Q1 2024 Unum Group Earnings Call
Thank you for standing by my name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the Union group first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like.
To ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question I've gotten press star one. Thank you I would now like to turn the conference over to not Royal head of Investor Relations. Ma'am you may begin your conference.
Thank you Crystal and good morning to everyone and welcome to you didn't group's first quarter 'twenty 'twenty four earnings call. Please note that today's call may include forward looking statements and actual results, which are subject to risks and uncertainties may differ materially and we are not obligated to update any of these statements.
Please refer to our earnings release, and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results.
Yesterday afternoon, Unum released our first quarter earnings press release and financial supplement.
Those materials may be found on the investors section of our website along with a presentation of the most directly comparable GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation.
References made to today to core operation sales and premium including unit International are presented on a constant currency basis.
Dissipating in this mornings conference call are <unk>, President and CEO Rick Mckenney.
<unk> Financial Officer, Steve Zabel, Tim.
Tim Arnold who heads our colonial life and voluntary benefit lines Chris.
Chris Pine for group benefits and Mark till C E O of international.
Now I'll turn the call over to Rick.
Thank you Matt.
Good morning, everyone and thank you for joining us today.
We're excited to discuss our exceptional first quarter results with you, which reflect a strong start to the year and a continuation of the success achieved over the past several years.
At our outlook meeting in January we laid out our expectations and plans to continue our momentum through 2024, including our ability to maintain industry, leading margins grow our top line at a higher rate and builds further capital flexibility, including eliminating need for our closed block.
Our first quarter results show, our ability to execute on these plans with a 13.6% growth in EPS to $2 12 per share a record level of earnings for the company.
$350 million of statutory earnings six 6% increase in core operations premium growth and capital metrics well in excess of our targets.
Coupled with our team's strong performance the market backdrop, and the economic environment continues to be favorable and supportive of our business.
The first quarter concluded on a positive note for the economy with job growth, surpassing expectations in March and a steady rise in wages.
This was evident in our existing client base as we observe sustained natural growth that played an ongoing role in our success, although at more typical levels.
Our offerings, which are a part of an employer's holistic employment package and attracting and retaining talent also have the important role of providing critical protections for their employees.
Our connection with these employers has been amplified through our digital interactions with clients and our unparalleled ability to provide quality services, including leave administration, which is playing an important role for them.
In addition to the labor market interest rates have been in our favor and consensus has shifted towards the higher for longer scenario.
With treasury yields up approximately 70 basis points. So far this year current rate levels are beneficial to both our core lines of business as we continue to invest new money above our portfolio yield, but also for long term care.
We continue to find ways to Derisk, the walk through our hedging strategy and repositioning two levers we further utilized in the first quarter.
Together this macro backdrop AIDS us in steadily and consistently building on our solid foundation and delivering profitable growth and strong returns across all of our businesses.
Looking across the franchise there were numerous bright spots to highlight in the first quarter.
First our group products in Unum U S are deeply integrated solutions, such as HR connect and totally have continued to improve the operations of our employer clients.
We continue to see attractive margins across our product sets based on the consistency of our pricing discipline and our aligned goals of helping employees get back to work.
Our products and services are resonating with our customers as shown by total group product persistency exceeding 90% with long term disability at 93% a level, we haven't seen in over 10 years.
Group sales, where we see the most price competition performed better than expectations in the quarter and are expected to meet our expectations for the year. These results underscore the value of our employers employees and their families find in our products and services.
Also within our U S business, our supplementary and voluntary lines, including voluntary benefits multi life individual disability and dental division continued to produce very strong levels of both topline and bottom line growth at seven 6% at 11, 8% respectively.
While these lines of business received less attention they generate high levels of cash and complement our group offering well as employers look to expand their benefit offerings and attract and retain talent in a highly competitive market.
Shifting to colonial life margins continued to be excellent where they are with an Roe of nearly 20%.
Since the pandemic, which impacted colonial's distribution model growth has been the main focus for this segment and in the quarter. We saw premiums increased by just over 4%.
While we are encouraged by the premium growth sales in the first quarter did not meet our expectations.
Despite this we maintain optimism regarding our ongoing differentiation through services like gather as well as the productivity of our agents. These factors support our plans to reach the 5% to 10% sales growth range at our outlook meeting.
Rounding out our core segments, our international business is operating at full strength.
With robust premium growth of nearly 17% coming off an excellent sales year last year and U K underlying earnings in the mid to upper 20 million pound range.
We continue to see excellent growth momentum in our growing Poland business and in the U K, we continue to redefine the broker experience setting a market leading standard that is distinctly unum and enhancing our relationship management model.
Across the company, our commitment to innovation prudent capital management and shareholder returns remains unwavering.
The closed block fully funded our capital generation model is at full strength.
As this is expected to be the first year in many years that we do not contribute capital to long term care.
Let me remind you that we do not to plan, we do not plan to contribute capital to support the long term care block going forward, given our assumptions and approximately $2 8 billion of protection that we outlined at our outlook meeting.
In the first quarter, the strong GAAP margins I mentioned earlier highlighted by disability and life translated directly to statutory earnings of $350 million.
This supports cash flow available for deployment at a run rate greater than we've seen before.
This consistent cash flow generation is supported by our disciplined and long term focused underwriting approach as well as our sole focus on employee benefits.
With these good results, we ended the quarter with holding company liquidity of $1 $4 billion and RBC of 440%. This provides.
