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    UNM
    Earnings call· Jun 2026(Q2 FY26)

    Unum Group Q2 FY26 earnings call UNM

    Jul 29, 2026 Source

    Executive summary

    Unum Group Q2 FY26 — Strong Core Performance Offset by PFML and UK Group Income Protection Pressures

    Unum Group delivered a solid Q2 FY26, showcasing strong underlying premium growth and robust sales in its core U.S. and Colonial Life segments, alongside favorable Group Life performance. However, results were tempered by elevated claims experience in newer Paid Family and Medical Leave (PFML) states within U.S. Group Disability and in the U.K. Group Income Protection business, which the company is actively addressing with pricing and underwriting actions. Management remains confident in its diversified model and reaffirmed its full-year EPS outlook, while continuing to manage Closed Block risks and execute capital deployment plans.

    Highlights

    5

    • Underlying premium growth of roughly 5% (adjusted for runoff/transactions).

    • Unum U.S. sales grew 7.4% in the quarter, with year-to-date sales growth of 14%.

    • Colonial Life sales grew 6% and achieved a record adjusted operating ROE of 19.4%.

    • Group Life and AD&D benefit ratio was 66%, reflecting favorable mortality trends.

    • Returned approximately $275 million to shareholders through dividends and share repurchases in Q2, totaling $750 million year-to-date towards a $1.3 billion target.

    Concerns

    5

    • U.S. Group Disability benefit ratio was 65.8%, pressured by elevated short-term disability experience, primarily from newer paid family and medical leave (PFML) states.

    • Unum International adjusted operating income was $24.3 million, below expectations, with a benefit ratio of 78.4% due to unfavorable experience in the U.K. Group Income Protection business.

    • U.K. Group Income Protection business saw elevated average claim values, leading to an 82.2% benefit ratio.

    • Closed Block earnings remained volatile, reflecting a 3% (20,000 lives) reduction in group LTC cases due to terminations in Q2, and 10% (50,000 lives) year-to-date.

    • Alternative investment portfolio supporting LTC generated an annualized yield of 6.1% in the quarter, below the long-term expectation of 8% to 10%.

    Guidance & targets

    7
    CategoryTargetConfidence
    Core earned premium growth
    4% to 7%
    high materiality
    High
    Effective tax rate
    approximately 22%
    medium materiality
    Medium
    RBC ratio
    400% to 425%
    high materiality
    High
    Holding company liquidity
    $1.5 billion to $2 billion
    high materiality
    High
    Total statutory earnings (adjusted)
    $1.2 billion to $1.4 billion
    high materiality
    High
    Capital return to shareholders
    approximately $1.3 billion
    high materiality
    High
    After-tax adjusted operating income per share
    $8.60 to $8.90
    high materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Unum US
    Adjusted operating income increased YoY. Premium growth was strong, especially when excluding runoff business and prior transactions. Sales showed significant momentum. Total group persistency improved.
    Adjusted operating income (Q2 FY25): $318.2 millionPremium growth: 3.3%Premium growth (ex-runoff/IDI transaction): just over 5% year-over-yearSales: $281.8 millionSales (Q2 FY25): $262.4 millionSales growth: 7.4%Year-to-date sales growth: 14.3%Total group persistency: 91.5%Total group persistency (YoY change): up nearly 2 percentage points
    		———$329.6 million
    Unum US - Group Disability
    Benefit ratio was elevated due to higher short-term disability claims, primarily from newer Paid Family and Medical Leave (PFML) states. Long-term disability recoveries were consistent with expectations. Pricing actions are being implemented.
    Benefit ratio: 65.8%Benefit ratio (expected): 62% to 64%Benefit ratio (pressure from STD/PFML): a couple of pointsROE: exceeding 20%
    		————
    Unum US - Group Life and AD&D
    Strong performance driven by continued lower incidents and favorable mortality trends. Adjusted operating income increased significantly.
    Adjusted operating income (Q2 FY25): $70.2 millionBenefit ratio: 66%Benefit ratio (Q2 FY25): 69.7%
    		———$93.2 million
    Unum US - Supplemental and Voluntary
    Favorable results, benefiting from strong multi-life individual disability claims experience. Adjusted operating income increased.
    Adjusted operating income (Q2 FY25): $123.2 millionBenefit ratio: 47.4%Benefit ratio (outlook range): 48% to 50%
    		———$133.3 million
    Unum International
    Adjusted operating income was below expectations due to unfavorable experience in the U.K. Group Income Protection business. Benefit ratio increased significantly.
    Adjusted operating income (Q2 FY25): $41.6 millionBenefit ratio: 78.4%Benefit ratio (prior year): 72.4%ROE: in the teens
    		———$24.3 million
    Unum UK
    Earnings pressure concentrated in Group Income Protection due to elevated average claim values. Premium growth remained strong, but sales declined.
    Adjusted operating income (Q2 FY25): GBP 29.4 millionBenefit ratio: 82.2%Benefit ratio (prior year): 75%Premium growth: 5.2%Sales (Q2): down about 14%Sales (H1): closer to 4% down
    		———GBP 15.3 million
    Unum Poland
    Strong premium growth, particularly in individual business. Sales trajectory is slower due to disciplined pricing.
    Premium growth: 8.8%
    		————
    Colonial Life
    Record earnings quarter with strong sales, persistency, and favorable benefits experience. Adjusted operating income increased, and benefit ratio was better than expected. High agent adoption of Agent Assist.
    Adjusted operating income (Q2 FY25): $117.4 millionBenefit ratio: 46.7%Benefit ratio (year-ago period): 48.3%Benefit ratio (expected range): 48% to 50%Premium income: $477.4 millionPremium income (Q2 FY25): $462.1 millionSales: $134.1 millionSales growth: 6%Adjusted operating ROE: 19.4%Agent Assist utilization: Over 70% of 12,000+ agentsNew client sales growth: 10%Sales growth (clients >500 employees): 15%Agent recruiting: 6% ahead of prior year
    		———$131.4 million
    Closed Block
    Earnings remained volatile, largely due to group LTC case terminations. Net premium ratio increased. Alternative investment yield was below long-term expectations.
    Group LTC case terminations (Q2): approximately 3%Group LTC case terminations (lives Q2): more than 20,000Group LTC case terminations (YTD FY26): around 10%Group LTC case terminations (lives YTD FY26): over 50,000Net premium ratio: 97.8%Net premium ratio (sequential change): increased 20 basis pointsPremium rate increase program achievement rate: approximately 15%Alternative investment portfolio annualized yield: 6.1%Alternative investment portfolio long-term expectation: 8% to 10%
    		————

