Q2 2025 Unum Group Earnings Call
Thank you for standing by. My name is Jeanne, and I will be your conference operator. Today, at this time, I would like to welcome everyone to the Unum Group second quarter 2025 earnings call.
Online lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. We do ask that for today, you limit yourself to 1 question and 1 follow-up. Thank you. I would now like to turn the call over to Matt Royal, Investor Relations. Please go ahead.
Great. Thank you, Jeanne, and good morning to everyone. Let's get started. Welcome to Unum Group's second quarter 2025 earnings call.
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 filing with the SEC, for a description of factors that could cause actual results to differ from expected results.
Yesterday afternoon, Unum released our second, quarter earnings press release and financial supplement. Those materials may be found on the investor section of our website along with a presentation in the most directly comparable, gaap measures, and reconciliations of, any non-gaap Financial measures included in today's presentation.
References made today to core operations, sales and premium including un International or presented on a constant currency basis.
Participating in this morning's conference call our unimes president and CEO Rick McKinney Chief Financial Officer. Steve zabel, Tim Arnold who heads our Colonial Life and voluntary benefits lines. Chris Pines for group benefits. Chris Pine for group benefits and Mark till CEO of Unum International. Now let me turn it to Rick for his comments.
Thank you Matt and good morning to everyone joining us today to discuss our second quarter results.
There are 3 key areas, I'll address in our opening remarks. First, a look into our current period earnings and the variability that we saw, second a view of the market dynamics, and the implications for our franchise. And third, a look at our Capital levels, Capital deployment, and ongoing management of the closed block
Looking at the second quarter, it was $1 million, where results fell short of our expectations, particularly in GAAP earnings.
More broadly. Our core fundamentals, remain solid particularly in premium growth.
And we continue to make meaningful progress against our key strategic priorities.
Notwithstanding this benefits experience in several lines, of business was higher than our expectations, for this quarter and caused the overall shortfall.
From the top-line perspective, the second quarter results include a continuation of strong premium growth near 5%, with growth experienced in almost all product lines.
Premium growth is at the heart of our business model and drives our ability to protect more people in the workplace.
With disciplined pricing and risk management. It also drives consistent earnings growth over time.
Several factors support premium growth, including the renewal of current customers. The increase in the number of employees on payroll and their relative wage inflation. And the addition of new customers with new sales
Similar to 2024, sales in the first half of 2025 have started slower than our annual growth expectations, resulting in lower year-over-year performance. As you may recall, the back half of the year is a critical time frame and will include a majority of annual sales, with the fourth quarter being our largest last year. It accounted for more than half of annual group sales.
Given results to date. We recognize there is more work to do.
While difficult to predict, we expect sales growth to improve in the second half of the year and show relatively flat sales growth for the full year.
Equally important to our premium growth is persistency of current customers which has a more immediate benefit to the financial results than even a new sale.
We saw a modest uptick in persistency in the second quarter. Ending the first half of above our expectations, across the board, which keeps our premium growth on track.
Based on Market feedback, our continued investments in digital capabilities and service. Excellence are resonating with clients.
Reinforcing our competitive position is helping us both win new business and retain existing relationships.
Specifically, since 2023, we've seen average persistency several points. Higher. On cases, utilizing our HR Connect platform, over non-hr, connect business.
This platform allows employers to have a tighter more simplified data connection with us.
as far as wage inflation and employment levels these both appear to be tracking on our expectations,
turning to the margins in our business core operations, continue to demonstrate solid fundamentals with benefit ratios across all lines, tracking within our expected Outlook ranges.
However, earnings were lower than we'd expected driven by claims experience in our group products as well as the closed block.
In group disability, the benefit ratio is 62%.
This is higher than what we built into our Outlook coming into the year, but it is another strong result on historical basis.
We are leaders in disability insurance and that these levels, this continues to be a well-managed high returning business.
We continue to see stable levels of paid claim incidents, steady levels of recovery, and there appears to be reasonable pricing discipline in the market.
This points us to continue to have a full year, expectation of a better fit ratio in the low 60s.
Doing group life and AD and D of about 70%, was in line with our Outlook. It was elevated compared to Prior year due to higher average claim size, which can be volatile quarter to quarter.
We're still very happy with the performance here. Although this margin is a little a little bit less than the very high margins we experienced last year.
Across our other core operations, earnings were relatively flat in our International and Colonial Life segments, but both experienced solid premium growth. International was up 12% on a constant currency basis, and Colonial Life started to build its growth trajectory with a 3.5% premium growth.
These are businesses with excellent margins and opportunities for continued growth.
Turning to the closed block, there are multiple headwinds in the quarter.
On investments are alternative Investment Portfolio. Fell short for the second consecutive quarter but continue to inch closer to our 8 to 10 percentage.
We also saw claims pressure in LTC while incidents counts. Continue to remain similarly elevated. The pressure was more related to claim size.
Most notably, we've advanced our strategic work in addressing the closed block. Earlier this month, we announced the closing of our external reinsurance transaction.
This is a major step forward in focusing, our long-term strategy of positioning, Unum, as a leading employee benefits provider, while meaningfully reducing our exposure to Legacy, long-term care.
The transaction reflects our disciplined approach to managing the closed block.
By improving our risk profile, freeing up capital and sharpening, our focus on more Capital efficient higher returning, core businesses. We're reducing risk and strengthening protections for policyholders.
We continue to prioritize actions aimed at increasing prices, where appropriate, and reducing the risk of the footprint of the closed block.
So bringing it all together. Given the results we have seen year to date and expectations of the environment for the rest of the year. We now expect full year EPS to be approximately 8 dollars, 50.
While this represents a notable shift compared to our expectations entering the year, we are driving a consistent strategy.
We see high returns and growth opportunities that remain for our core business, in conjunction with several years of exceptional performance.
We also remain encouraged and committed to further reducing our LTC exposure. A block. We will continue to manage with the same discipline we've demonstrated for well, over a decade.
We execute this strategy with a company in a robust capital position, building from a strong capital generation model. We ended the quarter with $2 billion in holding company cash and a 485% risk-based capital ratio.
We are well positioned to remain ready to act when attractive opportunities arise.
We recently took several actions aligned with our Capital deployment priorities to enhance the franchise and help position us for future growth.
In the UK, we acquired a relatively small block of Group business, and became the exclusive UK employee benefits partner, for the generally employed benefits Network.
This action leverages our leading UK operations and supports our efforts to scale the business in the years ahead.
In the US, we completed a capabilities driven acquisition to further, enhance our industry-leading digital platform.
Similar to our 2018 acquisition of Lee Logic, this platform, being stock benefits, is a technology solution that will be integrated into our existing customer experience ecosystem.
Strengthening our overall digital offering.
While an immaterial Capital outlay this capability, complements our traditional Insurance product. Set by providing digital enabled resources, allowing employers to better care for their employees at time of need.
