Unum Group

Hello and welcome to the Unum Group fourth quarter 2021 earnings conference call. My name is Harry and I'll be coordinating your call today. If you'd like to ask a question during the Q&A session, please do so by pressing star for number one on your telephone keypad. I'll now hand you over to your host, Tom White, Senior Vice President of Investor Relations to begin. Tom, please go ahead.

Great. Thank you, Harry. Good morning, everyone, and welcome to the fourth 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 in our website, also in the investor section. Yesterday afternoon, Unum reported fourth quarter 2021 net income of $159.7 million, or 78 cents per diluted common share. compared to $135.4 million or 66 cents per diluted common share in the fourth quarter of 2020. Net income for the fourth quarter of 2021 included the after-tax amortization of the cost of reinsurance of $15.5 million or 8 cents per diluted common share and a net after-tax investment loss on the company's investment portfolio of $6.8 million or 3 cents per diluted common share. Net income in the fourth quarter of 2020 included a net after-tax gain from the closed block individual disability reinsurance transaction of $32 million, or 16 cents per diluted common share. A net after-tax reserve increase related to assumption updates of $133.5 million, which is 66 cents per diluted common share. and a net after-tax investment gain on the company's investment portfolio, excluding the net after-tax realized investment gain associated with the closed-block individual disability reinsurance transaction of $1.6 million, or one cent per diluted common share. So excluding these items, after-tax adjusted operating income in the fourth quarter of 2021 was $182 million, or 89 cents per diluted common share, compared to $235.3 million, or $1.15 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 business. And now I'll turn the call over to Rick for his opening comments.

Thank you, Tom, and good morning, everyone. As we wrap up 2021, what we saw in the fourth quarter is a continuation of the good performance of our business model impacted by the difficult environment of ongoing COVID-related claims. Before getting to the quarter, I'd like to recognize the extraordinary work of our teams in serving our customers in this challenging time through their empathy, passion, and resilience. Throughout the pandemic, they have not wavered in fulfilling our purpose while still positioning the company for the future. As we turn to our financial results, our fourth quarter played out largely as we anticipated, with after-tax adjusted operating earnings per share at 89 cents for the fourth quarter. I'll come back to the COVID impacts in a minute, but as we look beyond these areas of our business directly impacted by COVID, I'm very pleased with many of our product lines that performed well in the quarter. Adjusted operating income for the UNM-US supplemental and voluntary line this quarter was among the highest in our history, with strong results in the IDI recently issued and voluntary benefit lines, as well as more stable performance in the dental and vision line. Colonial Life produced a solid level of income this quarter with a strong adjusted operating return on equity of approximately 16%. In addition, adjusted operating income in our international business continues to build momentum. And the overall performance in the closed block remained strong. We saw favorable benefit experience in both long-term care and individual disability and continued excellent returns from our alternative investment portfolio. In addition to the favorable returns from the alternative investments more broadly, our investment portfolio is in great shape as we continue to see very healthy credit trends. Looking at the top line, we are also very pleased with the trend in premium income growth for our core business segments. This includes the acceleration in year-over-year growth that we have seen in recent quarters. Premium growth in the fourth quarter on a year-over-year basis was just under 3% for our core businesses in aggregate, with growth of 3% for Unum US, 7% for international businesses, and 1% for Colonial Life. Persistency levels have remained healthy. We are also seeing a growing benefit to our top line from natural growth, with strong employment levels and wage growth coming through in our in-force block. From a benefits perspective, our results were significantly impacted by COVID claims. We saw continued elevated mortality in the group life business. COVID related mortality remained elevated at the national level, and the age demographics continue to show a high impact among working aged individuals. As in the third quarter, the fourth quarter was due to the Delta variant. The age demographics are a key driver for our business, and there was a slight decrease to 35% of national deaths in the fourth quarter from 40% in the prior quarter. We will continue to watch this dynamic as new variants like Omicron emerge. In addition, we continue to see pressure on our short-term disability results from the high levels of infection rates and hospitalizations. These also lead to an increase in leave request volumes, which pressure expenses in the group disability line. These COVID impacts are clear in our results, and will linger into 2022, but as the impacts from the pandemic lessen, we anticipate seeing recovery from the underlying strength of the business. And finally, our capital position remains in very healthy shape, even after paying more than a half a billion dollars in life claims through the pandemic. The weighted average risk-based capital ratio for our traditional US-based life insurance companies was approximately 395% to close the year. and holding company cash totaled $1.5 billion. Both of these metrics are well ahead of our long-term targets, and relative to year-end 2020, holding company cash remained stable, and RBC improved by approximately 30 points. This is the highest year-end RBC level since year-end 2016, and also reflects the impacts from the C1 factor changes that were implemented in 2021. In addition, we added $400 million of pre-capitalized trust securities, which gives us contingent capital on top of our pre-existing credit lines. All of this points to broad financial flexibility moving into 2022. Steve will get into our total LTC funding actions, but one area to highlight is our first unit subsidiary, where we have been adding reserves and capital for the last decade. For the first time in many years, we released reserves at year end and were able to pay a dividend to our holding company. This is an example that the funding needs for LTC can turn, particularly as interest rates move up. Overall, we wrap the year with a very strong capital picture. Looking forward, our outlook in the near term will be influenced by COVID trends, specifically the level of mortality, its demographics, and the rate and severity of COVID infections. We expect improvement in these trends over time, but it has proven difficult to forecast these trends and their impacts. Our focus remains the same, that is to ensure that we are taking the appropriate actions to rebuild profit margins and the overall level of earnings back to pre-pandemic levels. This will take several quarters, assuming diminishing COVID-related impacts over time. An important step in this process is to take the appropriate pricing actions with our new sales and renewals. That disciplined approach can have near-term implications for sales and persistency, but we have worked hard to be known in the market as a disciplined and consistent pricer when we work with our customers through these pricing actions. We experience that to some extent with fourth quarter sales in Unum U.S., particularly large case and mid-market sales in the group disability and lifelines, but we think it is the appropriate path to take. As we take these actions, we were pleased with the multiple business lines that showed very good sales trends, particularly Colonial Life, the Union of U.S. Voluntary Benefits and Individual Disability Benefits businesses, and our international segment. The breadth of our offerings allow us to manage through challenges in some lines as we look to overall growth. Looking ahead, we plan to connect with you later in February on the 25th to provide our outlook for the full year 2022. and give you insights into the strategic actions we're taking to deliver on our purpose, to protect more people, and position ourselves for good, profitable growth. To wrap up, I'm very pleased with our position as we move into 2022. It's a testimony to the strength of our franchise that despite the impacts from COVID the past two years, the primary measures of top line growth and capital strength have improved over the course of the year, providing us with optimism for growth and the underpinnings of a strong capital base. Now I'll ask Steve to cover the details of the fourth quarter results.