Unum Group

Hey, everyone, and welcome to the Unum Group second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one. Please note that this event is being recorded. I would now like to turn the conference over to Tom White, Senior Vice President of Investor Relations. Please go ahead, sir.

Great. Thank you. Good morning, everyone, and welcome to the second quarter 2021 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, 2020 and our subsequently filed Form 10-Q. Our SEC filings can be found in the investor section of our website at unum.com. I remind you that the statements in today's 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 gap measures and reconciliations of any non-gap 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 second quarter 2021 net income of $182.9 million or 89 cents per diluted common share, compared to $265.5 million or $1.30 per diluted common share in the second quarter of 2020. Net income for the second quarter of 2021 included the after-tax cost related to the early retirement of debt of $53.2 million or 26 cents per diluted common share, the after-tax amortization of the cost of reinsurance of $15.5 million or $0.08 per diluted common share, and after-tax impairment loss on the right-of-use asset related to one of our operating leases for office space we are no longer using to support our general operations of $11 million or $0.05 per diluted common share a net after-tax realized investment gain on the company's investment portfolio of $600,000 or one cent per diluted common share and the net tax expense related to a UK tax rate increase of $24.2 million or 12 cents per diluted common share. Net income in the second quarter of 2020 included an after-tax impairment loss on the right of use asset of $10 million or five cents per diluted common share and a net after-tax realized investment gain of $25.4 million, or 12 cents per diluted common share. So excluding these items, after-tax adjusted operating income in the second quarter of 2021 was $286.2 million, or $1.39 per diluted common share, compared to $250.1 million, or $1.23 per diluted common share in the year-ago quarter. Participating in this morning's conference call are Unum's President and CEO, Rick McKinney, Chief Financial Officer Steve Zabel, and Chief Operating Officer Mike Simons, as well as Mark Till, who heads our Unum International business, and Tim Arnold, who heads our Colonial Life and Voluntary Benefits businesses. And now I'll turn the call over to Rick for his opening comments.

