Unum Group · NYSE:UNM
Unum — Investor Day (February 2023)
77 slides from Unum's investor day presentation, Feb 22, 2023
Slide 1: 2023 Outlook Meeting
2023 Outlook Meeting February 23, 2023
Slide 2: Safe Harbor Statement
2 SAFE HARBOR STATEMENT Certain information in this news release 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
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 and Presenters
4 AGENDA AND PRESENTERS Opening Remarks & Company Overview Rick McKenney, President & Chief Executive Officer Growth Strategy Mike Simonds, EVP, Chief Operating Officer Chris Pyne, EVP, Group Benefits Polly Nicholas, SVP, Unum Services Tim Arnold, EVP, Voluntary Benefits & President, Colonial Life M
Slide 5: Opening Remarks and Company Overview
Opening Remarks and Company Overview Rick McKenney CHIEF EXECUTIVE OFFICER 5
Slide 6: Key Messages
KEY MESSAGES 6 • Purpose-driven employee benefits franchise with leading market positions established through multiple cycles • Emerged from pandemic stronger and better positioned to grow our leading market positions – Year-over-year earnings per share (EPS)1 growth of 43% – Accelerated return to l
Slide 7: Financial Information
FINANCIAL INFORMATION After-tax Adjusted Operating Earnings $1,254 million Total Revenue $12 billion Operating Return on Equity (ROE) 11.6% Book Value per Share (excluding AOCI) $60.45 PREMIUM DISTRIBUTION Group Disability 30% Closed Block 10% Group Life and AD&D 19% Supplemental & Voluntary 16% Col
Slide 8: Unum: A Diversified Employee Benefits Leader
8 UNUM: A DIVERSIFIED EMPLOYEE BENEFITS LEADER Helping the working world thrive throughout life’s momentsTM Paid nearly $8 billion in benefits in 2022 Protecting 45 million workers and their families Serving 181,000 companies as they attract, protect and retain employees Helped more than 348,000 ind
Slide 9: The Market Need
9 THE MARKET NEED workers will be disabled live paycheck to paycheck covered by high deductible 1 in 1063% 1 in 4 30% on family leave at any given time
Slide 10: The Workforce Remains a Powerful Distribution Channel
THE WORKFORCE REMAINS A POWERFUL DISTRIBUTION CHANNEL Our unique position of distributing products and services through the employer continues to be a differentiator 10 • Attract and retain talent • Workforce management • Economies of scale • Digital connectivity through HRIS platforms • Risk poolin
Slide 11: Doing the Right Thing the Right Way
11 DOING THE RIGHT THING THE RIGHT WAY Our purpose guides all that we do, supported by efforts in environmental, social and governance and recognized externally for our strong culture ENVIRONMENTAL Mitigating and adapting to how environmental matters, including climate change, will affect us and our
Slide 12: Market Leadership
12 MARKET LEADERSHIP US Voluntary Benefits (Unum and Colonial Life) US Life (Unum and Colonial Life) 1 1 2 4 INDUSTRY EVOLUTION • Group benefits consolidation over the last five years • Growing competitor investments in Voluntary Benefits • Solutions and services playing a more important role • Incr
Slide 13: Resilient Business Model
$6.31B $6.54B $6.87B $7.19B $7.47B $7.91B $8.33B $8.38B $8.49B $8.68B 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $32.25 $33.12 $35.90 $39.24 $42.45 $43.98 $48.92 $51.54 $54.63 $60.45 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Book Value per Share (excluding AOCI) Core Operations Premiu
Slide 14: Capital Strength
14 CAPITAL STRENGTH • 420% RBC • $1.6B holding company cash • Leverage 23.7% • Repurchased $200M of shares • Dividend increased 10%; paid $255M Emerged from 2022 with record strength • Maintain ample capital flexibility for executing on growth priorities • Increase common stock dividend • Increase r
