Unum Group Stock

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Unum Group Third Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Matt Royal, Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Unum Group's Third Quarter 2026 Earnings Call. Today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements.

Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results.

Yesterday afternoon, Unum released our earnings results and financial supplement for the third quarter of 2026. Materials are available on the Investors section of our website.

This quarter's reported results for our core operating segments include the effects of our annual reserve assumption review and refinements, which we refer to as notable items. These items are recognized in the quarter. However, they reflect experience and changes in expectations spanning multiple periods.

Therefore, we will discuss benefit ratios, excluding these items to provide a more comparable view of quarterly benefits experience. Also, as a reminder, references made today to core operations sales and premium, including Unum International, are presented on a constant currency basis for improved comparability period to period.

Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and Chief Financial Officer, Steve Zabel.

Following the remarks from Rick and Steve, additional members of management will participate in Q&A, including Chris Pyne, who leads our Group Benefits business; Mark Till, who oversees Unum International; and Steve Jones, President of Colonial Life.

Now let me turn the call over to Rick.

Thank you, Matt, and good morning, everyone. Thank you for joining us today as we report our third quarter results. It is a quarter where we saw many positives in growth and portfolio management, but ultimately fell short of our earnings expectations.

This was driven by elevated disability claims submissions in the U.S. and U.K. We'll unpack the drivers and the actions we're taking, and we will continue to closely monitor and act on this important business.

Many of our strategic initiatives remain on track, and our experience, discipline, the breadth of our franchise and our ability to reprice give us confidence that we can manage through a range of environments.

Looking more broadly at the quarter, after-tax adjusted operating earnings were $2.20 per share. This result includes $0.33 of favorable notable items, primarily from our annual reserve assumption review. Outside of Group Insurance, earnings results across the rest of the franchise were solid with good results in Colonial Life and in our supplemental and voluntary lines of business.

These results demonstrate the balance and earnings power of the broader franchise, but they were not enough to overcome the disability headwinds. From an overall returns perspective, the core business is still returning a high ROE.

From a top line perspective, our underlying growth drivers remain solid. Core operations premium grew nearly 5% on a constant currency basis with growth across Unum US, International and Colonial Life. And customer retention in our U.S. group businesses remained strong.

Overall sales declined year-over-year against a very strong performance in the third quarter of 2025, but remain up 4% year-to-date. Our strategy and purpose center on helping employers solve workforce challenges while supporting employees at important moments in their lives. This is as relevant as ever as employers are managing a dynamic workforce environment, balancing growth, productivity, talent development and employee well-being.

Our investments in connectivity, leave solutions and customer experience are helping employers address these challenges while strengthening our relationships and competitive position. We continue to believe strongly in the business model with our group franchise as the key to delivering broader solutions to employers and their employees.

So let me take a moment to dig into the challenges in the results we saw this quarter. The disability claims dynamics in U.S. group insurance and International warrant different tactical responses based on the experience in each business, but ultimately, it is addressed by some form of pricing action.

In U.S. group insurance, the entire group portfolio of disability products saw higher submitted claims, which was the primary driver of the elevated benefit experience. This was particularly pronounced in long-term disability, but similar to last quarter, we also saw elevated short-term disability and paid family and medical leave experience.

On long-term disability, we are evaluating a rapid increase in submitted claims and have not concluded that it represents a sustained change in underlying claims experience. What we've seen so far has been concentrated in behavioral health claims, where submission levels have fluctuated with external conditions in prior periods.

In the meantime, and as we always do, we will continue to make pricing changes on a customer-by-customer basis where we have seen poor performance. In PFML, as we noted previously, the industry experience is still developing, but utilization has been higher than we originally priced.

We see the PFML experience as more rapidly addressable as the pricing structure generally does not include multiyear rate guarantees. This allows us to incorporate emerging experience in new pricing for both new business and renewals, and we are implementing double-digit rate increases.

In International, U.K. group income protection experience remained elevated, driven by a higher number of large claims and increased overall submitted claims. Last quarter, we noted that we are already taking actions to address this and have done so through adjustments to new business pricing, the phased implementation of higher pricing at renewal, disciplined underwriting and expense actions.

Some of these actions are already reflected in our expense performance, while the pricing actions will take longer to work through the block. We remain confident in the franchise, its market position and the expertise of our team, and we have seen steadily rising performance in our other lines of business in the U.K.

Importantly, what we are seeing across all disability lines is not being driven by changes in the competitive environment or in how we adjudicate claims. It is being driven by more people submitting claims. We have an experienced benefits team that combines deep technical expertise with empathy for the people we serve.

That expertise and judgment have served us well over time and give us confidence as we position the business for continued success. We will take the action necessary to address the pressures we've seen in our disability lines, and we remain well positioned over the longer term.

While this was a challenging quarter, it is also a quarter that demonstrated the importance of our diversified business model. Certain products, segments or geographies will experience pressure from time to time, but the breadth of the portfolio provides balance and supports attractive returns over the long term.

Moving to the Closed Block. I am pleased to announce that yesterday, we formally closed our latest LTC reinsurance transaction with Fortitude Re. This is another important milestone in reducing our LTC exposure. Together with our prior transaction, this represents a cumulative reduction in our LTC statutory reserves of approximately 40%, another important step in reducing risk and improving the profile of the business that remains.

In addition, we continue to pursue organic actions across the retained block. In the third quarter, close to another 5% of group cases closed, and we achieved more than $100 million of rate increase approvals. The annual assumption update resulted in a negligible change in reserves for the block and significant protections remain in place at our Fairwind entity.

Our LTC position is in a very different place than it was just 18 months ago. Turning to capital. We repurchased approximately $200 million of shares in the third quarter, bringing year-to-date repurchases to approximately $800 million.

For the year, we have returned more than $1 billion in share repurchases and common stock dividends, and we remain on track to return approximately $1.3 billion to shareholders for the year. Our capital position remains strong, and we continue to expect to finish 2026 with $1.5 billion to $2 billion of holding company cash and a risk-based capital between 400% and 425%. When you look at the overall franchise, there are clear bright spots. Premium growth is steady, year-to-date sales remain positive. U.S. group persistency is attractive and capital deployment remains on plan.

We also continue to make meaningful progress derisking the Closed Block. While we saw elevated benefits experience in Group Insurance and International, we are monitoring and responding to the specific dynamics in each business, and we'll continue to adjust our approach as the experience develops.

At the same time, we continue to see evidence across our business that the investments we've made in our people, technology and processes are resonating with customers. We believe we have a clear path to value creation through continued execution of our plan, and we are confident in the strength of the franchise, the durability of our capital generation and our ability to create long-term value.

And with that, let me turn it over to Steve.

Great. Thank you, Rick, and good morning, everyone. As Rick described, third quarter after-tax adjusted operating earnings per share were $2.20 per share, including a $0.33 contribution from notable items compared with $2.81 last year, which included a $0.75 contribution from notable items. From a top line perspective, results sustain the positive trends we've seen all year, and we are well positioned to meet our 4% to 7% full year outlook.

We continue to see strong levels of persistency in our U.S. group businesses, which increased nearly 2 points year-over-year and helped drive core operations premium to increase 4.7%.

Our annual reserve assumption review completed in the third quarter resulted in an overall net decrease in reserves of $28.7 million pretax across our product lines, including the Closed Block, compared to a net increase in reserves of $478.5 million in the prior year.

In our core businesses, the impact of the assumption review was favorable with reserve releases totaling $83.7 million pretax. This compares to the pretax decrease in reserves in our core businesses of $162 million in 2025. The reserve assumption update in the Closed Block drove a $55 million increase in reserves, reflecting higher incidence and lower mortality expectations, partially offset by favorability from the continuing rate increase program.

The vast majority of this reserve strengthening was ceded as part of the reinsurance transaction that closed yesterday with only $9.5 million remaining in the retained block.

Then moving to segment results. Unum US adjusted operating income was $315.3 million, including $51 million in notable items. Apart from these items, earnings were lower year-over-year, reflecting the dynamics noted in group disability and Group Life, partially offset by solid performance in supplemental and voluntary. Group disability's adjusted operating earnings of $94.8 million declined from the prior year and included $28.6 million in notable items.

Excluding these items, the benefit ratio was 70.6% compared with 61.3% a year ago. This quarter's results reflects long-term disability submissions that were higher than our expectations with approximately 5 points of pressure and elevated short-term disability, including PFML with approximately 2 points of pressure. While the trend in PFML was largely expected, the increase in LTD submissions was not.

As Rick mentioned, we are not ready to conclude if these trends will continue, but we would call out a few considerations around them.

First, the related impacts of higher LTD incidence across group disability and Group Life and AD&D emerged in the third quarter rather than throughout the year.

Second, the increase we've seen is in claim submissions, which do not necessarily translate into paid claims. Most notably, the behavioral health claims driving the increase in LTD tend to rise along with certain other claim types during periods of labor market uncertainty. All things considered, we remain cautious about the increase in submissions this quarter and are prepared to take further corrective action if these trends persist.

At the same time, we continue to see favorable underlying recovery trends, which have supported our strong results over the last few years, and we are confident in a long-term benefit ratio of around 65% for our group disability business.

The increase in disability submissions also had a related impact on Group Life. Group Life and AD&D adjusted operating income was $78.2 million, including $5 million in notable items. The benefit ratio was 69.7%, excluding the notable items, with nearly 3 points driven by waiver premium experience where premiums are waived while a group life insured is on a disability claim.

Beyond this related impact from disability claim submissions, underlying life incidence continues to reflect the favorable mortality trends we've experienced recently. Together, when excluding notable items, total group benefits generated a benefit ratio of 70.3%. While this result is higher than our expectations, nearly 8 points of it was attributable to the impacts across group disability and life related to submitted LTD incidence and PFML, which we are actively managing and repricing.

Our Unum US supplemental and voluntary lines generated adjusted operating income of $142.3 million, which includes $17.4 million of notable items.

Apart from these items, underlying results were squarely within our outlook range with a benefit ratio of 49%, driven by favorable claims experience in individual disability and dental. Then wrapping up the discussion on Unum US, premium and sales were within our outlook range. Unum US premium grew 5.2%, supported by strong sales in prior periods and healthy persistency in our group product lines.

Third quarter sales declined 8.5%, mainly on lower group large case sales. The third quarter is typically our smallest sales quarter and year-to-date sales have grown 8.6%.

International adjusted operating income was $0.2 million, which included $27.3 million of notable items. Excluding the notable items, the benefit ratio was 76.9% compared with 71.3% in the prior year, driven primarily by the U.K. product lines.

Unum UK reported a loss of GBP 1.4 million, including approximately GBP 18.6 million of notable items. Without these items, the U.K. benefit ratio was 80.5% compared with 73.8% a year ago, driven by a higher number of submitted claims in group income protection.

Regarding premium growth, U.K. premium grew 3.5% and Poland premium grew 10%. As we discussed in the second quarter, we are taking thoughtful pricing and underwriting actions to restore the business to its target profitability. While these actions will affect near-term sales and persistency, they will ultimately position the business for long-term success.

So Colonial Life adjusted operating income was $169.4 million, including $42.5 million of notable items. After adjusting for those items, earnings were also higher year-over-year. Driving these improved earnings, the benefit ratio, excluding notable items, was 47% compared to 48.2% a year ago, driven primarily by lower cancer claims.

This is a continuation of the strong benefit trends that Colonial has exhibited all year. In addition to the strong margin trends, Colonial's top line also continues to exhibit strength and growing momentum.

Sales in the quarter increased 6.4%, bringing year-to-date sales growth to 4.7%, which compares to 2.8% a year ago. With this, premium grew 3% and is positioned to meet its full year premium growth outlook of 2% to 4% with year-to-date premium growth of 3.2%.

Finally, the Corporate segment produced an adjusted operating loss of $45.7 million and was within our expectation of a loss in the mid- to upper $40 million range.

Before turning to the Closed Block, I'd like to address our full year outlook. We have revised our definition of after-tax adjusted operating income based on discussions with the staff of the Securities and Exchange Commission during an ongoing comment letter process regarding our use of non-GAAP financial measures.

The revision does not impact our GAAP net income. As a result, our full year 2026 after-tax adjusted operating earnings per share will now reflect the impact of our annual assumption review. Incorporating the annual assumption review and refinements, our results through the first 3 quarters and our fourth quarter expectations for the core segments, we now expect full year 2026 after-tax adjusted operating earnings per share of $8.30 to $8.50, which includes approximately $0.33 from notable items.

I'll now turn to the Closed Block. As Rick mentioned, we have successfully closed our second external LTC reinsurance transaction, ceding $3.8 billion of statutory reserves to Fortitude Re at a 12% net cost relative to our best estimate reserves.

This cost is consistent with our previous transaction and reflects the economic benefits we realized from the transaction, including the required capital release and tax benefits. Through the transaction, we have meaningfully reduced exposure to LTC reserves and materially improved the risk profile of the remaining LTC block. Paired with the first transaction last year, we have reduced our LTC exposure by over 40%.

The upfront loss associated with the transaction will be amortized and reported within the Closed Block GAAP results, consistent with prior transactions. With the transaction now closed, we expect increasing amounts of non-contemporaneous reinsurance impacts, reflecting the ongoing recognition of earnings associated with the reinsurance transactions completed both in prior periods rather than current period operating performance.

The earnings impacts from both the amortization of upfront costs and non-contemporaneous reinsurance impacts are expected to be approximately $30 million to $40 million per quarter. Combining that with our prior Closed Block reinsurance transactions, the total impact from these items is expected to be approximately $90 million to $100 million per quarter initially and then will gradually decline over time.

Our third quarter GAAP result includes an impairment loss of $744 million on assets identified for transfer in the transaction, reflecting the difference between their amortized cost and fair value. This impairment and the other GAAP impacts associated with the transaction were contemplated in our original evaluation and signing and do not change the overall transaction economics that we described at announcement, which remain intact through closing.

Outside of the transaction, Closed Block earnings remain volatile, largely reflecting employers continuing to terminate group LTC coverage. In the third quarter, approximately 150 employers made this choice and closed their cases. This year alone, these terminations have reduced our group LTC case exposure by 14%. The net premium ratio increased 30 basis points sequentially from the second quarter to 98.1%, with most of the increase driven by group case terminations.

Other key indicators that we monitor for the health of the block remain solid. Fairwind protections stand at approximately $2 billion following the closing of the LTC reinsurance transaction.

We have now achieved over 25% of our current rate increase program with over $100 million of GPV approved this quarter. The alternative investment portfolio that primarily supports LTC generated an annualized yield of 10.1%, above our long-term expectation of 8% to 10%.

I'll end by covering our robust capital position. Holding company liquidity stood at $1.4 billion and traditional RBC at 485%. We remain on track to end the year within our full year outlook of 400% to 425% RBC and $1.5 billion to $2 billion of holding company liquidity. Our robust capital position is supported by statutory after-tax operating income of $298.7 million in the third quarter when adjusting for the effects of preparations for the reinsurance transaction.

Our year-end capital expectations remain unchanged. We continue to expect to finish the year within our stated ranges for both RBC and holding company liquidity, and we are generating capital as expected from our strong businesses.

Finally, during the third quarter, we repurchased approximately $200 million of stock. Paired with our common stock dividend, capital return to shareholders was approximately $280 million in the quarter, bringing our year-to-date deployment to over $1 billion. This positions us well to end the year at our goal of returning $1.3 billion to shareholders through dividends and share repurchases.

I will now turn it back to Rick for his closing comments before we move to your questions.

Thank you, Steve. This quarter's earnings shortfall does not diminish our confidence in the underlying franchise with growth, persistency and capital generation intact. Monitoring and understanding the increase in U.S. disability claims submissions remains a priority and emerging experience will guide where and how we respond.

We continue to strengthen the profile of the Closed Block through completed reinsurance transactions and ongoing actions across the retained business. Overall, we remain confident in our business and our ability to create long-term value.

And with that, let me turn the call over to Jordan, we're ready for your questions.

[Operator Instructions] Your first question comes from the line of Ryan Krueger from KBW.

I have, I guess, a multipart question on the LTD incidence. Hoping to get more details on when it started? Has it continued through October? Is there a concentration in any particular industries or job types?

And then can you just give more, any more detail on what, on the behavioral health component of all this? Is that the vast majority of the 500 basis point adverse impact? Or are there other things going on as well?

Good. Thanks for the multipart question there, Ryan. We do need to step back a little bit and look at the strength of the franchise overall. Strong business built on serving customers well and delivering products and capabilities for employers and their employees. We have managed through periods of elevated submissions before and the circumstances are never exactly the same, but we have a deep understanding of this business and the capabilities to respond as conditions evolve.

And we are a company of discipline. And so you'll hear more as we go through that. And we can start to unpack. You have a multipart question, a lot of dimensions to it, and I'll turn it over to Steve to start to do that.

Yes. Great. Thanks, Rick. And yes, as we described earlier, third quarter, we did see a sharp increase in submitted long-term disability claims. And I think it's good to ground a little bit on just what our reserving process looks like. And when we, when a claim is submitted, we set up the reserve based on just historical experience, the probability of what type of claim it is, the probability that it will actually go to payment.

And then we go through an adjudication process on that claim. And when we prove that it is valid, we pay it, and we adjust the reserve accordingly if that's appropriate to do.

So I'll take us back to the beginning of the year. We originally had an outlook coming into the year for our benefit ratio of 62% to 64%. And in the first 2 quarters, we did see pressure in our short-term disability and PFML business. That drove about 2 percentage points of pressure on the loss ratio with some other puts and takes.

