Unum Group · NYSE:UNM
Unum — Investor Day (December 2015)
83 slides from Unum's investor day presentation, Dec 17, 2015
Slide 1: 2016 Outlook Meeting
2016 Outlook Meeting December 17, 2015 | New York Exhibit 99.1
Slide 2: Safe Harbor Statement and Non-GAAP Financial Measures
2 Safe Harbor Statement and Non-GAAP Financial Measures 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 r
Slide 3: Today's Participants
3 Mike Simonds President and Chief Executive Officer, Unum US Peter O’Donnell President and Chief Executive Officer, Unum UK Tim Arnold President and Chief Executive Officer, Colonial Life Today’s Participants Business Segment Presidents Jack McGarry President and Chief Executive Officer Rick McKenn
Slide 4: Agenda
4 Agenda Introduction State of the Business Financial Performance Unum US Unum UK Colonial Life Closed Block Investment Performance 2016 Outlook Closing Comments Questions and Answers Appendix
Slide 5: Introduction
Introduction
Slide 6: Who We Are
6 WHO WE ARE Introduction Leading Provider of Employee Benefits Serving Customers at Challenging Times Disciplined Operator with Consistent Performance Shareholder Friendly while Growing the Company On Track for 2015, Improving Outlook for 2016
Slide 7: Diversified Employee Benefits Provider
7 DIVERSIFIED EMPLOYEE BENEFITS PROVIDER Trailing Four Quarters Ended September 30, 2015 First Nine Months 2015 Distribution of Operating Earnings* Financial Snapshot Introduction * Before tax results excluding corporate segment.
Slide 8: Strong Market Positions
8 STRONG MARKET POSITIONS Introduction All market positions based on inforce premiums, 2014
Slide 9: We Protect People When They Need It Most
9 WE PROTECT PEOPLE WHEN THEY NEED IT MOST Introduction We protect 25 million policyholders and families We help 178,000 companies attract and retain employees Unum paid $6.7 billion in benefits last year We helped 230,000 individuals return to work
Slide 10: The Potential to Grow
10 THE POTENTIAL TO GROW 5.8 million US small businesses are significantly underpenetrated 40 million people in small businesses lack group disability insurance, primarily in the less than 100 lives market Participation in high deductible medical plans has increased by ~10 million people in the past
Slide 11: 2015 Continues Trend of Consistent Performance
11 2015 CONTINUES TREND OF CONSISTENT PERFORMANCE Financial Performance
Slide 12: 2015 Continues Trend of Consistent Performance
12 2015 CONTINUES TREND OF CONSISTENT PERFORMANCE Financial Performance * December 31, 2007 common shares outstanding, through September 30, 2015
Slide 13: Seasoned Management Team
13 SEASONED MANAGEMENT TEAM Introduction Represents those leaders in attendance at Investor Meeting
Slide 14: Closing Comments
14 Closing Comments With an Environment of Low interest rates Low wage inflation Weak economic growth LTC challenges We Have Accomplished 8.1% BVPS (Excluding AOCI) growth Stable RBC ratio at ~400% Average ROE of 11-12% Consistent cash flow generation $4.1 billion of capital returned to shareholders
Slide 15: Closing Comments
15 Closing Comments Good operating businesses Strong market positions Solid financial foundation Substantial leverage to rising interest rates Proven ability to manage through a challenging environment Franchise Positioned for the Future
Slide 16: An Outlook with Building Momentum
16 AN OUTLOOK WITH BUILDING MOMENTUM Introduction * Consolidated After-Tax Operating Earnings including Corporate Segment
Slide 17: State of the Business
State of the Business
Slide 18: Financial Performance
Financial Performance
Slide 19: 2015 Outlook Update
19 2015 OUTLOOK UPDATE Financial Performance We continue to expect 2015 full year operating earnings per share growth towards the lower end of our range of 2% to 5% (compared to $3.51 in 2014) 4Q2015 operating trends Sales and premium growth trends remain strong, with continued momentum Generally so
Slide 20: 2015 Continues Trend of Consistent Performance
20 2015 CONTINUES TREND OF CONSISTENT PERFORMANCE Financial Performance
Slide 21: Strong Return on Equity
21 STRONG RETURN ON EQUITY Financial Performance Average equity excludes negative allocation of corporate deficit and will therefore not add to 100%
Slide 22: Improving Growth Trends in Our Core Businesses in 2015
22 IMPROVING GROWTH TRENDS IN OUR CORE BUSINESSES IN 2015 Financial Performance * Total Core Business Segments Sales and premium growth are consistent with our normalized view
Slide 23: Steady, Favorable Benefits Experience
23 STEADY, FAVORABLE BENEFITS EXPERIENCE Financial Performance *Year-to-Date through September 30, 2015 † Excluding Reserve Adjustments
Slide 24: Strong Capital Generation
24 STRONG CAPITAL GENERATION Financial Performance * Statutory Net Income for traditional US Insurance Companies † Ending September 30, 2015
Slide 25: A Track Record of Consistent and Predictable Capital Deployment
25 A TRACK RECORD OF CONSISTENT AND PREDICTABLE CAPITAL DEPLOYMENT Financial Performance *Cumulative % of float based on December 31, 2007 common shares outstanding
Slide 26: Strong Capital Position
26 STRONG CAPITAL POSITION Financial Performance *Weighted average risk-based capital ratio for traditional US insurance companies.