Additional flexibility as we explore opportunities to grow our core businesses and reduce our closed block exposure.
At the same time, we have steadily increased the pace of which we return capital to shareholders. This quarter, we increased the pace of share repurchases to approximately $500 million per year double from a year ago.
In addition, consistent annual dividend increases are another important part of our capital management and we're pleased to announce that in recognition of our strong capital position and projections, we will be increasing our shareholder dividend by 15% starting with the third quarter dividend payment in 2024, and placing our dividend payout ratio right around two.
30%.
All in all the first quarter was a very strong start for our company. We're encouraged by the trends we're seeing in our operations as well as the support we're receiving from the macro environment.
All of this positions us well to be able to execute on our strategy and reach our financial aspirations throughout 2024 and beyond.
Many thanks to our teams that work hard to serve our customers each and every day.
I'd like to now hand, it over to Steve to provide further insights into our financial strategy and outlook as well as provide insight into the closed block. Thank you once again for your attention and let me turn it over to Steve right. Thanks, Rick and good morning, everyone. As Rick described the first quarter was a very strong start to the year before getting into the details I would like to <unk>.
A few of the key trends that are driving the impressive results across our businesses first from the topline perspective, we're seeing high levels of growth in our core operations with premium growth of 6.6% bolstered by record levels of persistency in our group lines and nearly 17% premium growth for Unum International.
Paul.
In addition to growth our margins continued to be robust with group disability, maintaining the exceptional benefit ratio levels produced in 2023 group life and a D and D earnings at levels not seen since pre pandemic and long term care benefits continuing to normalize as expected.
Putting it all together these trends allow us to grow the company's earnings power and further our financial flexibility.
In the quarter, we grew adjusted operating earnings 9.6% to $514 $5 million, leading to after tax adjusted operating earnings per share of $2 12, representing growth of 13, 4% on the statutory side after tax operating income was up $26 nine.
<unk> percent to $355 million driving further capital strength with RBC and holding company liquidity well in excess of our targets.
While we are only one quarter end of the year all of these factors reinforce our confidence in executing against our targets for 2024.
Considering that backdrop I'll now move to this segment financial results, starting with Unum U S. Adjusted operating income increased 23, 3% to $385 $2 million in the first quarter of 2024 compared to $312 5 million in the first quarter of 2023 results for all.
Product lines improved year over year, with our group life and <unk> seen the greatest improvement driven by favorable mortality trends, leading to a 68, 2% benefit ratio.
Natural growth of lives and wages returned to more normal levels of approximately 2% and along with total group persistency of 92, 1% supported premium growth of six 1% in Unum U S or.
Overall Unum U S sales were lower in the first quarter of 2024 by $2 $5 million or approximately 1% year over year.
Group sales increased two 5% compared to the first quarter of 2023, while sales in supplemental and voluntary lines did not meet our expectations and were down 4%.
As Rick mentioned group sales performed better than expectations in the quarter and are expected to meet our expectations for the year.
The group disability line reported another robust quarter with adjusted operating income of $164 8 million compared to $145 $7 million in the first quarter of 2023 with the increase driven by favorable incidence along with consistently strong performance and recoveries.
The group disability benefit ratio was 57.5% in the first quarter compared to 60% in the first quarter of 2023.
Results for Unum U S group life, and <unk> also improved compared to the year ago period with adjusted operating income of $78 $8 million for the first quarter of 2024 compared to $41 million in the same period, a year ago as mentioned the benefit ratio decreased to 68, 2%.
Compared to 75% in the first quarter of 2023, driven by lower incidents.
The favorability experienced in the quarter does not change our expectations of low to mid 70% benefit ratios in the coming few quarters.
Adjusted operating earnings for the unit for the Unum us supplemental and voluntary lines in the first quarter of 2024 increased to $141 6 million from $126 $7 million, an increase of 11, 8%. The increase was driven by improved underlying benefits experience.
Year over year across all lines.
Then moving to Unum International adjusted operating income in the first quarter decreased to $37 4 million from $38 $4 million in the first quarter of 2023 due to a lower benefit due to lower benefit from inflation.
Adjusted operating income for the Unum UK business decreased in the first quarter to $28 2 million pounds compared to 31 million pounds in the first quarter of 2023 Unum U K earnings grew over 10% after removing the direct inflationary benefits, which were still positive in the first quarter of 2024.
That's significantly lower year over year.
Unum UK is underlying earnings strength is continuing to grow and we now expect the business to earn in the mid to upper 20 million pound range for quarter as inflation subsides.
Premium income for our Unum International business segment increased by 16.8% year over year, including 15% growth in Unum UK.
Similar to other segments strong persistency in excess of 90% in both Unum U K and Poland helped to offset decreased sales in the quarter.
Next adjusted operating income for the colonial life segment increased to $113 7 million in the first quarter compared to $93 $9 million in the first quarter of 2023.
Premium income of $446 $9 million grew at a healthy rate of four 1% compared to our full year 2023 growth rate of one 4%.
Premium growth was driven by higher prior period sales and persistency of 78.4% or 110 basis points greater than the year ago period.
Sales in the first quarter of $103 million decreased three 6% from prior year.
In the closed block segment adjusted operating income of $24.3 million was higher than last quarter's results of $21.3 million with relatively consistent LTC claims experience.