But what we did see also was recoveries continued in LTD at the rate that we would have expected. We saw a little bit of volatility in incidence there, but really nothing that was beyond our expectation. Then we come into the third quarter, and we saw the following.

First of all, STD and PFML experience was really consistent with the first 2 quarters, and it did pressure earnings by about the same 2 percentage points. Our pricing strategy to address is already in motion, and that is out there with our clients already. That's mostly annual renewable business. So work is underway there.

What we saw that was different was our long-term disability claim submissions created about another 5% of additional pressure on the loss ratio. And just to size it up a little bit, that's approximately a 10% increase in submitted claims above what our expectations would have been for the period.

This increase was focused on behavioral health type claims, and that's really a subset of claim types that we've seen that may fluctuate when you have different market uncertainties out there, whether it's economic or labor related.

What we've seen in prior cycles, we've seen an increase in environmentally sensitive claim type submissions. That doesn't necessarily translate to an increase in paid claims ultimately, but we have to monitor that. We have to take it through the adjudication process, and that will take some time, which Chris can talk about.

What we have seen, though, is really pretty decent stability in the employment levels within our in-force block. And I think that would mirror what you're seeing out there in the environment just around unemployment. And so we're thoughtful about that, but we really continue to see pretty good strength in the labor markets.

What I would say is every cycle can be different. Historically, when we've seen this type of spike, it does resolve over time, but it's unclear what that's going to look like this time, and we're just going to have to monitor it. The other thing that I'll hit on, Ryan, that you asked is just about the trend.

And I'll just ground a little bit with every quarter, we can see intra-period volatility. So not every month looks the same. And so incidence can bounce around a little bit on this. I guess what I'd say is year-to-date through second quarter, submissions were pretty much right at our expectations. So this was definitely a third quarter change in the volumes.

The other, I think, to mention on this is LTD claims volumes, they're much lower than some of our more high-volume claims like short-term disability. So they can be a little bit volatile.

So what I would say is during the quarter in third quarter, we saw this elevated size of claims. As we go into the fourth quarter, it will be volatile there, too. What I'll say what we've seen so far, it hasn't reverted to lower levels. But I'd also say it's very early in the quarter.

And we have seen these types of claims have a lot of volatility within a quarter. So we'll just have to see how the quarter plays out, and then we'll evaluate it.

But maybe I'll turn it over to Chris to talk about the actions we're taking and more broadly, how you think about the process of adjudicating these types of claims and what that looks from a business process perspective.

Yes. Thanks, Ryan. And to build on Rick and Steve's comments, when you think about our response, it really does call on things we do very well and have done for a long time.

One is we've got know-how around claims management. We've got a very thoughtful process around price. And we have those long-term relationships with customers where they understand the combination of services we provide for them and the need to make sure we're setting fair and stable prices over time.

So when experience emerges, like it did with STD and PFML, we're very clear with the data. We're very out in front of it as we have been already this year. And we will be talking about the long-term disability experience and what we're seeing.

Inside of the claim operation, which is important, we have some very deeply specialized teams, I think doctors and nurses in addition to other members of the claims organization who have real expertise in these areas. Behavioral health is something that's been a reality of our business for a long time, and we're very well staffed to make sure that we can go through the process that is appropriate for these claims. It takes expertise to work them through, and it's very important to us that we don't shortcut those processes.

We do all the work relative to restriction and limitation evaluation, conducting the appropriate medical research, giving guidance toward return to work possibilities. The contracts do have limitations on how long behavioral health claims are paid, but we're working them well in advance of that.

So think about that as part of the durable model that we've used and we're deploying today. And then to Steve's point, we do think ahead toward the pricing element. What will we do for pricing? This experience gets feathered into the renewal cycle immediately, and we take it through.

A majority of our block is up for renewal every year. So we'll be talking to customers. We are in market talking to customers today, and we will continue to do that. And again, this is all part of the combination of things we do very well, combining claims management and appropriate go-forward pricing actions.

I think you did ask, part of your question was around are we seeing any specific industry or segment of the business. And I would step back and say this is more broad-based rather than coming from any one direct area. And we're going to approach it with a broad view looking to move the meter forward.

Your next question comes from the line of Alex Scott from Barclays.

I wanted to see if you could talk about just the dynamic with the elevated benefit ratio, paid family medical leaves in there as well, contributing some to that. And I just want to understand, as this potentially continues, but paid family medical leave begins to get maybe a little bit of relief quicker from pricing, what does that cause the benefit ratio to do as we get into 2027? If you could just help walk me through that a little bit and the timing would be helpful.

Yes, Alex, this is Steve. Maybe I'll just kind of talk about the math a little bit and how we're thinking about that, and then maybe Chris can hit on just pricing strategies. You're right. We've seen about a 2% elevation in benefit ratio throughout the year for the first 3 quarters around PFML and STD. The majority of that, vast majority of that is annual renewal.

So if you think about just an annual pricing cycle, our expectation is that we would get that business back to our expected pricing levels within that period. So that's much more shorter-term actions that we can take. And so that will feather in as we get into '27 throughout the year as we go through the renewal cycles. But maybe talk more about just how we think the market pricing.

Yes. Thanks, Steve. Alex, there's no question, very data-driven PFML/STD type of renewals where you have highly credible loss ratios to show customers. They've seen the utilization in their own population. So they're not shocked when we're coming in showing the need for rate adjustment, generally speaking, up double digit.

That is kind of how we've been reflecting it. And we've been in those conversations with significant parts of the business already this year with 1/1 renewals and beyond. So you're exactly right. That plays through fairly quickly, and we'll be working that on a continued basis.

Long-term disability, again, this is the third quarter. This new experience is added into the experience review. We use a broader, a slightly broader kind of window for experience because of credibility on lower frequency type of products. We do try and reflect what the emerging experience is doing because I think that's the most important relative to how we set price going forward and customers want to know where it's headed.

Ultimately, the goal is stable pricing, very transparent for customers where experience matters for any time we have customers where we're talking about PFML, short-term disability, other leave services, the depth of the relationship and what we do for them, it makes it sort of is a true partnership where we want to get the price right as a kind of coordinated effort between our customers and us, and they're very receptive to these discussions.

Got it. That's all helpful. As a follow-up question, I wanted to ask on capital deployment and just to what degree all of this is going to potentially impact the redeployment of capital into things like buybacks.

And then maybe also if you could comment just around your strategic options more broadly in the way you're thinking about the business?

Yes. So when you think about the capital generation, capital deployment, as we've said for a long time, we've had a good, strong capital generation model. That continues. You saw that even in this quarter, continued strong capital generation. And so that gives us flexibility to what we're doing.

As we've talked about utilization of that capital, I think we've been very consistent in terms of what we want to do is put it back into our business, growing the business and the kind of growth rates that we've seen, how can we continue those with the right investments in our business that can come organically.

It can come inorganically, too, with some capabilities that we have out there. And then ultimately, what we've done over the course of this year, we kind of set in the range of redeploying capital to shareholders at about the level of which we're generating. And so this year, $1.3 billion, still very much intact.

And as we look to the future, we'll have to look at what our overall capital plans are, but we think that's still a good mode for our shareholders to sit with a good excess capital position we have today and then return back which we're earning in the future. And I think that will continue, Alex.

I think you had a question, I think we're on our fourth question with Alex. So we got to make sure we get through the queue here a little faster. I think Alex as well, strategically, how we continue to think about it is our strategy is very much intact. And so we're not distracted, although we're focused on it, but we're not distracted by a quarter's event.

We know how to run this business. We like this business very much, how it's placed, how it's positioned. Our ability to reprice is a real plus. And we'll manage through that period of time, but our strategic priorities remain the same.

Your next question comes from the line of Tom Gallagher from Evercore ISI.

First question is, so the 70.6% loss ratio you guys have emphasized that's based on claim submissions, not necessarily claim payments. How, help us think through what does that practically mean? So you've seen, I think, a 10% surge in submitted claims.

Do you, does it take a while to work through the inventory to determine what's a claim that gets approved? Do you initially put up a pick just based on submissions and then it needs to season? Like what does the 70.6% mean, I guess? Is it also a reasonable estimate for what will be approved? Or is there still some uncertainty in that relative to the 70.6%?

Yes. Tom, it's Steve. I'll talk to you just about how the reserving methodology works. And then maybe Chris can hit just on kind of timing of adjudication and how long that takes to work its way through. So when we get a claim submission, we mark it up, we have diagnosis, different things that are attributes of the claim itself.

And so we'll set up the reserve initially based upon those factors as well as probability that it will go to pay. So we do take that into account what we think the probability that it will ultimately pay when we set up the reserve to begin with.

Now that is an estimate based on historical experience and the actual kind of acceptance of that claim can differ over time. And what we've seen historically, and this isn't a forward-looking statement, but what we've seen historically when we have surges like this for these types of claims is sometimes the acceptance of those claims are a little bit lower and not as many of them may go to paid.

But we have to see every situation, every cycle is going to be different. And so we'll just have to see how that plays out. And then, Chris, maybe you can just hit on kind of timing and what the cycle looks like.

Yes. Tom, I think it's important to think about, and maybe I'll just break it apart between short-term disability and long-term disability frequency. On short-term disability, claims are paid relatively quickly. There's, decisions are made with the information that we need and we proceed and manage the claim.

Long-term disability slows down a bit. And I think it's important to note when we get a claim in, volumes are significantly lower. There are multiple layers of discussion. Again, using specialized medical, are you getting appropriate care? Are we talking to the right type of doctor? Do we really understand the ongoing restrictions and limitations, which means you have to understand the occupation that the person is doing, what they're required to do, what the options are.

And we measure that more in weeks than in days and hours. And so that's an ongoing process. And we certainly want to move expeditiously, but we want to make sure we do our full review. And I think that's very important. We've got a very strong history of making sure that we communicate well with claimants.

We communicate very well with their medical team. We understand what their employers' needs are and the occupation and then we arrive at a claim at the right time. And that's, I think, the process we're in right now.

Got you. And then Steve, the, so the 70 you said you've seen in the past when it's economically sensitive claims like this that there has been somewhat of a lower approval rate. Is that what the 70.6% contemplates? Like are you assuming a lower approval rate on this 10% increase? Or are you assuming a normal and then there could be, I don't want to, I'm not trying to ask are you in a favorable development on these, but I just want to understand what's in that 70.6% number.

Is that, does that contemplate the historic, when you see a surge, you have had lower approval rates. Is that in that number already?

Yes, Tom, I'll just answer that factually because you're right. I don't want to give any kind of guidance how this is necessarily going to play out. But we do use just kind of our normal acceptance rate that you would see during normal levels of submissions.

Got it. So you've not assumed, we'll call it, favorability at all on the lower acceptance rates on this particular moment?

Yes. That's right.

Your next question comes from the line of Joel Hurwitz from Dowling & Partners.

Just a quick follow-up on Tom's question. I guess, is there any early color on how the rate of these submitted claims moving to paid compares to your expectations?

Yes, it's probably premature to give any sort of guidance on that. Like Chris said, it takes time to work this through the system. We'll know more as we get into the fourth quarter.

Okay. And then I guess, at this time, are you able to contemplate the spike in LTD claims and pricing for 1/1/27? Or do you still anticipate that renewals will reflect some of the rate concessions that you've talked about in the past?

Yes, Joel, thanks. And it's a good point if I were to step back and say that we have had some very favorable group disability years, and you've seen and we've communicated that there has been appropriate rate reduction if experience was really good for customers, and we've shared that. That's actually a great setup for kind of where we are today, where we can go back to customers and say, new experience dictates a new pricing action, and we have the credibility to go and get those rates, that in combination with the work we do.

We're talking to customers all the time. I've touched on the fact that short-term disability and PFML discussions have been happening very directly, and that's been happening all year. Long-term disability is always part of that conversation. We generally have a bundle of products. Larger cases, there is a timing where larger cases for 1/1 negotiations did start earlier in the year, and we still kind of communicate all the way through with them.

Smaller cases are still in discussion right now. So that end of the block is still being kind of negotiated. So that's open for kind of current experience. And I will say just maybe as an addendum, there is always a significant majority of our block that is outside of rate guarantee. So we'll be actively working that through as effective dates come up beyond 1/1. So it's not like 1/1 is a cliff and nothing else is in play.

Your next question comes from the line of Mike Ward from UBS.

I guess I just wanted to dig in a little bit, like is there any sort of demographic or firm level kind of layer we can think about it through? Like is it -- are you seeing the long-term disability claim submissions at tech firms? Or is it younger employees facing burnout? Like I'm just hoping you can help us understand it on the ground a little bit better.

Yes, Mike, it's Chris. We are -- of course, we're keen into all the different ways we cut the block and segments. And I think it's appropriate to say at this point, any differences between size segment or industry or region are subtle enough that they really aren't telling.

And I think right now, we're approaching it as there's claim activity in the market, let's do our job and kind of keep focused on the elements that require claims management and the other elements that require pricing.

Okay. And then on the strategic interest sort of topic, just to flip it around a little bit. So there's growing discussion across the market around pent-up M&A across the sector. And Unum, I think, is pretty clearly that much cleaner because of all of your efforts but I do think a lot of people are sort of curious if this thought process makes sense and if we should include Unum in this debate. And so curious if you can opine on that and if you have had any credible strategic inbound interest.

Yes. I think, Mike, I just said very clearly that we would not speculate on anything like that. I would say that when we think about running our business, this is about growing the franchise, generating good returns and making sure that we're building the value for our shareholders across the board.

At the same time, we're also a company and our Board of Directors. We do -- we run the company well. I mentioned discipline that goes right along with corporate governance and everything that we do that we've been known for. We continue to pursue those paths. But that's as much as I'd say about that. This is about us this conversation today is about us building a really good -- or continuing to develop a really good franchise.

Your next question comes from the line of Wes Carmichael from Wells Fargo.

Steve, I think in your prepared remarks, you mentioned that you're confident in the long-term benefit ratio for group disability in the 65% range. It sounds like there's going to be some pricing actions taken, but also there's some near-term elevated claims submissions. So I'm just wondering how long you think it takes back to get around to that 65%.

Yes. There's a couple of different paths that this goes down. I would say, the spike that we've seen right now in claim submissions, we don't know how quickly that's going to resolve. We've seen different cycles in the past and just different timeliness of how those surges might come and then abate. So we have to see how that plays out. And that will influence, obviously, the performance of the block, what that looks like.

But then also from a pricing perspective, I think Chris hit on it, just we're able to get after this fairly quickly. And so when we talk about 65% loss ratio, we still do feel confident. Like we think that, that's the right level of underwriting margin for the franchise that we have, and that will be our pricing strategy to hit those levels. The timing of how that plays through, we're after it now.

Chris mentioned, we have a lot of renewals that we're able to go after on an annual basis. We will do that as appropriate. And so we would hope to do that in the medium term. But we'll just have to see how the experience plays out, just what the timing of that may be, whether it's kind of resolution of the spike or it's pricing or it's a combination of both.

Got it. And I just wanted to follow up on the group life and AD&D impact from the disability submission. Can you maybe just walk us through just a little bit of the mechanics of how that works? I mean I think I understand that if somebody goes out on disability, they're not paying a premium and you'll establish a reserve for that. But I just wanted to know, is that -- do you expect that to kind of continue that 3-point or so impact into the fourth quarter as well?

Yes. Again, it will depend on what the new submissions look like. And it is directly related to when we get a submission in for long-term disability and we also have a group life policy, we do immediately, in essence, waive premiums for that period of time that they're on disability.

And we set up a reserve for that of what the expected death benefit may be on that. And that can be both from integrated policies where we have the group disability coverage. It can also be where they may have that coverage somewhere else, and we're notified of that.

And so what we find is it flows relatively consistent with the flow of the submissions themselves. And we did see that a little bit when we saw the trends historically with our claim terminations increasing over time, where during that period of time, it wasn't as acute, but we were releasing waiver of premium on life at the same time. And if you go back and kind of check some of the comments that we've made, we have referred to that as well. So it works both ways.

Your next question comes from the line of Suneet Kamath from Jefferies.

At the risk of being the devil's advocate here, I just wanted to ask a question around timing. Why wouldn't this -- if this claims trend stays the way it is, why wouldn't it take years to fix?

And the reason I ask is because when the benefit ratios were actually lower, you guys were saying, well, we can hang on to this extra margin for a while because it takes a while for the business to reprice because it doesn't always come up for renewal and all of those things, which I think were positive.

But now that we're on the other side of this, it sort of seems like you're telling a story where you can fix it relatively quickly. And so I just want to make sure I'm not misunderstanding that. I'm just curious about your comments there.

Yes, Suneet, let me just start and say when we were talking about the margin that we're getting and how we're able to hang on to it. I mean part of that was actually the competitive dynamics and the capabilities we deliver to our customers. And so we said from that perspective, relative to the rest of the competition, we feel like we could hang on to it. This is a very different dynamic. And so what we're dealing with here as it's increased is a customer-driven submit.

It's not competitive dynamics. It's not our ability to adjudicate the claims or the knowledge about these customers. And that's why it's different. And so the pricing process here is different as well as we continue to reflect that.

And Chris, maybe you can talk a little bit about that in terms of how we can increase price differently than we talked about before.

Yes. Suneet, there's no question that if I were to go back to that price stability desire for most of our customers, as you reflect on some of the good experience we had, and we would talk about kind of bringing rate down appropriately, the pressure on the way down is such that you don't have to go right to rock bottom because the desire is that they hold a more consistent kind of outlook going forward.

So our discussions are, geez, here's where it's running. It's running really well. We think the prudent thing would be to take a little bit off the top for you, but not go all the way down. So that would have been the kind of maintain those strong margins for a period of time and hopefully give employers the stability they need.