These two transactions represent the kind of areas where we will look to continue to invest.
Of course, our lab, our largest capital outlay is returning capital to shareholders.
Consistent with our long-term capital deployment framework. We announced a 10% increase in our annual common stock dividend and repurchased million dollars in shares during the second quarter.
That brings the year to day, total of capital return to 650 million with 150 million in dividends and 500 million in repurchases.
After closing the LTC transaction and our solid overall position. We now expect to finish the year toward the upper end of our 500 million to 1 billion range of Sherry purchases that was outlined earlier and end the year with continued, strong capital.
The same period last year reflecting the earnings pressure. Rick described earlier core operations. Premium growth was 4.6% in the quarter. Keeping us well on track to achieve our full year premium growth Outlook of 3 to 6%.
This growth was driven by strong persistency and natural growth. Within the enforce block, both of which will mitigate the impact of pressured sales.
While these growth fundamentals, remain strong. We experienced some headwinds in the first half of 2025 that our reflected in our updated Outlook, when also considering our view of Trends in the second, half of the year. We now are expecting 2025 after tax adjusted operating earnings per share to be approximately 8 dollars, fifty cents.
I will take some time to unpack the key changes to our Outlook in a moment.
Diving into our quarterly operating results across the segments. The union us segment, produced the adjusted operating income of 318.2 million in the second quarter of 2025 compared to 357.5 million. In the second quarter of 2024 as described in our Outlook benefit ratios for group disability and group, life and ad&d, were expected to increase and impact earnings growth on a year-over-year basis.
This includes our full year 2025 expectation for low 60s and around. 70% benefit ratios for group disability and group life and AD and D respectively.
Group disability adjusted operating earnings of $124.8 million in the second quarter of 2025.
Reflects a benefit ratio of 62.2% compared to 59.1% in the year ago. Period, the increase in the benefit ratio was driven by lower recovery compared to the year ago period while recoveries were less favorable than they were a year ago. They are still running in a very strong level on a historical basis.
Sequentially. The benefit ratio was roughly consistent with the 61.8% in the first quarter with recovery is also consistent. But results were impacted by larger, average claim size, which can be volatile quarter to quarter.
Despite the slightly higher benefit ratio in the second quarter Returns on this line of business are still robust as shown by its Roe in excess of 25%.
Results for unimus group life, and ad&d include adjusted. Operating income of 70.2 million for the second quarter of 2025 compared to 89.1 million in the same period a year ago.
The benefit ratio increased to 69.7% compared to 65.4%, driven by an increase in average claim size.
While the benefit ratio increased represents a sizable change from a year ago, it is consistent with our expectations laid out in January of approximately 70%.
Adjusted operating earnings for the Unum supplemental and voluntary lines were $123.2 million in the second quarter, an increase from $15.2 million in the second quarter of 2024.
The increase was driven by voluntary benefits premium growth and favorable benefits experienced the voluntary benefits benefit ratio of 44.3% was lower than the prior Year's resolved before 45.1% due primarily to critical illness and Hospital Indemnity benefits experience.
so, turning to premium Trends and drivers, um, us premium grew 3.9% with support from typical levels of natural growth and persistency at levels above our expectations,
Similar to last quarter group, disabilities reported premium was flat with prior year due to the runoff of the stop-loss business.
Excluding this impact group disability, premium grew, approximately 3%, year-over-year unimus quarterly sales of 262.4 million. Compared to 313.24% of 89.7%, increase sequentially from the first quarter, but decreased from 92.4% in the same period last year as expected
Moving to Unum International, the segment continued to experience solid results. Adjusted operating income for the second quarter was $41.6 million compared to $42.5 million in the second quarter of 2024.
Adjusted operating income for the UNAM business was 29.4 million pounds in the second quarter compared to 32.5 million pounds. In the second quarter of 2024.
Ago.
The change in benefit ratio was primarily due to inflation differences year-over-year with a corresponding earnings offset reported in net investment income.
International premiums continue to show strong growth supported by Unum, persistency of 91.6%, a result higher than both the first quarter and the same period a year ago.
WK generated premium growth of 10% on a year-over-year basis. In the second quarter, while our Poland operation grew 21.8%. The international business's sales were 65 million compared to 67.9 million in the same period last year.
Next adjusted operating income for the colonial life segment of 117.4 million in the second quarter. Increased from 116.9 million in the second quarter of 2024, with the increased driven by premium growth of 3.6%.
The benefit ratio of 48.3% compared to 47.8% in the year ago, period. And similar to most core operations products was within our expected, range provided in the Outlook,
Premium income of $462.1 million compared to $446.2 million in the second quarter of 2024 was driven by higher levels of persistency and a growing trend we've seen in sales momentum, fueled by strong agent recruitment and productivity trends.
Sales in the second quarter of 126.5 million increased 2.9% from prior year, primarily driven by new account sales, we are very pleased with the Topline momentum at Colonial Life and its ability to produce strong returns including an Roe of 18.6%.
In the closed block, segment adjusted operating income of 3.9 million was significantly, lower than last year's result of 24.4 million. The decrease was due primarily to unfavorable LTC benefits experienced. Primarily in cap cohorts, which drives higher levels of current period earnings volatility.
The LTC net premium ratio is 94.9% at the end of second quarter of 2025 higher than the reported 93.7% in the same year ago period due to experience as well as the Assumption update in the third quarter of 2024.
Sequentially, the MPR increased 20 basis points compared to the first quarter of 2025, breaking down the drivers of experience in the quarter. The majority of pressure was a result of higher average size of new claims and lower size of climate mortality.
Incident counts continue to run above our longer-term expectations, but were in line with our recent experience.
The annualized yield on the alternative asset portfolio was 7% and was slightly below the low end of our long-term expectation of 8% to 10% returns.
For the first half of 2025, the portfolio generated a 6% annualized yield.
Each percent of yield contributes approximately 14 million dollars in annual earnings, most of which supports closed block liabilities.
Due to our actual earnings in the first half of the year and a revised view of alternative asset yields towards the lower. End of our 8 to 10% long-term expectation for the second half closed block, earnings are trending below the expectations. We had entering the year.
As such we now, expect full year closed block earnings to be between 90 million and 110 million.
Finally, we Advanced our closed block strategy with closing with the closing of the external reinsurance transaction on July 1st.
We continue to stay focused on actions that create value, reduce the footprint and increase predictability of outcomes for the block.
In terms of premium rate increases, we continue to make progress and have achieved approximately 60% of our current reserve expert expectation through the end of the second quarter.
Then wrapping up my commentary on the segments Financial results. The adjusted operating loss in the corporate segment was 31.7 Million compared to a 45.3 million loss in the second quarter of 2024.
Primarily driven by a higher miscellaneous net investment income, which we don't expect to recur.
We expect quarterly losses in the corporate segment to be in the mid 40 million range for the remainder of the year.