Earnings were below our expectations due to alternative assets the only six 3% in the first quarter on an annualized basis compared to our long term expectations of 8% to 10%.
As we discussed in January we expect LTC incidents to remain elevated in 2024 as a claim inventory normalizes.
LTC incidence experience in the first quarter was elevated compared to our long term expectations. We believe the recent trend continues to indicate a pattern of returning to normal inventory levels.
The LTC net premium ratio was 93, 8% in the first quarter of 2024 higher than the 85.3% result in the same year ago period, due primarily to the assumption update in the third quarter of 2023.
Sequentially, the MPR increased 30 basis points compared to the fourth quarter of 2023, due primarily to the impact of a large case termination in the first quarter.
Finally, we continue to execute on our closed block strategy, focusing on creating value, reducing the footprint and increasing predictability of outcomes as.
As we discussed in January this includes seeking actuarially justified rate increases.
The program refresh in the third quarter of 2023, we have achieved approximately 20% of our target, including approximately 5% in the first quarter of 2024.
So then wrapping up my commentary on the segments financial results. The adjusted operating loss in the corporate segment was $46 1 million compared to $33 $5 million loss in the first quarter of 2023, primarily driven by lower allocated net investment income and higher retirement plan.
Expenses.
Our expectation for the remainder of the year is that losses in the corporate segment will stay relatively consistent in the mid $40 million range.
And then lastly, the effective tax rate of 23% in the first quarter was favorable to our expectation of 21, 5% to 22% driven by one time amended filings of prior year returns.
Moving now to investments, we continue to see a good environment for new money yields and risk management.
Purchases made in the quarter were again at levels above our arn portfolio yield, which was 4.35% in the first quarter.
Total net investment income was $513 $5 million in the first quarter compared to $508 $8 million in the prior year, driven primarily by higher asset levels and higher miscellaneous investment income miscellaneous investment income increased in the first quarter to 28.
$8 million compared to $15 $8 million, a year ago with income from our alternative assets totaling $23 million.
In addition, we continued to manage our interest rate risk by expanding our hedge and repositioning programs.
Since inception of the program last year, we've entered into $2.7 billion of treasury forwards and reposition $765 million of assets, including a $165 million and $65 million respectively. In the first quarter of 2024.
I'll end my commentary this morning, with an update on our capital position.
As laid out at our outlook call. We project this year to be an inflection point in the free cash flow generation profile of the company our outlook for strong statutory earnings with no contributions to LTC is expected to drive significant capital strength and financial flexibility in 2024.
Through the first quarter, we're off to a great start with strong margins discussed in our GAAP results, leading to statutory after tax operating income of $355 million in the quarter and repositioning.
And positioning us well for our 1.2 to one $4 billion expectation for the year.
With the strong statutory earnings the weighted average risk based capital ratio for our traditional U S insurance companies strengthened further to approximately 440% and holding company liquidity remained robust at 1.4 billion while.
While both of these metrics are expected to fluctuate throughout the year, we do expect year end RBC of $4, 15% to 430% and holding company liquidity of greater than $2 billion.
Both well in excess of our long term targets, providing us with capital Optionality. This optionality already considers our plans to increase shareholder capital return by doubling our share repurchase run rate over 2023 levels to $500 million and increase in our shareholder dividend by 15% effective.
In the third quarter.
So then looking ahead as we progress throughout the year, we will continue to evaluate the best use of our excess capital in line with our priorities.
Overall, we are very pleased with our first quarter results. The strong start to the year sets us up well to execute on our strategy and deliver against our financial targets.
Now I will turn the call back to Rick for his closing comments and I look forward to your questions.
Great. Thank you Steve you can certainly hear in our comments the excitement as we wrap the first quarter business performance combined with our robust capital strength has set us on a promising trajectory for the year ahead. There are plenty of topics to discuss today. So with that let me turn the call over to the questions and turn it over to you Christa to facilitate session.
Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star One again and we ask that you. Please limit yourself to one question and one follow up your first question comes from Ryan Krueger.
Hey, Thanks. Good morning. My first question is on the pricing environment and group.
It seems like there's some maybe debate within within the industry on on kind of the competitive environment at this point.
Yes for you specifically you saw really favorable persistency.
So it seems like that.
That would indicate.
Yes, let less competition, but I guess, just hoping to get some more perspective on what the competitive environment is like.
Yes.
Kind of the debate on the need to give back some level of that the outperformance in group disability.
Great. Thank you Ray it's Rick.
Rick: Happy to enter into that debate I think when you think of the competitive environment out there is always a competitive market and so I think I'd start with that so we've been very consistent on that front and when we think about competition. We expect on a case by case basis, we're going to look at it and look at the fundamentals of it and make our decisions around what our pricing looks like the discipline.
We show has been consistent and I think that's an rote wavering I think when you look at our results overall, we're very happy with our sales results that we have coming in on the group side as well as persistency levels and you bring that together with the pricing and the profitability, it's a pretty powerful mix, but let me turn it over to Chris talk about maybe some more details on what we're seeing in that competitive.
Yeah, Thanks, Rick and thanks for the question Ryan No question of competitive environment is here to stay we are used to that.
A lot of respect for the marketplace in that regard.
One of the big things that that we continue to see us is as we address serious.
Challenges that our employer customers are facing the conversation does move away from price price is always important but as we talk about capabilities like addressing Lee So our total lead platform and connect connecting into the HR ecosystem of choice.