Slide 15: Our Goals & Aspirations
15 OUR GOALS & ASPIRATIONS We will focus on key actions to drive our strategy and deliver market leading returns for our shareholders. Exceed market growth rates for our core operations, leveraging our competitive advantages, bolstered by key capabilities Continue existing dividend approach, with an
Slide 16: Growth Strategy
Growth Strategy Mike Simonds CHIEF OPERATING OFFICER 16
Slide 17: Key Messages for Core Operations
17 KEY MESSAGES FOR CORE OPERATIONS • Our markets are largely under-penetrated with strong demand for our products and services • Rapidly expanding HR technology and Unum's investment in innovation is enabling greater reach across and within employer groups • Our strategy is focused on growth, under
Slide 18: Growing Demand for Benefits
18 GROWING DEMAND FOR BENEFITS TOTAL MARKET PENETRATION 46% 41% 35% 54% 71% 61% 56% 67% 80% 77% 66% 61% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Group Life STD LTD Dental GROUP BENEFITS 32% 28% 27% 53% 50% 45% 62% 61% 57% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Accident Hospital Indemnity Critical Illn
Slide 19: Employers Rapidly Adopting Cloud HR Technology
19 EMPLOYERS RAPIDLY ADOPTING CLOUD HR TECHNOLOGY HR PLATFORMS (Employer-Centric) LEADING BENEFIT PLATFORMS (Broker-Centric) 30% YoY growth of leading providers 20,000 Small Business Customers added in 2022 Larger Employers Larger Employers Larger Employers Smaller Employers Smaller Employers Smalle
Slide 20: How We Will Win Across Our Businesses
20 HOW WE WILL WIN ACROSS OUR BUSINESSES Best and most productive sales force Best absence experience for employers and employees Differentiated broker experience Market-leading products and value add proposition Best bundled admin experience for employers US EMPLOYEE BENEFITS INTERNATIONAL
Slide 21: Investing in Talent and Capabilities
INVESTING IN TALENT 21 BUILDING INNOVATION COMPETENCE INVESTING IN CAPABILITIES Growing our tech and change teams... ...and setting up for success • 85% of Unum employees agree that the company provides them with opportunities for L&D, top 10% of all companies • 84% of employees say their jobs make
Slide 22: Disability Risk Management
22 DISABILITY RISK MANAGEMENT Disability Market Share Unum + Colonial Life 19% #2 14% #3 12% #4 11% #5 10% Unum UK 32% #2 21% #3 16% #4 11% #5 10% US LTD PAID INCIDENCE & RECOVERIES Indexed to 2018 2018 2019 2020 2021 2022 2023 Outlook ⏺ Recoveries ⏹ Paid Incidence US GROUP DISABILITY Benefit Ratio1
Slide 23: Efficiency Initiatives
EFFICIENCY INITIATIVES INVESTMENTS WILL YIELD EFFICIENCY IMPROVEMENTS Adjusted Operating Expense Ratio1 Investments in people and technology • Wage increases to keep pace with market • Staffing ahead of strong growth • Expansion of Solutions business 2018 2019 2020 2021 2022 2023 2024 2025 2026 MAJO
Slide 24: Core Businesses Key Drivers of Growth
24 Core Businesses KEY DRIVERS OF GROWTH • Market dynamics and innovation accelerating top line • Predictable loss ratios • Improving efficiency • Strong and experienced leadership team 2019 2020 2021 2022 2023 Outlook ROE OUTLOOK 17-19% 2019 2020 2021 2022 2023 Outlook SALES OUTLOOK 8-12% growth 20
Slide 25: Unum US Strategy
Unum US Strategy Chris Pyne GROUP BENEFITS Polly Nicholas UNUM SERVICES 25
Slide 26: Business Snapshot: Unum US