Slide 27: Consistent, Steady Trends in Capital Management
27 CONSISTENT, STEADY TRENDS IN CAPITAL MANAGEMENT Financial Performance *Includes interest expense and common shareholder dividends
Slide 28: Incidence and Recovery Rates Support Best in Class Operating Margins
28 INCIDENCE AND RECOVERY RATES SUPPORT BEST IN CLASS OPERATING MARGINS Financial Performance Source: GenRe/JHA Profit Study/Unum submission to GenRe
Slide 29: Low Interest Rates Remain a Challenge
29 LOW INTEREST RATES REMAIN A CHALLENGE Financial Performance Pricing Flexibility Discount Rate Adjustments Manageable Investable Cash Flows Disciplined Asset Selection
Slide 30: Strong Interest Margins Against a Declining Reserve Base
30 STRONG INTEREST MARGINS AGAINST A DECLINING RESERVE BASE Financial Performance
Slide 31: Closing Comments
31 CLOSING COMMENTS Our 2015 operating trends have been consistent with our original expectations for the year Our focus on disciplined execution remains a primary driver of our results Premium growth is building momentum and will require additional capital for support Our core businesses continue t
Slide 32: Unum US
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Slide 33: Business Snapshot
33 BUSINESS SNAPSHOT Unum US Primary Products Group Long-term and Short-term Disability Group Life and AD&D Voluntary Benefits Individual Disability Benefits Top 5 market share position across all major product categories Market Characteristics Employers remain committed to offering an array of bene
Slide 34: Unique in Financial Protection Employee Benefits
34 UNIQUE IN FINANCIAL PROTECTION EMPLOYEE BENEFITS Excellent client service – 93% satisfaction Unmatched claims expertise – 2,500 benefits professionals Disciplined pricing and underwriting using largest, most diverse private data set Emerging leader in digital space Strong persistency – 90% YTD 20
Slide 35: Group Benefits: Changing Marketplace
35 GROUP BENEFITS: CHANGING MARKETPLACE Unum US Growth Drivers Growing need among consumers for financial protection Expanding voluntary protection markets Leveraged to economic expansion New digital channels emerging Pressures Interest rates remain low, necessitating continued price increases Marke
Slide 36: Group Benefits Marketplace
36 GROUP BENEFITS MARKETPLACE Unum US Source: Eastbridge
Slide 37: Protect Consumers. Broaden Client Relationships. Collaborative Partnerships
PROTECT CONSUMERS. BROADEN CLIENT RELATIONSHIPS COLLABORATIVE PARTNERSHIPS INCREASING CONSUMER GROWING OUR COLLABORATING TO PARTICIPATION IN RELATIONSHIPS WITH INCREASE CAPABILITY, VOLUNTARY PROGRAMS OUR EMPLOYER CLIENTS QUALITY AND EFFICIENCY Our commitment to risk discipline, the development of ou
Slide 38: Growth Through Consumer Focus
38 GROWTH THROUGH CONSUMER FOCUS Unum US Dedicated consumer marketing team with leadership from outside the industry Market tests leveraging behavioral economics yielded participation improvements of 7 points Increased use of technology to facilitate optimal counselor placement, auto- scheduling, ed
Slide 39: Growth by Engaging Clients
39 GROWTH BY ENGAGING CLIENTS Unum US We are investing in new technology, service models and products to improve the client experience and facilitate cross-selling
Slide 40: Strong Digital Partnerships
40 STRONG DIGITAL PARTNERSHIPS Market Trends Unum Position Compliance with ACA and greater complexity driving increased demand for HR technology o Cloud-based solutions enabling a move down market o Potential disrupters combining technology and benefits advice in an emerging digital channel Unum US
Slide 41: 2016 Business Outlook
41 2016 BUSINESS OUTLOOK Unum US Our strong overall results reaffirm the validity of our key strategies around consumers, clients, and collaborative partnerships We anticipate operating earnings growth of 1-3% Disciplined top line growth Consistent risk management Improving operational efficiency Su
Slide 42: 2016 Financial Outlook
42 2016 FINANCIAL OUTLOOK Unum US
Slide 43: Unum Group
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Slide 44: Business Snapshot