Moving down to Investments. We continue to see a good environment for new money yields and credit quality.
Increased to 37.3 million compared to 35.4 million a year ago, as higher traditional Bond, call premiums offset, lower alternative investment income.
Income from our alternative invested assets was 25.3 Million. Representing a 7% annualized yield as previously discussed.
As of the end of the second quarter, our total alternative invested assets were valued at $1.5 billion, with 45% in Private Equity Partnerships, 37% in Real Asset Partnerships, and 18% in Private Credit Partnerships.
Now, let's move on to an update on our capital position. As expected, our capital levels remain well in excess of our CAR targets and operational needs, offering tremendous protection and flexibility.
The weighted average risc-based Capital ratio for a traditional us insurance companies, increase to 1 of the highest levels. We've seen at approximately 485% and holding company, liquidity remains robust at 2 billion dollars,
Now that we have finalized the two LTC transactions announced earlier this year, we anticipate a year-end RBC of 425% to 450% and holding company liquidity between $2 billion and $2.5 billion, both in excess of our long-term targets.
I will also add that dividends from our insurance subsidiaries are traditionally weighted towards the fourth quarter, which will change the geography of excess capital from risk-based capital to holding company cash as we close out the year. The strong position also considers our intention to return capital to shareholders in the second quarter. We paid $74.2 million in common stock dividends and repurchased $300 million of shares.
Through the first half of 2025, we returned $500 million of capital through share repurchases, which puts us on a trajectory to finish the year towards the top end of our expectation of $500 million to $1 billion for full year 2025.
Capital metrics in the second quarter, continue to be supported by solid statutory. After tax, operating income of 291.8 million, for the second quarter or 781.6 million for the first half of the Year. This does include approximately 130 million dollars of reported statutory income. That resulted from the internal long-term care. Reinsurance restructuring. We executed in February
Considering where we are today, we've taken the opportunity to re-examine our outlook across all dimensions, including topline margins and capital.
starting with Topline while we feel confident in our ability to hit our 3 to 6%. Premium growth Target for core operations. How we get there, may look slightly different.
From a sales perspective, we are now anticipating relatively flat core operations. Sales in 2025, with varying, considerations for each of our segments.
Compensating for lower than expected sales, growth is higher than expected levels of persistency throughout our businesses.
Moving to margins through the first 6 months of 2025. We've seen our group disability benefit ratio. However, around 62%, while this is in line with our low 60s range, it is slightly above our internal planning expectations. Given recent stable levels of recovery, we expect results to stay in the low, 60% range and in line with the results seen throughout the first half of the year,
Outside of group disability, we have also seen lower alternative investment income results.
While the returns improved sequentially, they are below our long-term 8% to 10% target.
Despite the first half results, we see the lower end of the target returns achievable for the second half of the year. Lastly, while not a change to our outlook with the long-term care transaction now closed, we will see a step down in supplemental and voluntary earnings power of approximately $10 million per quarter starting in the third quarter, representing the seated individual disability income business.
considering all of this we are now forecasting, fully your earnings per share of approximately 8.50 with the quarterly run rate increasing as the year goes on driven by the growth of our enforce book and the impacts of share repurchases,
as already mentioned, we are projecting holding company cash to finish the year in the 2, to 2.5 billion dollar range which now reflects settlement of the long-term care transaction and our expectation for increased share, repurchase,
Of our 500 million to 1 billion range.
We see significant value in buying back our stock and will continue to do. So to return, Capital to our shareholders.
So, to close, while we took the opportunity to refine our outlook based on first-half results, the underlying fundamentals of our business remain solid.
Our Core Business continues to deliver on both top and bottom line. Trends, including continued premium growth of 4.6% and robust returns, including an Roe of 20.9%.
Our level of excess capital puts us in a position of strength and enables further flexibility to fund growth, return significant capital to our shareholders, and pursue further de-risking opportunities for long-term care.
We remain encouraged and cautiously optimistic for what the rest of 2025 has in store. Now, I'll turn the call back to Rick for his closing comments, and I look forward to your questions.
Thank you Steve, as we head to your questions, let me reiterate. We believe strongly in our strategic positioning and our business model.
We have the capabilities and capital to deliver for our customers expand, our reach and create increasing value for our shareholders. So now let's move to the question and answer session Genie. If you could start with the Q&A,
Thank you at this time. I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad. Again, we do ask that you limit yourself to 1 question and 1 follow-up.
And your first question comes from the line of Mike Ward with UBS. Please go ahead.
Thank you. Good morning. Um, on group disability just hoping you guys could unpack the underlying drivers of the elevated claims. And what you've seen, that drove the change in guidance. And if you're seeing any of that continued into July,
Great. Yeah, this is Steve, Mike. Thanks for the question. And um, yeah. So generally speaking, you know, we continue to feel great about the margins on this block. Uh, and and the loss ratio it is a little bit above our expectations that we had coming into the year. You know, it's been pretty consistent. The first 2 quarters
At uh at 62% um what what I would do is refer back to, you know, last year we did see recoveries that were a little bit higher than what our longer term, expectations might be and incidents. That was pretty favorable. So, as we came into the year, you know, we did think that we'd see a little bit of normalization there and what we've really seen as recoveries have been a little bit below our expectations in 2025 but very stable kind of quarter to quarter. We have seen a little bit of of elevation in our incidents and and really it's it's kind of 2 stories in the first quarter is a little bit more related to count and it was a little bit more acute.
Earlier in the quarter that really is subsided in the second quarter. Now, what we're seeing in the second quarter is a little bit, you know, higher than expected size of those new claims. And, and as we look out the year and we're trying to set the Outlook and set expectations, we think, 62% is a pretty good anchor for that. But obviously, with, with this type of business, we may see some variability, uh, in both recoveries and and new claims, but I feel like we, you know, we have pretty stable experience for the first 2, quarters relatively speaking, that that we can use that kind of as in our anchors we're going in the back half of the year.
The the the other, you know, question obviously with just the claims performance itself is just what's going on with pricing in in the environment and the influence that that might have on the loss ratio. And so maybe maybe Chris, it's it's always good to just hit on what we're seeing in the markets right now. Yeah, thanks Steve. So uh, good morning Mike, you know competitively, you know it's still a consistently competitive market. Um and you know we always expect to compete hard uh, to make these deals come together. Um, you know, we we would say where we, we can put, uh, capabilities together with the right Prospect. Uh, we still find it to be a favorable environment. Obviously sales were were disappointing in the quarter and, uh, Rick appropriately kind of, uh, outlined what we think the back half of the year is going to be. It's, it's, it's, it's going to be big, but we did reset to be, you know, flat for core operations. Are you going to us? We'll have the most headwind in that mix. Uh, but, uh, you know, we're still looking hard to find, uh, plenty of prospects, still out there.
