Unum Group Cuts Long-Term Care Risk With $3.8B Reinsurance Deal

Key Points

• Unum Group agreed to reinsure an additional $3.8 billion of long-term care statutory reserves with Fortitude Re, bringing total reinsured LTC reserves to $7 billion and reducing its exposure by 40% from the start of last year.
• The deal removes all of Unum’s remaining individual long-term care business from Fairwind, leaving mainly group LTC there, while total LTC statutory reserves are expected to fall from $14.8 billion to about $11 billion after closing.
• Unum said the transaction will use $650 million of holding company excess capital, but capital return plans remain unchanged, including about $1.3 billion in expected dividends and share buybacks in 2026.

Unum Group NYSE: UNM said it has agreed to reinsure an additional portion of its long-term care insurance liabilities, marking the company’s third major external reinsurance transaction and its second involving long-term care.

On a conference call with analysts, President and CEO Rick McKenney said the agreement will cede $3.8 billion of long-term care statutory reserves, bringing total long-term care reserves reinsured to $7 billion. He said the transactions have reduced Unum’s exposure by 40% compared with the beginning of last year.

The transaction is effective April 1, 2026, and is expected to close during 2026, subject to regulatory approvals and other customary closing conditions, according to Matt Royal, senior vice president of investor relations and treasury.

Deal Removes Remaining Individual LTC in Fairwind

McKenney said the transaction removes all of Unum’s individual long-term care business that was originally written by Unum America and subsequently reinsured to Fairwind. The remaining liabilities in Fairwind will be group long-term care, which management said has a different risk profile.

Chief Financial Officer Steve Zabel said the company is reinsuring $3.8 billion of long-term care statutory reserves to Fortitude Re. Similar to Unum’s prior long-term care reinsurance deal, the biometric risk ceded to Fortitude Re will be retroceded to a highly rated global reinsurer, he said.

Zabel said the reinsured block represents 26% of Unum’s total long-term care block and 52% of its individual long-term care business. It includes about 50,000 policies with an average attained age of 76 years, compared with 86 years for the block reinsured in last year’s transaction.

The block is concentrated in active life reserves, which account for about 75% of reinsured reserves. Zabel said it also has a “materially richer benefit profile” than the business Unum will retain, with 83% of policies carrying inflation protection and 43% offering lifetime benefits.

Capital Cost and Pricing

McKenney said the transaction will cost Unum $650 million of holding company excess capital, which he described as balanced against the risk reduction achieved. He also said Unum’s plan to return $1.3 billion to shareholders through dividends and share repurchases remains intact.

Zabel said management believes the most appropriate way to evaluate the transaction is relative to best estimate reserves, because that measure reflects the exposure being transferred. On that basis, he said the cost of the transaction is about 12% of best estimate reserves, compared with 10% for the 2025 transaction. The combined cost across both transactions is about 11%.

Zabel said the absolute cost relative to statutory reserves is higher because the 2026 block has a more adverse reserve profile. He said the block carries best estimate reserves nearly $700 million higher than statutory reserves, including a negative reserve margin of about $660 million.

Management said economic benefits from the deal include required capital release and tax benefits, which offset a significant portion of the gross cost. Zabel also said Unum is using temporary financing tied to future tax benefits that are expected to be realized over the next several years.

Remaining Long-Term Care Block

Following the transaction, Unum’s total long-term care statutory reserves will decline from $14.8 billion to approximately $11 billion, according to Zabel. Group long-term care will represent about 70% of remaining long-term care reserves and 95% of insured lives.

Zabel said the shift toward group long-term care is “structurally important” because the group business carries less rich benefit designs, younger attained ages and lower ultimate risk than individual long-term care. He said the average daily benefit on group long-term care is about one-third of individual long-term care. He also said 77% of group long-term care policies have no inflation protection and only 7% have lifetime benefits.

Management said the transaction reduces sensitivities across key Fairwind assumptions, including premium rate increases, lapses and mortality, claim incidence, claim resolutions and interest rates. Zabel said those sensitivities decrease by 28% to 42%.

After the transaction, Fairwind will retain approximately $7.1 billion of group long-term care reserves, supported by about $2.1 billion of reserve margin and total protection of about $1.9 billion, Zabel said. Provident Life will continue to hold the remaining long-term care exposure, supported by diversification from a broader and growing product portfolio.

Capital Deployment Plans Unchanged

Zabel said Unum expects year-end 2026 capital metrics to remain robust, including risk-based capital in the range of 400% to 425%, holding company liquidity of $1.5 billion to $2 billion and leverage of about 25%.

He said Unum’s 2026 capital sources and uses are unchanged, including expected capital generation of $1.4 billion to $1.6 billion and expected uses of about $1.5 billion, inclusive of roughly $1.3 billion of share repurchases and dividends.

“There is no change to our priorities, no change to our planned actions, and no change to our expected return of capital to shareholders this year as a result of the transaction,” Zabel said.

Analysts Ask About Future LTC Actions

During the question-and-answer session, analysts asked whether Unum could pursue additional long-term care reinsurance transactions, including for group long-term care. McKenney said the company continues to talk to counterparties about different parts of the block but emphasized that future deals would depend on market conditions and shareholder value.

“We would like to remove that risk from our balance sheet overall,” McKenney said of long-term care. “At the same time, we’ve also been very clear to say we’ll only do so if it makes sense from a shareholder perspective.”

McKenney said Unum remains focused on its core employee benefits franchises in the U.S., U.K. and Poland while continuing to manage the closed long-term care block. He described the new agreement as “another meaningful step” in the company’s closed block strategy.

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.

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