Unum Group

Hello and welcome to Unum Group first quarter 2022 earnings conference call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during a presentation, you may do so by pressing star followed by one on your telephone keypad. And I'd like to hand over to our host, Tom White, Senior Vice President of Investor Relations. Please go ahead.

Great. Thank you, Elliot. Good morning, everyone, and welcome to the first quarter 2022 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, 2021. 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, also in the investor section. So yesterday afternoon, Unum reported first quarter 2022 net income of $253.5 million, or $1.25 per diluted common share. an increase from the $153 million or $0.75 per diluted common share in the first quarter of 2021. Net income for the first quarter of 2022 included the after-tax amortization of the cost of reinsurance of $13.2 million or $0.06 per diluted common share and an after-tax investment loss on the company's investment portfolio of $10.6 million, or 5 cents per diluted common share. Net income in the first quarter of 2021 included the net after-tax loss from the second phase of the closed-block individual disability reinsurance transaction of $56.7 million, or 27 cents per diluted common share, Also, the after-tax amortization of the cost of reinsurance of $15.8 million, or 8 cents per diluted common share, and a net after-tax investment gain on the company's investment portfolio, excluding the net realized investment gain associated with the reinsurance transaction, of $13.5 million, or 6 cents per diluted common share. So excluding these items, after-tax adjusted operating income in the first quarter of 2022 was $277.3 million, or $1.36 per diluted common share, an increase from the $212 million, or $1.04 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, Chief Operating Officer Mike Simons, as well as Mark Till, who heads our Unum International business. Tim Arnold, the head of our Colonial Life and Voluntary Benefits business, is away with his family attending his son's graduation from law school this morning, which is a very exciting and proud moment for the Arnold family. So now I'll turn the call over to Rick for his opening comments.

Great. Thank you, Tom, and good morning, everyone. Yeah, we do appreciate you joining us this morning. And let me start by saying our first quarter results were an outstanding start to the year. We saw dramatic shifts in the environment throughout the quarter, which have been very favorable to our business. Since we've last talked to you, we have seen COVID mortality levels come down consistently. Of the estimated 153,000 COVID deaths in the US population in the first quarter, fewer than 30,000 were reported in March. And there was also a notable change in the demographic impacts by the Omicron variant relative to what we saw last year. Additionally, we have seen positive impacts from the current inflationary environment, seeing the 10-year Treasury move up nearly 140 basis points since the start of the year. These are welcome developments and helped our recovery accelerate faster than we anticipated. As a result, we saw first quarter after-tax operating earnings at $1.36 per share, which was up 31% over the previous year. There was broad-based solid performance on both the top and bottom line. And taking that into account, we now look to an expected operating EPS growth rate for the year of 15 to 20% up from the 4 to 7% previously expected. To set the broader context of how we stand in the current environment, the three elements most being discussed in the financial markets are all on a positive trend for us. First is how COVID has lessened and shifted its age demographic. It is not making the same headlines, but COVID-driven mortality is still one we need to monitor as our lifelines look to get back to pre-COVID claim levels. The second is the full employment and inflationary environment we're operating in. For employers, there is pressure to increase wages as they look to find workers in a very unique time. This creates top-line growth for us as these workers look to protect their higher levels of income. And third, our interest rates, which play very positively for our new investments backing our product lines, both in our ongoing core business lines and new cash flows coming into our closed block. Before getting further into the results, I do want to take a moment to reflect on how our purpose of helping the working world thrive throughout life's moments continues to guide all that we do. As the effects of COVID continue to lessen, our employees have stepped up in new ways. And I would like to highlight our colleagues in Poland who have shown uncommon resilience as they continue to demonstrate compassion, outreach, and support to the growing Ukrainian refugee crisis. The situation remains heartbreaking, but we take the utmost pride in our team's caring spirit in this time of need. So turning to our operating trends of the quarter, there are a few areas I'd like to highlight. First, we're pleased with the growth in premium income that is emerging in our core business segments. In the first quarter, we recorded 1.7% growth year-over-year in premium income from our core business segments combined. This compares to a growth of 1.2% for all of 2021. For the rest of 2022, we are anticipating growth to accelerate so that we are at just over 2% for the full year, and we are well on track to accomplish that. Adding to our confidence is a solid start to the year for new sales. with year-over-year increases of 7% in Unum US in total and 15% for Colonial Life as well as 55% for Unum UK and 35% for Unum Poland in their local currencies. Persistency levels were solid across the company and we are making good progress with our renewal plans as we look to continue to prudently implement targeted rate increases. Second, benefits experience was generally positive as we look at our benefit ratios for the first quarter compared to the fourth quarter of 2021. The Unum U.S. group disability line shows substantial improvement at 73.8% for the first quarter, as our claim recoveries in long-term disability were very strong, and short-term disability results improved sequentially. The Unum U.S. group life and AD&D line showed significant improvement as well, declining approximately 10 points from the prior quarter as the age demographics shifted, lessening the mortality impact for working-age individuals. And also related to that age shift, with COVID-related mortality impacting the elderly population more significantly this quarter, we saw the LTC, interest adjusted loss ratio, decline by 12 points to 70% in the first quarter. And finally, I'd highlight the improved benefits experience in colonial life, which generated its lowest benefit ratio in some time at 49% in the first quarter. A third operating trend I'd highlight is from the first quarter was on expenses. At our outlook meeting earlier this year, we indicated that we expected to see increased pressure on expenses this year as we managed through increased people costs, pandemic-related costs, and a normalizing environment. We still see this emerging later in the year. The reality is our teams have done an excellent job of managing through these pressures so far in 2022 as we have been working hard to fill open positions. Each of our core business segments reported an improved operating expense ratio in the first quarter compared to the fourth. We don't believe that these pressures have gone away as we will continue to invest in several major initiatives to connect with customers, to improve our efficiencies, and to catch up on staffing. But I am pleased with the discipline we have shown in managing expenses in this inflationary environment. In addition to these strong operating trends, the current business environment remains very favorable for us. Rising interest rates and widening corporate credit spread so far this year have been very beneficial in new money yields. In addition, it is particularly beneficial to the LTC line. To the extent rates remain at current levels, it would strengthen our ability to fully fund the premium deficiency reserve for long-term care ahead of the original schedule. Rising wages and strong levels of employment across the economy also provide a tailwind for us to top-line growth, as the natural growth created by these forces helps drive growth in the premium income for many of our business lines. And looking at our capital position, just as we showed strong gap earnings this quarter, our statutory results were also quite favorable, increasing by over $60 million on a year-over-year basis, $200 million for the first quarter of 2022. This helped drive the risk-based capital ratio for our traditional U.S.-based insurance companies to approximately 400%. Withholding company liquidity at approximately $1.3 billion, leverage at 25%, which is the lowest level we've seen since 2014, And with our contingent capital structure in place, we are in great shape with our capital position to execute the deployment priorities we outlined at our recent investor meeting, including the ability to fund the LTC premium deficiency reserve by the end of 2024, repurchasing $200 million of our shares annually, as well as increasing shareholder dividends, which we will discuss when our board meets later this month for our annual shareholders meetings. In summary, I am very pleased with our performance in the first quarter and the optimism it creates as we move forward. Now I'll ask Steve to cover the details of the first quarter results. Steve? Great.