Unum Group

Hello everyone and welcome to the Union Group second quarter 2022 earnings conference call. My name is Daisy and I'll be coordinating today's call. You will have the opportunity to ask a question at the end of the presentation. If you would like to register a question, please press star followed by one on your telephone keypad. Please kindly only ask one question and one follow up to allow others the chance. I would now like to hand the call over to your host. Tom White, the Senior Vice President of Investor Relations at Unum Group to begin. So, Tom, please go ahead.

Great. Thank you, Daisy. Good morning, everyone, and welcome to the second quarter 2022 earnings call for Unum. For one last time, 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, and are 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. 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 2022 net income of $370.4 million or $1.83 per diluted common share, an increase from 182.9 million or 89 cents per diluted common share in the second quarter of 2021. Net income for the second quarter of 2022 included the after-tax amortization of the cost of reinsurance of $13.1 million, or 6 cents per diluted common share, and a net after-tax investment loss on the company's investment portfolio of $3.1 million, or 2 cents per diluted common share. Net income in the second quarter of 2021 included the after-tax costs related to the early retirement of debt of $53.2 million, 26 cents 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 that we are no longer using of $11 million or 5 cents per diluted common share. The net tax expense related to a UK tax rate increase of $24.2 million or 12 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 a net after-tax investment gain on the company's investment portfolio of $600,000 or $0.01 per diluted common share. So excluding these items, after-tax adjusted operating income in the second quarter of 2022 was $386.6 million or $1.91 per diluted common share, an increase from $286.2 million, or $1.39 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, and Tim Arnold, who heads our Colonial Life and Voluntary Benefits line. And now I'll turn the call to Rick for his opening comments.

Thank you, Tom, and good morning, everyone. The second quarter was an outstanding one for Unum, highlighted by accelerating growth in premium income, favorable benefits experience across many of our business lines, and strong capital levels that give us great flexibility to carry out our strategic initiatives and investing growth. Pulling it together, our after-tax adjusted operating income per share increased 37 percent from the year-ago quarter to $1.91 per diluted common share this quarter. the highest quarterly earning levels we have seen. Reflecting on the first half of the year, our earnings have been on an accelerated realization of our expectations coming into the year. We now expect our adjusted operating earnings growth rate to be in the 40 to 45 percent range, much better than expected in the beginning of the year, and also double the growth we expected coming out of the first quarter. Over the last several years, we have remained disciplined in how we price and been good stewards of our capital. With an engaged workforce, we weathered a challenging period in the external environment. The fortitude of our team, combined with consistency in our strategic focus, has allowed us to accelerate our growth path in 2022. This is an inflection point for our company, and as we unpack the results, you will see the multiple factors that enabled the recovery ahead of what we had envisioned coming into the year. To start, a return to higher profitability this quarter was driven by the lessening of COVID-related mortality across the U.S. population, which declined to approximately 35,000 lives in the second quarter compared to an estimated 155,000 lives in the first quarter. There is also a lower percentage impacting the age of the population that we cover. This improvement in mortality levels led to a significant increase in adjusted operating income in our Unum U.S. group life and AD&D business, which returned to pre-pandemic levels, following operating losses in five of the last six quarters. We are in a much better place today, but it bears watching and it has not gone away completely. In addition, the current business environment has proven to be beneficial to many aspects of our business. High employment levels and rising wages have continued to generate higher levels of what we term natural growth. That is the incremental premium we realize from rising payrolls at our insured customers, which is now running at almost 5%. This rate is nearly double that of the benefit we were realizing prior to the onset of the pandemic. With this tailwind, which primarily impacts our group lines, we realized year-over-year growth in premium income of 3.5% in our core business segments on a constant currency basis. This second quarter performance compares to growth of 1.9% in the first quarter, also measured on a year-over-year basis. In addition to this lift from favorable employment conditions, we were quite pleased with the level of new sales we recorded in the second quarter, with increases of 26% for Unum US, 6% for Colonial Life, and 20% for Unum UK on a local currency basis. In addition to favorable employment and wage growth, today's higher interest rates are also benefiting the company in multiple ways. New money yields continue to rise in the second quarter, and we are now seeing the yields on many of our investment portfolios that back our product lines begin to stabilize after many years of persistent declines. Also in the second quarter, we raised the discount rate for new long-term disability claimant curls for the first time in many years as a result of higher new money yields and healthy interest margins in that block. This change was a contributor to the strong financial performance for group disability this quarter and will be a modest mitigate to our pricing actions for LTD going forward. And finally, higher interest rates and the projection of continued higher interest rates are helpful to the long-term funding needs for the long-term care close block. In addition to the significant improvement we saw in our Unum-US group life business, benefits experience in several other lines also showed good improvement. Most notably is the improvement we saw in the Unum-US group disability line that had one of its lowest benefit ratio on record at 66.4% in the second quarter. This was due primarily to very favorable new claims incidents and claims recoveries, in addition to the benefit from the discount rate that I just referenced. Colonial Life also recorded one of its lowest benefit ratios at 47.6% this quarter, with favorable claim experience across all product lines. And finally, UNMUS supplemental and voluntary lines continue to bruise very strong levels of operating income as it has throughout the pandemic. It's worth noting that the UNM-US supplemental and voluntary lines and colonial life, two lines with strong margins, solid growth, and stable experience over long periods of time, continue to represent almost half of our before-tax adjusted operating income this quarter. These many positive operating trends that help drive our gap earnings improvement also help drive strong after-tax adjusted statutory income, which for the second quarter increased by almost 60% over the year-ago quarter. This further improved our cash flow and capital position as risk-based capital for the U.S. traditional insurance companies increased to approximately 415% at the end of the second quarter, Unum's highest ever. Holding company liquidity remains well above our targeted levels at $1.2 billion and leverage dropped below 25%. This capital strength gives us increased flexibility as we look to grow our high margin core businesses, return capital to shareholders through dividends and share repurchases, and fund the needs of the long-term care block. In summary, I'm very pleased with our performance in the second quarter and the flexibility it creates for us as we move forward. Risks from the pandemic are still very real, and there is growing concern over the direction of economic growth. However, I believe it's a testament to the strength of our business that we are in such a favorable position today from an earnings and capital perspective after navigating through the pandemic over the last two years. Now I'll ask Steve to cover the details of the second quarter results. Steve?