate full-year premium income to be relatively flat to 2019. Benefit ratios, generally speaking, were in line this quarter with the year-ago quarter. We saw favorable year-over-year results across the Unum U.S. product portfolio, while Colonial had a slight increase in its benefit ratio and results in the international segment were more challenged. Results in closed-block long-term care were very favorable in the quarter, with an interest-adjusted loss ratio of 81% for the first quarter, well below our expected range of 85% to 90%, primarily driven by mortality on disabled lives. This takes our loss ratio to 86.2% over the past four quarters. Our capital metrics held in very well for the first quarter with the RBC ratio in our U.S. traditional life insurance companies at 365% and cash at our holding companies of just over $1 billion, both in excess of our targets. We expect to continue to meet our capital targets throughout the year and we will not repurchase shares in 2020 given the current environment. One other important event this quarter is the announcement that the Maine Bureau of Insurance is requiring us to establish additional statutory reserves for our long-term care block. This is the result of Maine's financial exam of Unum Life of America, which includes a review of our long-term care reserves by Maine's external consulting actuaries. We respectfully disagree with Maine's conclusion and see these additional statutory reserves further increase in margin over our best estimate assumptions. The added reserves will begin at the end of this year and will be added each year for seven years. The amount for 2020 is estimated by our actuaries to be within a range of $200 million to $250 million. Steve will touch on more of the details. We plan to fund these additional reserves through existing cash flows. In addition, our business's capital generation has provided substantial financial flexibility to the company. We believe that for 2020 we will continue to maintain our primary capital metrics in line with our targets and we anticipate maintaining our current shareholding dividend. As we step back from the pandemic and look to the future, the products and services we provide have never been more important to employees and their families. While today's environment is challenging and evolving rapidly, our business model has successfully navigated crises in the past and I'm confident it will do so again. While growth rates for premium income and earnings may be impacted in the near term, we intend to act decisively and continue to invest in our operations and expand into new areas where we can best leverage our expertise and capabilities to capture growth opportunities as those opportunities reemerge. At the same time, we'll remain disciplined on where and how we spend our money, being reflective of how the current environment emerges. Prior to the COVID-19 pandemic outbreak, with Mike Simon's new role as Chief Operating Officer, we had already begun work to transform our business model to ensure the proper alignment with the evolving needs of the market, as well as changes in our own business. We see this period of time as an opportunity to advance that transformation and continue to look for improvements for our business model to better serve our customers. When we think about the long term care close block, we also see the announcement we are making today addressing concerns on our LTC business for the long term and doing so in a measured way. We have a highly resilient franchise with tremendous core businesses that have successfully grown and maintained consistently strong margins over the last decade. We see ourselves getting through this period of time with a reinforced purpose of a high quality, highly connected employee benefits provider. I'll now ask Steve to cover the details of the first quarter results. Steve?