Indecision making mode right now. So inventory is there? Um, and we've got, you know, with capabilities that are interesting relative to integration with tech platforms and and Lead management. So um, that's where we stand right now and uh, we're working hard in the back. Half of the year. Yeah. Mike to to kind of zoom into the current quarter a little bit as well. We don't really see kind of pricing actions being a material part of what we saw in the benefit ratio for the second quarter. And so um, what we'll definitely just be monitoring, the operational aspects of just the claim management as we go to the back half of the year.
Appointment mortality: Do you see the current quarter result as truly a one-off or as normal volatility? Is there anything about the remaining block or the health profile that could cause pressure to persist?
Yeah, so, yeah, 2 2, important questions in there, so I'll Focus just on what we saw in the second quarter. Um, we, we actually saw the counts of new claims pretty consistent with what our expectations are. And I know that's been something obviously, that has been elevated here for a couple years, that that was pretty much in line with what our expectations were coming into the year. And so you're right that there really was kind of an average sized, um, uh, variability that we saw in the current quarter. It impacted though. Both new claims, as well as those claims that terminate due to mortality. And, and just to, to kind of scope it out that they were both about 5% off, what our expectation would have been. And so, we view that right now, from what we're seeing, as just volatility that they, they were, you know, pretty pretty, pretty different than what we've seen here over the last several quarters. And so we we wouldn't expect that to continue as we go into the back half of the year and so you know, as we were thinking about the outlook for closed block,
Which I, you know, I noted or reset Outlook is somewhere between 90 million and 110 million dollars for for the full year. Uh we we did bring the annualized yield on the all portfolio down to that lower end of the 8, 8 to 10% range but we haven't really adjusted kind of the benefits performance for the back half of the year um to you know, to any way um kind of put in less favorable benefits experience than what we had anticipated coming into the year. So what we're seeing right now, we think it's an anomaly, but obviously with this line of business, we're going to have to just see how it plays out for the back, half of the year.
Thank you, Steve.
Thanks Mike.
Your next question comes from the line of John barnidge with Piper Sandler. Please go ahead.
Good morning, thank you for the opportunity.
My first question, given the long-term care experience just stick with that. And the first half of the year, how should you be thinking about the upcoming annual Actuarial assumption review?
Yeah, you know, on that I I would say just to reground we complete. Our Gap, assumption review in the third quarter and Report out on that as we get to our third quarter earnings review. Um, and then we we look at the statutory Reserve adequacy as we're going into the end of the year. So it it's pretty early in that process. Um, we'll take into account kind of, you know, all the experience that we've seen over the last several years as we update our experience at, but we're constantly,
Looking at that the I I make 2 points. 1 would just be about just remind people around the 2.6 billion dollars of protection. That we feel we have within the long-term care balance sheet. So, you know, when we make adjustments to our best estimate for Gap, you know, we do have a lot of protection against that best estimate when it comes to our our Capital position. Um, and then I would just say we're we're kicking that off that off right now. And you know, we we'll see how that plays out as a year plays out. I I I will remind myself. I actually didn't answer all of my questions and I just to get that point across about, you know, with the deal. How did the experience we saw in the um, second quarter? How does that impact the the part that's reinsured versus the part that's remaining? And what I'd say is we really saw this experience across both parts of our book of business. It does it didn't really influence what's going to be remaining in our book versus what we reinsured, you know, kind of non proportionally. So so sorry I didn't hit that 1.
Mike.
Thanks for the answer Steve and then my other question around BuyBacks.
Given the excess Capital position.
Um,
how she would be thinking about sustainable free cash flow conversion at the company.
Given completion of the transaction. And why not more BuyBacks or is this more about
The sustainability of free cash flow conversion, not just 1 year.
150 million through the first half of the year will be just over 300 million for the full year and then to your point around Sherry, purchase and how we think about that, we've increased our Outlook to the top end of the range of 500 to a billion. And I just take you back a couple of years in terms of what that's looked like. Uh, so you go back 2 years ago, we were looking at more in the 500 level. Last year, it actually was about 750 million from a run rate perspective, although we did do more because of some balance sheet restructuring that we did. And this year we'll be at the top end of that 500 to a billion dollar range. And this is something that we look at from a sustainable basis. We do have excess capital and we do have the ability to act on that. Um, but that is where we'd like, to to sit right now is is at that level. And so the opportunity is there, um as we've said, we're going to be dynamic around Cherry purchase. And so when we see the opportunity to do there and as we continue to have very strong Capital generation, uh we're not afraid to to do what we think, is, right, overall for increasing shareholder value. So, hopefully that gives a sense.
Um, you know this is this is something we're playing out of a longer term and you've seen that progression. As you look over the last several years of how the increase in Cherry, purchase has been good for our shareholders.
Thanks for the.
Thanks, John. Your next question comes from the line of Elise Greenstand with Wells Fargo. Please go ahead.
Hi, thanks. Um, good morning. Um I guess I wanted to come back um you know just a disability and and the updated guide for the second half of the Year, you guys are looking for it to you know, make kind of be consistent with the first half. And so when you think about that are you expecting um you know the you know the elevated persistency from the first quarter to persist or the severity that you guys saw in the second quarter and then I'm also interested, right? If you know, kind of 62 is the level for this year, how should we think about, um, you know, kind of, you know, 26, um, you know, beyond 25, just the loss ratio of the business as well.
Yeah, so maybe maybe I'd start and just, just say, at least, I appreciate the question and I just reiterate some of the things that Steve said, you know, this is a very high returning business even in the, in the levels that we've seen this far. So, we're very happy about where that's been the persistency level in this block how it fits into the overall portfolio. And so, I just reiterate that first of all, and as we think about coming years, uh, how we'll talk about that. But Steve, maybe you can give a little bit, a little bit deeper context, in terms of why we're thinking we are where we are, and where we think we might go, yeah, I I kind of break apart the, the benefit ratio between what we're seeing with recoveries in the current year. And then what we've seen with incidents, recoveries are are pretty close to what we would have expected and and they are lower than what we saw last year. But, but last year recovery is were very strong and
Part of the reason that um, we were operating kind of that high 50% benefit ratio last year and we really raised our expectation coming into this year and it was because we we thought that recovery rates would come down a little bit, but they're pretty much right on top of what our expectation would have been and how we see that plane through. So we think that part of it is pretty sustainable and that's built in to kind of that. 62%, um, expectation for the back half of the Year incident is where it's been a little bit higher than what we would have thought coming into the year. And the first quarter, you know, we had
Some kind of very early year count elevation within the benefit ratio and then that came down in the second quarter and the second quarter it was more around average size and so you know that there is the possibility that incidents will come down in the back half of the year but as we're trying to set you know an Outlook um that has some reasonable assumptions. We thought it was just prudent to look at how it's performed for the first half of the year and the 62% range and just really carry that forward to the back half of the year to set that kind of spot. You know that spot expectation for EPS for the full year and then really Beyond this year we we wouldn't see any reason for the operational performance to to change longer term but that you know, that's something we'll get into as we close out the year. See how the back half of the Year performs, see how things are going just kind of from a commercial competitive environment and then we'll, you know, we'll we'll kind of set expectations as we're going into 2026 but we don't see anything operationally right now that wouldn't be sustainable. And I just reiterate that lease which is, you know, the team is doing a really good.
