Unum Group · NYSE:UNM
Unum — Investor Day (December 2012)
47 slides from Unum's investor day presentation, Dec 17, 2012
Slide 1: 2013 Outlook Meeting
2013 Outlook Meeting December 17, 2012 Exhibit 99.1
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 future operations, stra
Slide 3: Today's Participants
3 Today’s Participants Kevin McCarthy Executive Vice President and Chief Operating Officer President and Chief Executive Officer Executive Vice President and Chief Financial Officer Tom Watjen Rick McKenney
Slide 4: Agenda
4 A Look at Our Performance 2012 Assessment 2013 Outlook Closing Comments / Question & Answer Agenda
Slide 5: What's Working
What’s Working
Slide 6: Before-tax Operating Earnings by Segment
6 Before-tax Operating Earnings by Segment* BALANCED EARNINGS Full Year 2002 Operating Performance * Excludes Corporate Segment 9M2012 Does not reflect the impact of ASU 2010-26 or the segment reporting changes implemented in 4Q2008
Slide 7: Market Segmentation Growth Trends in Premium Income
7 Market Segmentation Growth Trends in Premium Income MANAGED GROWTH IN OUR CORE BUSINESS SEGMENTS 2.6% 5.0% Operating Performance ($ millions) Growth Markets Unum US – Core Market – Employee Benefits Colonial Life Unum US – Voluntary Benefits Unum UK – Group LTD Opportunistic Markets Unum US – Larg
Slide 8: Growth Trends in Premium Income
8 Growth Trends in Premium Income MANAGED GROWTH IN OUR CORE BUSINESS SEGMENTS Operating Performance Data – Trailing 4 quarters
Slide 9: New Account Growth
9 New Account Growth % of Sales from Existing Relationships MANAGED GROWTH IN OUR CORE BUSINESS SEGMENTS Operating Performance
Slide 10: Benefit Ratios: Disciplined Underwriting
10 Benefit Ratios DISCIPLINED UNDERWRITING Colonial Life Unum US Operating Performance * Excludes special items
Slide 11: Other Expense Ratios: Expense Management Rigor
11 Other Expense Ratios EXPENSE MANAGEMENT RIGOR Colonial Life Unum US Operating Performance * Excludes special items
Slide 12: Operating Earnings Per Share
12 Operating Earnings Per Share SOLID PROFITABILITY Operating Performance Years 2004-2008 do not reflect the impact of ASU 2010-26 and special items * EPS Growth Rate
Slide 13: YTD 2012 Return on Equity
13 YTD 2012 Return on Equity YTD % AVERAGE CONSOLIDATED GAAP EQUITY* CONSISTENTLY STRONG RETURNS Operating Performance 19% 11% 20% 10% 13% 27% * Excludes Corporate segment
Slide 14: Claimant Research Persistency: Strong Market Acceptance
14 Claimant Research Persistency STRONG MARKET ACCEPTANCE % Satisfied Unum Industry Average Unum Rank Brand Overall handling 91% 87% #1 Clear explanation 88% 83% #1 Quality of interaction 90% 86% #1 Likely to recommend 90% 87% #1 LTD Claimant Satisfaction Source: 2011 GenRe Survey of LTD Claimants
Slide 15: Image and Reputation: External Recognition
15 Image and Reputation External Recognition BROAD RECOGNITION Brand Source: Internal surveys of employees, brokers, and customers Best Places to Work in Insurance 2009 – 2012 Best Places to Work in Maine, Tennessee, and South Carolina 2006 – 2012 Forbes Magazine – Top 150 Most Reputable Companies C
Slide 16: Strong Credit Quality
16 STRONG CREDIT QUALITY Watch List Sales and Write-downs of Investments Investment Performance Default Experience Watch List Formerly 5.12% due to Lehman, Moody’s has subsequently removed it Sales and Write-downs of Investments * Includes Supranationals Breakdown of UK and EuroZone Exposure
Slide 17: Active Interest Rate Management