44 BUSINESS SNAPSHOT Unum UK Primary Products Group Income Protection Group Life Supplementary and Voluntary products: Group Critical Illness, Dental, Individual Income Protection (Closed) Market Share # 1 Group Income Protection # 4 Group Life # 3 Group Critical Illness # 2 Dental Market Scope Over
Slide 45: Strategic Overview
45 Enhance the Customer Experience STRATEGIC OVERVIEW Grow Income Protection Block Grow other Employee Benefits Products Expand into Adjacent Areas Simplify our Processes and Operations Develop Talent and Leadership Optimise Capital Efficiency under new Solvency II Regime To be working Britain’s fir
Slide 46: 2016 Key Priorities
46 2016 KEY PRIORITIES Grow the Income Protection Block - increase the number of ‘first-time buyers’ and broker relationships, broaden distribution capabilities (e.g. platforms), and continue to mitigate interest rate pressures through rate actions Grow other Employee Benefits Products - increase sh
Slide 47: Growth Momentum
47 GROWTH MOMENTUM Unum UK *Quarter-to-date
Slide 48: National Dental Plan Acquisition
48 NATIONAL DENTAL PLAN ACQUISITION NDP provides dental insurance to the employees of large and medium sized businesses in the UK and is one of only four dental providers of scale NDP offers indemnity dental insurance plans with the flexibility to use any dentist, anywhere NDP offers both strategic
Slide 49: 2016 Financial Outlook
49 2016 FINANCIAL OUTLOOK Unum UK
Slide 50: Colonial Life
Colonial Life
Slide 51: Business Snapshot
51 BUSINESS SNAPSHOT Colonial Life Primary Products Accident, Sickness and Disability Life (Term, Universal, Whole) Cancer and Critical Illness Market Share # 5 Voluntary Carrier with 6% market share Product Sales: o # 2 in STD and Cancer o # 3 in Accident o # 4 in Hospital Indemnity, UL and WL, and
Slide 52: 2016 Business Outlook
52 2016 BUSINESS OUTLOOK Colonial Life Our 2015 sales demonstrate the success of our strategic initiatives and investments in sales leadership, distribution effectiveness and sales support. Strong sales fundamentals through third quarter 2015: o New accounts up 10% o New account sales premium up 4%
Slide 53: Market Potential and Opportunities
53 MARKET POTENTIAL AND OPPORTUNITIES Colonial Life The total market opportunity within the US benefits market is estimated at $25-35 billion Increase employer penetration, especially below 100 lives Increase employee penetration in offered products Cross-sell additional products to employees Part-t
Slide 54: Strategic Overview
54 Talent STRATEGIC OVERVIEW Growth Customer Experience Productivity To protect 5 million people by 2020 Vision Colonial Life Grow and develop our distribution with a focus on strategic growth markets Provide simple, modern and personal benefits experiences Deliver new tools and capabilities that wi
Slide 55: Diversified Enrollment Technology Solutions
55 DIVERSIFIED ENROLLMENT TECHNOLOGY SOLUTIONS Scheduling Telephonic On-site counselors Click 2 Call Click 2 Chat Need a system? We have one! Already have a system? We speak your language! Colonial Life Virtual counselors On-demand counselor assignments and scheduling Live Enrollment Assistance Conn
Slide 56: 2015 Financial Outlook
56 2015 FINANCIAL OUTLOOK Colonial Life
Slide 57: Unum Group
ee @ UNUMGROUP
Slide 58: Business Snapshot
58 BUSINESS SNAPSHOT GAAP Net Reserves % Incurred Claim Reserves* Closed Block Legacy Discontinued Blocks Individual Disability (ID) Long-Term Care (LTC) Distribution ID Sales discontinued in mid-1990’s ILTC Sales discontinued in 2009 GLTC Sales discontinued in 2011 * 4 Quarters Ending 9/30/2015 LTC
Slide 59: LTC Inforce Premium and Risk Experience
59 Inforce Demographics Interest-Adjusted Loss Ratio LTC INFORCE PREMIUM AND RISK EXPERIENCE Total As of 6/30/2015 Closed Block ILTC GLTC In Force Premium ($,M) In Force Lives (K) 1,006 In Force Policies (K) 8.8 Avg. Attained Age Avg. Issue Age % Lifetime (only) 36.9% 4.9% 10% Avg. Premium ($) 1,955
Slide 60: LTC Block Characteristics
60 LTC BLOCK CHARACTERISTICS Closed Block Performance since 2014 Reserve Update Reserve Adequacy Studies complete, and we feel comfortable with our position Interest Rates – continue to be a pressure point, but 2015 in-line with assumptions o Interest rates assumed flat for five years, then gradual