On the flip, though, we do have now experienced data that says that the price needs to be different, and we will go and reflect back to a place where this is what we need, and we're doing a lot of services for you. We're providing great cover. We're providing the right level of long-term disability as well as some of the things we're doing around leave services and connecting HCM, but this is the price we need to run that.

And that's part of the discussion and negotiation to get the right levels of pricing going forward. So they do operate a little bit differently depending on the circumstance.

Got it. That makes sense. And then my second question or maybe it's more of a comment on this whole long-term 65% benefit ratio thing. I don't know how helpful it is to have that out there because when you first gave it, I think you said it was going to take a couple of years to get there.

And I think it took a couple of quarters, and now we're well above it without a real sense of when we could get back there. And as I've talked to investors about that, I think providing ranges as opposed to this line in the sand, given that there is uncertainty in this business might be a better way to go. But that's just my initial thought when I heard that comment in your prepared remarks. I don't know if you want to comment on that or not, but I just wanted to mention it.

Yes, I can. I mean, clearly, Suneet, when we came into the year, we did think that was very consistent with what we saw in the experience and very consistent with what our pricing strategy was. So we did know, as Chris said, that we were going to have to give some price back.

And so we thought that, that was a very reasonable target to set and where we wanted to run the business. What's happened this year with some of the claim submission dynamics, it was obviously unforeseen. And so we still feel committed that, that's the right place to run the business over the long term. But we're going to have to roll up our sleeves and take some action for us to get to that point, and we're prepared to do that.

The next question comes from the line of Maxwell Fritscher from Truist.

I'm calling in for Mark Hughes. Is there any part of the higher incidence in the U.K. being driven by similar behavioral health type claims that you're seeing in the U.S.? I know you had called out the group income protection, but any similar dynamic in the U.K.?

Mark, do you want to take that?

I didn't quite hear the first part. Was it about?

Yes, the question was similar -- are there similar dynamics around behavioral health that we're seeing in the U.K. as well. So maybe just talk about the dynamics that you are seeing in the U.K. and...

Yes, sorry. I heard the word expense at the beginning. That was why I was just slightly -- you're entirely right. We have -- probably behavioral health has been the biggest increase in claims submission in the U.K. So we have -- on that basis, we have a similar profile -- but also, we have been having this for probably a little bit longer than the U.S. business.

So we've been able to see as that works through the claims funnel and into admitted and claims. And actually, not that many of behavioral health claims in the U.K. turn into admitted claims, but it is a different environment in the U.K. than it is in the U.S.

Yes. And I would just say, as we talk about -- we talked about the U.K. earlier. So the U.K. has been taking price earlier as well. And so I think they're maybe a little bit ahead of the U.S. business, but it's the same process, and it's the same mentality we have in the U.K. relative to what we're seeing in the market and then how do we address it.

Got it. And then you had mentioned -- going off that, you mentioned no changes in the competitive environment. And I believe you were referencing the U.S., but -- and if that is the case, and what are your observations around the competitive environment in the U.K.? And would you also say that it's steady state there?

Yes. The competitive environment in the U.K. has remained pretty consistent over the last few years. Sorry, forgive me, I got slightly disturbed at the door of the room that I happened to be in. That threw me slightly. Sorry, the market is -- market has been consistent in the U.K. We have seen claims -- we have seen the claims profile change in the last little while, but the behaviors of the competitors is pretty consistent.

We continue to be a disciplined price of business in the market. And so we respond to the claims situation that we see. We pass price on where that's appropriate and where we think it's sustainable, and we continue to compete for business where we consider the margins to be attractive.

Your next question comes from the line of Josh Shanker from Bank of America.

When you think about giving value to customers in a higher interest rate environment, what is the right price or right ratios on the benefit to be targeting in the U.S. for the business? I realize this was -- there were unforeseen claims, but the margins are still very, very good in the business, certainly over a trailing 12-month basis.

When you think about the right margins to target that balance the needs of customers and the needs of shareholders equally, what is the appropriate sort of range that the company should be targeting on the benefit ratio and disability?

Yes, Josh, it's Chris. Thanks for the question. We do talk about value we create for customers all the time, and it's, quite frankly, the focus of what we do. We want to be a very valuable partner, both in terms of the financial cover we provide to the covered employees, but also helping employers run their businesses, providing robust leave management services, tying into their human capital management program, mixing bundles of products that have employer and employee paid options so that people can get the coverage that's appropriate for them.

I would say depending on the services we provide, the range of profit expectation on every customer does vary. And when we're deeply engaged in what more and more of our customers need around leave management and all the investments we've got to make in technology and all the investments we've got to make in people and process, we do feel like we should command a healthy margin that you're reflecting in what you see in the numbers.

And I think that gets into the financial stuff that Steve's outlined in terms of where we want to run the business going forward. But it is a value proposition as opposed to just a target margin.

And in a 5% 10-year environment versus a 3% 10-year environment, how much more value can you create for the customer without alienating shareholders?

Yes. What I would say, the interest rate -- our pricing is less sensitive to interest rate on this product. There's not a very big balance sheet necessarily with these types of products. And so don't think about a lot of value creation from interest spreads on group products. So it's really about underwriting margin, and it's about expense management. Those are the 2 things that we have to be really good at, and that's how we're going to generate value.

Your next question comes from the line of Jack Matten from BMO.

I wanted to follow up on the kind of the macro environment and how it's impacting your disability margins. I guess if we look at like headline unemployment still pretty low, and I think you even referenced some labor market strength earlier. I guess, given that, do you view there could be any risk of incidence remaining higher or even moving higher versus this quarter's levels if market conditions actually become more adverse? And just any thoughts on kind of that historical relationship that you've seen?

Yes. Thanks, Jack. Appreciate that. I think Steve mentioned it in some of his comments as well, which is the unemployment picture actually seems pretty good at the surface level in terms of where unemployment is. We see it in our own results in terms of our payrolls that we're covering are steady and things like that. And I think the question here is how much -- this is somebody that's submitting a claim because of something that's on their mind literally or an accident they may have had.

And so that's the thing that's hard to actually predict what that looks like. We can look to history. And so it's the only thing we can do is look to history where we've seen periods of submitted incidence increase and how those played out over time. But as we try to say, every scenario is a little bit different.

This one might be different as well. So it's really hard to correlate specifically what's happening in a macro environment to what we're seeing here. I think we'll look back at it and we'll probably have a better view. But as we look at it right now, it's very hard to use predictive analytics to help us tell us what that's going to look like.

Got it. That's helpful. And then I guess just looking at the disability benefit ratio a little above 70%. I guess if you go back like many years, pre-pandemic times, it was in a similar ballpark. If we're like at a high level comparing the ratio today versus historically, are the underlying drivers that are really just higher incidences this quarter, offset by the better recovery experience you've had over time? Or are there other moving pieces you'd kind of call out if we're thinking about drivers over a longer-term perspective?

Yes, Jack, that's the exact way to look at it. I mean we still feel very confident in the strides we've made in being able to get people back to work over the last 10 years. Those are sustainable. Those are holding even through the volatility that we've seen with incidences so far this year, our recovery performance continues to be kind of historically best that we've seen in the block.

And you even see it demonstrated our confidence in the sustainability. We haven't really talked about the reserve assumption review, but we did release a little bit more reserve on our claim reserve for long-term disability due to our confidence in the level of recovery rates that we're seeing. So we view that as structural. We just need to work through what we've seen with the elevated incidence.

Your next question comes from the line of Wilma Burdis from Raymond James.

I guess this is sort of more of a philosophical question maybe, but it seems like across pretty much every area that's exposed to health care trends, you're just seeing a lot higher costs, especially for mental health and really -- I mean, there's other factors as well.

But I think what you're kind of seeing is just because costs are so high, more costs are being pushed back on employees. I just -- and then some of these companies, it seems like their willingness to pay more is sort of declining a little bit. So how do you guys see this shaking out longer term? I don't know if you can really answer it, but any color you could give would help.

Yes. Well, I think it's more than just philosophical question. I mean it's a question of the business. We are at the employer. You talked about a number of dynamics. And some of those dynamics very much play in our favor in terms of our ability to work with employers to help them as they manage their workforce. But causal type things that you're talking about here, it's harder to see how those causal effects on what we're seeing specifically here.

But it is important that the workplace is a very dynamic time. The tools that we bring to help the employer, we think will certainly bear well for us over time. And that's what we're focused on today is continuing to build those good solid relationships with employers to help them through that period of time.

Yes. Wilma, the only thing I would add is I think it does help parts of our business where employers are thinking about their health care costs and going to more high deductible plans and passing more of the cost to employees.

Our voluntary benefit products are really engineered to help employees with that cost at a much lower cost to them on an individual basis. So I think it works well with the construct that's being created around health benefits themselves.

And then very, very good progress really on the group LTC this year, first 3 quarters. I know that going into the 1/1 season is a big time where HRs are thinking about these products and what they want to do for 2027. Maybe give us a little bit more color on how you see that season playing out, what you're seeing for 4Q and what we can expect near term there?

Yes, certainly. I mean I think when you look at the group long-term care, the work that was done was a year ago, basically, where we said that we were going to stop taking new lives on group long-term care contracts. I think that's caused a lot of employers to look at what their situation is today. It's not dissociated either from the question you just asked around the cost. Employers are paying for this benefit for their employees, which they may or may not be utilizing.

And so I think seeing some of those terminations through the first 9 months have been good. I think it's a continuing conversation we're going to have with employers about what makes sense for them, and we'll have to see how that plays out.

I don't want to give any forecast for 4Q or even into next year. But this is going to be an ongoing discussion from here on in, in terms of why an employer is deciding to continue this type of product line where it's probably in their best interest not to.

Yes. And when we've talked about this in the past, it's not that -- one of the conversations we have now that we're not allowing new enrollees in is just kind of the equity or inequity of offering this coverage to part of an employee base and not all of an employee base, that's just going to grow larger and larger as a difference between that experience for an employee at a single employer as people leave companies and we are not insuring the new people coming into the company.

So I don't think it's not a 1-year cycle having those discussions because I think it will be kind of a greater and greater issue for employers when they think about just overall coverages for employees.

If there's any chance I could sneak one more in.

No. Sorry, Wilma. We still have three or four more people we want to get in, so we'll have to come back to Wilma. I appreciate that. I apologize for the lateness of this, so

Your next question comes from the line of Bob Huang from Morgan Stanley.

This is [ Ji ] I'm calling on behalf of Bob. We have a question on the group disability loss ratio. So could you help us frame the outlook for the loss ratio heading to 2027? I think based on the EPS guidance, like probably 4Q is going to have a similar trend as in the third quarter.

And I understand it's still like really early to forecast 2027 as you will have the pricing action and you're still monitoring the cases. But could you just give us some like upside or downside scenarios and like as the loss ratio on the pace that like PFML and STD might reset, just anything helpful.

Yes. I would say we're not going to comment on '27 at this point. We'll know more as we get through the fourth quarter and we go into our outlook meeting, which we'll talk about in the first quarter of next year. I will say, in our outlook, we have assumed earnings levels overall very consistent with the third quarter.

And so the implication there is the benefit ratios for the various lines, we think will be pretty consistent, what we're seeing right now in the fourth quarter from what we've seen in the third quarter. But beyond that, we're not going to give any other kind of forward-looking guidance at this point.

Okay. Understood. And the second question is like do you view the elevated LTD claim trend as like a cyclical trend, like a normalization following you probably have a lower claims in the past few years? Or do you think this is like more structure reflecting the changes like in workplace behavior, mental health?

Yes. I would just say it's hard to actually predict whether it's cyclical or not. We're just telling you where we are right now relative to that. And it is elevated, but it's -- we'll have to work our way through when we talk about what this looks like. I think cycles are hard to look at when you're going through it, I think cycles are things you'll look back on. So -- but where we are right now is kind of what we talked about throughout the call.

Your next question comes from the line of Tracy Benguigui from Wolfe Research.

A follow-up question on your reiteration of your long-term 65% disability benefit ratio target. Just on a mechanical standpoint, does the 2-year limit on behavioral claims versus a longer tail and physical type of LTD give you more confidence in getting your benefit ratio back on track? Or are these type of behavioral claims just too volatile where in a way, it does not matter how long the tail is?

Yes. How I would answer that, Tracy, is when we set up the initial reserve, we have a view of the type of claim it is. And so we're going to set that claim reserve up, understanding what the duration is probably going to be. And so we take into account the limitations on behavioral health type claims. And so you might still have some variation in what the ultimate duration of that is, but that's taken into account kind of upfront.

Okay. Just a follow-up. It was good to see another 5% of group LTC cases closed. That was a tad higher than the second quarter. I'm just curious on a cadence perspective, was that a function of the timing of your annual letters that you sent out for your upcoming 1/1 renewals, reminding folks no longer -- you're no longer offering LTC policies to existing cases starting in February.

I'm just trying to figure out which period may be a bigger window to see those terminations in the third quarter or fourth quarter.

Yes. It's a good question, Tracy. I think these discussions with employers really go back a year, and they're ongoing. And so when they get to their decision point is perhaps less about the calendar and more about when they've made that conclusion for their own employee base.

So it's hard to look at any particular quarter and say that that's the window which we're going to see more. I'd just reiterate, we're very happy. 15% of our group long-term care cases have come off from that announcement. And so we'll look forward to that continuing.

And that's just part of the overall block management of our Closed Block. And so that's one element of it. We've been happy with the action that we took last year and the result that we've seen thus far.

Your final question comes from the line of Pablo Singzon from JPMorgan.

I'll try to be quick. So assuming that some portion of these mental health claims convert to paid, whether it's a normal or surge adjusted level, what do the recovery curves on these claims look like? And do you think it will be accretive, neutral or dilutive to your favorable recovery trends overall, right? I think Tracy said mental health claims are capped at 2 years, but perhaps determining claim resolution is less objective than with physical injury claim.

I'm sorry, Pablo, I have to back you up. We only got about 1/4 of that question. So if you could just summarize the key points.

Yes. It was just questions on recoveries in these mental health claims and whether or not you think the recoveries here expected to be accretive, neutral or dilutive to the overall favorable recovery trends for the book, right? And I think Tracy had said you're normally capped at 2 years, but perhaps determining claim resolution is less objective than with a physical injury claim.

Yes. I would go back to kind of how I answered, I think, Tracy's question. When we set up a reserve to begin with, we look at diagnosis and all those types of things, including the type of coverage that they have.

And we set up the original claim with the expectations that we have, including what the recovery rate may look like for that type of claim and therefore, what the duration of the claim is. So it's really hardwired in just our claim reserve calculation to begin with.

Okay. And then second question is on PFML. How long does it normally take for claims utilization in the population to season? And I guess the genesis of the question is that if you look at some public data on PFML, say, like in New York, it seems like utilization is just increasing year-over-year as more covered insureds become more aware of the benefits available to them. So I guess the question is, what are you seeing in your books now? And can we potentially be in a multiyear repricing process here as the PFML book season?

Yes, Pablo, it's Chris. I think PFML is it's in the short-term disability family relative to kind of that near-term limited benefit period. Different states have different rules. And obviously, where there are parts, which is the employee is healthy, but they're taking time that's compensated away from work for a variety of reasons.

There's been some maturation in the process that all goes into the experience. I would say we're watching it carefully, and I wouldn't draw any conclusions as to the future trends up relative to utilization. But we have been very close to it and set prices appropriately going forward as new states come on.

That concludes our question-and-answer session. I will now turn the call back to Rick McKenney for closing remarks.

Great. Thank you, Jordan, and I appreciate everybody sticking with us today. And obviously, a lot of details to get into. We'll be out there and available and look forward to coming opportunities in the next couple of months of the year to continue to have that discussion. So I appreciate you joining us. Appreciate your support, and that concludes the call for today.

That concludes today's meeting. You may now disconnect.

Good afternoon. We're going to get started with the next session. Great to have Unum with us today. Up on stage with me is Rick McKenney, President and CEO. Maybe just start with some opening comments on how you view Unum's performance in the first half of the year and how the company is positioned in the back half of this year and into 2027.

Certainly. Thanks, Ryan. Good to be here with everyone. I appreciate everybody in person or following us on the webcast. For Unum, it's been a continuation of a good year, and I really will dimension that on a multiple fronts. One is we always start with the core business and being in the employee benefit space at the worksite, the business continues to still do well dimensionally across the board. When we think about it, our Group Benefits business is a leading franchise, and we've been very happy how that's performed over the course of the year. We've seen some good sales growth. I think that through the first half of the year, we saw our U.S. business growing kind of in the teens, really good to see our Colonial Life business catching more pace in terms of what it does. So our U.S. business is doing well. Top line, margins are still pretty good. There's some dynamics underlying that, but in aggregate, still doing very well.

And then our U.K. business doing well, but some work to do there on our U.K. business as we reprice the book a little bit. It's something we know how to do, and we'll certainly get on that. But in aggregate, the company doing well. I think we talked about even for the rest of the year, being within a range of $8.60 to $8.90. So that's kind of right in line with what we talked about going into the year. Capital generation is still very good, what we see across the company. And so very happy about that.

And then, of course, we need to talk about long-term care, and we've continued to reduce the risk across that block, one organically from this year coming out of some actions we took late last year and then announced a transaction in the July time frame of reducing risk through reinsurance. So all of those things good. I think we continue to be in a very good spot, looking forward to growing through the rest of the year. Clearly, a lot of things happen in our business in the third and fourth quarter that we're focused on, but those will be important as we go into 2027. So I think overall, Ryan, very happy about where we are, but always work to do and always opportunity ahead of us.