17 ACTIVE INTEREST RATE MANAGEMENT 2012 Results to Date: $2.7 billion invested New money yield of 4.88% (hedge-adjusted) Overall portfolio yield down 13 bp to 6.54% Current investment portfolio market value $51.8 billion Interest Rate Impacts: Investing new cash flows at lower rates Decreases to res
Slide 18: Quality Balance Sheet
18 QUALITY BALANCE SHEET Balance Sheet Source: Moody’s Investor Service Goodwill and Intangibles (% of Stockholders Equity) * Weighted average RBC for traditional US Insurance Companies Capital Management Asset Quality Low Level of Intangibles Solid Investment Portfolio Liabilities Comfortable Lever
Slide 19: Book Value Per Share
19 Book Value Per Share BUILDING BOOK VALUE Balance Sheet (Excluding AOCI)
Slide 20: Capital Generation Model: Stable Cash Flow
20 Combined Statutory Net Income* Capital Generation Model STABLE CASH FLOW U.S. $600 - $650 U.K. $100 - $150 ($ millions) ($ millions) Capital Management * Statutory Net Income for traditional US Insurance Companies excluding special items STATUTORY NET INCOME $700 - $800 CAPITAL REQUIRED TO SUPPOR
Slide 21: Strong Capital Position in 2012
21 Risk-Based Capital Holding Companies Cash and Marketable Securities STRONG CAPITAL POSITION IN 2012 ($ millions) Capital Management As of 9/30/2012
Slide 22: Consistent Return of Capital to Shareholders
22 CONSISTENT RETURN OF CAPITAL TO SHAREHOLDERS Rating Agency Actions Share Repurchases TOTAL $2,176 million Dividend Increase $578 million Capital Management S&P Upgrade 2008 2009 $700 million --- Moody’s Upgrade Fitch Upgrade A.M. Best Upgrade 2010 2011 $356 million $620 million * Projection for 2
Slide 23: Key Challenges
Key Challenges
Slide 24: Key Challenges: Operating Performance
24 Operating Performance Unum UK - Group Life Long-term Care Interest Rate Management Key Challenges
Slide 25: Key Messages: Unum UK Group Life
25 Key Messages UNUM UK – GROUP LIFE Operating Results Operating Performance Our primary focus is to stabilize profitability in 2013 and improve returns and growth over the medium term. Our segmented growth strategy and focus on rate increases is expected to improve profitability; however, pressure
Slide 26: Key Messages: Long-Term Care
26 Key Messages LONG-TERM CARE Interest Adjusted Loss Ratio Operating Performance • Primary Risks: • Interest Rates – we see 2 to 3 years of sufficient margin for low interest rates. • Risk Experience – claim volatility expected given very young age of block; IALR estimated in range of 85% to 90% (+
Slide 27: 10-Year Single-A Bond Yields Key Messages
27 10-Year Single-A Bond Yields Key Messages Interest Rate Management Limited amount of new cash flow to invest relative to portfolio size Strong interest margins Hedges cover 20% of LTC cash flows for 2013 Pricing adjustments Source: Bloomberg Nov 2011
Slide 28: 2013 Investable Cash Flow
28 2013 INVESTABLE CASH FLOW Interest Rate Management
Slide 29: Product Line Sensitivities
29 PRODUCT LINE SENSITIVITIES Interest Rate Management
Slide 30: 2012 Assessment
2012 Assessment
Slide 31: 2012 Annual Outlook vs Actual
31 2012* Annual Outlook 2012 9 Months Actual Sales Growth 5 - 8% 6.1% Premium Growth 0 - 2% 2.7% Earnings Per Share Growth 6 - 12% 5.4% Return on Equity 11 - 12% 12.2% 2012 Assessment * Original outlook for 2012 as of November 16, 2011
Slide 32: Factors That Impacted Our 2012 Outlook
32 FACTORS THAT IMPACTED OUR 2012 OUTLOOK 2012 Assessment * November 16, 2011 Annual Investor Meeting
Slide 33: 2013 Outlook