Slide 61: 2016 Key Priorities
61 2016 KEY PRIORITIES LTC Rate Increases Continue to pursue justified rate increases Offer enhanced policyholder options Lead regulatory outreach program Operational Effectiveness High quality claims management Cost efficient customer service Effective communication and implementation of rate incre
Slide 62: 2015 Financial Outlook
62 2015 FINANCIAL OUTLOOK Closed Block
Slide 63: Investment Performance
Investment Performance
Slide 64: Asset Quality
64 Asset Quality Interest Rate Management Investment Performance
Slide 65: Invested Asset Quality
65 INVESTED ASSET QUALITY Investment Performance Investment grade bonds remain our core holding. Formerly 5.12% due to Lehman; Moody’s has subsequently removed it *Trailing 12 month default rates
Slide 66: Implications of Low Interest Rates
66 IMPLICATIONS OF LOW INTEREST RATES Investment Performance
Slide 67: Highly Rated Portfolio
67 HIGHLY RATED PORTFOLIO Investment Performance Source: SNL Financial
Slide 68: Analysis of Energy Exposure
68 ANALYSIS OF ENERGY EXPOSURE Investment Performance *Includes Contract Drillers Exposure as a percent of total fixed maturity securities at amortized cost
Slide 69: Managing Low Interest Rates
69 MANAGING LOW INTEREST RATES Pricing Flexibility Discount Rate Adjustments Manageable Investable Cash Flows Disciplined Asset Selection Investment Performance
Slide 70: Manageable Planned Cash Flows
70 MANAGEABLE PLANNED CASH FLOWS Investment Performance
Slide 71: Unum Group
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Slide 72: Key Messages
72 KEY MESSAGES 2016 Outlook Continued favorable premium growth trends, with strong persistency Expect generally stable benefits experience through disciplined pricing, risk selection and renewals Ongoing pressure on portfolio yields and net investment income from lower new money yields Expected tax
Slide 73: Factors Impacting Our 2016 Outlook
73 FACTORS IMPACTING OUR 2016 OUTLOOK 2016 Outlook
Slide 74: Capital Outlook
74 CAPITAL OUTLOOK 2016 Outlook
Slide 75: An Outlook with Building Momentum
75 AN OUTLOOK WITH BUILDING MOMENTUM Introduction * Consolidated After-Tax Operating Earnings including Corporate Segment
Slide 76: Closing Comments
Closing Comments
Slide 77: Closing Comments
77 Closing Comments Good operating businesses Strong market positions Solid financial foundation Substantial leverage to rising interest rates Proven ability to manage through a challenging environment Franchise Positioned for the Future
Slide 78: Questions and Answers
Questions and Answers
Slide 79: Appendix: Reconciliation of Non-GAAP Financial Measures
Appendix Reconciliation of Non-GAAP Financial Measures
Slide 80: Reconciliation of Non-GAAP Financial Measures
80 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Appendix Four Quarters Ended September 30, 2015 (in millions) After-tax Operating Earnings 896.1 $ Net Realized Investment Loss, Net of Tax (34.8) Non-operating Retirement-related Loss, Net of Tax (48.7) Long-term Care Reserve Increase, Net of Tax (45
Slide 81: Reconciliation of Non-GAAP Financial Measures
81 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Appendix Nine Months Ended September 30, 2015 (in millions) After-tax Operating Income 670.4 $ Net Realized Investment Loss, Net of Tax (23.6) Non-operating Retirement-related Loss, Net of Tax (5.8) Net Income 641.0 $ December 31 2015 2014 2014 Total
Slide 82: Reconciliation of Non-GAAP Financial Measures
82 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Appendix 2015 2014 2014 2013 2012 2011 2010 2009 2008 After-tax Operating Income 2.69 $ 2.61 $ 3.51 $ 3.28 $ 3.13 $ 2.98 $ 2.73 $ 2.64 $ 2.54 $ Net Realized Investment Gain (Loss), Net of Tax (0.10) 0.10 0.05 0.02 0.13 (0.01) 0.05 - (0.89) Non-operati
Slide 83: Reconciliation of Non-GAAP Financial Measures
83 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Appendix Four Quarters Ended September 30, 2015 (in millions) Operating Income (Loss) by Segment Unum US 845.3 $ Unum UK 141.8 Colonial Life 305.5 Closed Block 120.4 Corporate (114.6) Total Before Tax Operating Earnings 1,298.4 Net Realized Investment