Unum Group · NYSE:UNM
Unum — Investor Day (February 2022)
31 slides from Unum's investor day presentation, Feb 25, 2022
Slide 1: 2022 Outlook Meeting
2022 Outlook Meeting February 25, 2022
Slide 2: Safe Harbor Statement
2 SAFE HARBOR STATEMENT Certain information in this presentation constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those not based on historical information, but rather relate to our outlook, future ope
Slide 3: Non-GAAP Financial Measures and LDTI
3 NON-GAAP FINANCIAL MEASURES We analyze our performance using non-GAAP financial measures which exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We believe the following non-GAAP financial
Slide 4: Agenda & Presenters
AGENDA & PRESENTERS 4 Opening Remarks & Corporate Overview Rick McKenney, Chief Executive Officer Drivers of Growth Mike Simonds, Chief Operating Officer Steve Zabel, Chief Financial Officer Special Topics Steve Zabel, Chief Financial Officer Financial Outlook & Closing Remarks Steve Zabel, Chief Fi
Slide 5: Opening Remarks and Corporate Overview
Opening Remarks and Corporate Overview Rick McKenney CHIEF EXECUTIVE OFFICER 5
Slide 6: Key Messages
• We have executed through the pandemic by fulfilling our corporate purpose and positioning the company for growth ⁃ Stable/Growing Premiums ⁃ Strong Capital Position ⁃ Digital Investments • Benefits business environment is improving with payrolls and wage inflation and protection needs understood •
Slide 7: Unum: A Benefits Leader for Today's Challenges
7 Broad range of financial protection products, including disability, life, cancer, critical illness, dental and vision Helping companies manage the complexities of benefits administration, leave management and productivity Helping the working world thrive throughout life’s momentsTM Unique proposit
Slide 8: Group & Voluntary Benefits Leader
GROUP & VOLUNTARY BENEFITS LEADER • Top market positions • Distribution breadth • Strong capital generation • Resiliency through the pandemic ¹ 12 months ending December 31, 2021 PREMIUM DISTRIBUTION¹ STRONG BUSINESS MODEL 8 10.5% Closed Block 28.4% Group Disability 19.0% Group Life & AD&D 16.7% Sup
Slide 9: Fulfilling Our Purpose Through the Pandemic
9 FUFILLING OUR PURPOSE THROUGH THE PANDEMIC ~40,000 ~49,000 2019 2021 ~500,000 ~700,000 2019 2021 ~400,000 ~600,000 2019 2021 Group Life Claims Disability Claims Leaves Administered
Slide 10: Our Purpose Guides Us: Environment, Social & Governance
10 Our purpose guides us ENVIRONMENT, SOCIAL & GOVERNANCE INCLUSIVE PRODUCTS & PRACTICES Ensuring that the financial security that our products and services provide contributes to more inclusive communities REDUCING ENVIRONMENTAL IMPACT Mitigating and adapting to how environmental issues, including
Slide 11: Where We Are Today
Despite the pandemic disruptions, Unum’s position is strong WHERE WE ARE TODAY 11 • A strong platform that we have invested in • Generated positive premium growth through the pandemic • Enhanced our capital position over the past two years • Continued to invest in our business – Leave Management and
Slide 12: Drivers of Growth
Drivers of Growth Mike Simonds CHIEF OPERATING OFFICER 12 Steve Zabel CHIEF FINANCIAL OFFICER
Slide 13: Key Messages — Financial Plan
13 • Over the course of our outlook horizon, we expect to: ⁃ Deliver top and bottom-line growth ⁃ Become a more efficient company ⁃ Consistently deploy capital to our shareholders ⁃ Fully recognize our PDR • We expect 2024 after-tax adjusted operating EPS to be 45-55% higher than 2021, with successf
Slide 14: Key Drivers of Growth
14 KEY DRIVERS OF GROWTH After-tax Adjusted Operating Earnings Per Share We anticipate an improvement in after-tax adjusted operating EPS of 45-55% over the next 3 years, with strategies in place to drive this growth 2021-2024 EPS1 Growth Contributions PRE-PANDEMIC PANDEMIC POST PANDEMIC $5.20 $5.44
Slide 15: Pandemic Normalization
15 GROUP LIFE AND AD&D BENEFIT RATIO2 REFLECTS • Declining COVID mortality (130k FY22 assumption) • Pricing actions GROUP DISABILITY BENEFIT RATIO3 REFLECTS • Declining COVID-related STD claims • Pricing actions • Improving residual LTD environmental impacts 79.2% 76.5% 76.1% 74.4% 73.1% 76.7% 70% 7
Slide 16: Pricing Strategy
• Core competence in pricing and renewals: aligned sales, underwriting, and actuarial • Strong results achieved for January 2022, with only modest pressure to persistency expected in future years given consistent delivery through pandemic PRICING STRATEGY 16 2018 2019 2020 2021 2022 2023 2024 2025 R