26 BUSINESS SNAPSHOT Over 60,000 employers and 38 million policies in-force Group Benefits 1 Absence Management & FMLA Services Individual Disability Benefits 2 Group Long-Term and Short-Term Disability 6 Life Voluntary Benefits 7 Total Supplemental Health 11 Dental Providing Value for our Customers
Slide 27: How We Go to Market
27 HOW WE GO TO MARKET HOW WE WIN Small Employers (Under 100 employees) Mid Market Employers (100 to 2,000 employees) Large Employers (2,000+ employees) • 75 Small Business Sales Consultants • Digital-first bundled products enabled by broker or HR focused technology • 175 Market based Sales Consulta
Slide 28: Investing in the Future: Unum US
Best and most productive SALES FORCE 28 INVESTING IN THE FUTURE: UNUM US • Enhance benefits packages to attract and retain talent • Technology associated with administering benefits has become critical • MyUnum coordinated enrollment, billing and administration for Dental & Vision, Group and Supplem
Slide 29: Delivering a Unique Advantage Outpacing the Competition
29 Delivering a unique advantage that is outpacing the competition Our technology strategy enables greater reach and more efficient service models • Data Exchange • Enrollment • Eligibility • Billing • Evidence of Insurability • Leave Leave Landscape Employee Expectations • FMLA • State-Paid Leave •
Slide 30: Unum US Key Drivers of Growth
2019 2020 2021 2022 2023 Outlook SALES OUTLOOK 8-12% growth 2019 2020 2021 2022 2023 Outlook PREMIUM OUTLOOK 4-6% growth 2019 2020 2021 2022 2023 Outlook ROE OUTLOOK 16-18% 2019 2020 2021 2022 2023 Outlook 6-9% growth ADJUSTED OPERATING INCOME OUTLOOK Unum US KEY DRIVERS OF GROWTH 30 • Earnings demo
Slide 31: Colonial Life and Unum Voluntary Benefits Strategy
Colonial Life and Unum Voluntary Benefits Strategy Tim Arnold COLONIAL LIFE AND VOLUNTARY BENEFITS 31
Slide 32: Business Snapshot: Colonial Life
32 Over 95,000 clients served and 4.5 million policies in-force Providing Value for our Customers FOR EMPLOYEES • Benefits education • Protecting finances • Promoting wellness • Proactive claims payment FOR EMPLOYERS • Core enrollment • Personalized benefits counseling • Value of benefits • Digital
Slide 33: How We Go to Market
33 HOW WE GO TO MARKET HOW WE WIN Colonial Life Unum Voluntary Benefits Synergies across Brands • Comprehensive suite of relevant products and services • Accelerating investment in tools to support agents, clients and policyholders • Improving the overall customer experience • Leverage HR Connect •
Slide 34: Investing in the Future: Colonial Life
34 INVESTING IN THE FUTURE: COLONIAL LIFE • Gathr – Modern Enrollment Experience – Benefits Administration System – Payroll – HCM • Data Connectivity • Agent Assist – Lead Generation – CRM – Agent Productivity • Gathr • Cross-Brand Sales Product investments driving $250M+ of incremental value over 3
Slide 35: Colonial Life Key Drivers of Growth
35 2019 2020 2021 2022 2023 Outlook SALES OUTLOOK 8-12% growth 2019 2020 2021 2022 2023 Outlook PREMIUM OUTLOOK 1-3% growth 2019 2020 2021 2022 2023 Outlook 24-27% growth 2019 2020 2021 2022 2023 Outlook ROE OUTLOOK 20-22% ADJUSTED OPERATING INCOME OUTLOOK Colonial Life KEY DRIVERS OF GROWTH • Recor
Slide 36: Unum International Strategy
Unum International Strategy Mark Till UNUM INTERNATIONAL 36
Slide 37: Business Snapshot: Unum International
BUSINESS SNAPSHOT UNUM UK 1 Group Income Protection 2 Dental 3 Group Critical Illness 7 Group Life UNUM POLAND Premier player in Individual and Group markets Over 19,000 employers and 2.5 million people insured Group Long- term Disability 52.4% Group Life 19.2% Supplemental 15.9% Poland 12.5% Provid
Slide 38: How We Go to Market