Job of pricing on the front end of the business, good risk management the claims management of the teams that's actually able to do that helping to get people back to work. That's all going. Very, very well. And so it is that competitive Dynamic which is hard to predict in terms of what that looks like. But I would reiterate that where we stand today, the competitive environment has been reasonable, it's always competitive. People are always looking to, to grow their own piece of the business. But what you look out for is somebody that comes into the market and and actually is unreasonable in terms of how they price. We're not really seeing that. We think we're seeing good competition in the market today. And I think that bodes well for for where this is going to go over the next couple years.
Prepared remarks. You guys said you're committed, right to further. Reducing your LTC exposure and I know. Right. When you announced the transaction, you know you said you guys were also, you know, potentially looking into other things. So can you just now that the deal is closed? Just give us an update just on you know discussions you know relative to, you know, future transactions with the block.
Certainly, I I think, uh, you know, there's a couple things that we did earlier in the year 1 was actually the transaction external reinsurance. We also did some internal structuring in the block, which I think was a, was a good positive move for the Enterprise. And then, as we, we, as we said, then as we will say, now we're continuing to look and how we reduce the size of the footprint of LTC, um, from an external perspective, and we continue to be active in the market, so that really didn't slow down with the transactions that we think. This is something that strategically we want to continue to do. Um, and we will, we'll keep looking at that from a market perspective and, and how it is. I think it EBS and flows. And so, I think we're still in that period of time as you've looked at 3 transactions that have happened externally now, I think that's a good thing overall for the market. So you're starting to see repeatability in these type of transactions. Um, but they're very hard to do. And so I would just reiterate, you know, that, that we'll keep working hard at that. But the, the ability and the, the timing of, when something will get done, it's very hard to predict
Thank you.
Your next question comes from the line of Ryan Krueger with KBW. Please go ahead.
Hey, thanks, good morning. Um, first question was on, um, was on the Dynamics with more more, uh, plans staying put with their existing carriers, I guess, maybe. Can you just give a little more color on? Why? Why you think that's happening? Do you think it's more related to the pricing and competitive, that that makes or do you think it's more about uncertainty in the external environment? And, um, and plans just wanting to not make changes right now?
Yeah, Ryan, it's Chris. Thanks for the question. Um, you know, you're right, we have seen and and we're the benefactors of it on our block where, uh, you know, some of, uh, the power sits with the incumbent carrier. Um, and you know, and certainly, uh, there are there are elements of, uh, you know, people trying to protect their block because it, it's favorable right now. And, and think and people want to, you know, make sure that they're putting together a, a fair deal. We're, we're uh, kind of leaders in that where we'll work customer by customer, uh, to, you know, show in a very transparent way, what the loss ratios look like sometimes cases need, uh, rate increase and and we share that other times. The rate reduction, we share that all the time is your, you know, your setting price at current for a a longer term, more stable, uh, type environment. That's you know, that's always our goal. And um, I you know, I do think that right now uh,
In the financials of the, uh, of the business. Uh, you know, we've got some competitors who are probably doing some similar things, or I'm trying to, you know, make sure that they're, they're not losing customers that are generating a reasonable, uh, return. Um, you know, we still think that, uh, there are plenty of, uh, people out there prospects that that do need help with, uh, you know, either taking advantage of tech Investments that they've made and platforms for their ecosystem and or solving, you know, bigger problems like Ali management. So, it it still a dynamic, uh, in environment. We still have, you know, customers out there looking for Solutions, we're creating our own luck there. So we we intend to, you know, find enough to to drive our our second half sales results and Beyond. Uh but you know, I think you do point to some things relative to competitive environment. They're a little bit different right now or the incumbent is favored from a macro perspective. You know, certainly, people are making their own decisions around, you know, what, what's on their plate, uh, for, you know, a different elements, uh, in their industry. But, you know, to me, that's not the biggest driver. It's it's, uh, it's probably more localized.
And and right, I I just maybe put about, I put a bow on that a little bit and just come back to, you know, our feeling for our premium growth Outlook this year plays out. And, you know, I I mentioned in my remarks, we do think that the trajectory is going to look a little bit different as far as the contribution of sales versus the contribution of persistency. And so, as we look out though, we still feel really good about the Outlook that we put out there for premium growth in our core operations and you know, we mentioned a couple things we'll have to adjust.
Driving improved levels of Premium growth and a little bit above expectations. In addition, you know, you think about persistency at the employer level and also at the employee level for Vivi and increasingly we're seeing that the people who buy these products, understand the value of them.
And what to keep them for longer periods of time. Um, if you think about Freedom growth, also, you know, we're we're very fortunate to have had double digit growth on the unit on VB side over the last few years. With 10.3% growth in 23 111 and a half percent growth in 24 and about 14% growth in the first quarter of this year, which again drives.
Premium growth. And then, on the colonial life side, you know, we're seeing a lot of really positive momentum in the leading indicators for sales.
With um, recruiting up 31%.
Uh, in the quarter and sales from those new agents at 30 plus 34%, you know, the sectors that we like a lot of public sector up 9% for the year, new sales up almost 10% of the year. And we're also having a good, uh, first half of the Year from the large case perspective. So, you know, excited about the momentum, we're seeing on the 20 life side. Uh, really pleased with the, uh, persistency results. We're seeing driving premium growth above where we thought it might be at this point.
And Ryan. I uh I have to bring International into the mix too uh with double digit, uh premium levels of growth. Uh Mark till maybe you, give us some context in terms of what's Happening uh in the markets around the world.
Yeah, sure. Rick um persistence is being very strong, a bit of bit of common story that both Tim and Chris talked about. So persistency in the UK's up about 1% that's to levels that we haven't seen in in quite a long time and Poland is up 2%. We've seen core business sales being very strong. In both countries, risen very nicely uh, year on year, for example, the UK's up uh, in low double digits growth there. Uh, large case in Poland has been very strong. Um, large case in UK has been a little down on last year, uh, the market can be a little bit more lumpy. And we did have a, a jumbo in quarter 2, that sort of hurts the comparison to Prior year. But I would say the pipeline in both countries is very strong at the moment and we still feel that the guidance we gave at the start of the year for premium and sales. Uh, is a reasonable expectation for the international business.
Great. Thank you. Just a quick follow-up on long-term care. Um, do you I guess to what? I know the mortality was abnormal in the quarter about the same time. It does seem like overall mortality is improving. Um in the population in in in for the insured businesses like to do you have
Any, I guess concern or you know that that part of this could just be related to to broader improvements in mortality or or I guess, what gives you confidence? That. That's not really what's going on. It was more just of of an abnormal quarter.