All right. Let's dig into the Unum US business a bit more, starting more on the growth side. Can you talk about -- you mentioned it a little bit, but can you talk about the sales trends that you're seeing as well as premium persistency at this point?

Yes. So I think I'll start with your last point, which is the premium persistency has been very, very strong. So in a business that has high returns for us, we've been able to keep a significant amount of that on the books. And the thing that we'll talk about overall, which drives sales, which drives persistency are the digital connections that we continue to make. And so if you think about 70% of our U.S. business has some type of digital connection that's been added over the -- since 2023. So we're very happy about that. And those capabilities are critical as we think about the connections with customers, the ability to have that business persist, get high returns and continue to deliver for our customers overall.

This is, yes, somewhat related, I guess, to what you just mentioned, but can you talk about some of the technology investments you've been making in recent years? And I constantly hear from companies in the group benefits market, how you need to keep reinvesting in technology and improving the customer experience, where -- how you feel Unum is at, where you're at in both -- also in terms of kind of how it compares to some of your competitors?

Yes, we would echo those same comments. I think we started some of those comments in talking about how we want to connect with our customers with good digital capabilities. Think about embedding that in terms of what the process within the customer looks like. And we talk about that as HR Connect would be one digital connection that we've been investing in for 7 or 8 years now. And so we've been at it for a while, always iterating, always getting better, making things simpler for our customer would be one piece of digital. And we'll continue to invest in that. Just like any good piece of technology, you can always improve it, always make things better, and we've been doing that in concert with our customers. But it's not just that. It's across the board.

So leave management is another piece where we've invested significantly over the last 7 or 8 years. And that has really paid off. Leave management has become a big differentiator in our market today. It's a basis of competition. And because we were early in that game, I think we have iterated faster than a number of our competitors. But it is something we always have to keep investing in. So that would be across our U.S. business, really good in our Colonial Life business, which is an agency-driven business. What we do with Agent Assist, think about the systems that an agency force would use. The investments there have continued to pay off, and we've seen good momentum in Colonial Life.

And even in the U.K., what we've done with some partnerships we've had there, embedding new services within the product lines we have. So technology is a big piece of it. And so we've continued to invest in it. It's not a new thing. It's not a new step function. It's been just a continual investment over a longer period of time. And I think the team has done a good job of iterating new and developing areas and then always thinking about what the future looks like.

Going back a few years ago, it seemed like you were maybe making some heavier investments and you did see some uptick in your expense ratio. It seems like it's started to stabilize from here. But where are you at kind of in the evolution? I'm sure there's always ongoing investments, but where are you at in the evolution of some of these larger initiatives?

Yes. So I think we did see our expense ratio come up coming out of the pandemic. There's a couple of things we highlighted there. One is the technology we're investing in. It was a little bit heavier, but not that much. The other was investment in our people. So you would have seen that across the board, I think just given that environment we saw in 2022 in that timeframe, we did see an increase in the cost for some of our people. So the combination of those 2, we've seen that flatten out, even get a little bit better. And so we manage our expense ratio pretty tightly. And so we would expect to see that slowly improving over time while still making very significant technology investments. It's not because we're slowing the investment. It's just as we burn that in and continue to work through productivity across the company.

And when you -- this is more of a Unum US question, but although I guess we could expand it to the other areas, too, but how would you characterize the current competitive conditions in the market today?

Yes. So the U.S. side, always competitive, right? So it's -- I think that we don't look for competition going away. I think one of the things about our space is it's pretty clear. It's a good place to compete in. The margins are high. Others see that and others have participated in that. All we look for is having a rationally competitive environment. And so we've had periods of time in the past, which was a little bit more irrational. Some of those players that were more on the irrational front have left the industry, which has been a good thing. But the players that are there today are there for the longer term.

So we'll compete based on capabilities, based on relationships, based on price to some degree, but it's not just price. And as long as we see that overall, we think that's a good environment for our customers. And I think about that more macro perspective customers because they don't want to see radically different prices year in and year out. They like to see that stability. We can deliver that and our competitors hopefully will deliver the same.

Have you seen much change in the environment over the last year or so? Or is it -- would you say it's pretty stable?

I would say -- I think that there's always -- every case by case, there's plenty of competition around that because we're all trying to grow our businesses. But I think it's within a range of stability that we have out there. And I expect we'd hear that from some of our competitors as well. We will compete hard day in and day out. But I think overall, we will win our share based on the capabilities we deliver, the relationships we've had over time and just the know-how that Unum has in this space, this is all we do. And so I think we have a great team to execute on that front.

I want to shift to underwriting experience in Unum US and really start with group disability. You had come into the year expecting a 62% to 64% benefit ratio was 65% in the first half of the year, so a little bit above that. Can you unpack some of the drivers of what drove that and how you're thinking about the outlook for the rest of the year?

Sure. I think what we've said for the rest of the year, we expect a similar level of what we see. And I think unpacking that, we did a fair bit of that in the second quarter, talking about looking at the different pieces between our long-term disability, short-term disability and PFML. And I think we highlighted that in PFML, paid family medical leave, we highlighted that, that's a place which is not performing to our expectations, and it's a place that we will reprice over the next year. So that's caused some of the elevation that we've seen over the course of last year, something we'll get after from a pricing perspective. And so we've said over the longer term, which we've said 65% is a good number longer term, that's what we'll be working towards.

And then maybe it would be helpful if we could just step back and paid family medical leave or PFML is a newer -- generally newer product. Maybe a little background on it and how you're viewing that market.

Yes. So this goes back a long ways in terms of administration of paid family medical leave goes all the way back to the Family Medical Leave Act 30 years ago. And so what companies are looking for is to help them with the administration of leaves. You really saw and we've been at this for a long time, and we would have talked about this going back, like I said, last 8-plus years ago, we could see this coming. Where you came out of the pandemic is a lot more focus on leaves. And when I think about that, think about employee base, the type of leaves that their employees are expecting now, some of them have been just evolution of employers.

So you think about what used to be a maternity leave is now a bonding leave, which includes both mothers and fathers in that process or somebody that's adopted a new child. It's all expanded in that area. There's also caregiver leave, think about taking care of a parent over a period of time through a tough so I'll just give you 2 examples. Now there's 10 in employers. So the complexity of that has gone very -- kind of a straight up kind of thing. You've also seen with that complexity, it's different state by state. And that's where some of the complexity comes in. Every state is different in terms of what it has out there.

Now take across roughly 14, 15 states today that have a mandated paid family leave, PFML as we talk about it. That's gone state by state as it has evolved. We've added a couple over the last couple of years. Each state will dictate what the leaves are that they expect employers to provide. And companies like ours will administer those. And so we'll work with an employer to administer that. You've seen that evolve over time, the prices that we charge over that. And so where that's come out over the last couple of years and why we talked about it more is, one, it's more prevalent, but it's still a minority of the states that have this, but it's more prevalent. And then our ability to do that is based on the technology we have, the knowledge we have, the history we have to make sure we can do a good job for customers.

In the last year, we brought on some states that were kind of -- you don't really know exactly what the pricing or the experience will look like. And so some of the states have had less good performance over the course of the last year or 2. And so now we'll have to price for that. So that's the process you go through. So these are generally 1-year products. So when you see experience at an employer, what they've got, you come back and you reprice for those levels. And so although it's been a little bit elevated to date, that's something we can rectify and address with customers, doing so in a very thoughtful way because it is important to them to have somebody take care of this for them. So anyway, it's a bigger topic. It's something we've been involved with for a long period of time and helping to educate in the industry. It's ultimately a good thing for an employer to do this because it is complex, and we can actually manage some of that complexity for them.

And then when you think about the longer-term expectation for the group disability benefit ratio, you've talked about like the 65% steady state. I think some people still say it was 70% plus before the pandemic. So I guess what gives you confidence that you can maintain it at 65% and really hold the line there?

Yes. So you'd have to go back over a longer period of time, thinking about what the trend has looked like there. And certainly, we saw levels come down around long-term disability that got down into the high 50s, which we said at that time was too low. It's come back up now right around that mid-60s level. Different than what it would have been if you went back a decade ago is you've seen a lot of change in terms of the ability to get people back to work over a period of time. So the recovery rates, as we talk, somebody goes out on disability, the recovery rates are dramatically different than they were a decade ago.

That could be for a few reasons. One is our knowledge; two, accommodations that employers provide; three, even just the medical process is different in terms of people's ability to recover from certain things can be different. All those things feed into that over a period of time. So we've seen better experience. And then you get back to the competitive environment, you say, okay, well, competition take that away. The dynamics there have changed as well. So now it's more about the services that you provide, the connectivity that you have today. And so the pricing dynamic because you have a broader portfolio may not change that dramatically. So that's our view of where we have it today. We still lead in that space. We want to continue to be a leader around disability management, but we want to do the overall portfolio in a very reasonable way.

And then on group life, things have kind of been, I guess, the opposite trend, which is experience has been very favorable lately for you and the entire industry. Are you, at this point, optimistic that this can continue at least in the near term? And then at what point do you think there -- could there be pressure to potentially pass through some of this into pricing given how favorable the margins are?

So we have seen very good results in our Life space. I think as you say, the industry has been good on that front as well. It gets back to the packaging when you think about overall. And so how quickly does that price go back into the market. You asked about the near term. We've kind of said it will look similar to what it looked like for the first half of the year, I think, which is kind of in the high 60s, 66%, 67%, something like that, lower than our expectation, which would have been right around 70% loss ratio. And I think that it gets back to the overall bundling and the packaging of the different products in terms of why necessarily the price won't just find a new level of where it is today. And so we're happy about where it is. We haven't really kind of projected out beyond this year, but we continue to be very happy with how our group life business is performing.

And maybe moving into Colonial Life. Your premiums have been -- growth has improved to about 3%. Do you still think that's a higher growth business than that longer term? And then what are the -- some of the key things that need to happen to accelerate growth from here?

Yes. No, we're very excited about our Colonial Life business, and we have been. So Colonial Life, it's an agency-driven force, and so they're selling mostly voluntary products, simple products at the employer ranging in sizes from very small customers to kind of that 2,000 employee level. So it's a really good place to get reach into the market because these are people that may not be served as benefit plans anywhere else. And so Colonial Life is a very good business model. It was more impacted by COVID, and we're still talking about that.

Because we had both the -- what was happening from an overall at the workplace type impacts. And for Colonial Life, which is an agency-driven force, we also had some challenges kind of in that next wave '23 -- I'm sorry, 2022 area, where our recruiting of our agents was not as good as it could be. All that's kind of -- we're working through a momentum right now. You would have seen 6% growth last quarter in sales at very high returns. And so we really like that business. And we'd like to see a higher growth business. It's about getting feet on the street, giving them the right technology, getting the reach that we have out there today. And so we're very optimistic about Colonial Life, but it's one of building very strong fundamentals in that business, which the team is doing a good job of seeing good momentum.

Can you talk a little just about how Colonial interacts with Unum US and the voluntary business that Unum US has and how you avoid channel conflict between the 2 divisions?

Certainly. I think it's one thing we've been working on for a very long time. And I think we're in a better spot now than we've ever been with how they would work together. I think our Colonial Life agents now understand where they can bring our Unum product set to solve certain needs that we have out there. We actually are doing that more today than we ever have. But I think there's a fundamental different value proposition that's brought to the employer. So if you think about Colonial Life, I mentioned it's an agency force. They'll do the enrollment for the employer, whereas the Unum side is much more of an electronic delivery, a little bit larger case working through a broker. It's just a very different delivery model.

And so depending on what the employer is looking for, we'll be happy to have them have Colonial Life if they want that higher level enrollment experience or on the Unum side, bringing some of that connective technology we've talked about. And so the channel conflict is actually not that high. We want to compete. We want to be there. But I think when there is the opportunity to bring both or have the employer choose, we want to bring the best of both out there as well. And we've seen more of that over the last couple of years than we have in my time at the company.

I guess shifting to the U.K. You mentioned this initially that there's some work to do to improve the underwriting. What have you been seeing that has gone worse than you expected? And then what's the time frame that you think you can fix it?

Yes. So the U.K. -- first of all, the U.K. business has a tremendous franchise. Even at these levels, has been for a long period of time. We have a leading market position over there, particularly around group income protection, which is akin to what we have in the U.S. around long-term disability, leading market position. And so we're going to be ahead of the market in terms of what these things look like. And that gives us the ability to price for it differently. And so some of the results we've seen this year, if you go back a couple of years, very, very high returns. We've seen that come down, still be a decent return.

I mean think about it it's still low teens type returns on this product set, but we think they can be higher. That's the repricing process we're going through right now with the U.K. Eyes wide open. The team is focused on it. We think we know where there are spots that we can work on that. And they'll do that over the course of the next year or 2 as we work through a repricing process.

Is that -- are the rate guarantees in the U.K. typically in that 1- to 2-year range?

It looks similar to what we have in the U.S. It will take 1 to 2, and it might even go longer than that, but usually a 1- to 2-year repricing cycle. It will look similar to what we would have seen in pricing cycles here in the U.S., but the team is on it. We bring great capabilities. Customer service is fantastic. What we have from other services we provide good. So this is just a pricing process we're going to go through.

And then how does the -- and maybe it's impacted a little bit by the pricing, but how does the growth outlook look in the U.K. business?

The U.K. has seen tremendous growth over the last couple of years. And I'd broaden out a little bit to our international. Our Polish business has also done very, very well over the last several years. And so we continue to expect good growth coming out of them. New products that they've launched over the course of the last year, new capabilities we're delivering to employers are out there. We'll have to make sure the price is right through that process. But in a rational market, that should work its way through. And we'll have to see what that looks like as we go into kind of outlook for next year from an overall growth perspective. But the underlying fundamentals of the company and the business is still very, very good.

Shifting to long-term care. So you did the second reinsurance transaction in July. Maybe you could step back and talk a little bit about how you feel about how -- where the company is at and how you've kind of positioned the long-term care experience as you've gradually been derisking it over time.

Yes. It's been a longer-term story. So another transaction, which we haven't closed on, so we still have to make sure we close on the transaction we announced back in July. But it really goes back a few years in terms of addressing the exposure. So many years, we've been taking price. So we can increase the prices on this business. We've been doing that going back 10, 15 years, increasing the price. And we've gotten over $5 billion of price value over that period of time. So that's underlying. It continues. It's something we continue to work on.

The second is back in 2023, we put more capital behind our Fairwind business. If you recall back in that period of time, we put a lot of capital in there and so we're not going to put any more capital behind this business. So we made that statement back then, and we feel that way still today. And then the advent of what we've had from a reinsurance perspective has been able to derisk what we've had there as well. So transaction going back a couple of years ago for some of our older lives we had in our individual block there. And then this transaction, all of the individual lives, the remainder of the individual lives that we've had in our Fairwind entity that we've been able to take out once we close here and thinking about that. So I feel really good about the derisking on that process.

And then even in the third quarter of last year, we also announced not admitting new lives on to group cases. And that derisking process, which is more of an organic process is something that in the first half of the year, we've seen 10% of the cases out there lapse. And that's a positive because I think when you think about cases lapsing, employers lapsing, employees can still have the coverage if they so choose, but that decision point is then made at that point in time. So another thing that we've derisked over time. That's still playing its way out today. So we're going to have to see where that goes. But once again, this has been a focus of the company for many years now, and we're actually seeing some of the -- it's actually starting to look very different than it did a year ago.

I'd also say that to take you back, I mentioned the capital we put behind the business. I think we talked about not needing capital there and $2 billion of protections that we have behind the block of business. After this reinsurance transaction where the block is a lot smaller, we'll still have close to $2 billion of protections in our Fairwind entity. So we've managed the business over time. Very happy about the reinsurance transactions, but I think it's been bigger than that in terms of the work the team has done to derisk that block of business.

I wanted to come back to the group LTC organic lapses that are occurring. I guess why do you think that the lapse rates are kind of being elevated as you've made this change to not admitting new lives? And then do you still think there could be a lot more of this? I mean -- or I guess we've gone through like one probably cycle of it so far, but do you think do you feel like there's probably going to be more of this in the future?

Sure. Just to give you the time frame, we announced that third quarter of last year, but it wasn't really effective until February 1. So we've only gone through kind of, I'd say, a half year cycle on that. But you have to ask the employer on why they choose to lapse the coverage. One, they may not have really appreciated what they had. They thought about it to their employee base. The second thing is now they're going to have 2 groups in their business, those the historical employees, which will have long-term care, group long-term care. The new employees will not. So there is an administration process that they've got to rectify that.

And so it's -- you'd have to kind of go case by case in terms of what that looks like. So will this continue? That will be speculative as we go through that, but those customers will still have to make the evaluation of whether it makes sense for their employee base, knowing that we'll be able to take care of their customers once they make that choice.

Then sticking with group LTC. So I think the characteristics of the risk profile itself seems less risky in some ways than individual, but it's also very young. And as a result, we just haven't seen any reinsurance transactions in the entire market that have involved group LTC. So I guess what's your optimism? Anything you can share on level of interest from counterparties on the remaining group LTC exposure and if you feel like there are going to be opportunities to do reinsurance there?

Yes. So there's still interest out there. And so after our second transaction, there's still interest in other counterparties we're talking to on that front. The groups -- as you say, there's 2 elements to the group. One is the underlying risk is very different in terms of the benefit per day, the amount that has inflation protection, the amount that actually has different levels of benefit on a per day basis. And so it is a much lower risk profile. These products are very different.

