Unum Group · NYSE:UNM
Unum — Corporate Update (September 2018)
25 slides from Unum's corporate update, Sep 18, 2018
Slide 1: Long Term Care Reserve Analysis
Long Term Care Reserve Analysis September 2018 1
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements 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 rathe
Slide 3: Key Messages
Key Messages • Unum’s core business generates strong growth and cash flow to manage LTC and return capital to shareowners • Completed comprehensive LTC review process which incorporates our most recent experience and relevant industry data; Increasing GAAP reserves by $590 million, after-tax • Capit
Slide 4: Overview
Overview Unum’s strong ...Allows us to actively core business… manage the LTC Block • Market-leading positions in our primary • Added $4.9 billion in realized price products increases and reserves since 2006 • Growth and profitability over the last • Track record of successful closed decade block ma
Slide 5: LTC Reserve Analysis Overview
LTC Reserve Analysis OVERVIEW LTC Reserve Analysis is substantially completed; will formally conclude as part of 3Q 2018 earnings announcement Included a review of all assumptions and incorporates our most recent experience, through 2Q 2018 All assumptions reviewed by outside actuarial consult
Slide 6: LTC Block Overview
LTC Block Overview HIGHLIGHTS Attributes of Status Unum’s LTC policies are Group LTC predominantly in • Discontinued selling group-sponsored • Majority of policies are individual LTC coverage plans employer-paid, resulting in 2009 and group in 2011 962,000 lives in LTC block in higher lapse rate tha
Slide 7: LTC Block Demographic Profile
LTC Block Demographic Profile Data as of 6/30/2018 7
Slide 8: LTC Reserve Analysis: Assumption Review Process
LTC Reserve Analysis ASSUMPTION REVIEW PROCESS Actual vs. Expected Rigorous, iterative Analysis process Current review began in 1Q 2018 Data Quality Utilized four years of Advisory Review Assessment additional Unum data since 2014 assumption updates Management Assumption Review also incorporat
Slide 9: LTC Reserve Analysis: Impact Summary
LTC Reserve Analysis IMPACT SUMMARY GAAP reserve charge of approximately $590 million after-tax, or $750 million pre-tax assuming a 21% tax rate Statutory impact of approximately $200 million, pre-tax Impact on Reserve Assumptions (pre-tax) 9
Slide 10: LTC Assumption Update: Active Policy Terminations
LTC Assumption Update ACTIVE POLICY TERMINATIONS *Pre-tax basis Total policy terminations combine both deaths and lapses Review utilized 2012 Individual Annuitant Mortality industry table Ultimate lapse rate is 0.25%, a lower rate than industry study Unum’s total policy termination rate assump
Slide 11: LTC Assumption Update: Incidence
LTC Assumption Update INCIDENCE *Pre-tax basis Analyzed numerous claim factors including variations by age, gender, product, funding method, and other factors Updated assumption reflects recent elevated claims experience Updated assumptions reflect the elevated levels of incurred claims experien
Slide 12: LTC Assumption Update: Claim Terminations
LTC Assumption Update CLAIM TERMINATIONS *Pre-tax basis Analysis based on Unum’s experience Notable seasonality, with typically more terminations in the first quarter and fewer in the third quarter Strengthened claim termination assumptions to better align with Unum’s experience versus industry
Slide 13: LTC Assumption Update: Morbidity / Mortality Improvement
LTC Assumption Update MORBIDITY / MORTALITY IMPROVEMENT *Indexed to 2008 *Pre-tax basis Assumption for morbidity improvement is 1.0% per year, supported by Unum’s actual experience over 10-year period of 3.2% improvement Industry studies have indicated improvement in both general and insured pop
Slide 14: LTC Assumption Update: Industry Morbidity Studies
LTC Assumption Update INDUSTRY MORBIDITY STUDIES The prevalence of ADL disability and Found improvements ranging from Found incidence rate improvement cognitive impairment declined 0-4% depending on time period, by duration for a constant incurred substantively, with dependencies by duration and mar
Slide 15: LTC Assumption Update: Rate Increases
LTC Assumption Update RATE INCREASES *Pre-tax basis Total updated rate increase assumption of approximately $1.4 billion, including $700 million in previously filed, to-be-approved requests Assumption includes a conservative success rate relative to historical approval rates Shifting our 2019
Slide 16: LTC Assumption Update: Interest Rates
LTC Assumption Update INTEREST RATES *Pre-tax basis Actual new money yields since 2014: 6.03% Average 30-year treasury rate since 2014: 2.83% Even with Unum’s recent success in higher new money yields, our updated assumption reflects a lower expectation for future new money yields 16
Slide 17: Additional Items: LTC Loss Ratio and Capital Plans
Additional Items LTC Loss Ratio Capital Plans • Continue to expect the long-term • Share repurchases of LTC loss ratio range to be 85-90% approximately $100 million are with some quarterly fluctuation expected to resume in 4Q 2018 • First half 2018 LTC loss ratio, • 2019 capital sources and uses to
Slide 18: Conclusion: Key Messages
Conclusion KEY MESSAGES • Unum’s core business generates strong growth and cash flow to manage LTC and return capital to shareowners • Completed comprehensive LTC review process which incorporates our most recent experience and relevant industry data; Increasing GAAP reserves by $590 million, after-
Slide 19: Appendix
Appendix Reconciliation of Non-GAAP Financial Measures 19
Slide 20: Reconciliation of Non-GAAP Financial Measures
Reconciliation of 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 no
Slide 21: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Year Ended December 31 2017 2016 (in millions) per share* (in millions) per share* Net Income $ 994.2 $ 4.37 $ 931.4 $ 3.95 Excluding: Net Realized Investment Gain (net of tax expense of $15.0; $8.4) 25.3 0.11 15.8 0.07 Loss from Guaranty Fund Assessment
Slide 22: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures After-tax Adjusted Average Adjusted Operating Allocated Operating Year Ended 2017 Income (Loss) Equity (1) Return on (in millions) Equity Unum US $ 656.2 $ 4,130.2 Unum UK 92.1 607.3 Colonial Life 211.2 1,308.1 Core Operating Segments 959.5 6,045.6 15.9%
Slide 23: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures After-tax Adjusted Average Adjusted Operating Allocated Operating Year Ended 2013 Income (Loss) Equity (1) Return on (in millions) Equity Unum US $ 556.5 $ 4,141.8 Unum UK 104.5 744.3 Colonial Life 184.4 1,122.6 Core Operating Segments 845.4 6,008.7 14.1
Slide 24: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures After-tax Adjusted Average Adjusted Operating Allocated Operating Year Ended 2009 Income (Loss) Equity (1)(2) Return on (in millions) Equity Unum US $ 471.9 $ 3,853.5 Unum UK 183.8 640.7 Colonial Life 174.9 858.0 Core Operating Segments 830.6 5,352.2 15.
Slide 25: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures December 31 2017 2016 2015 2014 2013 2012 (in millions) Total Stockholders' Equity $ 9,574.9 $ 8,968.0 $ 8,663.9 $ 8,521.9 $ 8,639.9 $ 8,604.6 Excluding: Net Unrealized Gain on Securities 607.8 440.6 204.3 290.3 135.7 873.5 Net Gain on Hedges 282.3 327.5