Rick mentioned HR connect these.
These topics are take the conversation away from pure price and we're able to talk about ways. We can help enhance their business. That's happening and are you know again the market continues to move in that direction, which is very good for our business a couple that with the tradition of strong discipline underwriting and we do that both on new business and re acquisition through renewals that's.
DNA that we've had to deepen our company that will continue.
And you know I will give a call out to our claims organization that continues to perform exceptionally well, but put us in this position to have strong returns. So we could have conversations.
With our customers about how to help them enhance their business.
Rather than just pure price.
Thank you and then on long term care you mentioned that.
Sure David.
Rick: The trend in an incident suggests that there is.
Rick: You're on the path towards returning to normal incidents can you give us some more color on what youre seeing there.
Speaker Change: Yeah, Ryan and Steve Yeah, I would just really reiterate the messages that we've really been given over the last few quarters, where we have been seeing elevated incidence for last year, plus we did that see that start to abate the latter half of last year, although still at elevated levels.
And we've really message we thought that would continue into 2024, and then abate as we work our way through 2024 and that is really what we saw normally in the first quarter youll see a little bit higher incidence and a little bit higher claim mortality than maybe the other quarters that is what we saw there was pretty much netted down to get us to an underwriting margin that.
We would have expected.
I've also talked a little bit about this concept of our overall claim inventory and how that has trended over time and the fact that our claim inventory really trended below that regression line. During COVID-19 as we saw lower claim incidents during that time I would say the regression back to that line continues.
Speaker Change: The trend is pretty consistent with what we've seen in prior quarters. So our message is pretty much. The same we think it will still stay elevated for some time in 2024, but I would say you know what we are happy with kind of the trends that we saw in the first quarter.
Again, what would have to see how it plays out through the remainder of the year.
Got it thank you.
Alright, Thanks, Greg.
Next question comes from the line of Elyse Greenspan with Wells Fargo. Please go ahead.
Hi, Thanks, Tom Good morning.
My first question, maybe a quick one on the closed block. When you guys are firm on the full year earnings target for that business are you assuming on alternative investment income will get back to normal expectations for the other three quarters of the year.
Speaker Change: Yeah. Lisa this is Steve good question and yes. The simplest answer to that is when we set our planning expectations. We set it at that 8% to 10% yield on that alternative asset portfolio. We are right around six and a half in the first quarter, but we do have that incorporated them into our thinking around.
Speaker Change: The guidance for the year.
Thanks, and then you you know affirmed the 5% to 10% you know Unum U S sales growth target and you guys did point out that you know supplementary and voluntary sales didn't meet expectations in the first quarter, how do you see sales trending narrow, but the balance of the three quarters.
When you look to hit that full year target.
Yes, let me talk a little bit of budgets with our expectations and we did talk about although some of the areas in our business, we're a little bit slower.
Slower than we would have expected coming out of the gates that we are looking to make up that over the course of the year and so are we still feel a feel good about where our our sales targets or it's going to take some work to get there, but I wanted to actually highlight anything particular underlying that around the voluntary benefits side.
I think that's one we kind of work on quarter by quarter and getting back to that targets really important to us. So.
Thank you.
Yeah.
Your next question comes from some neat cannot with Jefferies. Please go ahead.
Some Neat: Thanks, Good morning.
I wanted to start with the group disability benefit ratio I mean, it continues to beat expectations can.
Can you talk a little bit about the glide path in that ratio to normal and have the underlying drivers of the better than expected benefit ratios sort of changed over the past year or is it kind of a continuation of what you saw last year.
Yes. This is Steve I'll start with the with the answer there and then turn it over to Chris to talk a little bit about pricing in the environment. So that's how.
We've addressed group disability is just around there's really two drivers one is the underlying claims performance, whether it's claims incidents or claims recovery and then the other piece of it is pricing and what possible or potential pricing actions you take down the line to reflect that performance. So I'll start with performance.
We've continued to see really good recovery patterns.
Our claims our claims department.
Some Neat: Hartman working well with both our customers.
Some Neat: As well as the employers to really get people back to work. That's the shared objective or really what we do as a company. So the the the recovery trends have been pretty consistent in the first quarter I'll say incidents was a little favorable from what our expectations might have been in the first quarter, we guided to a benefit ratio that would have been.
Some Neat: In the low <unk> for the year this quarter it was a little bit below that and I would say that was because of favorable claims incidents. So do we think that's sustainable we do we're seeing.
Some Neat: Sustained trends in both of those areas I would say, we can kind of see backlogs around short term disability instill comparable performance of long term disability block for the remainder of the year. So from just an operating performance perspective feel good about sticking with the guidance that would be in the low Sixty's then the other piece of that.
Some Neat: Equation, though it is pricing and what would we do anything with pricing new incorporate that level of performance can be Chris just talk a little bit about how we think about group disability pricing yeah. Thanks, Steve.
Dave in Sydney for the question.
Again, it does get back to capabilities, where we're able to talk about.
First we have a strong disability portfolio of short term long term disability as part of our bundle. The insurance coverage, we can extend to our employer customers is phenomenal and that gives us a lot of flexibility coupled that with leave and you start in those almost generally almost always go together.
To talk about being a critical partner to that employer and their employees.
That enables us to have conversations for the long term about how we're really going to be part of the solution.
To solve this challenging leave topic, while giving their employees great cover.