    Operational metrics

    14
    Adjusted operating ROE
    15.9%
    Q2 FY26

    Within outlook range.

    Core earned premium growth
    just over 5%
    Year-to-date FY26

    Underlying premium growth.

    Capital returned to shareholders
    $275 million
    Q2 FY26

    Part of the $1.3 billion deployment plan.

    Capital returned to shareholders
    $750 million
    Year-to-date FY26

    On track for $1.3 billion deployment.

    After-tax adjusted operating income per share
    $2.16up 4.9% from prior year
    Q2 FY26

    Consolidated performance.

    Closed Block GAAP earnings impact
    $30 million to $40 million
    per quarter

    Expected impact from the new reinsurance transaction.

    Total Closed Block GAAP earnings impact
    $90 million to $100 million
    per quarter

    Expected initially, gradually declining over time.

    Holding company liquidity
    $1.5 billion
    Q2 FY26

    Above long-term targets.

    RBC ratio
    480%
    Q2 FY26

    Above long-term targets.

    Statutory after-tax operating income
    $331 million
    Q2 FY26

    Supports full-year expectation.

    Fairwind protection
    $1.9 billion
    Post-closing

    Following the close of the Fortitude Re transaction.

    Fairwind retained Group LTC statutory reserves
    $7.1 billion
    Post-closing

    Following the close of the Fortitude Re transaction.

    Fairwind sensitivities decrease
    28% to 42%
    Post-closing

    Materially improves the risk profile of the retained block.

    Strategic actions costs
    $31 million
    Q2 FY26

    Excluded from adjusted operating earnings.

    Industry KPIs

    7
    MetricValueDetails
    Capital returns$275 millionUSD
    ROE operating ROE15.9%%
    Net investment income6.1%%
    Retention persistency91.5%%
    Net premiums written earned3.6%%
    Renewal rate change pricingdouble-digit%
    Statutory regulatory capital480%%

    Deals & partnerships

    1
    Fortitude ReReinsurance of long-term care reserves$3.8 billion

    Represents approximately 26% of total LTC block. Retained block will be predominantly group LTC.

    Risks & headwinds

    5
    Elevated Short-Term Disability (STD) Claims from PFML StatesQ2 FY26, expected to continue in H2 FY26 until new rates are fully embedded.

    Pressured U.S. Group Disability benefit ratio by a couple of points (60-70% of the pressure).

    Mitigation: Implementing double-digit rate adjustments for new business and renewals; PFML pricing structure generally does not include multi-year rate guarantees.

    Elevated Average Claim Values in U.K. Group Income ProtectionQ2 FY26, expected to continue in H2 FY26 (at a lower level from current elevated levels).

    Drove U.K. benefit ratio to 82.2% (from 75% prior year); Unum International adjusted operating income below outlook.

    Mitigation: Taking targeted pricing and underwriting actions; noted competitors are also facing similar claims experience; expense actions visible in H1, more in H2.

    Closed Block Volatility from Group LTC Case TerminationsQ2 FY26, ongoing.

