Unum Group Q2 Earnings Call Highlights

Unum reaffirmed its full-year outlook for adjusted operating EPS of $8.60–$8.90 after second-quarter adjusted operating EPS rose 4.9% to $2.16. Core premium growth remained on track for the company’s 4%–7% target, while return on equity reached 15.9%. Strong results from Colonial Life, group life and AD&D offset pressure in disability operations. U.S. group disability benefit ratios rose to 65.8% because of elevated short-term disability and PFML claims, prompting double-digit pricing increases; U.K. income-protection results also weakened. Unum plans to close a fourth-quarter reinsurance transaction covering $3.8 billion of long-term-care reserves and remains on track to return about $1.3 billion to shareholders in 2026 . The company repurchased $200 million of stock and paid $275 million to shareholders during the quarter.

Unum Group NYSE: UNM reported second-quarter after-tax adjusted operating earnings per share of $2.16, up 4.9% from a year earlier, while year-to-date adjusted operating EPS rose 7.5%. The insurer reaffirmed its full-year adjusted operating EPS outlook of $8.60 to $8.90 despite pressure in paid family and medical leave business in the United States and group income protection in the United Kingdom. President and CEO Rick McKenney said the quarter reflected “continued attractive returns, generally stable persistency, and favorable performance across several of our core businesses.” He said underlying premium growth was roughly 5% after adjusting for the runoff of the stop-loss business and prior transactions, while U.S. sales under the Unum brand increased 7.4% in the quarter and 14% year to date.

Chief Financial Officer Steven Zabel said consolidated adjusted operating return on equity was 15.9% for the quarter and 16% year to date, within the company’s outlook range. Core earned premium grew 3.6% in the second quarter, or just over 5% after the specified adjustments. Unum said it expects to achieve its full-year core premium growth target of 4% to 7%.

Unum U.S. produced adjusted operating income of $329.6 million, compared with $318.2 million a year earlier. Earnings were helped by group life and accidental death and dismemberment, as well as supplemental and voluntary products, but were partially offset by higher benefit costs in group disability.

The group disability benefit ratio was 65.8%, above Unum’s 62% to 64% expectation. Zabel said elevated short-term disability claims represented about two percentage points of the benefit-ratio pressure, with paid family and medical leave, or PFML, accounting for an estimated 60% to 70% of that impact. The company said newer PFML states have experienced higher claims activity. Management said it has started implementing double-digit pricing increases for new business and renewals, noting that its initial PFML pricing generally does not include multiyear rate guarantees. McKenney said PFML remains strategically important because it is connected to Unum’s leave-management offering. About half of the Unum U.S. in-force block, excluding individual disability insurance, is tied to HR Connect, Total Leave or Broker Connect. Premium and fees associated with those capabilities have increased nearly 70% since the end of 2023, according to McKenney. Management expects group disability benefit ratios to remain elevated near recent-quarter levels until revised PFML rates are fully incorporated into the block. Still, Zabel said the company continues to view a 65% group disability benefit rat...