Unum(US:UNM)2023-11-01 16:33Financial Data and Key Metrics Changes - The company reported a net income of $202 million or $1.02 per diluted common share for Q3 2023, a decrease from $510.3 million or $2.53 per diluted common share in Q3 2022 [30] - Adjusted operating income increased 15% year-over-year to $381.7 million or $1.94 per diluted common share, up from $332.3 million or $1.65 per diluted common share in the previous year [53] - Statutory after-tax operating income for Q3 2023 was $532.7 million, bringing year-to-date statutory after-tax operating income to $1.1 billion [16][60] Business Line Data and Key Metrics Changes - Unum US saw a premium growth of 6.5% year-over-year, with adjusted operating income increasing 27.4% to $357.8 million [44][58] - Colonial Life's premium income was $431.2 million, a 1.9% increase from the prior year, with sales in Q3 reaching $121.3 million, up 4.7% [48][14] - Unum International reported adjusted operating income of $36.8 million, up from $24.9 million in Q3 2022, with premium growth of 12% [46][58] Market Data and Key Metrics Changes - The UK segment generated premium growth of 9.9% year-over-year, while Poland's operation grew by 27.3% [68] - The overall core operations earned premium grew by 4.9% year-to-date, just below the top end of the full-year outlook of 3% to 5% [64] Company Strategy and Development Direction - The company plans to increase its share repurchase authorization to $500 million for 2024, reflecting confidence in capital generation and deployment [34][62] - The focus remains on growing high-margin businesses, enhancing the Closed Block's certainty, and effectively returning capital to shareholders [92] - The company is optimistic about future growth rates, particularly in Colonial Life, supported by successful agent recruitment and technology initiatives [22][58] Management's Comments on Operating Environment and Future Outlook - Management highlighted a favorable macro environment with strong employment, higher interest rates, and a benign credit environment as positives for the business [33] - The company expects to meet its Colonial Life premium target in 2023 and anticipates continued growth momentum [58] - Management expressed confidence in the sustainability of current recovery trends and the overall strength of the franchise [57][82] Other Important Information - The company completed its annual GAAP reserve assumption review, resulting in a net increase in reserves of $177.2 million, with favorable adjustments in group disability and Colonial Life [71] - The premium deficiency reserve is expected to be fully funded, eliminating the need for additional capital contributions for the next five years [55][111] - The company has de-risked its balance sheet by selling over $700 million of shorter duration bonds and reinvesting in higher credit quality, longer-duration bonds [77] Q&A Session Summary Question: Can you provide an update on long-term care assumptions? - Management indicated that the majority of the financial impact was related to strengthening mortality and lapse assumptions for older age populations, with a focus on policies with richer benefits [114] Question: What drove the $200 million to $300 million contribution to First Unum? - The increase was attributed to the need to strengthen the asset adequacy reserve due to new assumptions, despite a strong hedge program [136] Question: How do current interest rates affect the premium deficiency reserve? - Management noted that if interest rates remain high, a significant portion of the reserves could become redundant over time, potentially turning into capital [91]