Unum Group · NYSE:UNM
Unum — Investor Day (December 2020)
47 slides from Unum's investor day presentation, Dec 17, 2020
Slide 1: 2021 Outlook Meeting
2021 Outlook Meeting December 17, 2020
Slide 2: Safe Harbor Statement
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 opera
Slide 3: Non-GAAP Financial Measures
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 m
Slide 4: Agenda & Presenters
AGENDA & CEO OPENING REMARKS PRESENTERS Rick McKenney, Chief Executive Officer CORE BUSINESS OVERVIEW Mike Simonds, Chief Operating Officer CFO REPORT Steve Zabel, Chief Financial Officer 2021 OUTLOOK AND CLOSING REMARKS Steve Zabel, Chief Financial Officer Rick McKenney, Chief Executive Officer QUE
Slide 5: CEO Opening Remarks
CEO Opening Remarks Rick McKenney CHIEF EXECUTIVE OFFICER 5
Slide 6: Key Messages
KEY MESSAGES • Business model strong • Current environment highlights need for what we do • Finishing 2020 in solid financial position • 2021 will see continued effects, trending positively toward 2022 • Closed Disability Block sale as we shift portfolio 6
Slide 7: Strong Business Model
STRONG BUSINESS MODEL PREMIUM DISTRIBUTION¹ Closed Block 10.5% AN EMPLOYEE BENEFITS LEADER Unum Group International 6.9% Disability • Top market positions 28.0% • Distribution breadth • Strong capital generation Colonial Life • Resiliency through the pandemic 18.3% Life and AD&D 19.3% Supplemental &
Slide 8: Resiliency in Pandemic
RESILIENCY IN PANDEMIC OUR RESILIENT FRANCHISE… …HELPS US NAVIGATE • Financial strength • Pandemic pressures ⁃ Strong capital • Mortality rates ⁃ Cash buffers • Workplace disruption ⁃ Portfolio position ⁃ Employment picture • Closed block ⁃ Work from home ⁃ Updated GAAP LTC assumptions • Interest ra
Slide 9: Our Strategy
OUR STRATEGY Helping the working world thrive throughout UNITED STATES INTERNATIONAL life’s moments ENDURING CAPABILITIES • Leading edge employee benefits know how • Digital enabled distribution breadth • Reputation and consistency with decision makers • People and culture 9
Slide 10: Our Strategy: Our Reach
OUR STRATEGY OUR REACH The need for what we do has never been greater: 38 million customers and their families of workers live paycheck to 40% paycheck 195k companies to workers will be attract and retain 1 in 4 disabled workers are out on FMLA at 318k individuals 1 in 10 any given moment return to
Slide 11: The Workplace Remains a Critical Distribution Channel
THE WORKPLACE EMPLOYEE REMAINS A CRITICAL • Trust: 75% of employees trust their employer to do what is right DISTRIBUTION • Access: 90% of Disability and 78% EMPLOYER CHANNEL of Life Insurance is acquired through the workplace • Attract and retain talent Our unique position of • Workforce management
Slide 12: Driving Capital Efficiency
DRIVING 2010 PREMIUM MIX 3Q-2020 PREMIUM MIX* CAPITAL EFFICIENCY Capital Efficient Capital Efficient 74% of total premium 88% of total premium Over the last 10 years, we have shifted our • Increased proportion of voluntary products business mix while growing • Addition of Dental and Vision the Compa
Slide 13: Optimizing for Growth
OPTIMIZING FOR GROWTH We will continue to optimize RUN EFFICIENTLY ACCELERATE FUND PRIORITIES Unum’s organization for the GROWTH Simplify and improve Invest in digital future with investments in how we work while Meaningfully pursue capabilities for digital and a continuous keeping customers top- ou
Slide 14: Core Business Overview
Core Business Overview Mike Simonds CHIEF OPERATING OFFICER 14
Slide 15: Current Environment and Outlook
CURRENT ENVIRONMENT AND OUTLOOK COVID-19 has been disruptive to but the business model has the mid- and long-term growth and margin in the short proven resilient… outlook is promising term, • Customer satisfaction scores • Increased awareness of the need • Premium growth impacts from remain strong f
Slide 16: Persistency and Sales
PERSISTENCY AND SALES PERSISTENCY 5 YEAR RANGE SALES RECOVERY IN CORE OPERATIONS YTD 3Q 2020 RESULTS (2015-2019) 1H Dynamics UUS – LTD 89.9% – 92.1% 90.3% UUS – Group Life 88.0% – 91.2% 88.6% Unum UK 86.3% – 89.7% 86.0% 2H Dynamics 1H19 1H20 1H21 2H19 2H20 2H21 Colonial Life 77.0% – 79.3% 77.6% Curr
Slide 17: Core Operations Premium Dynamics