The other piece is they were distributed at the workplace. So oftentimes, the employer chose to bring that into the workplace as an employee who chose or an individual who chose to do that across the table. So just very different dynamics. But you also raised the right point, which is these are generally younger because they were done at the workplace up until recently, you're going to have a younger profile. And so you've got to just work through those dynamics about what that looks like. I think the important thing is, one, you say there's no group transactions. There's not that many folks out there that were group carriers, right? So there's a limited universe of people that offered this in the first place.

The second piece is, over time, we're able to tranche different pieces in terms of different ages, what things look like. And so I think that, that's a dynamic you've always got to think about. And that goes back a couple of years where we started to be able to look kind of on a by policy basis almost in terms of what the reinsurance look like. And that's how we're able to separate Transaction 1 from transaction 2 and how we'd be thinking about the next transactions around the group side.

So nothing precludes us. Those dynamics you talked about, different counterparties will think about it differently in terms of the lower risk profile versus the younger. And you've just got to find the right counterparty, both on the liability side as well as the asset management side that wants to take that risk on. But it's going to be a process we're going to continue.

I guess a related question, but somewhat different, but there have been a lot of individual LTC transactions you included. But the rest of your individual LTC exposure, I think, is mostly out of a New York subsidiary. Can you just help us understand like is that a major impediment? Or do you feel like you can get past that? And how does that affect the discussions for future transactions?

Yes, it's a good question. So we talk about that as being part of our PLA, Provident life and accident. So we have actually reinsured that internally. So it's sitting in that entity today. And that's just going to be worked through from a reinsurance with a counterparty. You're right that those were originally initiated in -- out of a New York domicilary we have. We talked about as first Unum historically. It's now in a different entity. And so those will just be part of the conversations in terms of how we will work through something like that.

And can you talk a little bit about Unum's free cash flow profile at this point? And then what your capital deployment priorities are?

Yes. So cash flow has been strong at the company. That continues. I think our product set that we have out there today continues to be good from an overall cash flow perspective. We've seen that through the first half of the year and still feel good about that. And what we're doing this year is from an overall priority perspective. Number one is the good core organic growth, right, making sure we're putting the right capital behind that business. We've been doing that pretty consistently, and it's not overly capital consumptive. So we'll continue to do that.

The second is inorganic. What are the acquisitions that we want to do to build out our book of business. We'll put capital there. And I think that when we think about that, it's more around how we build out capabilities and enhance our ability to grow the company has been where we've been focused. We did an acquisition last summer, Beanstalk Benefits, those type of things, which are the ability to grow a little bit faster. And so we'll continue to do that. And then we think about returning capital to our shareholders. So this year, our plan is to return roughly $1.3 billion of capital to shareholders, $300 million in dividends and another $1 billion in share repurchase.

And I think we're tracking through that for the first half of the year, we're a little bit ahead of that on the first half of the year in terms of the share buybacks we've had and the dividends we paid out. So we'll continue to do that as well. But the capital, go back to the generation, it's very, very strong, and we were able to have choices around what we want to do with the distribution of that, growing the company and then returning to shareholders when it makes sense.

I guess when it's come to inorganic, like you said, you've mostly either done things that add capabilities or you entered Poland. Are there any other either geographies you'd like to be in or product areas you feel like Unum wants to expand in that would be harder to do organically?

Yes. I'd start with the product. And I think we've got the product set that we want, at least what employers are looking for today. And we always want to be reactive to what employers are looking for. But the product that we have today is pretty filled. So it's actually much more about the connectivity, the type of distribution, how do we think about that? Beanstalk Benefits would be the kind of example we talk about there.

You mentioned Poland. That was 2018, which we bought our Polish business. Very happy about the growth rate we've seen there. But when we think about other geographies we want to be into, I think we're very happy about being in the U.K. and Poland. We want to continue to build those out to scale those up. And so I wouldn't add any more to that list at the moment.

And then I guess going back to growth in Unum US, maybe it's -- I don't know if it's too early to talk about this, but you get towards the end of the year, it's a big renewal season, you have bigger sales towards the end of the year. Any color you can give us at this point on how things are starting to look as we get into that year-end process?

Too early to talk about that, Ryan. So you called that right. I think it's something that we just focus on what are the capabilities we're good at and how do we compete. First half of the year is a good example. Although those are smaller quarters in the fourth quarter, I think we did a very good job of competing in the first couple of quarters and our team is out there working hard. But it's too early to talk about what the back half of the year is going to look like.

Are there any questions in the audience for Unum?

[indiscernible], I think Brian asked about the group disability benefit ratio. And I think you mentioned long term, your target 65%, but usually targets are averages and you have highs and lows. And do you think the pricing and just the persistency where we are with claims stops at 65% or could go a little farther, but 65% is still the long-term average?

Yes. I think what we said is 65% is the long-term average. Even if you look at the second quarter, it was a little bit higher than that. So I think it was a 65.8%, if I have that right. So it can fluctuate around that, but 65% is more of the long-term average that we would see over that. And when I mean long term, it's kind of an annual type thing as opposed to you'll see quarterly volatility that we'll see over time.

Could you talk about the impact of the GLP-1 drugs on your supplemental benefits business, particularly on the non-life side. So the life impact is more obvious, but maybe talk about what it means for the health type products. And then also, what does all the turbulence at the managed care companies mean for you guys from a competitive perspective? Is that a good thing for you? Or what does it mean for...

Yes. So maybe I'll start. talk about the GLPs first. When you think about the GLP impacts, we haven't really talked about it too much in terms of the impact that it might have on our life book of business, right? So that's still the question for us today. Most of our policies are under the age of 65, younger. So what are the impacts that GLPs will have on that? We haven't really talked too much about the impact of that. But when you think across our book of business, a healthier population, which I'd say the impacts of GLPs and weight loss reduction make for a healthier population is a good thing overall.

And so when you ask about the other products and the voluntary suite that we have today, Life is one of those that we put in our voluntary suite today. Accident policy is not an impact. Hospital indemnity is one, which is much more about care coverage. It's not really GLP related. So I don't -- I'm not sure there's much impact the GLPs to much of our portfolio that we see out there. There's some disability policies in there, accident, sickness type policies, but GLP is less of an impact on our voluntary business. There are smaller policies. There's simpler policies that really trigger based on different activities that might happen. And then your second piece, the managed care companies. One of the things that you look back over time is managed care companies were in our space today. They are not out there today. They're writing disability and others. So I don't think there's much of an impact in the disruption that you see there.

I thought they were trying to do more on the voluntary benefit side though.

Yes. You will see them as competitors on the voluntary benefit side, but it's usually akin to what they're doing across their broader. So I don't see them as the major competitor in this space, although they will participate in what they do there as well. But they have a history of being in our business, but they did actually get out of our business, most of them through disposition of the type of products, which are kind of our core businesses that provide out there, setting aside that some of them are still doing some voluntary benefit products.

Any other questions? All right. I think we'll wrap it up here. Thank you very much to Rick and the Unum team.

Thanks for everybody being here.

Thanks.

Thank you for standing by. My name is Kate, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Unum Group Q2 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Matt Royal, Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Unum Group's Second Quarter 2026 Earnings Call. Please note, today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a brief description of factors that could cause actual results to differ from expected results.

Yesterday afternoon, we released our second quarter earnings results and financial supplement. Those materials are available on the Investors section of our website. Also, please note, as usual, references made today to corporation sales and premium, including Unum International, are presented on a constant currency basis for improved comparability period to period.

Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and CFO, Steve Zabel. Following the remarks from Rick and Steve, additional members of management will participate in Q&A, including Chris Pyne, who leads our Group Benefits business; Mark Till, who oversees Unum International; and Steve Jones, who we welcome for his first earnings call as President of Colonial Life.

Now let me turn the call over to Rick.

Thank you, Matt. Good morning, everyone, and thank you for joining us. It's good to be back with you just a few weeks after the call to announce our latest transaction in our Closed Block. As we discussed then, the agreement to reinsure an additional $3.8 billion of long-term care reserves represents another meaningful step in our deliberate approach to reducing risk and actively managing the Closed Block. We will provide more detail on that later in the call, but today, our focus is on the second quarter results, first half performance and trending and outlook of our core employee benefits franchise.

It is consistently a franchise that generates attract returns, delivers free cash flow and creates long-term value for our shareholders. With that as context, let me turn to the second quarter. We delivered a solid second quarter, one that demonstrates the sheer breadth of our diversified employee benefits offerings. A key tenet of that is continuing to be a consistent partner for employers and their employees as their employee benefits needs continue to evolve. The quarter reflected continued attractive returns, generally stable persistency and favorable performance across several of our core businesses.

Starting with the top line, we saw continued underlying premium growth of roughly 5%. Across the board, we saw good persistency, which has been true throughout this year as our customer centricity and connectivity has paid off. Getting to new customers has also been successful. Sales growth has been solid, which was highlighted by U.S. sales in our Unum brands, growing 7.4% in the quarter, driving year-to-date sales growth of 14%.

Across the broader enterprise, our business continues to perform well against this backdrop of solid demand for workplace benefits. Employers continue to look for partners who can help them manage increasingly complex workforce needs and Unum is well positioned given the breadth of our product portfolio, our service capabilities and the investments we have made in digital connectivity and leave management. Our model is built around disciplined pricing, strong customer relationships and capabilities that support employers and employees at moments that matter.

Our investments in connectivity and leave capabilities continue to scale. Roughly half of our Unum U.S. in-force block, excluding our IDI business is now tied to HR Connect, Total Leave or Broker Connect and premium and fees tied to these capabilities have grown nearly 70% since year-end 2023. We are also seeing clear evidence that employer-facing capabilities are resonating in the market with HR Connect representing more than 20% of second quarter new sales. Similarly, sales, which are included in our Total Leave offering, more than doubled year-over-year in both group and voluntary benefits.

Colonial Life had another very strong quarter with 6% sales growth, leading to solid premium growth and attractive returns of nearly 20%. It has been a multiyear journey of building momentum and the business continues to benefit from disciplined execution. As a result, in addition to sales growth, we have seen solid persistency and favorable benefits experience, maintaining its important position in the worksite market. Colonial remains a critical part of our ability to reach employers at different sizes with solutions that help protect employees and their families.

Looking internationally, premium growth remained positive in both the U.K. and Poland, both north of 5%, yet sales were relatively flat in the U.K. Overall, our growth engine is performing well in a dynamic and competitive environment.

From an earnings perspective, this quarter showed variation of performance within our lines of business. We had solid performance across most of our lines, which included a continuation of strong group life performance. At the same time, there were 2 specific areas of elevated benefit experience that we are actively managing. Most notably, paid family and medical leave within the U.S. group disability segment and group income protection in the U.K. Importantly, we understand what is needed to address these areas, and we already have actions underway to do so. Equally important is that these lines continue to perform very well in aggregate. Total U.S. group disability is generating ROEs in excess of 20% and the International segment as a whole is in the teens.

To drill down a little, within U.S. group disability, results were pressured by elevated experience in short-term disability, primarily from the newer paid family and medical leave states. Although we were not happy with some of the results of these markets in their early days, we know that PFML is important in a developing market that is closely connected to our broader leave capabilities.

We have made the decision to participate early even as the claim data is developing. It's a natural extension of the investments we have made in helping employers manage absence, disability and mandated leaves. As the experience in the PFML market matures, we will respond, and we have the pricing know-how to incorporate this business into an overall high-return group disability franchise.

The U.K. story is a little bit different. Our U.K. group income protection business had results that were below our expectations this quarter. While the recent claims experience has been elevated, we have a long history of managing through changing experience cycles. We clearly continue to have strong market positions, maintain deep expertise in the market and are taking targeted pricing and underwriting actions to support attractive returns over time. These 2 areas are the current focus areas, but aren't overshadowing an overall franchise that had very strong performance. As a good portfolio does, we also had business lines that outperformed like our Life business and Colonial Life. That diversification is a meaningful advantage, helping balance performance across the portfolio as market conditions evolve. While the majority of our team has been actively growing our business, we also continue to make meaningful progress in actively managing and reducing the Closed Block.

The recently announced reinsurance transaction represents another important step in addressing our long-term care exposure and meaningfully improving the profile of that business that remains. Following closing later this year, the retained block will be predominantly group long-term care, with a much smaller individual long-term care component. The ongoing business will be characterized by a simpler benefit structure, a footprint that was distributed in a group format and continued natural runoff as employers reassess the role of long-term care coverage within their benefit programs. As a result, the remaining block will look materially different than it was just 18 months ago. Our objective remains to actively manage the risk and volatility of the Closed Block while keeping our focus on growing and strengthening the core franchise.

Turning to capital. As we look at our position today and looking through to the closing of the long-term care transaction in a couple of months, we are in a very robust capital position. Our deployment plans remain unchanged. During the quarter, we returned approximately $275 million through dividends and share repurchases and approximately $750 million year-to-date on our way to $1.3 billion of deployment this year.

Our cash-generating franchise creates significant financial flexibility and allows us to be consistent with our deployment philosophy, that is, investing in growth, having the ability to act on enhancing M&A opportunities and returning capital to shareholders through dividends and share repurchase.

Additionally, over the last several years, our strong core operations have also enabled us to manage and remove LTC risk from the company. Overall, the second quarter reinforces the quality and durability of our diversified business model. We delivered strong results across most of our business lines. This starts with solid growth metrics and customer demand on the top line while maintaining attractive returns through to the bottom line. We do have areas we can improve and our teams know how to address. Ultimately, we are clear-sighted about the opportunity in front of us to grow the company, to protect more individuals and families at time of need. We do so in a disciplined way that is good for our customers and good for our shareholders.

And with that, I'll turn the call over to Steve to walk through the results in more detail. Steve?

Great. Thank you, Rick, and good morning, everyone. Second quarter after-tax adjusted operating income per share was $2.16, up 4.9% from prior year, while year-to-date after-tax adjusted operating EPS growth was 7.5%. As Rick noted, we continue to produce attractive returns with consolidated adjusted operating ROE of 15.9% in the quarter and 16% year-to-date, both within our outlook range. Top line trends remain positive, supported by strong sales and persistency in our core businesses.

Second quarter core earned premium grew 3.6% with a 3.7% increase year-to-date. Adjusting for the runoff of the stop-loss business and the transactions executed last year, year-to-date core premium growth would have been just over 5%. Looking ahead, we are positioned to achieve our full year expectation of 4% to 7% as the impacts of last year's transactions will not dampen the growth rate in the second half of 2026. Total U.S. group persistency remained strong at 91.5%, up nearly 2 percentage points from the prior year.

So then turning to our quarterly operating results, the Unum US segment produced adjusted operating income of $329.6 million in the second quarter of 2026 compared to $318.2 million in the second quarter of 2025. Results reflected favorable earnings in group life and AD&D and supplemental and voluntary, partially offset by pressure in group disability. Group disability reported a second quarter benefit ratio of 65.8% compared to our 62% to 64% expectation. This result included a couple of points of pressure from elevated short-term disability experience, primarily driven by higher claims activity in the newer paid family and medical leave markets. While traditional STD experience was also elevated, PFML remained the primary driver of the quarter's pressure with LTD recoveries remaining consistent with our expectation.

We continue to view PFML as a developing market that is closely connected to our broader leave capabilities. Importantly, our initial PFML pricing structure generally does not include multiyear rate guarantees, allowing us to incorporate emerging experience in new pricing for both new business and renewals.

We have begun implementing double-digit rate adjustments for new business and at renewal for existing clients. And we expect those actions to build into results over time. As a result, until new rates are fully embedded into the 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. Importantly, underlying trends in LTD remains stable, driving confidence in our longer-term view of the benefit ratio over time.

Results for Unum US group life and AD&D were favorable. Adjusted operating income was $93.2 million for the second quarter of 2026 compared to $70.2 million in the prior year quarter. The benefit ratio was 66% compared to 69.7% in the second quarter of 2025, driven by continued lower incidents. This quarter's strong performance reflects the favorable mortality trends we've experienced recently consistent with the pattern observed over the last several quarters, which we do expect to continue.

Taken together, total group benefits generated a benefit ratio of 65.9% compared to 65.2% in the second quarter of 2025, as favorable group life mortality balanced increased PFML pressure in group disability. This translates to combined ROE exceeding 25%, a very strong result.

Adjusted operating earnings for the Unum US supplemental and voluntary lines were $133.3 million in the second quarter, an increase from $123.2 million in the second quarter of 2025. Benefit ratio was 47.4%, favorable to our 48% to 50% outlook range as the segment benefited from strong multi-life individual disability claims experience.

Turning to premium and sales. Unum US premium grew 3.3% with support from strong sales and persistency. Excluding the impact from the runoff of the stop loss business and our IDI transaction last year, Unum US premium grew just over 5% year-over-year. Unum US quarterly sales were $281.8 million compared to $262.4 million in the second quarter of 2025, representing growth of 7.4%. Year-to-date Unum US sales were up 14.3%, reflecting continued momentum across several product lines.

Moving to Unum International. Adjusted operating income for the second quarter was $24.3 million compared to $41.6 million in the second quarter of 2025 and below our outlook. Segment's benefit ratio was 78.4% compared to 72.4% in the prior year quarter, driven primarily by unfavorable experience in the U.K. 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. The U.K. benefit ratio was 82.2% compared to 75% a year ago. Premium growth remained strong with U.K. premium growing 5.2% and Poland premium up 8.8%. The earnings pressure remains concentrated in the U.K. group income protection business, where elevated average claim values continued during the quarter.

Looking ahead, we expect pressure to continue in the U.K. segment, but at a lower level in the second half of the year from current elevated levels, supported by the pricing and underwriting actions we are taking. Given the impact of U.K. results on our international tax profile, we currently expect our effective tax rate to be approximately 22% for the remainder of 2026.

