What drives the sustained low loss ratio in Group Life, and how will it impact future pricing?

Steve Zabel attributed the strong performance to lower incidence rates and favorable mortality trends, which are expected to continue. He believes the 66% benefit ratio seen in Q2 is sustainable and that the company won't need to "give that away with price" due to the bundled nature of their products and services. “We clearly performed better than that for the year. kind of as we look forward, we're thinking that the second quarter is probably more indicative of what we'll see for the back half of the year. We had a 66% benefit ratio in the second quarter. And we think that's definitely sustainable.”

With 3% additional GLTC terminations this quarter, what are the updated thoughts on the potential for further terminations?

Rick McKenney explained that the terminations are a result of prior actions, including rate increases and the decision to no longer allow new employees into existing GLTC policies. Steve Zabel noted that 3% (20,000 lives) terminated in Q2, bringing year-to-date to 10% (50,000 lives). While hard to predict, ongoing discussions with employers about their benefit packages mean continued terminations are probable. “The big move last year was actually we told employers that had a group long-term care policy that we were not going to allow new employees. So that, in combination with what we've seen with rate increases lead us to a spot where an employer has to evaluate.”

Why is the protection in Fairwind so high relative to reserves, and how will it trend over time?

Steve Zabel clarified that post-transaction, most of the $1.9 billion in protections are built into the reserve margins for the GLTC business, making it less fungible than prior excess capital. While this ensures the block is well-reserved and reduces sensitivities, the margins will only be released into Fairwind's capital over the lifetime of the block, offering more flexibility in the long term. “If you go to post transaction, pretty much all those protections are in the margin of the reserves. So that makes you feel really good that we're well reserved for that group LTC business. But it does make it less fungible.”

UNM

Unum Group (UNM) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 29, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Core earned premium growth	4% to 7% high materiality	FY26	High
Effective tax rate	approximately 22% medium materiality	H2 FY26	Medium
RBC ratio	400% to 425% high materiality	FY26	High
Holding company liquidity	$1.5 billion to $2 billion high materiality	FY26	High
Total statutory earnings (adjusted)	$1.2 billion to $1.4 billion high materiality	FY26	High
Capital return to shareholders	approximately $1.3 billion high materiality	FY26	High
After-tax adjusted operating income per share	$8.60 to $8.90 high materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%	—	—	—	—

UNM operating KPIs by quarter

UNM operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Persistency US Group	92% Leading the way our group -- our US group business had a standout quarter with sales up 22% and persistency is strong at 92%. Source: earnings call transcript	91.5% Total US group persistency remained strong at 91.5%, up nearly 2 percentage points from the prior year. Source: earnings call transcript	-0.5 pt
Risk-based capital ratio	460% with RBC at 460%, which is over 100 points above our target range and holding company liquidity is strong at approximately $1.7 billion. Source: earnings call transcript	480% Holding company liquidity stood at $1.5 billion, and traditional RBC at 480%, both above our long-term targets and consistent with our expectations. Source: earnings call transcript	+20 pt
Benefit ratio Unum US Group Disability	63.7% Group disability adjusted operating earnings of $106.6 million in the first quarter of 2026 reflect a benefit ratio of 63.7% compared to 61.8% in the year ago period and an improvement from 64.2% in the fourth quarter of last year. Source: earnings call transcript	65.8% Group disability reported a second quarter benefit ratio of 65.8% compared to our 62% to 64% expectation. Source: earnings call transcript	+2.1 pt
Benefit ratio Unum International	71% The International segment's benefit ratio was 71% compared to 66.5% in the year ago period driven by unfavorable experience in the UK business. Source: earnings call transcript	78.4% Segment's benefit ratio was 78.4% compared to 72.4% in prior year quarter, driven primarily unfavorable experience in the UK Adjusted operating income for Unum UK business was GBP 15.3 million in the second quarter compared to GBP 29.4 million in the second quarter of 2025. Source: earnings call transcript	+7.4 pt
Benefit ratio Unum UK	72.9% The results reflect underlying claims performance, including a benefit ratio of 72.9% compared to 76.1% a year ago. Source: earnings call transcript	82.2% The UK benefit ratio was 82.2% compared to 75% a year ago. Source: earnings call transcript	+9.3 pt
Net premium ratio Closed Block Long-Term Care	97.6% Combined with the underlying benefits experience, the NPR increased 10 basis points to 97.6% on a sequential basis. Source: earnings call transcript	97.8% The net premium ratio increased 20 basis points sequentially to 97.8%, with most of the increase driven by group LTC case terminations. Source: earnings call transcript	+0.2 pt
Alternative investment portfolio annualized yield Closed Block	6.7% Then lastly, for the closed block, our alternative investment portfolio, which mainly supports LTC and and an annualized yield of 6.7% in the quarter, below our long-term expectation of 8% to 10%. Source: earnings call transcript	6.1% Lastly, the alternative investment portfolio that primarily supports LTC and generated an annualized yield of 6.1% in the quarter, below our long-term expectation of 8% to 10%. Source: earnings call transcript	-0.6 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Fortitude Re Reinsurance of long-term care reserves $3.8 billion

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

Risks & headwinds

Elevated Short-Term Disability (STD) Claims from PFML States Q2 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 Protection Q2 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 Terminations Q2 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 Expectation Q2 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 FY26 Q3 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

PFML benefit ratio stabilization

Next quarter (Q3 FY26) and subsequent quarters

Current U.S. Group Disability benefit ratio 65.8% (pressured by PFML)

Target Benefit 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.

Find out whether UNM delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.