Unum Group

Hello and welcome to the Unum Group 1Q 2023 Earnings Results and Conference Call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, please press star followed by one on your telephone keypad. I'll now hand over to Matt Royal, Head of Investor Relations. The floor is yours. Please go ahead.

Great. Thank you, Elliot. Good morning and welcome to the first quarter 2023 earnings call 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 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 31st, 2022. Our SEC filings can be found in the investor's 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 gap measures and reconciliations that may be non-GAAP financial measures included in today's presentation can be found in our statistical supplement on our website in the Investors section. Results discussed in today's call reflect the first quarter following the company's adoption of the Long Duration Targeted Improvements Accounting Pronouncement, or LDTI. Unless otherwise noted, all comparisons to historical results are based on recast financials, which we furnished in March of this year and can be found in the investor section of our website. As we've described, LDTI applies only to GAAP-based financial statements and has no economic, statutory accounting, or cash flow impacts to the business. Yesterday afternoon, Unum reported first quarter 2023 net income of $358.3 million or $1.80 per diluted common share, an increase from $240.4 million or $1.18 per diluted common share in the first quarter of 2022. Net income for the first quarter of 2023 included the after-tax amortization of the cost of reinsurance of $8.7 million or $0.04 per diluted common share, the after-tax impact of non-contemporaneous reinsurance of $5.7 million or $0.03 per diluted common share, and a net after-tax investment gain on the company's investment portfolio of $0.1 million or a diminished amount per diluted common share. Net income in the first quarter of 2022 included the after-tax amortization of the cost of reinsurance of $10.6 million or $0.05 per diluted common share, The after-tax impact of non-contemporary is reinsurance of $9.8 million or $0.05 per diluted common share. And the after-tax investment loss on the company's investment portfolio of $10.6 million or $0.05 per diluted common share. Excluding these items, after-tax adjusted operating income in the first quarter of 2023 was $372.6 million or $1.87 per diluted common share. an increase from $271.4 million, or $1.33 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 lines. Now I'll turn to Rick for his opening comments.

Great. Thank you, Matt. We are pleased to be with you this morning. As we look to the results of the first quarter, I would like to place that in the context of a company that continues on a positive trend, serving more than 180,000 employers and 45 million people across our markets. The environment remains uniquely positive for us on multiple fronts, as macroeconomic factors at play break favorably for our business. To highlight, higher interest rates, wage inflation, and a continuing tight labor market are all positives. Also, when we look to more current events around credit and balance sheet management, our credit portfolio has performed very well, and we have ample liquidity across our franchise, compounded by the illiquid nature of our policies. It's through that positive environmental lens that I'd point you to our first quarter results, which are a strong start to 2023. After-tax operating earnings for the quarter were $372.6 million, an increase of 37% from the same time last year. Double-digit sales growth across our core operations and earned premium growth near 4% on a constant currency basis highlights the ongoing momentum of our franchise. As a result, we are incorporating the first quarter results and expectations of continued good performance of our group disability business into our view for the full year 2023. This pushes our 2023 EPS growth expectations to be in the range of 20 to 25% over last year's historically reported results, and 10 to 15% over our recasted 2022 results under LDTI, which as a reference point was $6.75. Across our business, the need for what we do has never been more evident, and the breadth of our benefit offerings and the differentiation of our digital capabilities have positioned us well to continue our growth trajectory. A major part of our success story is our deep connections with employers and customers. Our nearly 11,000 employees are focused not only on providing a high-quality experience, but on building meaningful relationships with the individuals we help and the companies we serve. Our sales results for the quarter show that this approach continues to resonate with customers. Across our core operations, sales were up nearly 19% on a constant currency basis. Growth in our group lines was particularly strong, as Unum US saw a 22.5% jump, and our international business was up nearly 47% in constant currency. Persistency, while mixed, remained within our expectations across our lines, and along with our strong sales results, drove higher premiums. For UnumUS, a key driver of our long-term growth is our new total leave offering. This is a transformational update to our absence management business, which we have been in for the last two decades. We're also seeing healthy gains through HR Connect as the ability to deeply integrate our benefits into our clients' talent management systems, and it continues to be a differentiator for us. Internationally, our business fully supports our growth picture with some very strong results. Our businesses in the UK and Poland have delivered good top-line growth over the last several years, in fact, and as a result, premium levels are now more than 30% higher than the first quarter of 2019 on a constant currency basis, showing good, sustained top-line not only in this period, but over the last several years. And turning to Colonial Life, as articulated at our Outlook meeting earlier this year, the pace of growth has been slower for the segments. This is evidenced by relatively flat premiums in the first quarter. Sales growth was also a more modest 2.7% this quarter. But make no mistake, we think Colonial Life is a tremendous franchise. These are solid results off of a good year-ago quarter, and we're encouraged by some early successes and key initiatives at Colonial Life that we believe will drive growth as we move through 2023. As an example, we launched Gather. our new technology platform for small business, which provides opportunity for us as we look to enhance benefits enrollment and administration. We have also introduced an expanded portfolio available to our Colonial Life agents to offer a more comprehensive set of products to meet the needs of small business. Looking to the company-wide product returns, we continue to see attractive margins as our multi-year discipline around pricing has driven favorable benefit ratios across our businesses. On a consolidated basis, ROE was a healthy 13%, fueled by over 20% return in our core operations. Coupled with our strong top-line results that I referenced earlier, before-tax operating earnings and return on equity across our core operations were at or above the top end of our outlook ranges. And from a market perspective, while always an area for attention for us, the overall stress that we've seen across financial services has caused heightened awareness of management of balance sheets for both liquidity and asset quality. These are areas we have managed well, thanks to the prudent approach of our team and our focus on long-term returns. We have avoided exposure to sectors that have been in the news of late, which have allowed us to remain focused on improving our book yield and mitigate balance sheet risks through our ongoing hedging program, activities that enable us to generate predictable investment returns that our businesses and ultimately our customers count on. The results across the board have solidified our strong capital position that gives us ongoing financial flexibility. We have maintained capital metrics that are historically among our highest levels, and our performance in the first quarter provides additive strength as we have begun the process to accelerate funding of the premium deficiency reserve, which we will complete by the end of the year. While doing so, we will continue to reinvest heavily in our business, repurchase our shares at an increasing rate in the second half of the year, and contemplate an increase in our dividend in the coming weeks. I'm proud of what we've accomplished as we extend the momentum we've seen into 2023. Our purpose drives us to reach more people, a goal that is aided by our digital-first approach and favorable operating environment as we advance our market-leading positions. Before I turn it over to Steve to provide more details about our results, I would note that they are the first under LDTI, as Matt referenced. And I appreciate the effort of our team preparing us for this change. The results under this basis, as well as on a statutory basis, reflect the strong underlying fundamentals in our business. Steve? Great.