So then moving to Colonial Life. The segment produced a record earnings quarter. Adjusted operating income for this segment was $131.4 million compared to $117.4 million in the second quarter of 2025. Benefit ratio of 46.7% was favorable compared to 48.3% in the year ago period and was better than our expected range of 48% to 50%. Premium income was $477.4 million compared to $462.1 million in the second quarter of 2025, which was driven by prior period sales.

Sales in the second quarter were $134.1 million, which was up 6% from the prior year. Colonial Life produced strong returns, including adjusted operating ROE of 19.4%. We are continuing to see strong adoption of Agent Assist, our proprietary agent productivity platform and digital workspace. Over 70% of our more than 12,000 agents utilize Agent Assist to help build the client relationships and enhance sales. Colonial Life's results demonstrated disciplined operating execution, resulting in overall strong sales, persistency, benefits experience and returns.

I'll now provide an update on the Closed Block. As Rick mentioned, the most significant development since our first quarter call was the announcement of our agreement to reinsure an additional $3.8 billion of long-term care statutory reserves out of Fairwind. As we described on the call earlier this month, the transaction represents approximately 26% of our total LTC block and 52% of our individual long-term care business, removing 100% of the remaining individual long-term care reserves held in Fairwind. The process to close is continuing as expected with completion expected in the fourth quarter. Following the transaction, Fairwind retains approximately $7.1 billion of group long-term care statutory reserves, supported by total protections of approximately $1.9 billion. The transaction materially improves the risk profile of what we retain.

Across key Fairwind assumptions, sensitivities decreased by 28% to 42%. The retained block is now predominantly group long-term care, which carries a different risk profile and generally more basic benefits than individual long-term care. It is also important to note that following closing, the upfront cost of the transaction will be amortized and reported within the Closed Block GAAP results, consistent with prior transactions. In addition, the transaction is expected to generate increasing amounts of noncontemporaneous reinsurance impacts, which represents the ongoing recognition of earnings associated with reinsurance transactions completed in prior periods rather than current period operating performance. The earnings impacts from both the amortization of upfront transaction costs and noncontemporaneous reinsurance impacts are expected to be approximately $30 million to $40 million per quarter.

Combined with our prior Closed Block reinsurance transactions, the total impact from these items is expected to be approximately $90 million to $100 million per quarter initially and will gradually decline over time. Excluding these items, we expect Closed Block GAAP earnings to continue tracking to our expectations with some quarter-to-quarter volatility as we execute actions within the block. More importantly, the underlying exposure is well protected from a capital perspective, supported by substantial reserve margins and protection within Fairwind and Provident Life.

Outside of long-term care, we also expect impacts post closing on the ongoing business, which includes the loss of net investment income on transferred holding company cash and the addition of temporary debt service as a result of our temporary financing for future tax benefits, which are associated with the transaction.

Turning back to quarterly performance. Closed Block earnings remained volatile, largely reflecting the impact of employers choosing to terminate coverage leading to group LTC case terminations. In the second quarter, approximately 3% of group long-term care cases closed, reducing our long-term exposure in the Closed Block by more than 20,000 lives. Since the end of 2025, around 10% of group long-term care cases have closed, reducing long-term exposure in the Closed Block by over 50,000 lives. Outside of these impacts, underlying experience trends remained broadly in line with expectations. The net premium ratio increased 20 basis points sequentially to 97.8%, with most of the increase driven by group LTC case terminations.

Other key indicators we monitor for the health of the block remains solid. Following the close of the Fortitude Re transaction, we expect Fairwind protection to be approximately $1.9 billion. We also continue to make progress on our premium rate increase program with the current program achievement rate at approximately 15%.

Lastly, the alternative investment portfolio that primarily supports LTC generated an annualized yield of 6.1% in the quarter, below our long-term expectation of 8% to 10%.

I'll end by covering our robust capital position. Holding company liquidity stood at $1.5 billion,and traditional RBC at 480%, both above our long-term targets and consistent with our expectations. We remain on track to end the year within our full year outlook of 400% to 425% RBC and $1.5 billion to $2 billion of holding company liquidity.

Our robust capital position is supported by statutory after-tax operating income of $331 million in the second quarter, positioning us for our full year expectations of $1.2 billion to $1.4 billion of total statutory earnings when adjusting for the expected impact of our most recent reinsurance transaction. As we prepare for the anticipated closing of the Fortitude Re transaction, we have begun positioning capital to support the transaction in the third quarter.

Holding company liquidity will decline in the third quarter as we use holdco cash to fund this temporary positioning. Accordingly, we expect to retain statutory earnings at Unum America rather than upstream a dividend, which may temporarily elevate our RBC ratio at the end of the third quarter. Our year-end capital expectations do remain unchanged, and we continue to expect to finish the year within our stated ranges for both RBC and holding company liquidity. This cash generation model paired with our strong capital position enables our durable approach to deploying capital to our shareholders while maintaining flexibility to support growth, manage risk and execute strategic transactions.

During the second quarter, we repurchased approximately $200 million of stock. Paired with our common stock dividend, capital return to shareholders was approximately $275 million in the quarter. This brings our year-to-date deployment to approximately $750 million, and we remain committed to our plans of deploying approximately $1.3 billion back to shareholders by the end of the year, an amount that represents the entirety of our expected free cash flow generation during the year.

So overall, the second quarter demonstrates the strength of our diversified business model. We delivered strong results in Colonial Life, group life and AD&D and supplemental and voluntary, maintain expense discipline and attractive returns and continue to make meaningful progress in actively managing the Closed Block.

At the same time, PFML and U.K. long-term disability experience remain areas of focus as we move through the remainder of the year. While results reflected offsetting performance dynamics across the business, in aggregate, they delivered an outcome in line with our expectation. As a result, despite the expectation for pressure in those 2 lines in the second half of 2026, we are reaffirming our full year outlook for after-tax adjusted operating income per share of $8.60 to $8.90.

I will now turn it back to Rick for his closing comments before we move to your questions.

Great. Thank you, Steve. As you heard today, the second quarter demonstrates the strength and resilience of our diversified business model. Overall, we remain confident in the quality of our franchise, the durability of our capital generation and our ability to create long-term value for our customers, employees and shareholders.

And with that, when we are ready to take your questions, I'll turn it over to Kate, our operator.

[Operator Instructions] Your first question comes from the line of Suneet Kamath with Jefferies.

Just wanted to start with paid family medical. I think you sized the impact at like 2 points on the benefit ratio. As we think about the price actions that you're talking about, are there any limitations on how quickly you can raise pricing? Or how would you expect that price increase to sort of feather in over the next few quarters?

Yes. Great. This is Steve, and I'll kind of cover off the math on just the benefit ratio and then kick it over to Chris to talk to us about the pricing environment and what that looks like putting price into the market. So -- yes, so the loss ratio was higher than expected. In the comments, we did talk about STD experience generating about 2% of the elevation in the loss ratio. Most of that was PFML. I would size that up as about 60% to 70% of that was driven by PFML. I would note, importantly, if we shift a little bit to our long-term disability, we were right on top of our expectations for recovery. Overall, that experience was within the range of our expectations in the quarter, and it's really performed really well. But we are going to see some pressure in PFML. And so 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. And maybe I'll kick it to Chris just to talk about the receptivity and what the market looks like.

Yes. Thanks, Steve. And Suneet, maybe just a little bit more about the environment. First off, PFML is really core to what our customers depend on us for. It's a big part of the leave management, short-term disability and overall benefits package that we can really help them. A lot of these new states put a burden on the HR teams to make sure they're compliant and also giving the employees what they need to operate their businesses. So we're square in the middle of it. As Steve said, we've been out with rate increases. And what's kind of important to remember about PFML and short-term disability is these are high-frequency type of products. So we get a lot of good data at the customer level, and we're able to share that early and often. And we've been doing that.

Yes, we do have -- we've got -- we have a business that's in rate guarantee for generally a year. So as things come up for renewal, we're able to go and again, communicate with them early about what claims experience looks like, what the needed increase will be. 1/1/27 is a big moment for us to put a lot of action into the market. So we're on top of that. And then the other element of the environment that has changed over time is, we've had some really nice profit in the disability lines, and we've kind of resettled those rates on a go-forward basis for customers. So it's a little bit more of a balanced view than before where LTD was in a really good spot, and we were maybe a little slower to raise rates on PFML or STD given that dynamic. That's shifted a bit.

Got it. Okay. And then maybe on group life, it looks like the loss ratio there has been below 70% for, I don't know, 10, 11 quarters now. So maybe unpack what you're seeing there? And I guess, how quickly will that strong performance sort of build back into pricing?

Yes, this is Steve. I'll kind of hit on just the performance we're seeing. We've been extremely happy with the performance, and it's really all been driven by lower incidence than what we would have anticipated. I know coming into the year, we set an outlook for the loss ratio that was in that 68% to 72% range. 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. So definitely happy with the margins. We really don't think we're going to have to give that away with price. Just we think about the bundled experience and the bundled price of all of our products and services probably not as much price sensitivity there, and we think we're in the range and should be able to maintain those margins through the end of the year.

Your next question comes from the line of Wes Carmichael with Wells Fargo.

Just a question on long-term disability. How would you describe, I guess, price adequacy there? And I think there were some concessions last year on price maybe. But would you expect from here -- I guess I'm just trying to understand, when we think about excluding PFML and STD, like what's the direction to travel of the benefit ratio in LTD? Like is there more price concession to come?

Yes. Thanks, Wes, it's Chris. So over the past couple of years, it has been a very good story for long-term disability, and we're thrilled about that. We are very good about walking customers through how the performance of their particular case or broader blocks of business have gone, and we try and set the right pricing level for the future. That has included being able to reset rates in some cases, a little bit lower, depending on the experience and performance of either a case level or block level book of business. We feel really good about where it is now.

We also feel good that our disability business, long-term disability and short term, it's tied to a much bigger strategic package. And whether we're kind of solving the needs for that customer, inclusive of financial protection on the long-term disability side and/or tying in technical investments with platforms, it really comes together in a robust way. So LTD is a really meaningful part. We have tremendous knowledge and strength in that business. We're super confident that the performance is highly sustainable. Really pleased with how we've kind of looked at rates over the past few years and feel great going forward.

Got it. And just shifting gears, but on the group long-term care termination, I think there's an additional 3% this quarter. Now that you've seen a couple of quarters, just hoping you could share updated thoughts on how meaningful additional terminations could be from here.

Yes. Let me step back for a second, Wes, and just talk about the long-term care actions that we've taken. You could even go back a couple of years and talk about many years on the pricing side. So we've continued to increase prices. And these all come together, I think, in what you're seeing in the first quarter. And then even in the business as we've gone through risk transfer, so we've taken out some of our individual long-term care, particularly all of that, that we had in the Fairwind entity. So we see more on the group long-term care side.

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 do they want to have different people in their organization with different benefit packages. And so we've seen some terminations.

Steve, maybe you can unpack that a little bit, but that's what we started to see. This is a pretty new phenomenon that we've seen because of the actions that we announced last fall.

Yes. No, that's great. And yes, you're right. We had about 3% of cases, about 20,000 lives terminated in the second quarter. And those are just ongoing discussions. That takes us to about 10% of the cases and 50,000 insured lives from the beginning of 2026. It's really hard to predict going forward what that might look like. What I would say is we do have kind of renewal effective dates throughout the year. And so there will continue to be employers making decisions about their next enrollment and renewal period. And so there definitely is the probability that we'll see continued terminations of cases. But it's something that we're not able to predict, and so we'll just have to monitor that as we go forward. But we're always in ongoing discussions and, just as Rick said, just weighing what a company's benefit -- full benefit package looks like. And like any HR decision-maker, they're always going to be thinking about where they want to spend their money for the benefit package for their employees.

Your next question comes from the line of Alex Scott with Barclays.

I first wanted to ask about Fairwind, and I've just been thinking about the amount of protection you have there. And I think relative to reserves, it's seemingly quite high. But I know there's RBC requirements. And I know the reserve also potentially builds over time for Group LTC. So I just wanted to get a feel from you all, what's driving such a big buffer there? And how will that trend over time?

Yes. It's Steve, and I can take that. I'll go back to some of the comments that I made when we announced the deal and kind of talk about the post-deal profile of what Fairwind would look like. If I compare that to kind of before the transaction, we had a nice combination in Fairwind of excess capital over a 350% target and margin within the reserve. And that kind of made up the $2 billion-plus protections that we have there. And think about that as the excess capital is something that's a little bit more fungible that we can use across the organization. The reserve margin just kind of is what it is.

We have locked in reserve calculations there, and we have our view of the best estimate. 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. And so our intent, obviously, would be to keep that business in Fairwind, be able to manage the business with those reserve margins. Over time, those reserve margins will play out if our expected experience plays out and will be released just into the capital of Fairwind and then we'll decide what to do with it over time. But that will be more over the lifetime of the block.

But I'll just step back, and we feel really good about the margins that we have there. We feel really good about the sensitivities. I mentioned that in my comments about just how we really reduced -- will reduce the sensitivities of that block post-transaction close. And so I just think about it as very well protected. Short term, not a lot of flexibility to do what we might want to do with those margins because it's built into the reserves themselves. But over time, we will have kind of more flexibility to do what we want with the excess capital there.

Got it. That's helpful. Second question I had is just if you could talk about your expectations for sales as we head towards the more important end of the year sales process. It sounds like you guys have a fair amount of repricing between paid family and medical leave and maybe on the flip side with group life and areas of disability. So with all of that movement, do you expect to see any differences in the way that the sales process will go?

Yes. So maybe we'll talk about that on multiple lines because I think it's an important topic about how we feel about our proposition that we have that we're taking to the market. And more broadly, we'll start in the U.S., but I definitely don't want to miss the opportunity to hit on Colonial Life in the U.K., what we have there. You mentioned, Alex, the pricing. Yes, we're going to work our way through that. It's going to weave its way into it. But these sales processes are much bigger than just the more near-term things.

And Chris, maybe you can highlight, one, how we're doing on sales today, but also where we see it going over the course of the year.

Yes. Thanks, Alex. It's kind of ironic. When you're in the middle of something important like a topic like leave management, which has a lot of parts, PFML is just one small part of it, your relevance to both the distributor, the broker consultant and/or the customer just gets elevated. And we've been living that for several years. So you think about the strategic investments we've made in leave management, you think about the strategic investments we've made in human capital management platforms and connectivity to those platforms.

What we've done to promote capabilities to customers who will benefit from them to make the sales process more efficient for our brokers and consultants, that puts us in a really good spot. So when you start the year, essentially, we're up about 14% year-over-year. That's an all-in Unum US number. That is -- that feels really good. And in the quarter, we're right in the range where we'd expect that feels strong. And knowing, again, that we are really solving problems that not every carrier can solve. And that kind of changes the dynamic. There's a lot of trust there.

We handle renewal programs like we are with PFML, and we've got a lot of experience with this in a very kind of partnering and mature way. We leverage data to explain where things are, why they're happening. We are -- as we talked about with LTD where we have positive experience, we've made adjustments in the past that give us the credibility to go and raise rates as appropriate in the future. So I think to Rick's point, it's a very dynamic, broad long-term effort. And I think the first half of the year results show that we're able to win business as appropriate, and we're excited about the second half of the year.

Good, and thanks. Steve Jones, in your first call, maybe talk about Colonial Life and what we see on the sales front there.

Great. Thanks, Rick, and thanks, Alex. So first of all, exciting time to step into this role as the Colonial Life business has a lot of positive momentum right now and a lot of exciting things happening. I've spent much of my first 60 days out in the field talking to our agents, talking to our broker partners around where we're doing well and where we still see opportunity to grow. What's clear to me is 2 things. One is that the distribution system still has a lot of room for growth, a lot of upside, both in scale of agents and geographically, but also through investments in agent productivity.

And then secondly, our value proposition still resonates in the market broadly. And that value proposition for Colonial Life is around benefits education, enrollment support, technology support, coupled with voluntary benefits. And so we feel like that strategy is very solid.

Looking forward, I see the opportunity with this business to continue leveraging technology to drive the growth and productivity of the sales force. We're making a lot of investments in digital enrollment experiences and AI tools aimed at lead gen and agent training and other things. And so a lot of opportunity to continue optimizing this business and growing.

Relative to sales results in the quarter, we feel good about the 6% sales growth we saw. I think what's especially encouraging as we saw growth coming from new clients as well as our existing book. So we had 10% growth in the quarter from new clients coming through the door. That's certainly a positive sign relative to the value proposition.

We're also seeing growth across different size segments in the business. So for example, our clients with more than 500 employees in the quarter grew 15%. So we feel really great about the -- not just the overall top line growth, but the balance of those results.

And then lastly, on the agency side, we continue to recruit at a high clip, which is important for Colonial Life. We had a banner recruiting year last year, really returning to pre-pandemic levels. And we're tracking 6% ahead of that number for this year. So continue to feel good about just the growth of the agency model in general. So a lot of positive indicators there for the second half of the year.

Thanks, Steve. Mark, do you want to take us through the International business, the U.K. and Poland?

Yes. Well, let's start with the U.K. I think we come off a very strong momentum over the last few years. And the latest data that came out said that for 3 of the last 4 years, we've been the largest writer of group risk business in the U.K., including last year. And cumulatively over that period, that 4-year period, we were the biggest writer of business with our market share growing. And that's definitely driven by the strength of proposition of the business. We -- there's an independent survey conducted by NMG for all brokers. And in the latest field study at the start of the year, it shows that Unum has got the highest quality proposition in the market. So for those reasons, we've had a strong coming in period.