38 HOW WE GO TO MARKET • Strongly intermediated UK market (sales, admin and claim). Distribution through large-scale 'Employee Benefit Consultancies' (EBC’s), mid-size brokers and extensive network of small IFA's • Poland – Group risk business distribution through brokers and (newly created) direct
Slide 39: Investing in the Future: Unum UK & Unum Poland
39 INVESTING IN THE FUTURE: UNUM UK & UNUM POLAND • Building new strategic broker relationships in the mid-market • Strengthening relationship management model • Investment in CRM tools • Market leading integrated value-added services - Help@Hand 360 • Improved employer and employee engagement • Bro
Slide 40: Unum International Key Drivers of Growth
40 • 2022 earnings at highest level in 10 years, driven by top-line growth and UK inflation tailwind1 • UK 2023 top-line growth driven by strategic investments to improve broker experience and customer engagement • Poland sales and premium growth driven by group business • UK Inflation tailwind expe
Slide 41: Key Takeaways
Key Takeaways Mike Simonds CHIEF OPERATING OFFICER 41
Slide 42: Deliver Products and Services
42 DELIVER PRODUCTS AND SERVICES That help the working world thrive throughout life’s moments OUR CURRENT FOCUS Market-leading growth and returns in our core business • Disability & Absence Management • Life • Supplemental Health • Dental & Vision INVESTING IN THE FUTURE Building expanded competenci
Slide 43: Key Messages for Core Operations
43 KEY MESSAGES FOR CORE OPERATIONS • Sustained demand for our products and services at the workplace • Technology enabling greater reach and more efficient service models • Market-leading positions with strong track record of value creation for clients • Advantaged business model through business c
Slide 44: Q&A
Q&A Rick, Mike, Chris, Polly, Tim, Mark 44
Slide 45: Intermission
Intermission Pe UNUMGROUP 45
Slide 46: Investments
Investments 46 Martha Leiper CHIEF INVESTMENT OFFICER
Slide 47: Key Messages
47 KEY MESSAGES Our resilient investment portfolio, constructed to support our liabilities, is aided by our ability to be selective and hold through cycles • Higher rates contributing to an improved book yield • Portfolio size allowing us to be selective and pursue relative value opportunities • Exe
Slide 48: Portfolio Snapshot
48 PORTFOLIO SNAPSHOT Constructed to support our liabilities Investment Approach ASSET ALLOCATION1 Recent Highlights Corporates 54% Private Placements 14% Municipals 9% High Yield 5% Gov’t 3% Mortage Backed Securities 2% Commerical Mortgage Loans 6% Alternatives 3% Cash 4% 1Portfolio Information as
Slide 49: Well-Diversified Fixed-Maturity Portfolio Specialized in BBB
49 WELL-DIVERSIFIED FIXED-MATURITY PORTFOLIO SPECIALIZED IN BBB • Concentration in corporate credit aligns with core competency • Underweight to more cyclical industries • High yield exposure at historically low level • Watch-list low, with no credits as high default risk • 91% of BBB- holdings have
Slide 50: Opportunities in Other Asset Classes
50 OPPORTUNITIES IN OTHER ASSET CLASSES 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2017 2018 2019 2020 2021 2022 Alternatives & High Yield Alternatives High Yield • High yield has declined over time due to active management, call activity and ratings upgrades • Alternative assets increasing to match liabi
Slide 51: Credit Outlook: Demonstrated Track-Record
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Moody’s 0.16 2.21 2.75 0.34 0.40 0.40 0.25 0.39 0.79 0.74 0.32 0.34 0.60 1.00 0.10 0.20 Unum - 0.45 0.64 0.02 0.05 0.05 - - 0.12 0.10 - - 0.42 0.25 0.03 0.11 (% ) 51 CREDIT OUTLOOK: DEMONSTRATED TRACK-RECORD Portfolio co
