Unum Group (NYSE:UNM) reported second-quarter after-tax adjusted operating earnings per share of $2.16, up 4.9% from a year earlier, while year-to-date adjusted operating EPS rose 7.5%. The insurer reaffirmed its full-year adjusted operating EPS outlook of $8.60 to $8.90 despite pressure in paid family and medical leave business in the United States and group income protection in the United Kingdom.
President and CEO Rick McKenney said the quarter reflected “continued attractive returns, generally stable persistency, and favorable performance across several of our core businesses.” He said underlying premium growth was roughly 5% after adjusting for the runoff of the stop-loss business and prior transactions, while U.S. sales under the Unum brand increased 7.4% in the quarter and 14% year to date.
Group benefits strength offset by disability pressure
Unum U.S. produced adjusted operating income of $329.6 million, compared with $318.2 million a year earlier. Earnings were helped by group life and accidental death and dismemberment, as well as supplemental and voluntary products, but were partially offset by higher benefit costs in group disability.
The group disability benefit ratio was 65.8%, above Unum’s 62% to 64% expectation. Zabel said elevated short-term disability claims represented about two percentage points of the benefit-ratio pressure, with paid family and medical leave, or PFML, accounting for an estimated 60% to 70% of that impact.
The company said newer PFML states have experienced higher claims activity. Management said it has started implementing double-digit pricing increases for new business and renewals, noting that its initial PFML pricing generally does not include multiyear rate guarantees.
McKenney said PFML remains strategically important because it is connected to Unum’s leave-management offering. About half of the Unum U.S. in-force block, excluding individual disability insurance, is tied to HR Connect, Total Leave or Broker Connect. Premium and fees associated with those capabilities have increased nearly 70% since the end of 2023, according to McKenney.
Management expects group disability benefit ratios to remain elevated near recent-quarter levels until revised PFML rates are fully incorporated into the block. Still, Zabel said the company continues to view a 65% group disability benefit ratio as sustainable over the longer term, as higher PFML pricing takes effect and other pricing adjustments are made.
Group life and AD&D results were favorable, with adjusted operating income of $93.2 million, up from $70.2 million in the prior-year quarter. The benefit ratio improved to 66% from 69.7%, driven by lower claim incidence. Zabel said the company expects the favorable mortality pattern to continue through the second half.
Colonial Life posts record quarter; U.K. results weaken
Colonial Life reported record quarterly adjusted operating income of $131.4 million, up from $117.4 million a year earlier. Its benefit ratio was 46.7%, better than both the prior-year result of 48.3% and the company’s expected 48% to 50% range. Premium income increased to $477.4 million, and sales rose 6% to $134.1 million.
Steve Jones, president of Colonial Life, said the business saw growth from both new and existing clients. Sales from new clients increased 10%, while sales to clients with more than 500 employees grew 15%. He also said the company was recruiting agents at a pace 6% ahead of last year’s level.
Unum International adjusted operating income declined to $24.3 million from $41.6 million a year earlier. The segment benefit ratio rose to 78.4% from 72.4%, largely due to unfavorable experience in the U.K. group income protection business.
U.K. adjusted operating income was £15.3 million, down from £29.4 million a year earlier, as elevated average claim values continued. Zabel said the higher costs were associated with a greater proportion of claims from higher-income employees. The company expects U.K. pressure to moderate in the second half from current elevated levels, though broader pricing actions will take time to affect results because two- to three-year rate guarantees are common in that market.
U.K. premium grew 5.2%, while Poland premium increased 8.8%. Mark Till, who leads Unum International, said U.K. sales were down about 14% in the second quarter as the company made pricing decisions that made it more selective on new business.
Long-term care reinsurance transaction advances
Unum also discussed its planned reinsurance of $3.8 billion in long-term care statutory reserves from its Fairwind closed-block business. The transaction, expected to close in the fourth quarter, represents about 26% of the company’s total long-term care block and 52% of its individual long-term care business.
Following the transaction, Fairwind is expected to retain about $7.1 billion of group long-term care statutory reserves, supported by approximately $1.9 billion of protections. Zabel said sensitivities across key Fairwind assumptions would decline by 28% to 42% after the deal closes.
The company expects the amortization of upfront transaction costs and non-contemporaneous reinsurance impacts from the deal to total approximately $30 million to $40 million per quarter. Including prior closed-block reinsurance transactions, those items are expected to initially total about $90 million to $100 million per quarter and decline over time.
Unum said group long-term care case terminations continued to reduce exposure. About 3% of cases closed during the second quarter, reducing long-term exposure by more than 20,000 lives. Since the end of 2025, about 10% of group long-term care cases have closed, representing more than 50,000 lives.
Capital return plans unchanged
Holding-company liquidity stood at $1.5 billion and traditional risk-based capital was 480% at quarter-end. Unum expects to finish the year within its targets of 400% to 425% RBC and $1.5 billion to $2 billion in holding-company liquidity.
The company repurchased approximately $200 million of stock during the quarter. Including dividends, Unum returned about $275 million to shareholders in the quarter and approximately $750 million year to date. Management said it remains on track to deploy about $1.3 billion to shareholders during 2026.
About Unum Group (NYSE:UNM)
Unum Group (NYSE: UNM) is a leading provider of employee benefits in the United States and selected international markets, specializing in disability, life, accident and critical illness insurance. Through both fully insured and self-funded arrangements, the company offers group coverage designed to protect income and mitigate financial hardship for employees and their families. Its portfolio includes short-term and long-term disability plans, group life and accidental death & dismemberment (AD&D) policies, as well as critical illness and hospital indemnity products.
In addition to its core product lines, Unum Group markets voluntary benefits under its Colonial Life brand, allowing employees to purchase supplemental insurance such as accident, cancer, and dental coverage directly through payroll deductions.
