Unum(UNM) - 2025 Q2 - Quarterly Report

PART I Item 1. Financial Statements This section presents Unum Group's unaudited consolidated financial statements for Q2 and H1 2025, covering balance sheets, income, cash flows, and detailed notes on key financial data Consolidated Balance Sheets Total assets increased to $62.84 billion by June 30, 2025, driven by cash growth, while liabilities and stockholders' equity also rose Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $45,689.8 | $45,706.3 | | Cash and Bank Deposits | $1,194.8 | $162.8 | | Total Assets | $62,843.8 | $61,959.3 | | Future Policy Benefits | $37,182.9 | $36,806.4 | | Total Liabilities | $51,523.8 | $50,998.2 | | Retained Earnings | $13,287.2 | $12,914.0 | | Treasury Stock | $(1,524.5) | $(938.3) | | Total Stockholders' Equity | $11,320.0 | $10,961.1 | Consolidated Statements of Income Net income decreased to $335.6 million in Q2 2025 and $524.7 million in H1 2025, primarily due to a significant net investment loss and higher policy benefits Consolidated Income Statement Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Premium Income | $2,748.0 | $2,627.2 | $5,450.9 | $5,237.5 | | Net Investment Income | $560.7 | $545.1 | $1,073.9 | $1,058.6 | | Net Investment Loss | $(17.7) | $(10.4) | $(224.5) | $(11.6) | | Total Revenue | $3,361.4 | $3,233.4 | $6,453.0 | $6,433.7 | | Income Before Income Tax | $417.0 | $495.5 | $660.6 | $991.2 | | Net Income | $335.6 | $389.5 | $524.7 | $784.7 | | EPS (Diluted) | $1.92 | $2.05 | $2.97 | $4.09 | Consolidated Statements of Cash Flows Net cash from operating activities increased to $701.6 million in H1 2025, while investing activities provided $960.7 million, and financing activities used $630.3 million for repurchases and dividends Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $701.6 | $637.4 | | Net Cash Provided (Used) by Investing Activities | $960.7 | $(273.4) | | Net Cash Used by Financing Activities | $(630.3) | $(377.3) | | Net Increase (Decrease) in Cash | $1,032.0 | $(13.3) | Notes to Consolidated Financial Statements This section details accounting principles, fair value measurements, investment portfolio, derivatives, segment performance, employee benefits, stockholders' equity, and recent transactions, including a reinsurance agreement Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial condition and operations, covering performance, GAAP to non-GAAP reconciliation, consolidated and segment results, investments, liquidity, and capital, highlighting the Fortitude Re transaction and capital deployment Executive Summary Q2 2025 net income was $335.6 million ($1.92/share), with after-tax adjusted operating income at $361.1 million ($2.07/share), supported by a strong 485% RBC ratio and $1.96 billion liquidity, alongside a Fortitude Re reinsurance transaction Q2 2025 Performance Summary (per diluted share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $1.92 | $2.05 | | After-tax Adjusted Operating Income | $2.07 | $2.16 | - In February 2025, Unum America entered into a master transaction agreement with Fortitude Re, executing a coinsurance agreement in July 2025 to reinsure portions of its Closed Block long-term care and Unum US individual disability businesses[265] - As of June 30, 2025, the risk-based capital (RBC) ratio for traditional U.S. insurance subsidiaries was approximately 485%, and available holding company liquidity was $1,955.7 million[264] Reconciliation of Non-GAAP and Other Financial Measures This section reconciles GAAP net income to after-tax adjusted operating income, showing $335.6 million net income adjusted to $361.1 million after-tax adjusted operating income for Q2 2025, providing a clearer view of underlying business trends Reconciliation of Net Income to After-tax Adjusted Operating Income (in millions) | Description | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $335.6 | $389.5 | $524.7 | $784.7 | | Excl: Net Investment Loss (after-tax) | $(13.9) | $(8.2) | $(177.3) | $(9.0) | | Excl: Amortization of Cost of Reinsurance (after-tax) | $(7.7) | $(8.2) | $(15.3) | $(16.4) | | Excl: Non-Contemporaneous Reinsurance (after-tax) | $(3.9) | $(5.5) | $(9.3) | $(11.2) | | After-tax Adjusted Operating Income | $361.1 | $411.4 | $726.6 | $821.3 | Consolidated Operating Results Consolidated total revenue rose 4.0% to $3.36 billion in Q2 2025, but higher policy benefits and a $17.7 million net investment loss led to a 15.8% decrease in income