Unum Group Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Core Business Focus: Emphasized a customer-centric approach with digital capabilities like HR Connect, Total Leave, Gather, and Help@Hand to enhance customer satisfaction and competitive advantage.
• 2024 Results: Earnings per share grew 10% in 2024, above initial expectations. Core operations had an ROE over 20%. Capital was deployed through dividend increases and share repurchases.
• 2025 Outlook: Expected core premiums to grow 4%-7%, EPS growth of 8%-12%, and share repurchases between $500 million and $1 billion. Strong capital levels were anticipated with risk-based capital in traditional subsidiaries between 425%-450%, holding company liquidity >$2 billion, and leverage capacity 21%-22%.
• Segment-Specific Initiatives: Unum US leveraged go-to-market expertise. Colonial Life supported independent sales force with tools. Unum UK redefined broker experience and expanded product set.

Segment Performance

• Unum US: Full year 2024 adjusted operating income was $1.4 billion, up 6.2% from 2023. Earned premium grew 4.6% to $6.9 billion. Disability benefit ratio was 59% for the full year and 60.4% in the fourth quarter. Group Life and AD&D had a benefit ratio of 66.3% for the full year and 66.7% in the fourth quarter.
• Unum International: Full year adjusted operating income was $157.8 million, relatively flat. UK premium growth was 9.4% and sales growth was 6.6%. Poland saw premiums increase 24.2% and sales grow 4.2%.
• Colonial Life: Full year sales were down, but premium grew 3.3%. Fourth quarter adjusted operating earnings were $122.7 million, and full year results were $466.7 million, up 16.6% from 2023, with a return on equity of 19.7%.
• Closed Block: Adjusted operating earnings were $137.8 million in 2024. The LTC net premium ratio ticked up to 94.6%. The alternative investment portfolio had an annualized yield of 9.1%.

Guidance

• Core premiums expected to grow in the range of 4% to 7% in 2025.
• Earnings per share growth expected to be 8% to 12% in 2025.
• Plan to repurchase between $500 million and $1 billion of shares in 2025.
• Risk-based capital in traditional subsidiaries expected to be between 425% and 450%, holding company liquidity to be greater than $2 billion, and leverage capacity between 21% and 22%.

Risks

• Volatility in LTC incidents post-pandemic.
• Competitive environment impacting pricing and market share.
• Potential tax effects on reserve releases in the LTC block.

Q: Tom Gallagher from EVR on group disability margin favorability A: Steven Zabel and Christopher Pyne discussed claims recovery, with incidents returning to near pre-pandemic levels and improved recovery trends driving favorable margins. Christopher Pyne also mentioned the competitive environment but emphasized the value of the overall package over price alone Q: Thomas Gallagher on long-term care risk transfer A: Richard McKenney stated that risk transfer for LTC is approached in tranches, with focus on structuring the block piece by piece and being active in the market, though transactions are complex Q: Elyse Greenspan on voluntary benefits weakness A: Steven Zabel explained that voluntary benefits had volatility due to different products, but earnings power was expected to stabilize around $120 million per quarter Q: Wesley Carmichael on U.S. group sales and long-term care rate increases A: Christopher Pyne talked about strong sales in higher market segments tied to capabilities. Steven Zabel discussed progress on LTC rate increases, with over 50% completed, and pace expected to continue over 3-5 years Q: John Barnidge on market dynamics and leave management capabilities A: Richard McKenney and Steven Zabel highlighted investment in leave management capabilities as a competitive moat, with integration into employer ecosystems, and financial commitment to such technologies Q: Ryan Krueger on Unum US premium growth and Colonial Life turnaround A: Steven Zabel noted no specific issues in Unum US premium growth, and Tim Arnold discussed Colonial Life's 2025 outlook with growth in Gather platform sales, agent productivity tools, and new sales leadership Q: Suneet Kamath on LTC risk transfer bundling and capital for growth A: Richard McKenney said LTC risk transfer is approached in tranches, and capital for growth is prioritized for organic investment in the core business Q: Joshua Shanker on disability margin pricing A: Richard McKenney and Christopher Pyne discussed that pricing is flexible with the bundle of solutions and products, relying on claims organization performance and reasonable pricing for continued growth Q: Mark Hughes on LTC risk transfer optionality A: Richard McKenney stated that LTC risk transfer is approached piece by piece, aiming for full offloading but realistic about tranched structuring Q: Francis Matten on Closed Block outlook and capital generation A: Steven Zabel explained that Closed Block incidents were expected to moderate, and capital generation was driven by growth in international and U.S. insurance subsidiaries' margins Q: Jamminder Bhullar on LTC reserve monitoring and share buyback guidance A: Steven Zabel mentioned monitoring LTC block earnings, net premium ratio, hedging program, and premium rate program progress. Richard McKenney discussed share buyback flexibility based on capital deployment needs like M&A Q: Michael Ward on voluntary benefits claims and group disability recoveries A: Steven Zabel discussed voluntary benefits claims volatility as temporary and recoveries as a key driver of improved group disability loss ratios