CORE OPERATIONS PREMIUM DYNAMICS 2019 2020 2021 Strong 2018 Sales led to good 1 st year 2020 employment conditions adversely Natural growth returns as conditions improve, premium growth in 2019 impact natural growth dynamics but weaker 2020 sales pressure 1st year premium Beginning Premium Lapse Nat
Slide 18: Resilient Franchise
RESILIENT 9 % FRANCHISE Strong Unum Year over year employee engagement improvement from 2019 translates into satisfied customers OVERALL UNUM CLAIMANT EMPLOYEE ENGAGEMENT SATISFACTION 18
Slide 19: Distribution Channels Remain Strong
DISTRIBUTION • Sales teams remain intact, positioning us well as economy recovers CHANNELS • Investments in digital sales tools REMAIN STRONG • Capability-based selling readies us for the future UNUM US COLONIAL LIFE UNUM INTERNATIONAL • Field sales retention • Agent recruiting improved to 90% with
Slide 20: Unum US
UNUM US INVESTMENTS IN DIGITAL • MyUnum – 25,000 clients on our new small employer platform PREMIUM DISTRIBUTION¹ • New digital enrollment capabilities in 2021 • HR Connect provides a differentiated experience on Dental & Vision Individual Disability 7.5% 4.2% leading HCM platforms Voluntary Benefit
Slide 21: Unum US Investments in Disability & Leave
UNUM US INVESTMENTS IN DISABILITY & LEAVE As we’ve grown our fee-based business and managed our disability products, LTD Paid Incidence & Recoveries — Indexed (2017=100) Absence Management Claim Volume vs. Fees adjusted return on equity for group disability grew from Annual Fee Growth 15.4% in 2017,
Slide 22: Colonial Life
COLONIAL LIFE INVESTMENTS IN DIGITAL • Worker engagement and enrollment platform • Investment in digital tools that enable growth and PREMIUM DISTRIBUTION¹ productivity such as Agent Assist Cancer & • Advance digital customer experience for policy, Critical Illness 21.1% claim, and client administra
Slide 23: Unum International
UNUM INTERNATIONAL INVESTMENTS IN DIGITAL • The roll-out and take up of Help@hand has accelerated with approximately 250,000 PREMIUM DISTRIBUTION¹ employees having access to the service Poland • UnumOnline broker portal continues to build 11.9% momentum with increasing quote volumes and close ratios
Slide 24: Optimism for the Future
OPTIMISM FOR THE FUTURE • 2 in 3 workers plan to pay more attention to their employee benefits 1 CORE OPERATIONS LONG-TERM • Workers plan to enroll for the first time or increase their coverage in TARGETS INTACT Life (27%), Hospital (14%), Disability (12%), and Critical Illness Insurance (12%)1 Sale
Slide 25: CFO Report
CFO Report Steve Zabel CHIEF FINANCIAL OFFICER 25
Slide 26: Items to Cover
ITEMS TO COVER • 2020 Environment • COVID-19 Considerations • Long-term Care Reserve Review • Closed Disability Block Reinsurance • Alternative Investments • Capital Management 26
Slide 27: Influential Macro Factors on 2020 Results
INFLUENTIAL MACRO Treasury Yields in 2020 US Unemployment Rate 3.00 16.00% 14.70% 2.39 FACTORS ON 2.50 14.00% 2.00 1.67 12.00% 2020 RESULTS 10.00% 1.50 1.92 8.00% 0.84 1.00 6.00% 6.70% 0.50 4.00% 2.00% 3.60% 0.00 0.00% 10 Year Treasury Yield 30 Year Treasury Yield GDP Growth US COVID Infections (mil
Slide 28: How COVID Has Impacted Unum in 2020
HOW COVID HAS IMPACTED AREAS OF UNUM IN 2020 PRESSURE Long-term Life Claims Care Claimant Mortality Sales and Natural Growth Dental & Vision AREAS OF CONSISTENT Utilization PERFORMANCE UK GIP, other • LTD Benefits Claims and Delayed Medical Service Expenses Procedures • LTC Active Life Mortality Imp
Slide 29: 4Q 2020 Expectations
4Q 2020 UNUM US • Continued sales and premium pressure, felt more in VB than Group EXPECTATIONS • Elevated group life mortality, and higher volumes for STD and services businesses partially offset by strong LTD risk results 4Q earnings are expected COLONIAL LIFE to be similar to 3Q • Pressure on sal
Slide 30: Net COVID Impacts on Our Business
2Q-20 3Q-20 4Q-20 1Q-21 2Q-21 3Q-21 4Q-21 NET COVID IMPACTS ON OUR BUSINESS FAVORABLE COVID Impact NEGATIVE COVID Impact OUTLOOK Net Impact • Group Life: Unum experiences approximately 1% of US COVID-19 related deaths through group life, with an average claim size of approximately $50k • LTC: Unum e
Slide 31: Annual Reserve Adequacy Review
ANNUAL • Through our GAAP reserve adequacy review we analyze historical experience against our morbidity, mortality, lapse, expense, and interest rate reserve RESERVE assumptions and re-visit our view of future rate increases ADEQUACY • Observations for 2020: REVIEW ⁃ No material update to morbidity