This year has been a little bit slower for us. The market is still acting rationally, but we've chosen to make some pricing decisions on the back of our group income protection business that makes us just a little bit harder on the new business front. I think in quarter 2, sales were down about 14%. But if you look across the first half as a whole, that's closer to 4% down. So a little bit of that was timing between periods.

In our Polish business, actually, we've had really strong growth in our individual business. That's growing very nicely as we continue to add LPAs, that's our life planning advisers. That's a very profitable business. And our group business, again, we've chosen to be disciplined around pricing in that business. So we've accepted a slower sales trajectory there, but in return for which we're seeing much stronger earnings out of that business.

So when you take it overall, Alex, I think when you think about it, we're very excited about the growth potential. We recognize the pricing, but we can do both. And I think as Chris said, which is really important, we bring more to these customers than just a price or a product. It's also the know-how capability for -- to help to manage through. PFML is a good example of that. This is new for our customers as well. And so us being there to help them through this process of what was a state-mandated leave is a good example of where we can be helpful even after we have to take some price.

Your next question comes from the line of Mike Ward with UBS.

Your next question comes from the line of Tom Gallagher with Evercore ISI.

Just had a few PFML questions. So what portion of your book has multiyear rate guarantees versus the 1 year that can be repriced? Can you just give us the percentage split there?

Yes. Tom, it's Chris. I don't know that I have a percentage exactly, but you -- in terms of the percentage, it is a very small percent that has multiyear. And with that, the genesis of that, of course, is things emerge, and we wanted to have that flexibility on a new product line to -- with a new customer that gets credible very quickly due to frequency to be able to lean on the emerging experience. So short answer to the question is a small percentage.

Okay. That's good to know. The -- and just a few other quick ones on PFML. When you think about the claims you're getting, would you say -- can you at least broadly quantify what do you think are clearly short-term claims for things like paternity, maternity leave versus some other claims that could turn into LTD claims? That's one question.

And the other one is just related to the double-digit rate increases that you're citing. Would you expect that any of that is going to lead to loss of business? Or do you think that part of the market is hard enough and peers will be looking for similar rate increases that you'll be able to retain a vast majority that you're putting rate through on?

Yes, Tom, good questions. Starting with the kind of what type of claims, the profile of these claims, essentially, these are heavily short-term only claims. This still falls into the -- whether it's something along the lines of general surgery accident, maternity or bonding. And we do break out whether they're more family related, where it's something that's not actually happening to the employee, but that's impacting their ability to go to work, given lifestyle and family connections or their own medical situation.

So we had a very good handle on which are short-term medical and which are short-term family. And they do perform in a way that has largely a lot of caps on how long the benefits will last. Every severe claim does start in the short term, so if you have a cancer or cardiovascular or something like that. But we're very comfortable with that flow-through of what normally is going to come to LTD and whatnot, where we've got a tremendous amount of experience doing that. You can expect us to continue to kind of manage the PFL part and the PML part appropriately. And again, we've got good -- really great people and teams focused on that every day.

In terms of rate increases and potential pressure, I think one of the elements of running a group insurance block of business is that you've got to be willing to communicate well with customers and explain what the expected performance going forward is based on either what we know or what we've seen from an experience standpoint. So yes, in essence, you always take a chance when you elevate rates and you work that through. And we have a great history in terms of knowing what the impact to persistency will be. We'll balance that like we always have. And again, when you're solving bigger issues, like the outsourced leave management partner to these customers, you're solving compliance for them, you're solving employer experience, you're solving employee experience. They're generally willing to pay a fair price based on experience. And again, I think we have a lot of good history and confidence that we can get that done.

Your next question comes from the line of Ryan Krueger with KBW.

I had a question on the U.K. I know you talked about maybe a little bit better performance in the second half of the year than the recent quarter. Can you give us any quantification of what you'd expect as a kind of run rate earnings at this point for the U.K. business and then just how to think about the pace of remediation and how long that could take?

Steve, do you want to take that?

Yes. Ryan, it's Steve. Yes, I'll just kind of cover more to the point like what the experience we're seeing in the U.K. And then maybe Mark can just talk about pricing dynamics over there in the markets a little bit. So clearly, the issue we're seeing with the earnings challenges in the U.K. is related to group income protection business. It's not a broader issue with the U.K. franchise. What we've seen over the last several quarters is the claims experience. It's driven mostly by higher average claim values. And I talked about this a little bit in the past when we talk about severity of these types of claims. It's really driven by things like occupation, industry, income levels. And you just do the math and calculate what our expected ultimate claim is going to be for that situation.

What we're seeing in the U.K. right now is a higher or greater proportion of claims coming from high-income employees. And so that's really increased the overall average benefit cost of what we've seen over there. So it's something that we're able to really isolate and look at -- we're able to then look at those new and existing customers and make appropriate -- take appropriate actions. Now a lot of that is going to take place during the year and be effective next year.

So how we're thinking about the back half of this year just from an earnings perspective, it's going to be -- we think it's going to be a little bit better for the U.K. There are some other actions that we've been able to take. But as far as kind of the larger price actions going into next year, it's going to take a little bit for that to bake in.

But maybe, Mark, just talk a little bit about the pricing environment and our ability to execute on our pricing strategy.

Yes. Thanks, Steve. I think the core thing to say is the U.K. market remains a sort of competitive and rational environment. There are half a dozen large competitors, of which Unum is one. It's #3 by size, gaining ground and #2. The market operates rationally when it comes to pricing, although we do notice that with our dominant position in group income protection, it can mean we see and therefore, response to claims changes earlier than the market generally. There's now some sign that our competitors are beginning also to face into some of the higher claims experience being seen in the product, and that will be helpful over time.

As Steve said, it's important to say that claims experience is linked just to the group income protection products. We're actually seeing positive claims trends in our other product lines. And we view this group income protection challenge to be consistent with cycles we've seen before. The claims experience adjusts and pricing then needs to adjust to reflect that. In recent years, that claims experience was lower and prices were falling. That claims pressure is now rising and pricing is following. However, given that the 2- to 3-year rate guarantee periods are typical in the U.K. market, it means that when rates are falling, we benefit, but when rates need to rise, it takes a little while to see the experience fully reflected in the pricing.

What I would say is that in the meantime, we're very disciplined in our pricing actions. We've adjusted new business pricing. We're phasing in our new prices at renewals. We've taken on a notable expense action, some of which is visible in the H1 results and more will come through in H2. So overall, I think I'm positive about the long-term trends in the U.K. driven by our competitive position and our experience in managing these insurance life cycles.

And then just one more on group disability in the U.S. You've talked about 65% as the long-term expectation for the benefit ratio. And I know you're seeing some short-term pressures on PFML, but you're at that 65% now. Is it still your view that 65% is the right sustainable level longer term that you can maintain?

Yes, Ryan. It's Steve. Yes, the short answer is yes. But let me give you a little bit of math to get there and how that's going to play out over the next few years. So when we were coming into the year, we set our expectation in that 62% to 64% range. And we had anticipated needing to put some price or to take some price in the market. And so we knew that coming into the year, loss ratios were going to be about 1% higher this year and probably 1% higher next year just because of our pricing strategy. And then we thought we'd end up being around that 65% and being competitively being able to hold those margins. So that was our going-in view.

Obviously, what we've seen now is about 2 percentage points of pressure that we didn't anticipate. We're seeing that play out, and we think that's going to play out for the remainder of the year. And so we're already kind of at 65% probably for this year. As we get into next year, it's -- we're going to have kind of 2 dynamics going on. We're going to be increasing prices on PFML and those will take effect mostly going into next year.

For long-term disability, we might also be making some price adjustments the other way still. But when it kind of evens all out, when you get to a multiyear view of this, we do still think that 65% is the right number. And we will price accordingly using that as our target. And so a couple of offsetting dynamics, but that is still the destination that we feel good about.

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

You're now active in 13 PFML states. Given the elevated incidents you're seeing, has that changed your appetite or time line for expanding into additional PFML states?

Yes. Tracy, it's Chris. Good question. We are active where private plans are appropriate, and we are also kind of managing PFML in states even where they don't accept private plans. We're still part of helping our employer customers and brokers solve for the leave problem. So our appetite for being a clear leader in the leave business is still enormous. We think it's critically important. We've invested a tremendous amount. We get great receptivity from brokers and customers and consultants relative to helping with this really important element of managing their workforce.

Leave is one of those things that is very important to the employee population. So in terms of attracting and retaining quality people, you've got to have a strong leave program. There's a compliance element relative to multistate employers that gets complicated. They need help there. They want to be able to offer a robust income replacement where it's deserved, and they want to make sure somebody is managing that carefully from a time and attendance perspective. We are central to all that. And we're continuing to make investments there.

As new states come on, again, we get a little bit of a break in '27 in terms of not a lot of new activity. But as new states come on, we look at those states very carefully. We know more from experience, but each state is a little bit different. So we have to pay attention and make sure we're educating our broker consultant community as well as our customers, and we feel like we're in a perfect position to do that.

Okay. Since you announced your individual LTC deal, I'm getting a number -- into a number of discussions with investors on the likelihood of doing a group LTC deal and the merits of the group versus individual. So I understand there's no precedent for group LTC. So my questions are more theoretical. Are the bid-ask spreads wider there since you think it's less risky? Or is the preference to do individual LTC deal rather than group more about wanting to see how your in-force management performs through early '26 before seeing that upside to a reinsurer? Like it was good to see during the first half of the year this 10% group LTC case terminations.

Yes. Thanks. Let me back up a little bit, Tracy. I think you highlight some interesting dynamics. When you go back and look at what we've been able to do and how we're able to do 2 transactions now in that area, it was about teams coming together, meeting an asset management team for one part of it as well as biometric reinsurer on the other part of it. That was really positive on the individual long-term care side. There are different dynamics in the group side. You highlighted some of them. These are still discussions that we will have with those same kind of counterparties. Think of the asset manager. They're going to like the fact that these are a little bit younger and they will last a little bit longer. And then the biometrics is what it is, and they'll make judgments around that.

You also highlighted, I think an important thing is that there are new dynamics happening in our block of business given the changes that we've made. And so when we think about when we would continue to go forward in that business, you have to take into account that we've seen 10% of this block lapse, which if we had done a GLTC a couple of years ago, we wouldn't have experienced that. So there are new dynamics happening in the block. So we have to take them into account as we talk to different counterparties that are out there. But the markets are still good. The discussions are still out there. And ultimately, you think about what our goal is to remove this risk from overall, whether it comes organically, like we're seeing on the group long-term care side at the moment, or through reinsurance, those are both part of our goals. And so that should give you a sense that this is still something that we're working on, but we have to be thoughtful about what's happening in our current book of business and what's happening in the marketplace today.

But what about the part of my question about the bid-ask spreads? Do reinsurers have the same sentiment? Right, yes, go ahead.

Yes. No, it's -- well, it's hard to talk about that. One is on the asset side of this business, there is no bid-ask spread. We know where it's going to be. There's still appetite for the assets on this side. So the question is probably more bid-ask spread with what we would see with a biometric reinsurer, and that really comes down to how we parse the block. It's not -- it's true of how we do the individual. We're going to parse the block into the things that make sense for that counterparty to do it. So the bid-ask spread in aggregate is -- doesn't really make sense. It's how does bid-ask spread look on each of those individual tranches that we may take to a counterparty that likes that particular tranche. And so I wouldn't want to speculate too much on that. We're happy to get to the 2 deals done that we did, and we'll have to continue to look at what different tranches look like to different counterparties over time.

Your next question comes from the line of Joel Hurwitz with Dowling.

I have one on expenses. So Steve, the past couple of calls, you've talked about expecting the expense ratio to be flat to maybe down a little in '26. But expenses in the quarter, particularly in the U.S. and U.K. came down quite a bit. Anything unusual in the quarter? Is there some additional expense levers that you're pulling that could support a lower expense ratio for the year?

Joel, it's Steve. Yes, I'll just kind of take it back a few years and just the journey we've really been on when it just comes to expense management and the trade-off between investing into our business and driving productivity. We have invested quite a bit in the business over time in our people as well as in our technology that has driven our operating expense ratio up a bit historically. We did think coming into the year, we were kind of at this inflection point where we should see that plateau and start coming down over time. And it should come down over time because a lot of the technology that we've invested in will help drive productivity within the organization and help us grow expenses at a slower rate than the rate at which we're growing the company. And we're just starting to see that take effect.

I would say there's no specific programs or targeted areas. It's just good hygiene, running a good company and really taking advantage of the investments we've made to drive productivity across the entire organization. And so we would expect that to continue, albeit at, I'd say, a moderate rate, but we are pretty happy with what we've seen so far this year as far as being able to drive that mindset within the organization.

Got it. That makes sense. And then just one on Colonial. So the second straight quarter for record earnings there, the benefit ratio, again below the guidance range. Can you just unpack the experience trends that you saw this quarter? And is this sort of lower benefit ratio sustainable?

Yes. It's Steve again. I'll take that. I guess Steve is able to. I have to start differentiating the Steve now. But Colonial is actually a lot of different products. And what we usually see over time is just because you've got variances and experience across those products, usually end up in a range that's pretty consistent with what your expectations are. Sometimes you'll see them all perform a little bit unfavorably or sometimes they might all perform a little bit favorably, and you'll see variations from our expected range. What we've seen this year, though, is just really across the board, pretty good experience.

As we look forward to the remainder of the year, we do think that there's a chance that, that will continue. We're not saying we're going to be kind of outside of the range we gave for benefit ratios, but we may be at the lower end of that range as the year plays out. And it is one of the things we think about when we think about the full outlook and being able to be comfortable with that outlook for the full year.

Your next question comes from the line of Mark Hughes with Truist.

How do you think about the claims pattern in the paid family and medical leave area? Seemingly when the new states come online, there's probably a burst of activity. And then that evens out over time. And as long as those don't turn into long-term claims and that will, to a degree, correct itself, how should we think about that pattern?

Yes, Mark, it's Chris. I do think you've hit on something that we have seen relative to a little bit of what is described as pent-up demand. And again, each state is different. It does seem like awareness of the benefits depends on the state and the public rollout of the mandate. So that can impact. You're right, it does settle a bit, but we have seen some level of what I would call maturing activity in older states. So we're paying attention to both the new states, how they come on, but also the older states, and we're communicating with our customers to let people know that there is an element of awareness. There's an element of understanding what is covered by the regulations. And ultimately, that will be baked into the experience and ultimately the overall cost there. The good news is in terms of flow-through to LTD, we just very normal patterns there, nothing that's abnormal. This is highly a short-term paid family and medical measured in weeks away from work type event. And that's kind of where we stand right now.

And then how do you protect yourself with new states coming on? So potentially, we don't face another burst of higher claims?

Yes. Exactly right. We learn with each state. We have a growing database of -- in addition to our broad disability database, we've got more information on the nuances of PFML. And then you've got nuances within that of what's unique to each state. And then whatever state comes next, Maryland, Virginia type states that are coming out in the '28-ish time frame, we'll compare and contrast to what we've learned from prior states. And again, we will we will have a more kind of precise pricing approach going forward. But again, we'll watch the emerging experience as well. But it is -- it matures over time for us as well.

Your next question comes from the line of Pablo Singzon with JPMorgan.

So first question on group life, I was wondering what the fundamental driver of the better outlook there. Steve, you had mentioned good incidents that's been running for some time already. But any reason or theory why you're seeing a favorable break from the long-term trend there?

Yes. No, it's as simple as that. Just lower counts. These are policies that have pretty low face amounts. So we don't usually see just the severity or the size of light claims be much of a driver of margin variability. It usually just comes down to the number of claims we receive. I think if you look across the industry, we have seen lower mortality here for a bit, and we're experiencing that kind of that same trend in our book. So I feel great about the margins that we've experienced so far this year. And we'll just monitor that and look at that for the back half of the year.

Okay. And then secondly, just a quick follow-up on Tom's question about STD transitioning into LTD claims. I think PFML itself does not cover LTD anyway. But I was wondering how much of an overlap you have between LTD plans and the insurance you cover under PFML, right? Or are those risks effectively separate with basically limited transition risk?

Yes. Pablo, Chris. If I caught the gist of the question accurately, please redirect me if I didn't. We sell PFML, short-term disability and leave management as a package with LTD. They are kind of sequential. Your PFML and short-term disability leave is generally on the short, again, measured in weeks and months. And then LTD is more of that catastrophic cover that picks up for the small percentage, but very important times when somebody has got a severe disability that's going to go out into the years, and we manage that well. So we've got a tremendous amount of experience of high frequency, shorter duration claims like PFML, how they work through the system upfront and then only kind of picking up those claims that are severe in nature for the longer-duration LTD programs.

I think, Pablo, if we got your question right, it was more of the -- this is a package product. We don't sell PFML stand-alone.

Your next question comes from the line of Mark Ward with UBS.

I know how to use the phone. But -- so I was just wondering -- so expanding on that last question there. I'm just kind of curious like how -- the package deal, right, how do you kind of weigh the, I guess, pricing pressure with conceivably, maybe it's anecdotal, but the rate need for PFML?

Yes. Mike, it's Chris. We've alluded to a dynamic that had been in place. And if you think about in general, these are our customers. We're communicating all the time. Our brokers try and make sure that they're doing a good job for the customer to get a solid but sustainable deal. And the environment we had seen before was really good LTD returns, and that kind of in a combined way with the group short-term and PFML lines kind of felt like, well, yes, you could use a little bit more on the PFML lines, but your LTD is so good. Why don't you just take a pass or something like that dynamic? Well, we've been readjusting those LTD rates down to more normal returns. We're really happy with them, but more normal returns.