Slide 52: Credit Outlook: Tool Set to Calibrate and Monitor Trends
CREDIT OUTLOOK: TOOL SET TO CALIBRATE AND MONITOR TRENDS 52 • Fewer IG downgrades (to HY) despite heavy BBB exposure • Credit lists monitor changes in credit trends • We expect net neutral upgrades/downgrades in 2023 Tracking changes in credit quality Performance: Unum vs. Moody’s Downgrade Benchmar
Slide 53: Closed Block Strategy
Closed Block Strategy Steve Mitchell CLOSED BLOCK 53
Slide 54: Key Messages
54 KEY MESSAGES Focused strategy on reducing the footprint and capital demands of the closed block • Actively managing the capital demands through multiple actions • Ongoing rate increase program and active risk management provide meaningful value levers • Market for inorganic transaction continues
Slide 55: Closed Block Overview
55 CLOSED BLOCK OVERVIEW Closed Long Term Care (LTC) Block • Announced discontinuation of ILTC sales in 2009 & GLTC in 2011 • Largely group plans • 98% of policies are indemnity based LTC Block: Active Lives 14% 52% 34% Group: Employer- Paid Group: Employee- Paid Individual Net GAAP Reserves1,2 % In
Slide 56: Progress Obtaining LTC Rate Increase Approvals
56 We continue to make meaningful progress, working with regulators, to obtain approval for LTC rate increases 0.5 0.7 2.5 3.8 4.2 4.2 0.5 1.1 2.4 3.4 4.0 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 2008 2010 2012 2014 2016 2018 2020 2022/2023 B ill io n s To date, have achieved a total net pr
Slide 57: Enabling Risk Management through Changes in LTC Claim Process
57 Enabling Risk Management through changes in LTC claim process Enhanced data and technology to manage risk, optimize care, and drive efficient claim management ON CLAIM Wellness interventions aimed at longer term impact: disease prevention, healthy living Targeted interventions to help prevent mor
Slide 58: Recent IDI Transaction Shows Market for Risk Transfer
58 Recent IDI transaction shows a willingness, a capability, and a market for risk transfer IDI CLOSED BLOCK REINSURANCE TRANSACTION HISTORY The transaction with Global Atlantic, which was finalized in early 2021, covered roughly 85% of the risk within the IDI Closed Disability Block (CDB) • Have co
Slide 59: LTC Investment Strategy and Hedging Program
59 Our LTC investment strategy allows us to capitalize on alternative investments and market conditions to manage interest rate risk We’ve taken measured steps to advance our hedging program during 2022 and early 2023, with plans for continued expansion • Hedging actions to-date represent approximat
Slide 60: Strong Capital and Statutory Reserve Positions Behind LTC
60 Strong capital and statutory reserve positions behind LTC provide meaningful flexibility and protection As of December 31, 2022, we have recognized $1.2B of PDR balance As of December 31, 2022, total statutory reserves exceed GAAP reserves by nearly 20%2 30-Year Treasury Yield1 (assume rates held
Slide 61: Financial Performance
Financial Performance Steve Zabel CHIEF FINANCIAL OFFICER 61
Slide 62: Key Messages: Financial Outlook and Capital Plan
62 KEY MESSAGES FINANCIAL OUTLOOK Strong business fundamentals experienced in 2022 are expected to continue in 2023, driving earnings growth, capital generation, and ability to expand capital return and fully recognize PDR by year-end. CAPITAL PLAN • Core operations premium growth back in long-term
Slide 63: Outlook
Outlook Pe UNUMGROUP 63
Slide 64: Outlook and Long-Term Expectations
