Unum Group

hello and welcome to the unum group 3q 2021 earnings conference call my name is robin and i'll be coordinating your call today if you would like to ask a question during the presentation you may do so by pressing star 1 on your telephone keypad i will now hand you over to your host tom white from union group tom please go ahead great thank you robin good morning everyone and welcome to the third 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-Qs. 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. 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 third quarter 2021 net income of $328.6 million or $1.60 per diluted common share compared to $231.1 million or $1.13 per diluted common share in the third quarter of 2020. Net income for the third quarter of 2021 included the after-tax impairment loss on internal use software of $9.6 million or 5 cents per diluted common share, the after-tax amortization of the cost of reinsurance of 15.5 million or 8 cents per diluted common share, The net after-tax reserve decrease related to reserve assumption updates of $143.3 million, or $0.70 per diluted common share, and a net after-tax realized investment loss on the company's investment portfolio of $100,000, or the de minimis impact on earnings per diluted common share. Net income in the third quarter of 2020 included after-tax costs related to an organizational design update of $18.6 million or 9 cents for diluted common share and a net after-tax realized investment gain on the company's investment portfolio of $3.8 million or 1 cent per diluted common share. Excluding these items, after-tax adjusted operating income in the third quarter of 2021 was $210.5 million or $1.03 per diluted common share compared to $245.9 million, or $1.21 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. Good morning, everyone, and thank you for joining us today. As we look at our third quarter earnings results this morning, let me start by highlighting that our core business has continued to perform well. We saw top line growth in our business lines at good returns. We also recognize the continued challenge that COVID presents on our near term results. It has cast a shadow on our core returns, but we still see a great business that we believe will return to the levels of profitability that we expect. Let me start with the overall operations before commenting on these COVID trends. I would first highlight that core premium growth has been steady and tracking to the expectations we previously laid out for you. On a year-over-year basis in the third quarter, UNMUS generated an increase in premium income of 1.2%. Colonial life was slightly better than break-even following three previous quarters with negative comparisons, and our international lines also generated positive premium trends. This premium growth momentum is building back as sales growth reemerges, persistency remains favorable, and the external environment of employment growth and wage inflation benefits our business. Outside of the COVID-related impacts, we remain very encouraged with the benefits experience and operating income contributions from our other business lines. The supplemental and voluntary lines, colonial life, our international businesses, and our closed block segment all show generally stable results and made substantial contributions to income this quarter. We're also pleased with our overall investment results this quarter. It was another quarter for strong returns from our alternative investments and also another quarter of higher than normal bond call premiums. The underlying credit quality of the portfolio is excellent and the investment team remains diligent in their analysis of our credits through the changing market dynamics. With this backdrop of strength, we were also highly affected by the evolving nature of the COVID pandemic. Given the breadth of our customer base across the U.S., we have seen this quarter we have been impacted by the resurgence of higher infections, hospitalizations, and mortality brought on by the Delta variant. As we have discussed throughout the pandemic, the best way to monitor COVID's impact on our results is to follow national mortality and infection rates. Differently in this quarter, we also need to focus on how the demographics of the incremental mortality relate specifically to our customer base. To put it in context, in the third quarter, the U.S. experienced a significant increase in national COVID mortality counts to approximately 94,000 lives, which is almost double the 52,000 in the second quarter. The dramatic increase over the course of the third quarter occurred very rapidly and consistently throughout the quarter. In fact, just 90 days ago, most experts were estimating a third quarter mortality count of approximately 44,000 deaths, an estimate that has more than doubled over the course of the quarter. The absolute increase in mortality has certainly been impactful to our industry and for us, most notably in our Unum US group life business, although we also saw impacts in our voluntary benefits lines. Beyond the higher mortality counts in aggregate, data from the CDC Also shows that the third quarter working age individuals comprise approximately 40% of the coven related mortality double that of the fourth quarter of 2020 and first quarter 2021 before vaccinations began to widely be available. This shift in demographics impacts us threefold first we now see higher impacts in the working age population, our primary customers who are covered by our group and voluntary products. In addition, these younger working age individuals tend to have higher benefit amounts than we saw before. And finally, with the welcome news of the decline in COVID-related deaths among the elderly population, the higher mortality in our long-term care block has substantially subsided. An additional but smaller impact that we see is that the Delta variant has brought on a resurgence of infections and hospitalizations, leading quickly to higher claims in our short-term disability business and pressure on our group disability benefit ratio. While COVID impacts are evident in our results this quarter, we believe as the pandemic continues to come better under control with increased vaccinations and advanced treatments, then we will see a strong reemergence of growth and profitability in our business. The recovery from COVID has been delayed longer than we anticipated by the Delta variant, but we do expect to see a recovery ahead. It is because of that view that we are excited to begin to deploy a portion of the company's excess capital in a way that we believe can create value for our shareholders. We start first with a capital position that remains very healthy with holding company cash at $1.6 billion and weighted average risk-based capital ratio for our traditional U.S.-based life insurance companies at approximately 380%. This gives us the opportunity to begin to deploy a portion of that capital to enhance shareholder value while also maintaining a healthy position for opportunities that could materialize in the future. Last week, we were pleased to announce the $250 million share repurchase authorization approved by our board, which we intend to initiate in the fourth quarter with an execution of an accelerated share repurchase of $50 million. We expect to continue the program through the end of 2022. In addition to buying shares, we also plan to accelerate recognition of the premium deficiency reserve for the long-term care block by a similar amount over this same timeframe. We see value in accelerating the recognition ahead of the original seven-year schedule and could see its completion as early as the end of 2024 under certain market conditions. Even with the additional capital we plan to allocate to share buybacks and accelerated PDR recognition, we will continue to maintain a strong capital position and flexibility. While we remain optimistic over the long term, given the volatility of the pandemic, we will move our traditional December analyst meeting to the first quarter of 2022 to discuss with you our full year outlook. The area to stay focused on is our continued premium growth in our core business lines looking into 2022, as well as the impact of our capital deployment plans. We expect the impact of the pandemic to subside over the course of next year. But we do expect fourth quarter of this year to be impacted similarly to the third quarter. We are watching the national numbers, as are all of you. And as the delta wave subsides, we look to return to the growth and profitability we believe that we can deliver. Now I'll ask Steve to cover the details of the third quarter results.