Unum Group

Good morning. My name is Brianna and I will be your conference operator today. I'd like to welcome you to the Unum Group third quarter 2023 earnings results and conference call. Please note that this call is being recorded. All participants are in listen only mode at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. Thank you. I will now turn the call over to Matt Royal, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Brianna. Good morning, and welcome to the third 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 may differ materially from the results suggested by these forward-looking statements. Information concerning factors that could cause results to differ appears in our filing 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, 2022. Our SEC filings can be found in the Investors section of our website at unum.com. I remind you that the statements in today's call speak only as 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, including recast financials for the long-duration targeted improvements accounting pronouncement, can be found in our third quarter statistical supplement on our website in the investor section. Further, all references to or which include Unum International sales and premium results are presented on a constant currency basis. Yesterday afternoon, Unum reported third quarter 2023 net income of $202 million or $1.02 per diluted common share, a decrease from $510.3 million or $2.53 per diluted common share in the third quarter of 2022. Net income for the third quarter of 2023 included the after-tax amortization of the cost of reinsurance of 8.7 million or 4 cents per diluted common share, the after-tax impact of non-contemporaneous reinsurance of 7.3 million or 4 cents per diluted common share, a net after-tax investment loss on the company's investment portfolio of approximately 24.4 million or 13 cents per diluted common share, and a net after-tax reserve increase related to assumption updates of $139.3 million, or $0.71 per diluted common share. Net income for the third quarter of 2022 included the after-tax amortization of the cost of reinsurance of $9.3 million, or $0.04 per diluted common share, the after-tax impact of non-contemporaneous reinsurance of $1.4 million, or $0.01 per diluted common share, a net after-tax investment loss on the company's investment portfolio of 3.4 million, or 2 cents per diluted common share, and an after-tax net reserve decrease related to the assumption updates of 192.1 million, or 95 cents per diluted common share. Excluding these items, after-tax adjusted operating income in the third quarter of 2023 was 381.7 million, or $1.94 for diluted common share. an increase from $332.3 million, or $1.65 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 Tim Arnold, who heads our Colonial Life and Voluntary Benefit lines, and Mark Till, who heads our Unum International Business. Now I'll turn to Rick for his comments.

Thank you, Matt. It's good to be here with all of you this morning, and we appreciate you joining us. Three quarters of the way through 2023, our year has shaped up to be a good one, and we have a number of favorable trends that set up for a continuation of positivity. Specifically for our business, the macro picture remains favorable. A strong employment atmosphere, higher interest rates, and a benign credit environment are all positives. In this environment, it is also clear that our teams continue to execute against our plans to protect more people and deliver on our core business results. They are highlighted by exceptional core premium growth, strong sales levels, solid margins, and consistent performance from our investment portfolio, all resulting in record levels of capital. The third quarter was also a milestone quarter in that we expect the premium deficiency reserve has been fully funded with our current quarter contribution. As we said at our investor day, completing this in 2023 will mean that we don't expect contributions required to back our long-term care business for the next five years. With ongoing strong capital generation from statutory earnings, this provides a capital picture going forward that provides ample flexibility. It is with that confidence that we have increased our share repurchase authorization to $500 million for 2024. The third quarter was also our first reserve assumption update filed under long-duration target improvements. While net impacts are muted, especially given that we cannot incorporate the sharp increase in interest rates, this new accounting guidance introduces dynamics that will impact go-forward quarterly gap earnings, most notably in the closed block. We'll get into the GAAP assumption review further throughout our discussion, but the steps we have taken and continue to take to de-risk and strengthen the closed block have improved its position. And as we have reiterated, the GAAP accounting does not impact views on our capital and capital deployment plans. In addition, we expect around $3 billion in statutory reserves over our best estimate at year-end. As we look to the details of the third quarter for our business, we had another very strong quarter of performance. From the top line to the bottom line to capital generation, we continue to deliver on very strong trends of a growing customer base and profitability. Starting with the top line, in the third quarter, earned premium growth exceeded 6%. This is a level we have not seen in several years and included growth across all core operation products, from solid sales as well as generally stable persistency that remained within our expectations. We are pleased with the premium growth across the core segments, including 6.5% in Unum US, over 12% in international, and nearly 2% in Colonial Life. Colonial Life continues to see momentum building in sales and premium growth aided by success in agent recruiting and the positive customer reception we're seeing for our Gather platform. All in all, we expect to meet our Colonial Life premium target in 2023 and continue to be optimistic for higher growth rates in the future. Current and future premium growth is fueled by sales, which continue to grow on top of strong prior year results. Core operations sales grew nearly 2%, highlighted by 8.5% in UNMUS and close to 5% at Colonial Life. Underlying UK results were also good, absent very high sales comparable in the year-ago quarter. We are also pleased with the robust year-to-date levels of growth the UK business has brought to the franchise. The growth seen in our top line is amplified by the success we've seen in key technology initiatives, such as HR Connect and Total Leave, where we continue to differentiate, creating and maintaining deep connections with both existing and new employers and their employees. who value a high-quality digital experience backed up by the knowledge of our team and the AI tools we are equipping them with. Our success is also a result of the breadth of our team's strong execution, providing operational excellence and taking care of employees at time of need. Employers are putting increasing value on our service and offerings. Our discipline in pricing and customer engagement combined with our consistent execution translate to solid product returns as we continue to see attractive margins across our lines. Consolidated ROE was a very healthy 12.7%, and our before-tax operating earnings and return on equity in our core operations were well above the top end of our most recent outlook ranges. In total, after-tax operating earnings of $381.7 million increased 15% from the same time last year. Looking to our balance sheet, our investments continue to perform very well. We have de-risked our balance sheet, increased the credit quality profile of our portfolio, and are well positioned for future market cycles. In addition, we continue to build out our interest rate hedging program and sold a portion of our shorter duration bonds in the LTC portfolio, extending duration for cash flow matching purposes. The results across the board continue to support and strengthen our already robust capital position. With statutory earnings over $500 million, Our holding company liquidity ended at $1.2 billion, and our RBC was 470%, both at levels well north of our targets. The capital generation provides tremendous flexibility to pursue our strategy and continue to return capital to shareholders through dividends and share repurchase. The new board-authorized share repurchase program I mentioned supports our greatly accelerated capital deployment strategy heading into next year. Beginning in the first quarter of 2024, we expect to begin repurchasing shares at a rate that we have not seen in many years. The path we are on has us well positioned for earnings per share growth towards the upper end of our outlook and capital metrics well in excess of our targets. Underpinning strong financial results is in our purpose that drives us to protect more people, meeting the needs and exceeding the expectations of our customers. Our digital-first and disciplined approach is capitalizing on the favorable trends in the operating environment as we advance our market-leading positions. Our formula for creating shareholder value is straightforward. Grow our high-margin businesses at an accelerated pace, drive greater certainty around our close block, and effectively return capital to shareholders. We have made excellent progress on all three of these areas through the first nine months of 2023. Now let me turn it over to Steve for details of the quarter.