    Approximately 3% (20,000 lives) of group LTC cases closed in Q2; around 10% (50,000 lives) since end of 2025. Net premium ratio increased 20 bps sequentially to 97.8%.

    Mitigation: Actively managing and reducing the Closed Block; recent reinsurance transaction materially improves risk profile of retained block.

    Alternative Investment Portfolio Yield Below ExpectationQ2 FY26.

    Annualized yield of 6.1% in Q2, below 8% to 10% long-term expectation.

    Mitigation: Not explicitly stated, but implies continued monitoring and management of the portfolio.

    Holding Company Liquidity Decline in Q3 FY26Q3 FY26.

    Holding company liquidity will decline from $1.5 billion.

    Mitigation: Use of holdco cash to fund temporary positioning for Fortitude Re transaction; retaining statutory earnings at Unum America rather than upstreaming dividend (may temporarily elevate RBC ratio at end of Q3); year-end capital expectations remain unchanged.

    What to watch in Q3 FY26

    5

    PFML benefit ratio stabilization

    Next quarter (Q3 FY26) and subsequent quarters
    CurrentU.S. Group Disability benefit ratio 65.8% (pressured by PFML)
    TargetBenefit ratio closer to expected range (62-64%) or showing impact of double-digit rate adjustments.

    Why it matters

    Indicates effectiveness of pricing actions and stabilization of PFML claims experience, crucial for U.S. Group Disability profitability.

    As a result, until new rates are fully embedded in block, we expect to see continued elevation of the benefit ratio more in line with the experience in the past 2 quarters driven by PFML.

    Q&A highlights

    8

    How quickly can Unum raise PFML pricing, and what are the limitations?

    Steve Zabel clarified that PFML was the primary driver of the 2-point elevation in the Group Disability loss ratio (60-70% of the pressure). Chris Pyne explained that PFML is a high-frequency product allowing for good data at the customer level. Pricing adjustments are double-digit, and most policies have 1-year rate guarantees, enabling repricing at renewal. The shift in LTD returns means PFML/STD no longer have "air cover" for lower rates.

    “we've already taken steps in the market. And really how we've sized it out, it's going to take double-digit pricing actions for PFML.”

    asked by Suneet Kamath · answered by Steven Zabel

    2 min read6 chapters

    Detailed Narrative

    01

    Core Business Momentum and Digital Investments

    Unum's core employee benefits franchise demonstrated strong performance with underlying premium growth of roughly 5% and U.S. sales up 7.4% in Q2, contributing to 14% year-to-date growth. The company's investments in digital connectivity and leave management, such as HR Connect and Total Leave, are scaling effectively, with premium and fees from these capabilities growing nearly 70% since year-end 2023. HR Connect now represents over 20% of Q2 new sales, and Total Leave sales more than doubled year-over-year.

    02

    Strategic Management of Closed Block

    The recently announced reinsurance transaction for an additional $3.8 billion of long-term care reserves is a significant step in reducing risk and actively managing the Closed Block. This deal, expected to close in Q4, will transfer 52% of the individual long-term care business, materially improving the risk profile of the retained block, which will be predominantly group long-term care with simpler benefit structures and continued natural runoff.

    03

    Addressing PFML and UK Group Income Protection Pressures

    While overall performance was solid, the U.S. Group Disability segment experienced elevated short-term disability claims, primarily from newer Paid Family and Medical Leave (PFML) states, resulting in a 65.8% benefit ratio. Similarly, Unum UK's Group Income Protection business saw an 82.2% benefit ratio due to elevated average claim values from higher-income employees. Management is implementing double-digit rate adjustments for PFML and targeted pricing/underwriting actions in the U.K. to address these issues, expecting improvements to build over time⏳.

    04

    Capital Strength and Deployment Consistency

    Unum maintains a robust capital position with holding company liquidity at $1.5 billion and an RBC ratio of 480%, both above long-term targets. The company returned approximately $275 million to shareholders in Q2 through dividends and share repurchases, bringing year-to-date deployment to $750 million, on track for the full-year target of $1.3 billion, representing its expected free cash flow generation.

    05

    Colonial Life's Record Performance

    Colonial Life delivered a record earnings quarter with adjusted operating income of $131.4 million and an adjusted operating ROE of 19.4%. Sales grew 6% from the prior year, driven by strong adoption of Agent Assist and growth across client segments, including 15% growth for clients with more than 500 employees. The business benefits from disciplined operating execution, strong persistency, and favorable benefits experience.

    06

    Expense Management and Productivity Gains

    The company is seeing the benefits of its long-term investments in technology and people, leading to improved expense management. The operating expense ratio is beginning to plateau and is expected to decline over time⏳ as technology drives productivity across the organization, allowing expenses to grow at a slower rate than company growth.

    AI-generated summary of the company’s earnings call. Not investment advice.