Some Neat: Pricing wise.
People like long term stability in their prices start to talk about how you can maintain this excellent experience through effective claim management and a renewal strategy that keeps prices.
In check over time that that seems to resonate very well. So it's a combination of a bundled portfolio with lead management and long term stability and pricing that fits very well with our underwriting DNA.
Okay that makes sense. Thanks for that and then I guess the second one for Rick on long term care one of the things that we have observed.
And the market is just a combination of different types of insurance risks, particularly on the asset intensive side.
Rick: In order to get risk transfer done in post your individual IDI risk transfer solution. A couple of years ago. I wouldn't think that you would have a ton of that asset intensive stuff, but just curious if that's the right read or how you'd think about sort of combining <unk>.
<unk> blocks of business, if you were to do something.
Speaker Change: Yes, so you talked about the asset intensity in terms of our blocks of business. So the idea was one that had some of that we're happy to go through that transaction long term care is clearly our other our asset intensive business and that's why we made the comments about the current rate environment being good for US our team is doing a great job of putting money to work.
Behind that block of business and then the asset intensity kind of goes down throughout the course of the business and you think about our group lines of business a little bit on the group disability, although that portfolio shrunk as the claim inventory has shrunk there as well and then on the voluntary benefits side really very little in terms of asset intensity. So so I think.
If your question is getting ads, you know kind of where do we look at where that as it is in long term care. When we think about what we're trying to do today in and making sure that we're hedging what we're doing there and the overall mix, but what we're happy about how it looks between our insurance risks our asset mix that we have today.
And then the overall, Steve you want to add yeah. I mean, so that I think he might have been getting out a little bit is just around potential transactions and just different businesses that maybe you can pair up with a long term care transaction and I I wouldn't put that I wouldnt bucket that just in asset intensive businesses to go with that I think counterparties are looking at just.
Risk diversification generally and so we do have blocks I think would would match that criteria with different counterparties.
Steve: Got it yeah that was the thrust of my question. So thanks for that.
Yes.
Your next question comes from the line of Tom Gallagher with Evercore ISI. Please go ahead.
Thomas George Gallagher: Good morning few few follow ups on long term care.
I guess the first one is so I heard.
Steve Your comment about long term care claim trends if they do remain elevated somewhat throughout the course of the year.
Thomas George Gallagher: Is it likely you would have to strengthen GAAP reserves again in the third quarter review.
We're not necessarily is that really just depend on a long term assumption.
And I assumed statutory should be pretty bulletproof, though even even if there was something adjusted for GAAP that that's my first question.
Yes, Tom I think there are two questions in there, but all counted as one yeah from from a GAAP perspective, I think youre thinking about it right. We look at all of our assumption set on an annual basis, that's required under L. D. T I and we will do that in the third quarter like we normally do we look at a pretty long.
Experience set when we set those assumptions and think more long term about them. So we will take into account. The recent elevated claims experience that we've seen but we'll also take into account all the experience that we've seen over the last year and we did do a pretty comprehensive review last year, but we'll go through that process in the third quarter on a GAAP basis.
And then on the statutory side I would just refer back to some of the discussion that we had as part of our outlook meeting, where we do feel like we have quite a bit of.
Margin or a buffer for adverse deviation in and in our assumption set on a best estimate basis, we talked about the $2 $8 billion of protection, which is really.
The difference between our reported statutory reserves and kind of our economic view of best estimate along with the excess capital that we have behind the LTC line. So we continue to feel pretty good that we got the right buffers there for any deviation in our actual experienced or even any any deviation.
Our best estimate I'd just refer you back to some of the sensitivities that we gave as part of that presentation back in January.
Speaker Change: Gotcha, and then just for a follow up the large case.
Speaker Change: Group lapse for long term care that you had in the quarter that impacted the benefit ratio did you lose the group life and disability, along with that or did the employer just discontinue the LTE coverage.
Yeah, and just at one clarification it impacted our net premium ratio that that was a large group LTC case that terminated did have margin in it we released that margin basically and it was buffered into the benefit ratio itself. We did not lose the other coverages that that was specific to the LTC Cup.
Average.
Is there just just out of curiosity I mean to me that probably is more positive than negative if you have.
At the group level employers lapsing LTC coverage all things considered.
Speaker Change: Is that kind of is that was that just voluntary or is there an effort to to do that in that unit.
Speaker Change: Yeah, I mean, I wouldn't comment on you know, whether it's voluntary or not we were always talking to our groups about providing value to them through our our various products and services.
Speaker Change: What I would say is it's a reduction of risk.
In the LTC book, which I think is always a positive thing.
Okay. Thanks.
Thanks, Tom.
Speaker Change: Your next question comes from Joshua Horowitz with Dowling and partners. Please go ahead.
Hey, good morning, I wanted to follow up on Ryan's earlier question on persistency and Chris I heard your commentary on <unk>.
Capabilities is a major driver now with retaining business or getting new business. I guess can you just talk about.
The first is the persistency of your business with some of those capabilities like HR connect or the total lead product.
Speaker Change: Yes.
Thanks for the question Joel it'd be no question capabilities, you know again, it changes the conversation and the prospects age of engaging with an employer. It also changes the relationship over time.
So where.
We're consistently talking to customers about what we need for appropriate price up or down, but when done in context of our lead.
Speaker Change: Lead management or the HR connect ecosystem that we're participating in.