Slide 17: Revenue Growth Initiatives
• Core Operations premium growth averaged 5% annually from 2015-2019, slowing to 1.8% during pandemic • Targeted initiatives are expected to drive growth acceleration in all but large employer business, which is expected to build more slowly given price increases 17 0% 1% 2% 3% 4% 5% 6% 7% FY22 FY23
Slide 18: Targeted Initiatives for Premium Growth
18 TARGETED INITIATIVES FOR PREMIUM GROWTH VOLUNTARY BENEFITS • Distribution expansion & effectiveness • Engage Platform for on-boarding, enrollment and administration • Product refresh for consumer needs and tech platform fit INTERNATIONAL • UK broker service excellence & partner arrangements • Ext
Slide 19: Efficiency Initiatives
• 2022 expenses expected to remain pressured with operating expenses up 125-175bps driven by wage inflation, pandemic- related costs, and a normalizing environment • Active management expected to drive improvement in expenses post-2022 through the outlook horizon • Major initiatives include: ⁃ A dig
Slide 20: Investments Actions
Our portfolio has performed well through challenging times, and we are taking steps now to meet the needs of the future INVESTMENTS ACTIONS 20 POSITIONING FOR THE FUTURE • Updated asset allocation focused on generating higher returns for our long tail liabilities ⁃ Added high-quality long duration m
Slide 21: Capital Actions
• During 4Q-2021 we restarted our share repurchase program at approximately $50M per quarter and paired it with an equal amount of accelerated recognition of the LTC PDR • We expect to maintain $200M of buybacks per year over our outlook horizon, along with expected Fairwind LTC contributions betwee
Slide 22: Special Topics
Special Topics 22 Steve Zabel CHIEF FINANCIAL OFFICER
Slide 23: LTC Premium Deficiency Reserve
23 LTC PREMIUM DEFICIENCY RESERVE • In May of 2020, a resolution was reached with MBOI to recognize a PDR over seven years, to be fully funded by YE-2026; Initially established at $2.1B as of 12/31/2018 • Calculated PDR will change over time, based on several factors, including: ⁃ Assumed reinvestme
Slide 24: LDTI Overview
• LDTI will be implemented 1/1/23 with 1Q-23 the first reported quarter under the standard; 2021 and 2022 will also be recast under LDTI and be included in our 2023 filings • Today’s discussion, and our subsequent 10-K filing, will focus on LDTI adoption impact • Additional LDTI related disclosures
Slide 25: Transition Impacts
25 TRANSITION IMPACTS All changes to retained earnings at transition are a result of any cohorts of reserves when the net premium ratio exceeds 100%; All other impacts at transition result in a change to AOCI. TRANSITION REQUIREMENTS Impact to AOCI Impact to Retained Earnings Remove shadow DAC (FAS1
Slide 26: Credit Impact of LDTI
26 CREDIT IMPACT OF LDTI ~40% ~25% ~35% Components of impact at transition Current GAAP, before FAS115 INVESTMENT STRATEGY • Composition of our investment strategy differs from a broad single-A bond index, allowing us to outperform single-A • These higher yielding asset rates are now divorced from l
Slide 27: Financial Outlook & Closing Remarks
Financial Outlook & Closing Remarks Steve Zabel CHIEF FINANCIAL OFFICER 27 Rick McKenney CHIEF EXECUTIVE OFFICER
Slide 28: 2022-2024 Outlook
• 45% to 55% after-tax adjusted operating EPS growth through 2024 (2024 EPS range of $6.30 to $6.75) ⁃ 2022 after-tax adjusted operating EPS growth of 4-7%, reflecting continuing 1H impacts from COVID mortality and anticipated recovery in 2H • Strong level of capital return with anticipated dividend
Slide 29: Closing Comments
CLOSING COMMENTS 29 • We have executed well through the pandemic and are positioned for growth • Favorable environment for our business • Expect strong growth 2H-2022 through 2024 with solid (4-6%) growth thereafter • Balanced capital plans including share repurchase, dividends, and funding of the P
Slide 30: Q&A
Q&A FOR Q&A PARTICIPANTS Please ensure you’ve dialed in and placed yourself in the queue 30
Slide 31: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION ‘Year Ended December 31 2021 2020 2019 2018 Gunillions) _pershare* _(umilions) _pershare* _(umillions)__pershare™ _Gamillions)_pershare™ Net Income S$ §42 S$ 402 S$ 7930 $ 389 $ 1103 $ Sm $ SB4 S$ 238 Excluding ‘Net Investment Gains and Losses ‘Net Realized Investment Gain Re