Thank you, Tom, and good morning, everyone. I am very pleased with our second quarter results. We showed a 13% increase year-over-year in after-tax adjusted operating income to $1.39 per share. These improved results were driven in large part by the significant decline in COVID-related mortality this quarter and by excellent performance in our investment portfolio. Given our strong second quarter results, we're raising our outlook for full-year 2021 growth in after-tax adjusted operating income per share to a decline of approximately 1 to 3% compared to our previous outlook of a decline of 5 to 6%. We believe we're making good progress to returning to our pre-pandemic levels of profitability and margins over the coming quarters with a trajectory of that improvement dependent on the developing trends in COVID and the Delta variant. Embedded in our expectations is that COVID mortality will improve, but only slightly in the third and fourth quarters. In many ways, results for this quarter played out in line with our expectations, with declining mortality impacts, solid underlying premium trends, and further strengthening of our healthy capital position. This quarter was also highlighted with some areas of positive upside relative to our expectations. Most notably, we saw continued excellent returns from our alternative investment portfolio, which is benefiting from the strong financial markets and growth in the economy. We also saw a record level of quarterly operating income for Colonial Life, along with an impressive recovery in sales. And rounding it out, we had favorable underlying benefits experience from our closed-block business lines, both long-term care and the closed disability block. We'll cover these positive trends in detail throughout our comments this morning. In addition to the positive trends we saw this quarter, I am pleased that our indicators continue to support our expectation of generating slightly positive growth in premium income in our core business segments this year, with further improvement expected into 2022. Sales trends are emerging in line with our expectations in our primary business lines within Unum US, and Colonial Life showed very strong results this quarter with over a 50% increase from the year-ago quarter, a good indicator of consumer interest in the basic financial protection products we offer. It also highlights that the agency model of colonial life is quite resilient, as it saw some of the most pronounced headwinds in the early stages of the pandemic. In addition to sales trends, we remain very encouraged with the strong levels of persistency we're seeing across the majority of our business, which provide a solid base to grow. Finally, we're seeing a pickup in natural growth, primarily from higher wages in many sectors of the economy, as we continue to build back premium income that was impacted by the sharp spike in unemployment in the first half of 2020. The environment we are seeing today is quite good for our core business. We often talk about wage inflation, but you have to add to the mix, there is renewed recognition for the need to prepare for the unexpected. And in a competitive world for talent, employers are looking to ensure that they have competitive benefits package for their current and prospective employees. Turning to our capital position at quarter end, it remained very healthy as well, withholding company cash at $1.7 billion and weighted average risk-based capital for our traditional U.S. insurance companies at 375%. Both of these measures are in excess of our targets and provide substantial flexibility for us going forward. Additionally, this quarter, we successfully completed a 30-year debt issue and redeemed a shorter high coupon maturity, enabling us to further extend our debt stack while reducing the overall coupon. Leverage remains approximately 26% and provides further capital flexibility for us. This strong capital position creates options for us as we look to create value for our shareholders. Our deployment strategy will first focus on continuing to invest in the growth of our core business segments, both organically and through capability-driven acquisitions. We like our position in the employee benefits market, and putting money to work to grow our core franchise is where we are focused. We also expect to be consistent in returning capital to shareholders through dividends, which will increase by 5.3% with a dividend to be paid this month. We do have funds in excess of these needs, so as we look to the future, we are constantly evaluating how to best deploy or hold onto this capital. A key question is how we can use these funds to lessen the challenge to our current share price from the overhang of our legacy LTC block. Return of capital to shareholders remains an important option for us, but we are also considering pre-funding a portion of the PDR. Our goal is to help reduce the LTC discount in our stock. And in the future, this funding would be utilized in any risk transfer transaction that we explore on a portion of this block, should that become an option for us. While we are clearly optimistic looking forward, we do see areas of our business that continue to be impacted by the pandemic. Results in our short-term disability line and leave services continue to be impacted by COVID-related claims, which remain stubbornly high. The group life and AD&D business within Unum US returned to profitability in the second quarter after recording losses in the previous two quarters as COVID-related mortality in the US declined materially from the peak levels experienced late last year through the early months of 2021. What we are watching now is that the Delta variant is impacting a younger unvaccinated population that has different dynamics from what we have seen today from COVID-19. Recently updated estimates for COVID-related mortality for the third quarter and second half of 2021 are pointing to persistently high counts and only a marginal improvement relative to the second quarter. We continue to watch these trends closely and are reflecting them in our own plans. There is room for optimism, though, as we have started to see employers looking at the role that they might play in getting more of the population vaccinated. As we look at growth in our enterprise, the steps we've taken to run our business more efficiently have freed up funds that we're reinvesting in new products and capabilities that tackle some of today's critical business workplace challenges. During the quarter, we launched our new total leave and behavioral health solutions, and we've logged our first sales for both offerings. On the digital front, platforms like MyUnum and Colonial Life's improved portal are steadily providing more self-service, real-time capabilities for clients and customers. And new technology we're testing will enhance the digital enrollment experience, automate processes, and allow people to interact with us in new ways. Equally important is the work we're doing to strengthen our culture and engage our employees across the enterprise. We've taken steps during the quarter to accelerate and expand our inclusion and diversity journey. and we broaden the scope of our social justice fund to support even more groups facing discrimination. These and many other efforts help place Unum among the points of light, Civic 50, and on Forbes Best Employers for Diversity, Best Employers for Women, and Best Employers for New Graduates. We're also happy to receive another perfect score on the Human Rights Campaign's Corporate Equality Index and to be named a Best Place to Work for Disability Inclusion. These efforts and accomplishments reflect the strong culture we have built. We are proud of how it has helped us endure through the challenges of the past year and a half and how the engagement of our team will propel us going forward. Now I'll ask Steve to cover the details of the second quarter results. Steve?