2013 Outlook
Slide 34: Key Messages
34 KEY MESSAGES We anticipate the general environment for 2013 to be similar to 2012. Below average economic growth with limited employment growth A continuation of today’s low interest rates While the environment will remain challenging, the need for our products and services remains strong. We are
Slide 35: Factors Impacting Our 2013 Outlook
35 FACTORS IMPACTING OUR 2013 OUTLOOK 2013 Outlook
Slide 36: Capital Outlook
36 CAPITAL OUTLOOK 2013 Outlook Capital Management Criteria 2012 Projection September 30, 2012 Actual 2013 Projection Risk-Based Capital Ratio for Traditional U.S. Insurance Companies 375% - 400% 407% 375% - 400% Leverage 22% - 23% 25% 24% - 25% Holding Companies Cash and Marketable Securities ($ mi
Slide 37: 2013 Outlook
37 2013 Outlook Sales Growth Premium Growth Earnings Growth ROE Unum US 3 - 6% 1 - 3% 0 - 2% 12 - 14% Unum UK ($) (15 - 20)% (17 - 20)% (1) - 1% 15 - 17% Colonial Life 3 - 6% 3 - 5% 1 - 3% 15 - 17% Core Operations 1 - 5% 0 - 2% 0 - 2% 13 - 15% Closed Block 15 – 20% 2 - 4% Total Operations* (2 - 5)%
Slide 38: Closing Comments
Closing Comments
Slide 39: Good businesses with positive long-term trends
39 Good businesses with positive long-term trends We remain committed to disciplined growth Not tempted to “stretch” in these uncertain times Our solid financial foundation and predictable cash flow remain an asset Leading to a consistent capital deployment strategy We have a realistic but cautious
Slide 40: Closing Comments: A Look At Our Performance
40 Closing Comments A Look At Our Performance
Slide 41: Question and Answer
Question and Answer
Slide 42: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures
Slide 43: Reconciliation of Non-GAAP Financial Measures
43 Reconciliation of Non-GAAP Financial Measures Year Ended December 31 2002 * (in millions) Unum US Group Disability 289.9 $ Group Life and Accidental Death and Dismemberment 224.1 Supplemental and Voluntary 165.9 Total Unum US 679.9 Unum UK 69.5 Colonial Life 137.5 Closed Block 170.4 Corporate (15
Slide 44: Reconciliation of Non-GAAP Financial Measures
44 Reconciliation of Non-GAAP Financial Measures (in millions) benefit ratio (in millions) benefit ratio Unum US Premium Income 4,481.1 $ 4,703.6 $ Benefits and Change in Reserves for Future Benefits 3,681.3 82.2% 4,263.4 90.6% Regulatory Reassessment Charge (76.5) (349.2) Benefits and Change in Res
Slide 45: Reconciliation of Non-GAAP Financial Measures
45 Reconciliation of Non-GAAP Financial Measures 2011 2010 2009 2008 2007** 2006** 2005** 2004** After-tax Operating Income 2.98 $ 2.73 $ 2.64 $ 2.54 $ 2.25 $ 1.85 $ 1.69 $ 1.78 $ Net Realized Investment Gain (Loss), Net of Tax (0.01) 0.05 - (0.89) (0.12) 0.01 (0.02) 0.06 Non-operating Retirement-re
Slide 46: Reconciliation of Non-GAAP Financial Measures
46 Reconciliation of Non-GAAP Financial Measures After-Tax Average Operating Allocated Annualized Income (Loss) Equity Return On Equity Nine Months Ended September 30, 2012 Unum US Group Disability 144.5 $ 1,503.5 $ 12.8% Group Life and Accidental Death and Dismemberment 108.0 897.0 16.0% Supplement
Slide 47: Reconciliation of Non-GAAP Financial Measures
47 Reconciliation of Non-GAAP Financial Measures September 30 December 31 September 30 December 31 2012 2011 2011 2010 Total Stockholders' Equity, As Reported 8,673.3 $ 8,169.7 $ 8,995.8 $ 8,484.9 $ Net Unrealized Gain on Securities 892.2 614.8 894.0 416.1 Net Gain on Cash Flow Hedges 400.3 408.7 42