64 OUTLOOK AND LONG-TERM EXPECTATIONS 2020 OUTLOOK 2023 OUTLOOK LONG-TERM EXPECTATION Core Operations Premium 4-6% 3-5% 4-7% Consolidated After-tax Adjusted Operating Earnings1 0-2% 6-9% 4-7% Adj. Operating Earnings Per Share1 4-7% 8-12% 8-10% 12023 outlook represents growth rate over historically r
Slide 65: Considering LDTI
65 CONSIDERING LDTI MAJOR LDTI OUTLOOK CONSIDERATIONS BY LINE DAC Amortization Impact Benefit Ratio Impact Net Earnings Impact Voluntary Products (Colonial Life & Unum US) • Reserve margin runoff • Longer DAC amortization period • Buffered claims volatility Long-term Care • No DAC or margin in LTC b
Slide 66: 2023 Segment Outlooks
66 2023 SEGMENT OUTLOOKS Benefit Ratios Unum US Group Disability 64-67% Group Life and AD&D 73-76% Individual Disability 48-52% Voluntary Benefits 40-43% Dental & Vision 70-73% Unum International 71-74% Colonial Life 47-50% Long-term Care 85-90% Sales Growth Premium Growth Adjusted Operating ROE Unu
Slide 67: Capital Management
Capital Management Pe UNUMGROUP 67
Slide 68: Capital Generation
68 CAPITAL GENERATION • The primary sources of our holding company cash are dividends from our US traditional insurance companies • Our statutory earnings provide for strong dividend capacity. Additional sources of cash include dividends from our UK subsidiary and services agreements • We expect the
Slide 69: 2023 Expectations for Cash Use
69 2023 EXPECTATIONS FOR CASH USE Unum’s capital position at the end of 2022 provides immense financial flexibility to fully recognize the PDR and begin returning more capital to shareholders 2023 OUTLOOK 5-YEAR HORIZON LTC Capital Contributions $800-900M None expected Dividends $250-275M Expected t
Slide 70: Capital Targets & Priorities
• Following actions to fully recognize the PDR by year-end and increase the pace of share repurchases, we expect healthy levels of capital at year-end 2023. • Our capital deployment priorities remain: ⁃ Investing in the growth of our industry leading core business ⁃ M&A opportunities focused on capa
Slide 71: Q&A
Q&A Rick, Martha, Steve M, Steve Z, Mike 71
Slide 72: Closing Comments
Closing Comments 72 Rick McKenney CHIEF EXECUTIVE OFFICER
Slide 73: Appendix: LTC Demographics, Non-GAAP Reconciliations
Appendix: LTC Demographics Non-GAAP Reconciliations 73
Slide 74: LTC Demographics Profile
74 • Our LTC block is predominately group- sponsored plans • These group policies generally have higher lapse rates and less rich benefits (less lifetime benefits, lower avg. daily benefits and less inflation protection) • Approximately 98% of the LTC block is indemnity based (not impacted by cost o
Slide 75: Reconciliation of Non-GAAP Financial Measures
75 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES December 31 December 31 December 31 December 31 December 31 2022 2021 2020 2019 2018 (in millions) per share (in millions) per share (in millions) per share (in millions) per share (in millions) per share Total Stockholders' Equity, As Reported $ 9,19
Slide 76: Reconciliation of Non-GAAP Financial Measures
76 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES After-Tax Adjusted Operating Income Average Allocated Equity1 Adjusted Operating Return on Equity Year Ended December 31, 2022 Unum US $ 767.2 $ 4,706.9 16.3% Unum International 156.7 772.7 20.3% Colonial Life 295.7 1,549.1 19.1% Core Operating Segmen
Slide 77: Reconciliation of Non-GAAP Financial Measures
77 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Year Ended December 31 2022 (in millions) Net Income $ 1,314.2 Excluding: Net Investment Loss (net of tax benefit of $3.5) (12.2) Amortization of the Cost of Reinsurance (net of tax benefit of $13.4) (50.4) Net Reserve Change Related to Reserve Assump