Unum Group

Hello everyone and welcome to the Unum Group third quarter 2022 earning results conference call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I'll now hand over to your host, Matt Royal, Senior Vice President of Investor Relations. Matt, please go ahead.

Thank you, Alex. Good morning and welcome, everyone. I'm excited to be hosting my first call where we will be discussing the third quarter 2022 earnings for Unum Group. Our remarks today will include forward-looking statements, which are statements that are not of current or historical fact. As a result, actual results may 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 31st, 2021, and our subsequent quarterly reports on Form 10-Q. Our SEC filings can be found in the Investors section of our website at www.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 GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation can be found in our statistical supplement on our website in the investor section. Yesterday afternoon, Unum reported third quarter 2022 net income of $410.7 million or $2.04 per diluted common share, an increase of $328.6 million or $1.60 per diluted common share in the third quarter of 2021. Net income for the third quarter of 2022 included the after-tax amortization of the cost of reinsurance of $12.1 million or $0.06 per diluted common share, a net after-tax investment loss on the company's investment portfolio of $3.4 million or $0.02 per diluted common share, and the reserve decrease related to reserve assumption updates of $122.5 million or $0.61 per diluted common share. Net income in the third quarter of 2021 included The after-tax impairment loss on internal use software of $9.6 million, or $0.05 per diluted common share. The after-tax amortization of the cost of reinsurance of $15.5 million, or $0.08 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 an after-tax net realized investment loss on the company's investment portfolio of $100,000, a de minimis impact on earnings per diluted common share. Excluding these items, after-tax adjusted operating income in the third quarter of 2022 was $303.7 million, or $1.51 per diluted common share, an increase from $210.5 million, or $1.03 per diluted common share, in the year-ago quarter. Also 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 lines. Now I'll turn to Rick for his opening comments.

Thank you, Matt, and good morning, everyone. We're happy to be with you today to share the results of the third quarter, as well as our positioning in the current environment. Our performance in the third quarter continued to build on the momentum of the first half of the year, with growth and operating earnings per share of 47% on a year-over-year basis. Starting with the top line, premiums in our core businesses grew at a rate just shy of 4% on a constant currency basis. Additionally, we continue to see very strong benefits experience, particularly in U.S. group disability and colonial life. The growing top line, solid margins and a better interest rate environment layer on top of already strong capital levels. This provides us the ability to invest in our growth and positions us to navigate the multiple macro scenarios that may emerge. As we look to close out 2022, there are many things that give me confidence in our franchise, and future growth prospects. When I reflect on our company's leadership in the employee benefits space, it is not a commentary on recent sales or even market share, though both are strong. It is more a statement that we are consistent in our purpose of serving employers and their employees. We have a deep understanding of the realities and dynamics of the workplace, whether it's managing leaves, comforting people through tragedy, or continued focus and progress returning someone to work, our teams and processes deliver for our customers. This requires ongoing investments in our people, capabilities, and operations, something we continue to build on over the past several years. With COVID shifting to a more endemic phase, we are poised to benefit from the advancements we've made to connect and serve our customers in new, leading, digital-first ways. Further, the current environment is very good for our franchise. Our position is benefiting from awareness, full employment, related wage inflation, and much higher interest rates. So let me unpack that for you. The pandemic brought an acute awareness of the financial fragility that many workers and their families face, reinforcing the need for the types of protections we provide and the importance of providing them through the employer. Changing workforce dynamics caused companies to rethink their overall employee value proposition, inclusive of benefits, as the competitive environment for talent continues. From a growth perspective, as you see in this quarter's results, our core businesses have rebounded nicely. Increasing employment levels and rising wages have continued to generate higher levels of what we call natural growth. That is our incremental premium we realized from rising payrolls at our insured customers. With this tailwind, which primarily impacts our group lines, we realized year-over-year growth in premium income of 3.9% in our core business segments on a constant currency basis. In addition, core business sales rose 14.1% on a constant currency basis, with growth across all segments. With regards to interest rates, we have prudently managed the company over many years of declining rates. Today's rising rates are a welcome change and benefit the company in multiple ways. New money yields continue to rise in the third quarter and are at levels that exceed portfolio rates that back our product lines. Higher interest rates also provide greater flexibility to manage interest rate risk. And as you may have seen in our earnings release, we took steps to lock in these benefits by entering into another series of Treasury interest rate locks this quarter. These actions reduce uncertainty in our LTC business by locking in some of today's rates for future cash flows. We will continue to actively explore ways to further reduce risk associated with our LTC block. At the same time, we have always had a watchful eye on our investment portfolio. The underlying credit quality of the portfolio is strong. and the investment team remains diligent in their analysis of our credits through the changing market dynamics. We view credit analysis and management as a core competency over many years and over many years and through many different credit cycles. We have consistently shown favorable default rates compared to industry averages. Turning to less environmentally driven dynamics, and certainly at the heart of what we do, we are very pleased with the benefits experience we have seen across the board. We think this showcases our expertise and continuous investments in our underwriting, pricing, claims processes, and technology. Specifically, performance in our U.S. group disability line was very strong for the second quarter in a row. It recorded one of the lowest benefit ratios on record, and for the second year in a row, we reduced reserves as favorable trends and recoveries repeated. In addition, the Unum U.S. supplementary and voluntary lines and Colonial Life had another quarter of strong margins and combined to represent over 50% of our core business pre-tax adjusted operating income. Although results moderated slightly from the highs we saw in the second quarter, both segments posted ROEs in the high teens. These many positive operating trends that help drive our gap earnings improvement also help drive strong statutory income. which for the third quarter doubled over the year-ago quarter, and on a run rate basis is back to our pre-pandemic level of close to $1 billion a year. This is a great achievement by our team and a reflection of our business model's resiliency. These operating results drove notably strong capital metrics. Risk-based capital for the U.S. traditional insurance companies remained at approximately 415% at the end of the third quarter, and our holding company liquidity of $1.1 billion remains well above our targeted levels, while we have also delevered to below 25%. This capital strength, along with our contingent capital sources, gives us ample flexibility as we look to grow our high-margin core businesses to fund the needs of our long-term care block and return capital to our shareholders through dividends and share repurchases. As we look to long-term care, we have committed over $1 billion to the premium deficiency reserve over the last several years. As you may recall, these contributions strengthen our long-term care reserves over and above our best estimate liability. At our outlook meeting in February, we provided sensitivities to help you better understand and approximate the impacts of interest rate movements on this PDR balance. It's important to note that the higher interest rates we're experiencing now worked their way into this calculation over a three-year look-back period. When you consider the recent sharp rise in rates and the capital contributions made, projections show positive moves in future funding needs if today's rates hold. To summarize, our highly profitable industry-leading core businesses are building momentum at a faster pace than we anticipated coming into the year. Coupled with a favorable operating environment, strong capital position, and prudent risk management, We are in position to advance on our leading market positions to continue delivering excellent customer service and fulfill our purpose of helping the working world thrive throughout life's moments. Now I'll ask Steve to cover the details of third quarter results. Steve?