You know you can you can just tell theres, a lean to drive toward long term partnerships.
So persistency does increase.
When you're tied to a capability like HR connect deal. That's a very that's a mature offering at this point, we've been partnering with workday for over five years in terms of customers, who choose that platform and other platforms like workforce now.
Multiple years and so we are seeing that favorable retention and again, we get excited about the discussion that focuses on what are the products can we add to that bundle as well as long term price stability. So I think the theme of your question is spot on without getting into too much detail on specific numbers.
I would just add that July I think as Chris is getting its multifaceted so that relationship.
All of those pieces pricing connections the relationship management all of those things come into play, we're really happy with where the presidency was like you said, it's the highest levels that we've seen but it does come back to that ongoing relationship management.
Okay makes sense.
And then switching over to colonial life can you can you talk about what youre seeing from a recruit and productivity standpoint, and maybe provide some more color on.
Speaker Change: On the gather technology and what gives you the confidence that you can achieve that 5% to 10% sales growth target this year.
Yeah. Thanks, Joe This is Tim Argo I appreciate the question.
Timothy Gerald Arnold: So Rick mentioned this I'd like to just reiterate that overall premium growth in the quarter was four 1% versus one 4% last year. So we're pleased with that you mentioned gathering just for those who may not be aware of what it is it's a benefits administration human capital management platform that we can make available and the small into the market.
Especially at no cost to an employer.
And we've seen independent third party data that suggests that about 90% of employers with fewer than 100 employees do not have a benefits enable technology.
<unk> platform. So our technology enabled benefits administration platform. So we're excited about our proprietary offering there we saw very strong growth in adoption rates of gather in the first quarter continuing the great growth that we saw in 2023.
Timothy Gerald Arnold: Another capability that we have it's resonating in the marketplace. Currently is our cross brand solution, so partnering with our peers that Unum U S and.
In colonial life agents have access to those.
Group employer paid products now in the quarter, we saw premium from those products grow at 44% and we saw a 43% increase in the agents at colonial life, who are selling our unum group products. So.
Speaker Change: Okay. Thank you.
Your next question. Your next question comes from the line of <unk> with J P. Morgan. Please go ahead.
Yes.
Hey, good morning. So first just a question on long term care along the lines of what's been asked previously as well but.
You mentioned elevated incidents and you had assumed that but are your reserves right now predicated on an improvement in incidents or is the variability in incidents not enough to cause.
Caused the charge, even if it stays around recent levels.
Yeah, Jimmy I just go back to the statements I made before we will go through our normal process. Our annual process in the third quarter. We will look at all of our assumptions and we will look at that over the long term. So I wouldn't comment on kind of any any individual trends that we're seeing in a certain quarter, what will take a long term view of that when we get through.
And we did just go through a pretty comprehensive review back in the third quarter of last year. So we will take into account what we've been seeing more recently, but I think it's premature to really discuss that.
Okay, and then on on buybacks.
I realize you've increased the amount of decent amount this year.
You're raising the dividend as well, but if we look at yours that income generation and then hold co liquidity RBC levels.
Is that do you have the flexibility to do more than what Youre doing so is the 500 million sort of the number that you'll do this year and it's sort of set in stone Stone Neal review. It next year or is there a possibility that if your results continued to surprise on the upside that you might revisit that later this year.
Speaker Change: Yes, it's a great question, Jimmy and so when you think about the overall capital generation I think both Steve and I reiterated very happy with how we started the year both from a generation perspective.
Important different than it's been in previous years as theres not not to use that will be going towards long term care. So what we generate.
Speaker Change: Is for US is for us to be using right now we're seeing as we talked about our outlook meeting we're going to see those capital levels grow, particularly in terms of holding company cash saw that in the first quarter and so that's a trend we put out there we've increased the pace of redeployment of capital to shareholders and so we're happy about the $500 million you asked is that locked.
And stone I think capital is somebody needs to be managed on a daily basis, and so we will keep obviously looking at that.
We're very happy with the plans, we have in place and what the execution on the first quarter. It looks like towards those plans I'd go back to our users we still want to grow so in terms of growing the business at the rates. We have at the returns we have that's first and foremost both from an organic perspective, and then on the M&A side, we've talked about the types of capabilities that we'd like to.
Speaker Change: On to continue to grow that core business. So that probably gives you. Some sense you know we're tracking as we had not a lot of different message than we had in the first quarter, but we think about capital. We think about its uses are frequently in terms of what it can be so nothing locked in stone, we were very happy with where we are today.
Okay, and then fair to assume that the lapse of the LPC cases, a slight headwind for earnings going forward for that division.
Yeah, It's it's immaterial for earnings.
It was kind of a large impact in the period, but really not material for ongoing earnings.
Speaker Change: Okay. Thanks.
Your next question comes from the line of well not verdict with Raymond James. Please go ahead.
Hey, good morning, RBC in Stat earnings were very strong in the quarter could you just talk about the capital generation and deployment trajectory for the remainder of the year. Thank you.
Yeah, well this is Steve I can take one I can take that one I would say very consistent with the ranges that we would have given at Investor day, we're not really changing our view of that we are happy that we started off strong and I would say first quarter results were a little bit above what our expectations would have been.
But at this point don't feel like the need to really change any of the guidance for either GAAP earnings trajectories or statutory earnings trajectories or the <unk>.
The relevant capital metrics.