Yeah, you know the the uh the kind of variability that we saw in the quarter wasn't really due to counts. The the counts were pretty consistent with what our expectations would have been and and that's been the case, you know, really, for the last several quarters, it was really more just about the the size of those claims that terminated and the way to think about that is really just richness of benefits. And so it tends to just be you know somewhat random on an individual basis. But over time you usually kind of have large all, you know, laws of large numbers where the average tends to be pretty consistent period to period. But it, it just so happened this quarter. We had very, very low, um, claim reserves on those claims that that terminated. And a lot of times that has to do with just the richness of benefits or, or just the duration of the claim itself. So, so we we kind of view it as a bit of an aberration, but obviously we we need to see how that plays out in the coming in the coming quarters.
Okay, thank you.
Thanks Ryan.
Your next question comes from the line of Alex Scott with Barkley's. Please go ahead.
Good morning.
I had a follow up on. LTC. I just want to see if you could give us an update on sort of where you're at with your last, uh, premium. Uh, I guess pricing approvals from from Regulators, you know, maybe just how that's comparing with what you assumed uh and the reserved, the last time you reviewed
Achievement of what's in the, the last, um, kind of Reserve adjustment that, that we took. So feel good about that. And this quarter, uh, the gpv from approvals is is right around 90 million. So it was a, it was a good quarter and, you know, it's it's been pretty stable as far as every quarter making progress. And so I I would say we feel really good about our progress against the reservation um, at this point and good about just the general environment.
Got it. Uh, that's helpful. Um, I know you guys provided a lot of commentary around, like, you know what kind of drove benefit ratios here or there. But I wanted to see if maybe you could talk more broadly about, you know, the potential for medical cost inflation. Um, you know, we've seen it from a number of health insurers. I think a little more like Medicare and Medicaid, but I think even more recently, some of the commercial.
Uh, health stuff with United. So I just wanted to see if you could kind of walk us through, like, are there areas of your business that do get impacted by that? Um, and then, you know, I assume there are a lot of areas of your business that are much less impacted by that. See, maybe you could frame that.
Alex, I appreciate the question. And I actually say in general, uh, we are not very impacted uh, the board in terms of what's Happening from a medical and inflation perspective. If you think about our benefits and I just talked about life insurance, it's going to be what happens, uh, you know, disability insurance is really about somebody's wages. Not about what what the cost of care looks like and even as you get into the long-term care business, you know, we were Indemnity based business. So it's a, it's a fixed benefit level. So, in general, yes, I don't know, Chris, if there's anything else that we'd highlight that that we're watching. Yeah. Thanks Rick. Um, Alexi. It's, it's an interesting point. I, you know, I would say just, you know, some of the things we don't always talk about are just the quality of our of, our claims organization and the work, they do behind the scenes. Uh, you know, our medical cost isn't really our big issue, but, but we do do a great job of making sure that if people on claim get the right care and that they're on the right treatment plan that improves outcomes. Um, so you know, we're, we're tied to Medical in that way, but not so much in terms of the cost of care. So I I think that
Uh, it's an interesting point, though.
Got it. Thank you.
Your next question comes from the line of Tom Gallagher with evercore isi. Please go ahead.
Good morning. Uh, for first just 1 on long-term care and then I have a disability follow-up. Um, so.
I guess the um, since you last time you did your actual review,
The incidents Trends or inventory, whatever you want to call it continues to be somewhat above. Long-term expectations. Is there a risk. You now make that permanent because I think the expectation is by now that would have improved and it sounds like it still has an improved. And so
I guess. My my question is, is that directionally, right? And if so
Um, it sounds like from the way you framed it that it would be a gap only charge pretty unlikely to have any statutory impact, given this considerable buffer you have in uh, in Fairwind. But any uh, that's my first question.
Yeah. Tom I you know I'm not going to preview kind of any results from the reserve adequacy work this year. You know that that's ongoing we'll report on it on that as we get to the third quarter I would say there was really nothing new in the second quarter um that would be different than maybe some of the elevation of counts that we've seen, you know, prior to that. And so we'll take that into account as well as all of, you know, our the rest of our data set as as we go into that. So I, you know, don't take any of my comments for saying that we you know, we we might have an impact here but not there we'll we'll take it all into account.
As we're looking at our best estimate Reserve, which is really what our Gap reserves are based on. My, my only point is you know, if there was some sort of adjustment there we continue to have a a significant buffer when it comes to the margins that we have in our statutory reserves, and we just feel really good about that, and really good about, you know, statements that we've made just around Capital deployment in the, in the past behind LTC, and you know, that buffer remains. So if that, that was my only point there but really, you know, no, no preview of results, of of the reserve assumption review.
Okay. That's that's fair Steve the and my follow-up is just on the disability loss ratio. I guess I heard what you responded to with the Lisa's question that it sounds like
Stable, operational performance Beyond 2025. Um, but I guess my question is
You it appears.
I think the best-in-class pure is around 10 points better. Um,
I hear what you're saying, but at the same time, I think you've had so much
Better accounting improvement than peers that it's a little hard.
For, for us, from the outside to say stable, you know, 62 is the right level. I mean, 65 would still be a pretty good outcome and a good Roi, so, I don't know. Can you help frame that a little bit more like, is it is 62 possibly continuing to drift Tire here? Or, or do you feel like 6, for whatever reason? And maybe it's claimed recovery 62. It really is the right number for you, even though it's better than peers.
Yeah, I kind of get back to. We we do think we have best-in-class operations and the capabilities that we have to manage claims. So we we don't really compare ourselves to competitors. We we look at what we're doing, within our 4 Walls and we know why we've had that Improvement. We can see it in the improvements in our operational areas. And so that, that's that gives us confidence. That the level of recovery is that we're seeing right now that that those are sustainable. And so again, you know, these are these are businesses that carry on over years. And so we're not predicting things, you know, years ahead of time. But as we look out over the, you know, the medium-term here, we feel pretty good about the sustainability of the results. We're getting out of our, our claims management.
And, uh, maybe I just wanted to comment, um, uh, in terms of, you know, again, the way we are selling to customers. The way we're tying into their ecosystem and, and managing things, like leave prices still important part of the discussion. But, uh, uh, it's not, uh, what it was years back where, uh, in a lot of ways price was the first and, uh, you know, the primary thing we talked about, uh, you know, there's much more kind of connectivity, uh, into their ecosystem, much more problem solving, uh, and, you know, that gives us a little bit of capacity to get a fair return and, and work things through. And I think that shows up in, in the the analysis that Steve just shared,
Okay, thanks.
Thanks Tom.
Your next question comes from the line of Joel hurwitz with darling. Please go ahead.
Hey, good morning. Uh, just want to go back to Colonial Life real quick. Tim Tim Tim you provided some good metrics on recruiting and and overall momentum I guess do. Do you see a path uh for sales to improve to your your 5 to 10% growth? Target for 25 at this point?