before tax - Premium income increased 4.6% in Q2 2025 and 4.1% in H1 2025 year-over-year, driven by growth in all principal operating segments[290][293] - A significant net investment loss was recorded in H1 2025, primarily due to a $160.9 million impairment loss on fixed maturity securities intended for transfer in the Fortitude Re reinsurance transaction[296] - The consolidated benefit ratio, including remeasurement, increased to 71.9% in Q2 2025 from 68.9% in Q2 2024, indicating unfavorable overall benefits experience[298] Segment Results This section details segment performance, noting Unum US and Closed Block income declines due to unfavorable benefits, while Unum International and Colonial Life remained stable or grew, and Corporate's loss narrowed Investments The investment strategy prioritizes high-quality fixed maturity securities, with the portfolio fair value at $36.0 billion and a net unrealized loss of $2.0 billion as of June 30, 2025, alongside commercial mortgage and private equity portfolios - The investment strategy aims to match asset cash flows and durations with expected liability cash flows, investing primarily in a high-quality, diversified portfolio of fixed maturity securities[371] Fixed Maturity Securities Portfolio (in billions) | Metric | June 30, 2025 | | :--- | :--- | | Fair Value | $36.0 | | Net Unrealized Loss | $(2.0) | - As part of the reinsurance transaction with Fortitude Re, the company transferred fixed maturity securities with a fair value of $3.22 billion and recognized related impairment losses of $160.9 million in H1 2025[375][266] - The carrying value of the commercial mortgage loan portfolio was $2.2 billion, and the private equity partnership portfolio was $1.5 billion as of June 30, 2025[392][394] Liquidity and Capital Resources Unum Group maintains strong liquidity with $1.96 billion in holding company liquidity as of June 30, 2025, actively managing capital through $505.9 million in share repurchases and a $500 million undrawn credit facility - As of June 30, 2025, Unum Group and its intermediate holding companies had available liquidity of $1,955.7 million[400] - During the first six months of 2025, the company repurchased 7.1 million shares of common stock for $505.9 million[264] - In April 2025, the company amended and extended its $500.0 million senior unsecured revolving credit facility through April 2030; it was undrawn as of June 30, 2025[415] - In July 2025, as part of the Fortitude Re transaction, the company transferred $953.5 million in cash, which included a ceding commission of $461.7 million[401] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposures are interest rate and foreign exchange rate risks, with no substantive changes in H1 2025 - The company's primary market risk exposures are interest rate risk and foreign exchange rate risk, with no substantive changes in these exposures or their management during the first half of 2025[441] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[442] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[443] PART II Item 1. Legal Proceedings The company is involved in various legal proceedings arising in the normal course of business, with further details in Note 13 to the Consolidated Financial Statements - Information on legal proceedings is referenced in Part I, Item 1, Note 13 of the financial statements[446] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes have occurred from the risk factors disclosed in the 2024 Form 10-K[447] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 3,840,822 shares of common stock under a $1.0 billion program, with approximately $700 million remaining available as of June 30, 2025 Share Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 1,994,390 | $75.79 | | May 2025 | 1,218,986 | $80.89 | | June 2025 | 627,446 | $80.08 | | Total Q2 | 3,840,822 | N/A | - A $1.0 billion share repurchase program was authorized in February 2025, with approximately $700 million remaining available as of June 30, 2025[450] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025 - During Q2 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading plan[451] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Coinsurance Agreement with Fortitude Re, an amended credit agreement, and CEO/CFO certifications - Key exhibits filed include the Coinsurance Agreement with Fortitude Reinsurance Company Ltd. and the Third Amended and Restated Credit Agreement[453]