Okay. Thank you and this $37 million earnings in international at good run rate and talk a little bit of that in relation to figure was boosted by U K inflation benefits and what you're seeing there. Thank you.
Speaker Change: Yes, I'll talk about that.
Yeah, I'll tell you that I mean, if we working if we look in local currency.
Then the earnings we produced this year put us in a range of $25 million to $30 million.
Sterling for the quarter and we think that we can continue to produce in that in that sort of range.
Speaker Change: And in terms of the inflation impact.
We've seen a reduction of about $5 $6 million in.
Speaker Change: In the quarter and is now largely disappeared.
So there's a small amount of inflation that will continue through the year, but largely it's out of the way now.
The other way to think about that wilmar is the performance for the current quarter.
Speaker Change: It's probably something that's sustainable because the impact of inflation was pretty minimal.
Speaker Change: Your next question comes from the line of Mike Ward with Citi. Please go ahead.
Michael Augustus Ward: Thanks, Good morning.
Michael Augustus Ward: Maybe maybe more for Chris, but just curious about what youre seeing across the key benefits product lines.
Michael Augustus Ward: Trying to think if you have any sense of pricing between different employer sizes.
Chris: Yeah. Thanks, Mike Good question.
Chris: I think that the small end of the market.
Chris: Price is probably a little less sensitive.
Speaker Change: You know.
Michael Augustus Ward: When you get into mid and large it there's probably a little bit more of a sharp eye on how price plays.
Michael Augustus Ward: We do feel it across.
Michael Augustus Ward: All all angles on the on the on the market.
Michael Augustus Ward: Everybody is trying to make a good decision it gets back to where you have specific offering and strategy for upper market segments small medium and large when we bring that to the conversation. It helps us get a fair price. It helps us renew at a fair price that's consistent across we just get there in different.
Michael Augustus Ward: Way, so again upmarket you're talking heavily about leave management youre talking heavily about HR connect downmarket at some of the things that Tim talked about in terms of our gather type offering where our group insurance shows up.
Michael Augustus Ward: That gets a little bit life less price sensitive because you're solving a different problem and we can do that in a couple of days a couple of different ways with our buy unit platform gather or connecting with Ben Atkins of choice in that small end of the market.
Ben Atkins: Thanks, Chris.
Speaker Change: And then one last one just on the on the closed block termination just because it is.
Speaker Change: It's unique but.
Michael Augustus Ward: <unk>.
Michael Augustus Ward: Steve your tone sort of suggests that it was one off but.
Michael Augustus Ward: I guess, if you could could you confirm that or should we think about it maybe as like a risk management tool that.
Michael Augustus Ward: That we hadn't really thought of before for LTC.
Steve: Yeah, Mike I would consider a one off again, we're always talking to our customers across all product lines about the value, we can provide to them and in some of those conversations that the customer just decides that they want to move a different way and so thats what happened with this group.
Steve: Okay.
Steve: Your next question comes from the line of Wes Carmichael Carmichael with Autonomous research. Please go ahead.
Wesley Collin Carmichael: Hey, good morning, just wanted to follow up on this group LTC case lapses. It sounds like your commentary is positive, but I think it was the driver of the increase in the net premium ratio in the quarter, which I guess implies that it was profitable relative to the overall block I just want to make sure that I'm thinking about that correctly. Steve is this just a good thing and reducing risk exposure.
Wesley Collin Carmichael: Is it a bad thing is that the overall block it out is a little bit worse worse off overall.
Steve: Yeah, I would say youre right. Its father for a risk reduction perspective that there was margin in the case and so that's why it drove the MPR up to 30 basis points.
Steve: It does not have a material impact on our go forward earnings and I would say.
Steve: We just feel like it's a one off thing a lot of these grew cases are one one effective dates so.
Steve: The HR departments are reassessing kind of their wallet share and so I would consider it just a one off thing.
Steve: Doubling the individual LTC policyholders rate for Unum America. So your comments to state regulators said that the experience review that you did last year is kind of driving the need for this additional rate increase and I'm just trying to square that away with the idea that statutory reserves are significantly redundant.
Steve: Yeah, what I'd say and it's a totally different I guess construct as far as how those rate increase.
Steve: Rate increase requests our capital or our calculated you look at really the lifetime benefit ratio to.
Steve: To get to the actuarial justified amount that you can ask for that's much different than our current statutory reserve construct which has quite a bit of margin in it where when you look at those rate increases you're not really able to incorporate what I would say would be the same levels of margin into your assumption side. It is more.
Steve: The best estimate I'm also I'm not going to really comment on that specific filing where we're not doubling individual rates right now as part of the current program that the focus right now is it mostly on the group.
Steve: Block of business, where we've got the most opportunity there so I won't comment on that specific to the island.
Steve: Your next question comes from the line of Mark Hughes with <unk> Securities. Please go ahead.
Mark Douglas Hughes: Yes, Thank you and good morning, any themes dimension in the group life mortality sounds like it was better or is that the.
Mark Douglas Hughes: Multi quarter trend or just this quarter.
Mark Douglas Hughes: Yeah no.
Mark Douglas Hughes: It is interesting what we've seen over the last couple of quarters in group life, and AT&T and in the fourth quarter of last year, a loss ratios just below 70%. This quarter. It was just a little bit about 68%. So so both very good quarters and quite a bit below what our expectation would be and I reiterated in my comments, our expectation continues to be in the low <unk>.
