Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unum Group (UNM, Financial) achieved a return on equity (ROE) of over 20% in the first quarter.
- Premium growth exceeded 4%, supported by strong sales in voluntary benefits.
- The company ended the quarter with record levels of holding company liquidity at $2.2 billion and a high RBC position of 460%.
- Unum Group (UNM) successfully executed long-term care reinsurance transactions, removing 20% of the risk from this block.
- The company repurchased approximately $200 million in shares during the first quarter, indicating strong capital deployment.
Negative Points
- Earnings per share fell short of expectations at $2.04 due to a higher level of disability claims.
- The Group Disability benefit ratio increased to 61.8%, higher than the previous year's 57.5%, driven by elevated incidents.
- Unum International experienced a large decline in sales, particularly impacted by a lack of large case sales.
- Persistency in some product lines was lower than last year's high point, aligning more with historical levels.
- The Closed Block segment saw lower earnings due to reduced income from alternative assets, yielding only 5.1% compared to the long-term expectation of 8.10%.
Q & A Highlights
Q: Can you provide more details on the disability incidents observed during the quarter and whether the trend continued into April?
A: Steven Zabel, CFO, noted that there were elevated incidents in both short-term and long-term disability, particularly high in January. However, these rates normalized as the quarter progressed. While April data wasn't available, the expectation is for the benefit ratio to align more closely with internal projections for the remainder of the year. Recoveries were consistent with expectations, indicating a stable outlook moving forward.
Q: How do you view the economic sensitivity of disability claims, especially in relation to the broader economy?
A: Richard McKenney, CEO, explained that while there can be an increase in submitted claims during economic downturns, these do not necessarily translate into paid claims. Historically, long-term disability claims have not shown strong economic sensitivity, as they are designed to protect individuals unable to work due to specific conditions, rather than economic factors.
Q: What factors contribute to your confidence in achieving the 6% to 10% growth guidance for the year?
A: Richard McKenney, CEO, and Steven Zabel, CFO, highlighted several factors, including an anticipated improvement in the group disability loss ratio, expected higher alternative investment income, and a decrease in operating expenses as the year progresses. Additionally, organic growth and share repurchases are expected to contribute to earnings growth throughout the year.
Q: Can you elaborate on the impact of technology investments on persistency rates?
A: Christopher Pyne, EVP of Group Benefits, stated that technology investments, such as leave management and integration with HCM platforms, are expected to enhance persistency rates. While not all business segments currently utilize these technologies, there is a strategy to migrate more clients to these platforms, which should improve persistency over time.
Q: How are macroeconomic conditions affecting your international markets, particularly in Poland and the UK?
A: Mark Till, CEO of Unum International, noted that Poland's economy is strong, contributing to significant growth in that market. The UK market, while facing some economic challenges, continues to show positive long-term trends, with the government investing in growth and Unum providing solutions to employers facing challenges from the national health service.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