And Joel. Thanks for that question. We actually do, you know, we've said all along that we thought momentum would build throughout the year. Uh we brought in a new head of sales in the fourth quarter of last year and she had her team to do a really nice job of getting us back to the point of really heavily focusing on the fundamentals. Focusing on the consistent execution of a business plan. You heard some of the metrics we shared earlier 1 other metric, I didn't share.
Is that for people who have joined Colonial Life in 2023 24, the first half of 25, their sales are up collectively 16.3%. So we we are seeing some pretty broad-based success right now and for the areas where we still have a little bit of softness Ashley and her team have had a sales of her team really heavily focused on that. So our plan is to continue to see that momentum build over the second half of the year and we think we have a shot at getting to the lower end of the range.
Great. And then shifting gears back back. When you guys announced the LTC transaction, you you had noted that the deal created some further excess Capital, within Fair win. That could potentially be dividend. It out with, with the transaction now closed. Where do you stand on potentially extracting capital from Fairwind?
Yeah, I I don't think our view has really changed at this point. You know, we, we generated about 200 million of released Capital down in Fairwind. That's built into our 2.6 million or billion dollars of protection down in Fairwind. So, at this point, you know, we're not, we haven't really made a decision if we're going to leave it there or not. And that's something we'll contemplate is, you know, we're wrapping up the year and thinking about just overall Capital deployment for the organization. So, no, no, no news there. I would say.
Okay, thank you.
Thanks.
Your next question comes from the line of West Carmichael with autonomous research. Please go ahead.
Hey, thank you. Good morning. Um, someone else you see closed? A pretty significant transaction but in the months I guess since you've announced that deal, has there been any, any change in the risk transfer landscape, whether that's new counterparties or or any other changes and I guess relatedly, do you have any insight into the appetite for uh Global reinsurers to want to take additional biometric risk? Like like this deal was structured?
And Float a little bit. I think the news of 3 different transactions, probably has more people interested in what the Dynamics are. And as we've said this was a very good deal for us but also a good deal for our reinsurance, our 2 reinsch, but we've got, you know, continued work to do and
And certainly, uh, you know, we're playing this for longer term as well.
Got it. Thanks, Rick. And maybe this 1 follow up and maybe a little more Technical and LTC but
On the net premium ratio. Steve, is there any way you can help us understand the movement just in the quarter? It only picked up, you know, 20 basis points, but there was some unfavorable experience in the cap cohort. So I guess I'm just trying to understand is, is the movement in the NPR going forward, is that going to be more dependent on performance of the uncapped cohorts? Um, if that question makes any sense, but just just hoping to get a little bit of color on the movement there.
Yeah, I mean, the way to think about it is...
That the, the benefits experience that we look at, you know, is is in multiple cohorts. Each of those kind of that unfavorable experience or it's going to articulate itself differently. And so what you would see is um, on the cap cohorts, that's going to, you know, come through earnings more directly.
Because there's really no buffering impact on those. Um, and then on the other cohorts that will come through as a change in MPR and, in essence, get, you know, a portion of that buffered into the reserve itself. The current period experience that we saw was really across both capped and uncapped. So you would have seen, you know, unfavorable earnings results in the period, but also a little bit of an uptick in the MPR.
Got it. Thank you.
Thanks Wes.
Your next question comes from the line of Zenit. Kamath with Jeffrey's, please go ahead. Uh, great thanks. Um,
I wanted to come back to the to the BuyBacks for a second and and Rick I appreciate the fact that you guys have been increasing your level of annual BuyBacks. But the other thing that's been happening is the excess Capital has been increasing as well and based on your prepared remark. It sounds like you could end the year 2 to 2 and a half billion of hold Co cash, which is even more than where you thought when you gave your 2025 plan. So, I guess the question is, why not lean in a little bit more than the billion. Uh, especially since you got the additional 630 million um, from the reinsurance, uh, sorry, the LTC restructure,
Yeah, it's a fair question to you and we don't, we don't minimize that. You know, returning Capital to shareholders is an important part of our overall construct and our value proposition. And so we do think about it. We've said, we we'd be dynamic. I think as we look at where we are today, um, and given the performance and closure of the LTC transaction to move to the top end of our range, going into the years appropriate. Um, but it's something that we'll always look at in terms of the pace and and how we look at it and all your facts are right. I mean, the, uh, the generation has been good, we had even some excess generation with reinsurance earlier in the year. We, we put that into our Outlook um, and then, you know, the ability to buy back shares, so backs are, right? Um, something will evaluate and continue to talk to the market about but this is where we see things right now.
Okay, got it. And then, I guess just to follow up on Wes's question about the cohorts, have you guys told us if any of the cap cohorts are part of the Fortitude transaction or kind of what the mixes are? I don't know if you've gotten into that level of detail.
You know, we we we haven't, we haven't, that's not something that we've really dug into. What, what I, what I will say is and I I mentioned this earlier, the impact of the current period experienced, you know, was pretty much split amongst the remaining business and the seated business, you know, some some would, um, on a relative basis. So it it pretty much cut across those cohorts. Um, equally, I would say,
Okay, thanks.
Your next question comes from the line of Jack Matten with BMO Capital markets. Please go ahead.
to say like roughly what, what percent of your your customers have that kind of integration and how that's changed over time and just wondering if you think, you know, competitors have similar offerings that are also helping with persistency on on their side and maybe contributing to some pressure on on new business opportunity for for you and them
Yeah, Jack. It's Chris, uh, it's a good question and and uh, we certainly have um, you know, seen that kind of Rick mentioned it in the uh, in the uh, kind of his initial comments that we've seen nice persistency, uh, spread when we do have capabilities in mind. Uh, before before I get to kind of, uh, the block, like, you know, there certainly are competitors who are looking to respond to, uh, some of the connect connection points, uh, that we've got out there. Um, what I would say is that it that is a multi-year uh kind of process uh getting uh to really understand these ecosystems understanding what connections look like, understanding what type of prospects really fit? Well, uh, is something that we've been asked for, you know, literally 5 to 7 years. And it's, uh, it's been a wonderful learning process and we continue to get better at it and we would expect to continue to see, uh, you know, the more customers we put into these situations. Uh, it's good for for all aspects of our of our business, um, without giving percentages. Because, you know, we really do have a multi-pronged strategy in terms of
So, you know, how we're making, uh, Investments, uh, not only in in Tech and platforms, uh, both up and down Market sizes, but also leave management without getting into, you know, exact percentages. I, I will say it's very logical to, to think that, you know, more and more of our sales have, uh, these connection points. Uh, and, uh, a larger and larger part of our block has these connection points. So over time, look and see, it would be a bigger part of the story.
That's helpful. Thank you. And um maybe follow up in the in the US business. Um I mean you've been you've been seeing kind of a lower run rate for for net investment income. I think just given the lower invested asset base. Is that a trend we should think about continuing? Or could we see that eventually reverse at some point in the coming quarters?