Mark Douglas Hughes: <unk>, what we saw in the fourth quarter last year was more around perform favorable performance at our waiver of premium part of that business. We consider that more of just kind of a one off thing that we saw in the fourth quarter and volatility and that played out in the first quarter, where the waiver premium performance was right at <unk>.
Mark Douglas Hughes: Expectations I'll say, then if you just look at kind of core mortality the actual incidents of mortality in the fourth quarter. It was pretty close to our expectations I would say and then when we got into the first quarter. It was very favorable to what our expectations would have been and so that's what's really driving the six to eight 2% benefit ratio in.
Mark Douglas Hughes: The first quarter, we again think that's just volatility around mortality and that's why we're given guidance. If you look for the remainder of 2024, we think the loss ratio will go back up into the <unk>.
Mark Douglas Hughes: In the low seventies, and then that's how we price for it.
Mark Douglas Hughes: Yes.
Mark Douglas Hughes: Easier flu season, I hadn't looked at that data.
Mark Douglas Hughes: You know it's interesting you have to kind of look across age categories. I'd say, what we saw was probably in the older age think LTC claimants. It was probably a fairly regular flu season, just the mortality that we saw there.
Mark Douglas Hughes: But the group life block is more in kind of the working age group and just what we saw there was lower mortality.
Mark Douglas Hughes: It's a relatively small book as well. So so you can have a bit of volatility there.
Speaker Change: I appreciate it thank you.
Speaker Change: Thanks, Mark your next.
Speaker Change: Your next question comes from the line of Joshua Shanker with Bank of America. Please go ahead.
Joshua David Shanker: Yeah, Hi, there. Thank you for taking my question. This morning hope you're all well.
Joshua David Shanker: Question about long term history and after periods of notable wage inflation and full employment.
Joshua David Shanker: Is there an outlook for what happens to volumes and price.
Speaker Change: This macro backdrop as we look out a few years.
Speaker Change: And so that's a good one Josh I appreciate that to wrap up I think we're in that period of wage inflation and good employment numbers I think there's been a lot of discussion here in the last couple of years of that abating, which we have not seen that I think those two are still looking very good it's been a long time since since we've actually seen.
Speaker Change: That and so when you go back in history, and how we come out of that period can be very very different I think probably the latest example that we've seen some of that inflationary type of at least on the wage side would be over a decade that we've seen.
Speaker Change: But we think the employment picture actually looks good how benefits are structured today are good for people and that time, Chris I don't know if you'd add anything to that it's a it's an interesting question I think we're focused probably a little bit nearer term in terms of what the environment looks like today, but but it's a good hypothetical.
Chris: I think we see continued interest in the whole kind of talent topic, where where we need a good benefits packages to attract and retain good talent and as long as that persists.
Chris: Our ability to be creative in terms of what we bring how we present it and how we can enable the employee population to utilize that that's that's good for us and our employers as.
Chris: As we look forward. So in addition to what Rick is saying, we like the fact that attract and retain is still a major topic.
Chris: Okay.
Chris: I don't mean to be labor the point, but just trying to learn more is there anything that might be learn at a local level that you've seen in different geographies.
Chris: Fees that have had few reader.
Chris: Boom or whatnot about what happens to your offering or what happens to the disability.
Chris: Opportunity post the period of significant growth.
Speaker Change: I think the the thing I would say is.
Speaker Change: We think about it in terms of what our employers offering and that will kind of flow a little bit with what their attract and retain needs are and then on the back end, it's claims management and having a superior team who can manage through cycles, where there are different kind of economic factors at play in terms of bringing people back to work which is good.
Speaker Change: For everyone, we do a phenomenal job operationally.
Speaker Change: As experts in that space.
Speaker Change: As we add lead management, we could be become more important. So I think we're going to continue to have our ability to kind of find the right type of customers to partner with and it and to help them enhance their business.
Speaker Change: Different cycles.
Speaker Change: I would just add Josh I mean, if you look at go back within the last 10 years, what we've seen so you've been in that wage inflation, that's a pretty short lived type thing.
Speaker Change: You can go back to just before that where we saw the exact opposite with what happened as a result of the pandemic our business model held up very well through that period of time, and so what you're asking and thinking about it is when you get into a much more difficult economic situations coming off the good times when you see higher claims levels, where you see different to premium growth and I think through the last 10 years.
Speaker Change: As we've been able to grow very well through both which is a very difficult time, they're one of the worst we've seen in terms of the pandemic and then coming out of that very very good inflationary period, that's where we sit today and I think where we sit today is that a really strong position. The processes are in place our product set is really good. The overall structure of the company is as good as <unk>.
Speaker Change: Well and so I'd I'd leave you on that very optimistic point in terms of what we look to the future we remain very optimistic.
Speaker Change: Well, thank you for indulging me.
Speaker Change: Have a wonderful morning.
Speaker Change: Thank you Josh.
Speaker Change: This does conclude our question and answer session I will now turn the call back over to Rick Mckenney for closing comments.
Richard McKenney: Great. Thank you that was a great great question wrap while I appreciate that Josh we wanted to thank everybody for joining us. This morning, and your continued interest in Unum. We are very delighted with our first quarter results and optimistic about the outlook for 2024 and beyond and so with that let's conclude today's call. We'll look forward to connecting with you all again in the very near future.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: [music].