Unum Group Q3 Earnings Call Highlights

Key Points

• Unum missed Q3 earnings expectations as higher U.S. and U.K. disability submissions increased benefit costs. Adjusted operating earnings were $2.20 per share, including $0.33 from favorable notable items, compared with $2.81 a year earlier.
• U.S. long-term disability submissions were about 10% above expectations, with behavioral health claims a key driver; the U.S. group disability benefit ratio rose to 70.6% from 61.3%. Unum is raising prices in affected lines but said it is too early to know whether claims levels will persist.
• Unum forecast 2026 adjusted operating earnings of $8.30–$8.50 per share. It also completed a $3.8 billion long-term-care reinsurance transaction, cutting exposure by more than 40% across two deals, and returned over $1 billion to shareholders through the first nine months.

Unum Group NYSE: UNM fell short of its third-quarter earnings expectations as more people submitted disability claims in the United States and United Kingdom, executives said on the company’s earnings call. The insurer is raising prices in some product lines but said it is too early to determine whether the increase in long-term disability submissions will persist.

After-tax adjusted operating earnings were $2.20 per share, including $0.33 from favorable notable items, primarily related to the annual reserve assumption review. A year earlier, earnings were $2.81 per share, including $0.75 from notable items.

President and CEO Rick McKenney said results in Colonial Life and supplemental and voluntary products were solid but did not offset the disability pressures. Core operations premium grew 4.7% on a constant-currency basis, while sales declined in the quarter against a strong year-earlier comparison. Sales were up 4% for the first nine months.

Disability submissions drive benefit costs higher

Unum’s U.S. group disability benefit ratio rose to 70.6%, excluding notable items, from 61.3% a year earlier. CFO Steve Zabel said higher-than-expected long-term disability submissions added approximately five percentage points of pressure to the ratio, while short-term disability and paid family and medical leave added approximately two points.

Long-term disability submissions were about 10% above expectations for the quarter, Zabel said, with the increase concentrated in behavioral health claims. He said submissions had not reverted to lower levels early in the fourth quarter, although it was too soon to draw conclusions from that period.

Claims submissions do not necessarily become paid claims. Zabel said Unum sets reserves when a claim is submitted based on its characteristics and the historical probability of payment. The company used its normal acceptance rate in establishing reserves for the recent submissions, rather than assuming a lower acceptance rate associated with some prior surges.

Chris Pyne, executive vice president of group benefits, said the increase appeared broad-based rather than concentrated in a particular industry, customer size or region. Long-term disability claims generally take weeks to review, he said, as staff evaluate medical information, job requirements and potential paths back to work.

Zabel said the company remained confident in a long-term group disability benefit ratio of around 65%, but could not specify when it would return to that level. He pointed to uncertainty over how long the submission increase would last and how pricing changes would work through renewals.

Pricing actions and international pressure

Unum is implementing double-digit rate increases for paid family and medical leave, where utilization has been higher than originally priced. Zabel said much of the short-term disability and paid leave business renews annually, allowing pricing changes to flow through during 2027.

For long-term disability, McKenney said Unum is making customer-by-customer pricing changes where performance has been poor. Pyne said emerging experience is being incorporated into renewal discussions, though negotiations for some larger cases renewing on Jan. 1 began earlier in the year.

International adjusted operating income was $0.2 million, including $27.3 million of notable items. In the U.K., the benefit ratio excluding notable items rose to 80.5% from 73.8%, driven by higher submitted claims in group income protection.

Mark Till, CEO of Unum International, said behavioral health represented the largest increase in U.K. submissions, although relatively few of those claims become admitted claims. Unum has already adjusted new-business pricing and is phasing in higher renewal pricing in the market.

Outlook and reinsurance transaction

Unum now expects full-year 2026 after-tax adjusted operating earnings of $8.30 to $8.50 per share, including approximately $0.33 from notable items. Zabel said the company revised its definition of the non-GAAP measure following discussions with Securities and Exchange Commission staff, so the full-year figure will include the annual assumption review. The change does not affect GAAP net income.

Zabel said the outlook assumes overall fourth-quarter earnings and benefit ratios broadly consistent with the third quarter. The company did not provide a 2027 earnings or benefit-ratio forecast.

Unum also closed its second external long-term care reinsurance transaction, ceding $3.8 billion of statutory reserves to Fortitude Re at a net cost equal to 12% of best-estimate reserves. Combined with the prior transaction, the deal reduced the company’s long-term care exposure by over 40%, Zabel said.

Third-quarter GAAP results included a $744 million impairment loss on assets identified for transfer in the transaction. Zabel said the impairment and other GAAP impacts were contemplated when the deal was evaluated and did not change its overall economics.

The company repurchased approximately $200 million of shares in the quarter, bringing year-to-date buybacks to about $800 million. Including dividends, it returned more than $1 billion to shareholders through the first nine months and maintained its goal of returning approximately $1.3 billion for the full year.

About Unum Group (NYSE:UNM)

Unum Group is an insurance holding company that provides employee benefits and related services, primarily to employers and their workers. Its offerings include group disability and life insurance, accident and critical illness coverage, and services that help employers manage employee leave and workplace absence.

Through its Unum and Colonial Life businesses, the company also provides voluntary benefits that employees can elect through their workplaces. In the United Kingdom, Unum offers workplace benefits including income protection, life insurance and critical illness coverage.

The company traces its roots to 1848, when Union Mutual was established in Maine.

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