Yeah. It's it's the you're right. I mean, it's really driven by lower assets behind the liabilities mostly driven by the great performance. That we've seen in our group disability business. So that, that's a good thing but it, it does reduce the asset base to generate investment income. It, it feels like you know, that should be pretty stable from what we're just seeing going forward. And I think that's indicative of kind of where the overall benefit ratio is for the group disability business that you know, those are somewhat linked with um trends that we see in new incidents and recoveries and you know that that's pretty stable. So I didn't anticipate that being relatively stable, you're always going to have a yield. Differential is, you know, new yields come into the portfolio. But um I think that's probably the right way to think about it.
Got it. Thank you.
Your next question comes from the line of Jimmy Butler with JP Morgan. Please go ahead.
Hey, good morning. Um, so I had a question around sort of the same topics that have been discussed through the call, but maybe with a slightly different angle. Um, on disability, everybody's margins have been good; yours have been good as well. Obviously, everybody's got a different level of what normalized is, but it seems like what some of your peers have been saying is that the market's still disciplined but getting a little bit more competitive. In some cases, prices are coming down, maybe down a little bit less than how favorable experience has been, but down nonetheless. And um, that's also contributing to margins declining a little bit, but still staying pretty strong. Are you seeing that as well, or is your view of the competitive environment different than what I just described?
Yeah, Jimmy it's Chris. I I, you know, I I'll go back to kind of our comments around feeling good about being on track for premium and have a, you know, in the in the quarter, the mix of uh, persistency and sales was a little bit different than we might have, uh, uh, thought going into it. And, you know, we'll always be thoughtful. Uh, and, you know, and we're fully engaged in the market. So, you know, we're looking at uh, opportunities, uh, you know, uh, from a new business perspective and you know, with a discipline approach, we're aggressively going.
After those, uh, and then also looking at retaining current customers, uh, and making sure that we understand, you know, what the Dynamics are there. Again, whether where there are capabilities, we have a little less pressure on price, which is helpful. Um, and you know, we'll make a decision on on, you know how to hold the line, uh, their, uh, in this quarter, you know, I think the the mix of, you know, hitting premium targets was, you know, more favorable around keeping a few more customers. And, and, you know, that does speak to the competitive environment, uh, or what's out there. But I wouldn't go too far with, with any major shifts, uh, in the competitive environment. Um,
Outside of what we talked about before.
To keep some business. You would given how good your results are. Right. And so, um, Less business coming to Market partly is, is a function of everybody's margins being very strong as well. And then being trying to protect the business and keep it in force, correct?
Yeah, I think it, you know, that's certainly an element of it. I I I think we're seeing enough in Market, that's, that's the good news. And part of that, we, you know, we want to continue to improve our ability to, uh, you know, make our capabilities known to the right type of prospects. So we can keep uh, the pipeline full, not just the people out for a market check because I think that's that Dynamic. You talk about Jimmy, you know, does show up when somebody's off for a market check and and you'll get people who are, you know, willing to kind of um, you know, think about dropping rates just to, to to become attractive to a customer when you're talking about capabilities and bringing people to Market because they, they want to hear about what's out there again it's it's less of a price discussion. Uh, and therefore you, you know, we can we can see if we say that we we do expect to to be fairly rewarded for uh the Investments we've made and the problems we're solving uh, for customers. And you know, that's, that's a, a long-term Pursuit that we're a deep into and we'll continue on.
And then maybe on long-term care are there, things that that we could watch from the outside, whether it's the net premium ratio or anything else to sort of, um, get a better idea on if there's going to be a need for a reserve increase, um, down the road, maybe not necessarily this year. But, uh, is there a level at the net that if the net premium ratio increase?
Says that um um that it would necessitate a charge. I realized that 2 simplest but there's only a limited number of things that 1 can see from the disclosure. But how do you how how should 1 assess from the outside? Their LTC Reserve pieces, might become a risk,
Yeah. I mean, as you can imagine, going through these assumption updates in, um, incredibly complex. And so we, we've tried to give some measurements to the market, whether it's just around the absolute earnings coming. Um, the explanation of what's going on with the benefit experience within those earnings. The NPR is an indicator for some of those cohorts just whether we have adverse, um, experience during the period. And then we also try to give an indication of our progress towards our rate increase um expectations with within the reserve. So I mean that those are those are the measurements we've tried. We've tried to give. Uh but until you really you know go through the entire process it's I'd say it's pretty hard you know to to give a to give a lean 1 way or the other, you just need to do the work from from our perspective and we'll let you know as we see things emerge 1 way or the other.
Okay, thank you.
Your next question comes from the line of Mark Hughes with Truist Securities. Please go ahead.
Yeah, thank you. Just a 1 quick 1 on the natural growth. Any observations about wage inflation versus, uh, employee headcount. You know, what was it in Q2 versus 6 months ago, 12 months ago.
Yeah, Mark, it's, it's Rick, you know, we we watch it and, uh, it's not exact science, but I think that we'll see it evolve between the both wages and and perils, and I think business quarter, we have to see payrolls, uh, looked looked good and looked strong. And so we, we kind of look at it and aggregate to say, how is the size of the block growing, uh, on its own and and the mix between those 2? And so we're kind of on our longer term expectations, right around 3%, but, but it's something that we'll continue to watch. So, so we appreciate that. And that's, as I say, the environment for our business, still continues to be very good. Um, we're still seeing that and, uh, we'll continue to look to grow those premiums that being a core element of that.
Appreciate it.
Yep.
Your next question comes from the line of Mike Ward with UBS. Please go ahead.
Hey, thanks for the follow-up. I was just wondering if there's any, uh, any way we can think about just the fact that your, um, your stock has appreciated, um, the last several quarters. And so that must be a drag on the, uh, the ETF's guidance to some degree, right?
In terms of the buy expectation, yeah, I would say it's not a huge impact or headwind as we were, you know, coming through the year versus how the stocks perform. We tend to be pretty conservative with how we set our plan and just what the stock price is going to do over time, and we update that as well throughout the year as we kind of reform. So what I tell you is the outlook that, you know, that we gave of the $850 million, that reflects kind of current levels and just what our expectation would be between now and the end of the year. But I, I wouldn't factor that in as kind of a big contributing factor of, you know, the change to our EPS outlook.
Okay, thank you.
Thanks. Bye.
Questions at this time, I will now turn the call back over to Rick McKenney for closing remarks.
Great, thanks Jeanne, appreciate it. Uh, thanks everybody for joining us this morning and uh your continued interest in Unum. As you can tell from our comments today. We are very focused on executing on our strategy and confident in our 2025 Outlook and Beyond. So with that we conclude today's call look forward to connecting you with you again in the very near future. Thanks everyone.
Ladies and gentlemen.
Thank you all for.
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