Unum Group

Good day and welcome to the Unum Group third quarter 2020 earnings conference call. Today's call is recorded. At this time, I would like to turn the conference over to Mr. Tom White. Please go ahead, sir.

Great. Thank you. Good morning, everyone, and welcome to the third 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 our subsequent Form 10-Q filings. Our SEC filings can be found in the investor section of our website at unim.com. I remind you that the statements in today's conference call speak only as 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 which is also on our website in the investor section. Excuse me. Yesterday afternoon, Unum reported third quarter 2020 net income of $231.1 million or $1.13 per diluted common share compared to $242 million or $1.16 per diluted common share in the third quarter of 2019. Net income for the third quarter of 2020 included a net after-tax realized investment gain of $3.8 million and after-tax costs related to an organizational design update of $18.6 million. Net income in the third quarter of 2019 included a net after-tax realized investment loss of $20.8 million and after-tax debt extinguishment costs of $19.9 million. So excluding these items, After-tax adjusted operating income in the third quarter of 2020 was $245.9 million, or $1.21 per diluted common share, compared to $282.7 million, or $1.36 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 Unum International business and Tim Arnold who heads our Colonial Life and Voluntary Benefits businesses. So now I'll turn the call over to Rick for his opening comments.

Thank you, Tom, and good day, everyone. Our third quarter performance demonstrates a very good operating performance by our Unum team. This is in the face of difficult business and economic conditions that persist in our world and specifically in the employee benefits market. Overall, our financial results were solid this quarter and largely consistent with the expectations we set back in July. In the previous two quarters, we outlined what we believe are the factors that will influence our business, and these have evolved largely as expected, though impacts and recoveries are moving at different speeds. This morning, we will outline the most influential factors while highlighting the key parts of our business that continue to deliver excellent results in this stressed environment. So in the backdrop, I'd like to outline the high-level business and economic conditions that persisted throughout the quarter and had meaningful impact on our results. As we look at it, there are three major trends to follow. First and foremost, the health effects of COVID-19 remain significant with high mortality and high infection rates that impacted our benefits experience in multiple ways. Second, the sharp spike in unemployment rates in the spring has abated somewhat, but unemployment remains high relative to pre-COVID levels and continues to present a headwind to our growth rates. Third, we are beginning to see parts of the economy reopen and individuals return to more normal behavior and activities in their daily lives. This trend, when done in a responsible way, we think is a positive, but it did produce more negative impacts on our results in the third quarter relative to the second quarter. It may take time, but the longer-term implications of a containment of the COVID-19 pandemic leading to a full reopening of the economy will be very beneficial for our business. So when we take these three dynamics, health, unemployment, and gradual reopening, I'd like to highlight the important trends affecting our business in the current quarter. Sadly, high mortality rates continued into the third quarter and impacted our life insurance businesses, as well as seeing higher mortality within our long-term care claimant population. Although these claims impact our results, it reaffirms exactly why we are here, to take care of people at time of need. Our average death claim is around $50,000, and this may be the only form of life insurance these individuals and their families have. We are also seeing infection rates negatively impact our short-term disability and leave services businesses. These increases will follow the course of the pandemic and will abate as infection rates slow. Coming out of the March timeframe, the shock of shutting down the economy froze new business trends and disrupted our delivery models. We also saw high unemployment negating what we usually see as growth in payrolls. As our delivery models adapt, and employment conditions stabilize, our long-term premium growth rates will return as the economy improves and more people get back to work. Although we are happy to see it, the early phases of the reopening of the economy tend to produce more short-term negative trends for us with higher dental utilization relative to the second quarter and a return to more normal levels of non-COVID related STD claims in concert with COVID related claims remaining elevated. So this is a moment in time and we look forward to seeing these influences moderating and settling back down in future quarters. We remain very committed to our business model and we expect the return to more normal business and economic conditions will demonstrate that providing financial protections to the workforce is good for employers and their employees. As we head into the final months of 2020, there are clearly some positive trends that have continued despite the challenges of this year. An example is that we continue to see strong performance from our Unum US long-term disability business. This is a testament to our disciplined approach over many years to all facets of managing this business. Benefits experienced in the closed long-term care block remain favorable while the team continues to make progress on achieving rate increase approvals. The investment portfolio continues to trend favorably and expectations around impairments and downgrades have not materialized to the extent predicted. Our investment team has done a good job of analyzing our credit portfolio at a granular level and has executed well in this environment. And finally, our capital position remained with very good RBC at approximately 380% and holding company cash at $1.2 billion a quarter end, both nicely above our targeted levels. Despite the pandemic and the challenges it presents in the day-to-day management of our operations, we continue to operate the company with a focus on the future. The $18.6 million of organizational design update costs we recorded this quarter was part of an ongoing effort to continue to manage our operations with an eye toward the future. The savings generated allow us to continue to reallocate dollars to invest in the growth areas of our business. Importantly, we're seeing the payoffs with investments made to date with growing adoption of our digital assets throughout the organization, which is leading to strengthened relationships with customers and their employees. A few examples of these returns on our investment include our HR Connect platform, which digitally links our customers' HCM systems directly to Unum benefits. This allows for the automation of activities such as enrollment, billing, lead management, and evidence of insurability. Additionally, we have made investments to improve the customer experience through web and mobile claim submission tools and automated claimant communications. And one final example I'll mention is the MyUnum platform that creates a simple and intuitive end-to-end self-service experience for clients to administer their benefits and ultimately eases the administrative burden for HR managers. These are just a few of the ways we are transforming our operations to better serve employers, their employees, and their families throughout these difficult times. It also positions us well for the future. To wrap up, I want to express how proud I am of the hard work and dedication of our teams this year through these difficult conditions. Our teams feel the challenge and uncertainty in their own lives, but their efforts to support our customers and each other has been exceptional. We have remained true to our purpose of helping people thrive throughout life's moments, and what we are witnessing today has amplified the need for what we have always done. And now I'll ask Steve to cover the details of the third quarter results.