Slide 32: Closed Disability Block Reinsurance
CLOSED • Reinsuring substantial portion of Closed Block Individual Disability ($7.1 billion of reserves) to subsidiary of Global Atlantic DISABILITY • Expect to release approximately $600 million of capital backing the block as holding company BLOCK cash, assuming receipt of all consents and regulat
Slide 33: Investment Portfolio Update — Alternative Investments
$50 Quarterly Average ~$19 Million ALTERNATIVE INVESTMENT INVESTMENT $40 DISTRIBUTION PORTFOLIO $30 $20 UPDATE — $10 $0 33% 38% Private Credit ALTERNATIVE -$10 -$20 Private Equity Real Assets INVESTMENTS 29% -$30 -$40 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Traditional Miscellaneous I
Slide 34: 2020 Year End Capital Management Expectations
2020 YEAR END CAPITAL • We anticipate the year-end 2020 capital position to provide significant MANAGEMENT capital cushion above our targeted levels EXPECTATIONS YE 2020 METRIC TARGET PROJECTION Risk Based Capital* ≈365% 350% Holding Company $1.5 Billion 1x Fixed Costs ≈ $400 million Liquidity • We
Slide 35: 2021 Outlook
2021 Outlook Steve Zabel CHIEF FINANCIAL OFFICER 35
Slide 36: Assumptions for 2021 Outlook
ASSUMPTIONS OUTLOOK ASSUMPTIONS FOR 2021 1H-21 2H-21 OUTLOOK GDP Growth 4.30% Unemployment 8.5% 7.5% Total US COVID Deaths ~120,000 ~20,000 WTI Oil Price $45 / Barrel • 2021 outlook assumes continuing challenges in 1H-2021 from the COVID-19 pandemic and high unemployment rates with improving trends
Slide 37: 2021 Financial Outlook
2021 FINANCIAL OUTLOOK We anticipate after-tax adjusted operating OTHER ASSUMPTIONS earnings for 2021 to remain generally flat with • Capital deployment plans consistent with full year 2020 expectations 2020; awaiting clarity on economic and employment conditions • 1H-2021 trends expected to mirror
Slide 38: 2021 Outlook External Factors
2021 OUTLOOK EXTERNAL FACTORS UPSIDE POTIENTAL DOWNSIDE RISK • Early distribution of an effective • Delay in vaccine effectiveness or vaccine distribution • Stronger employment as a result of • Slower economic recovery continues faster economic recovery to pressure natural growth • Continued favorab
Slide 39: COVID Impacts
COVID IMPACTS PRE-PANDEMIC INITIAL IMPACT CONTINUING EFFECTS BEGINNING RECOVERY $370 Before-tax adjusted $351 $346 $317 319 operating income throughout the pandemic (in millions of dollars) 2H 20 1H 21 2H 21 2H 19 1H 20 OUTLOOK OUTLOOK OUTLOOK • The first half of 2020 presented unique dynamics as th
Slide 40: 2021 Capital Outlook
2021 CAPITAL OUTLOOK • We expect to head into 2021 with ample capital cushions to absorb volatility • The maintenance of this capital cushion against our long-term targets is prudent given the on-going uncertainties presented by the pandemic and economic conditions • We expect our year-end 2021 capi
Slide 41: Closing Comments
Closing Comments Rick McKenney CHIEF EXECUTIVE OFFICER 41
Slide 42: Key Messages
KEY MESSAGES • Business model strong • Current environment highlights need for what we do • Finishing 2020 in solid financial position • 2021 will see continued effects, trending positively toward 2022 • Closed Disability Block sale as we shift portfolio 42
Slide 43: Q&A
Q&A FOR Q&A PARTICIPANTS Please ensure you’ve dialed in and placed yourself in the queue. We will pause briefly to provide participants a chance to connect. 43
Slide 44: 2021 Outlook Meeting: Q&A Panel
2021 OUTLOOK MEETING: RICK McKENNEY Chief Executive Officer Q&A PANEL MIKE SIMONDS Chief Operating Officer CHRIS PYNE Executive Vice President, Group Benefits STEVE ZABEL Chief Financial Officer TIM ARNOLD Executive Vice President, Voluntary Benefits and President, Colonial Life PETER O’DONNELL Chie
Slide 45: Appendix
Appendix Reconciliation of Non-GAAP Financial Measures 45
Slide 46: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Annualized After-tax Adjusted Average Adjusted Operating Operating Income Allocated Equity(1) Return (in millions) on Equity Nine Months Ended September 30, 2020 Group Disability $ 178.3 $ 1,393.9 17.1% Year Ended December 31, 2017 Group Disability $ 232
Slide 47: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES 47