So the dynamic shifts a little bit to say, hey, we're pleased with LTD, but it doesn't have any extra air cover for the STD PFML lines. And in fact, the STD PFML lines are a little bit hotter than they have been in the past. So we have a much different conversation at that point. And again, customers want price stability. They want to know what the experience is. We've got -- this is not just a kind of last-minute discussion. We're talking to customers all the way through tons of contact because PFML and short-term disability are higher frequency. And again, that shorter rate guarantee enables us to have the conversation set rates. And someday, if we have to lower those rates because they've recovered, we'll do that and customers know that as well on both the LTD and the STD PFML side.

All right. And then you had some -- you guys had some strategic action costs in the quarter. I was just hoping you could expand on that. Was that all just long-term care deal? Or was there other stuff?

Yes, Mike, it's Steve. So the $31 million that we reported as strategic actions, and just to be clear, that was something that was excluded from our adjusted operating earnings in the quarter. And it was really made up of 2 parts. We had about $18 million just related to some real estate strategy changes that we had that impacted the valuation of some of our home office real estate. So that was pretty straightforward.

But then the remainder are some employee-related costs. And we're looking -- we're constantly looking at our operating model and how best we can deliver for our customers and do it in a productive way. And so we've looked at some of that. We've made some changes in that operating model, and there were some employee-related costs. And so that would have been the remainder of the $31 million. So we -- it's kind of a onetime thing. So we went ahead and reported that kind of below the line.

I will now turn the call back over to Rick McKenney for closing remarks.

Thank you, Kate, and I want to thank everybody for joining us today and your continued engagement with Unum. We look forward to upcoming opportunities to connect and talk more about this, talk more about the future. And that concludes our call for today. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by, and welcome to the Unum Closed Block Update Conference Call. [Operator Instructions]

I'd now like to turn the call over to Matt Royal, Investor Relations. You may begin.

Thank you, and good morning. I hope everyone had a good holiday weekend. Earlier today, Unum announced we have entered into an agreement to cede a portion of Long-Term Care policies effective April 1, 2026. The transaction is expected to close during 2026, subject to receipt of required regulatory approvals and satisfaction or waiver of other customary closing conditions. The press release announcing the transaction and supporting materials for today's call have been made available on the Investors section of our website at www.unum.com.

Let me briefly take care of the safe harbor statement before we jump in. Today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results.

Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and Chief Financial Officer, Steve Zabel.

Now let me turn the call over to Rick.

Thanks, Matt, and good morning, everyone. We appreciate you joining us on short notice to discuss an exciting transaction for Unum. Earlier today, we announced that we have an agreement to enter our third major external reinsurance transaction and second with regard to Long-Term Care. Following the success of last year's transaction, we are executing a similar structure to remove the risk of another significant portion of our Long-Term Care exposure.

This transaction covers an additional $3.8 billion of Long-Term Care reserves, bringing the total reinsured to $7 billion, reducing our exposure by 40% compared to the beginning of last year. This also removes all of our individual Long-Term Care that was originally written by Unum America and subsequently reinsured to Fairwind. The remaining liabilities in Fairwind are all group Long-Term Care, which have a very different risk profile.

As we embark on this next transaction, we have spent the appropriate time to balance cost and risk mitigation. Although we ultimately landed with the same strong partners as our first LTC transaction, the evaluation process and the engagement with multiple parties has been extensive. A key part of this process has been to evaluate a price that makes sense given our desire to remove Long-Term Care from the overall Unum story and be sure to do so at a level that makes sense for our shareholders.

When you boil it down, this transaction will cost us $650 million of holding company excess capital, which is well balanced with the derisking that we achieved. As we take you through the details, you will see that the remaining risk sensitivities have been greatly reduced, and the pricing is consistent with the cost of the first transaction. An additional positive is that unlike the first transaction and others in the market, we did not include other lines of our core franchise.

Looking forward, as we deploy some of our excess capital to back this transaction, we remain in a position of capital strength and our deployment plans of $1.3 billion returned to shareholders through dividends and share repurchase remain intact. As we discuss this transaction today, it's important to keep in mind the backdrop of our leading franchise in employee benefits that has been steadily and profitably growing while we have a dedicated team focused on reducing and managing this block. It is also important to give a sense of what the journey has looked like and an expectation that the work continues.

So let me take a moment to set the context of where this transaction fits within the overall strategy. Since stopping active marketing of LTC in 2012, we've taken significant actions to mitigate the risk of this block. In the years following closing the block, we established a successful and thoughtful premium rate increase program. To date, we have achieved billions of dollars of rate improvements through disciplined and persistent execution and doing this by working closely with regulators and customers through the process. This continues to remain an important tool for us today. In addition, in recent years, we have accelerated actions to reshape this exposure for the company. It includes our ability to derisk our position, including meaningful internal actions and the establishment of the risk transfer market. The time line shown exhibits this with notable actions to reshape the block over the last 5 years.

Taking you back just a couple of years with the implementation of our interest rate hedge program and the fortification of our capital, we were able to make the commitment in 2023 that no further capital contributions would be needed for this block. While these actions were all significant, throughout this time, we were talking to counterparties about risk transfer. And in the beginning of 2025, we were happy to execute on our first external risk transfer deal, removing $3.4 billion of reserves at disciplined pricing levels. Alongside this deal, we also restructured internally to optimize our first Unum LTC reserves and released $600 million of capital.

Later in 2025, we made 2 additional important steps. We removed morbidity and mortality improvement assumptions, which significantly derisked our assumption set. Also notable at that time was our announcement that we would stop the enrollment of new lives on existing GLTC or Group Long-Term Care policies, which led to 7% of cases closing in the first quarter of this year with continuing discussions with employers as they evaluate the cost and value to their employees of this legacy offering within their broader employee benefits package.

That takes us to today. I'm very pleased with what today's transaction represents for Unum. We have continued to work diligently to reduce the footprint and capital demands of the closed block, and today's agreement is another meaningful step in that strategy. All of our actions up to this point have highlighted our intense focus on limiting our exposure to this business. I am appreciative of the Unum team that has gotten us to this point and continues to think about next steps. Their tireless efforts have allowed the other 10,000 Unum associates to build an industry-leading benefits franchise across the U.S., U.K., and Poland.

And with that, let me turn it over to Steve for more details.

Great. Thanks, Rick, and good morning, everyone. Let me walk through the transaction in detail. I'll cover the scope and characteristics of the block, the economics, the impact on the remaining LTC block, the sensitivity and protection picture and our post-transaction capital position.

Starting with the transaction itself, we are reinsuring $3.8 billion of LTC statutory reserves to Fortitude Re with an effective date of April 1, 2026. Similar to the first deal, the biometric risk ceded to Fortitude Re will be retroceded to a highly rated global reinsurer. This represents 26% of our total LTC block and 52% of our Individual Long-Term Care business. Importantly, this is a stand-alone transaction that removes 100% of the remaining Individual LTC reserves held in Fairwind.

The reinsured block is comprised of approximately 50,000 policies with an average attained age of 76 years compared to 86 years for last year's transaction. The block is also concentrated in active life reserves at approximately 75% of reinsured reserves with a materially richer benefit profile than what we retain. 83% of policies have inflation protection and 43% have lifetime benefits. The block also carried best estimate reserves nearly $700 million higher than statutory reserves, reflecting a more adverse reserve profile than the block we reinsured in 2025.

As you can see in the chart, this transaction reduces total LTC statutory reserves from $14.8 billion to approximately $11 billion. ILTC reserves declined meaningfully, while GLTC remains stable, leaving the remaining block predominantly Group Long-Term Care, which has a more basic benefit profile.

So then turning to the economics on Slide 6. We believe the most appropriate way to evaluate and compare pricing across deals is relative to best estimate reserves because that reflects the underlying exposure being transferred. This can differ compared to statutory reserves due to differing reserve margin profiles of each block. Neither last year's transaction nor, importantly, the remaining block in PLA have negative reserve margins. When considering this, the cost of this transaction is approximately 12% of best estimate reserves and is closely aligned with the 10% we achieved on the 2025 transaction. Combined cost across both transactions is approximately 11%. While the absolute cost relative to statutory reserves is greater, that difference is driven entirely by the more adverse reserve profile of the ceded block.

As you can see, the 2026 block carried a negative reserve margin of approximately $660 million, while the 2025 block carried a small positive margin. Similar to our deal last year, we also realized meaningful economic benefits as part of the transaction, including required capital release and tax benefits. When considered together, these economic benefits offset a significant portion of the gross cost. The key takeaway is that pricing across both transactions is consistent when evaluated relative to best estimate reserves. The level of funding differs across transactions, reflecting differences in the underlying blocks and statutory reserve levels while maintaining consistent pricing.

So then turning to the remaining LTC block on Slide 7. The most important point on this page is that this transaction materially improves the risk profile of what we retain. Following the transaction, Group Long-Term Care represents approximately 70% of LTC reserves and 95% of insured lives. That mix shift towards GLTC is structurally important as Group Long-Term Care carries materially less rich benefit designs, younger attained ages and lower ultimate risk than Individual LTC. To put that in context, the average daily benefit on GLTC is about 1/3 of ILTC, 77% of GLTC policies have no inflation protection and only 7% have lifetime benefits compared to 33% of retained ILTC. The younger average attained age of the GLTC block also supports continued rate adjustments and block management actions over time.

Considering these less rich benefits paired with the younger age of the block, there is the potential that lapse rates become structurally higher over time. Importantly, this risk profile improvement flows directly through to our sensitivity analysis. Across all key Fairwind assumptions, including premium rate increases, lapses and mortality, claim incidence, claim resolutions and interest rates, sensitivities decreased by 28% to 42%. The net result is a smaller, less risky benefit profile with materially lower sensitivities.

So then on Slide 8, we walk through the protection picture across the 2 legal entities holding the remaining LTC reserves. Following the transaction, Fairwind retains approximately $7.1 billion of GLTC reserves, supported by approximately $2.1 billion of reserve margin and total protection of approximately $1.9 billion. PLA or Provident Life continues to hold the remaining LTC exposure, supported by diversification from a broader and growing product portfolio. Total entity-wide protection of approximately $1.9 billion is the combination of asset adequacy margin plus entity excess capital above 350% RBC.

The funding of this transaction modestly reduces absolute LTC protection in Fairwind by approximately $200 million, while Fairwind's RBC position remains strong at approximately 300%. Fairwind RBC will grow as margin in the group LTC reserves is released is realized through future runoff. Considering total LTC protections across both entities, we expect close to $2 billion in Fairwind alone to be more than sufficient to eliminate the need for future capital contributions. Thus, we will be evaluating the protections going forward, including the rate at which excess capital builds. Importantly, following the transaction, we continue to be confident that no incremental capital contributions will be required to support the remaining LTC reserves. The remaining LTC block is self-supporting across both legal entities.

So finally, I'll turn to capital on Slide 9. As Rick noted, the transaction was funded in part by leveraging Fairwind excess capital to adjust for the remaining risk, limiting the use of holding company liquidity to approximately $650 million. As part of the funding mix, we are also utilizing temporary financing as we will realize the future tax benefits associated with the transaction over the next several years. As a result, leverage will be slightly higher in the near term and then decrease as we pay down this financing.

Our year-end 2026 capital metrics remain robust. We expect risk-based capital in the range of 400% to 425%, holding company liquidity of $1.5 billion to $2 billion and leverage of approximately 25%. Our 2026 capital sources and uses are unchanged, including expected capital generation of $1.4 billion to $1.6 billion and expected uses of approximately $1.5 billion, inclusive of approximately $1.3 billion of buybacks and dividends. The bottom line is that sustained capital strength enables our continued capital deployment strategy. There is no change to our priorities, no change to our planned actions and no change to our expected return of capital to shareholders this year as a result of the transaction.

With that, I'll hand it back to Rick.

Great. Thanks, Steve. And to wrap up, today's announcement reflects continued deliberate execution of our closed block strategy. This is the second external reinsurance transaction for LTC we have announced in just over a year, and it represents another meaningful step in actively managing this business. As a result of this action, we further reduced LTC exposure, materially improved the risk profile of the remaining block and reinforce the protection supporting our retained reserves, all while maintaining capital strength and our capital deployment priorities. Our focus remains on the strength and growth opportunities of our industry-leading core franchises while managing the closed block. We will continue to be active, selective and opportunistic over time.

And with that, we're looking forward to your questions. So I'll turn it over to the operator.

[Operator Instructions] Your first question today comes from the line of Joel Hurwitz from Dowling.

Congrats. First, just Steve, can you talk about future rate increases? Looking at Slide 6, it shows no benefit on this deal. I guess just why is that? And what is different from how this deal was structured versus the prior one in terms of rate increases?

Yes. No, good question because there is a slight structural difference in the second deal versus the third. But let me back up. I mentioned that we do get benefits that help to offset the gross cede, and we've done that in both the deals. And there was really 3 of those at the first deal. There was basically the capital released on the block that was reinsured, tax benefits that we're able to realize because there is a statutory loss on that. And on the first deal, it was rate increases that we expected over time.

The difference with the second deal is we did get paid for those upfront. So that would have been reflected in the actual ceding commission itself. And so it's kind of embedded in the gross cede to begin with. And so that's not something now that we've reflected as a benefit over time. So we were kind of indifferent in how that was structured as long as we were able to get the economic benefit of us executing that strategy. But obviously, getting paid for it upfront, we view as very favorable in this deal.

Joel, I'd say that's a positive development when you think about structuring of deals over time and the fact that we can get paid upfront, where that shows the confidence in the counterparties that's going to come through as well.

That makes sense. And then just on the funding of the deal, I guess I thought that Fairwind had had over $1 billion of excess capital at year-end. So I would have thought that would have covered most of the net negative cede, but you guys mentioned you need $650 million from the Holdco. Can you just sort of take me through what Fairwind's excess capital position was? How much of that is being moved to Unum of America and why the $650 million is needed?

Yes, Joel, it's Rick. Just to step back a little bit on the $650 million. We're very happy with that number to bring that from the holding company. I think when you get into the details of the funding sources, I'll let Steve do that. But there's multiple sources that, that comes from. And so the $650 million, we think overall in terms of what the company is going to spend to take this risk off the books is a very good deal, but there are some moving parts, Steve, which maybe you'll take him through.

Yes. So think about the Fairwind protections pre-transaction, and it was really comprised -- it totaled just over $2 billion. And it was really comprised of 2 things: the excess margins that would have been on the reserves within Fairwind and then also the excess capital. That was split about 50-50. The one thing to note is those protections were on a pre-tax basis. So when you think about excess capital being about half of that, you have to haircut that for the tax. So that's one funding source that we were able to use there.

And then, the other important thing here is that this was a block where our statutory reserves were lower than our best estimate. So just if you think about funding sources themselves, we did not have the assets backing the statutory reserves to back this specific block. It was a more risky block and just the dynamics of this block, that's where the reserving levels were. So we had to fund that. And then obviously, with any of these deals, you have to fund the return for the counterparty. And so that's something that would not have been contemplated in our best estimate reserves and how we feel about the protection.

So you put those 3 things together, and it did require a little bit of holding company cash, which when you look at the risk reduction and just how we feel about the balance sheet and really what's remaining in Fairwind having pretty significant reserve margins, we thought that this was a good trade. We look at it versus best estimate and was the pricing fair based on what our view of the liability was. We think about that always. And then we just think about, is this a fair deal for shareholders, and we felt that it was.

Your next question comes from the line of Wes Carmichael from Wells Fargo.

Congrats on the transaction. Just thinking about the remaining $3.5 billion of Individual LTC reserve post transaction, I think a portion of that is New York business from First Unum that you reinsured. But can you maybe just comment on contrasting that profile, that block versus the cedes that you've done? Just directionally, I'm just trying to figure out if you wanted to transact on it, any help with how to think about a directional ceding commission relative to the first 2?

Yes. Wes, good question. And this is Steve. I'll take that one. Yes, you're right. The majority of what's left in Provident Life at this point is the New York business that we reinsured. We also have an individual block that was written out of Provident Life. I would say the characteristics of that New York block is probably pretty consistent with kind of the collective 2 blocks where we've had transaction. The Fairwind blocks, one was a little bit older. This one is a little bit younger. So it's probably pretty representative of what's left in that first Unum block. The one thing that I would say that is different is just the level of reserves. We do not have kind of negative reserve margins on that New York block when we compare it to best estimate in Provident Life.

And I think one thing, Wes, you're trying to take it forward to what the next transaction. I'd caution you from doing that. We talked about the market continues to evolve and there's more dynamics there. But I think what Steve said is right about what it looks like from a liability perspective, but I wouldn't extrapolate that into what future pricing might look like. We really won't know until we have such a transaction.

That's very helpful. And Rick, maybe just following up on that. Is there any help you can give us with how this market is evolving? And I mean, I guess maybe the logical question is, are you seeing any interest in GLTC? And I mean, I know you don't want to get too far ahead of the next transaction, and I don't want to discount this one, but just curious if you have thoughts there.

Yes. No, I think it's very consistent, Wes, with what we've been saying that even after the first transaction, we saw an uptick. And even as another party did a transaction, that's when we started the momentum to build being able to parse these blocks into assets and liabilities on the morbidity side. That's good developments. Getting to this next transaction with younger lives more active life reserves, as Steve said, all important. And then 2 things that -- one, we talked about, one we haven't really yet is the price increases being paid for that upfront. That's a good development. And then this is stand-alone. So I'd highlight that piece. Steve and I both mentioned that in our comments. We think that's a good development. Previous transactions have had an ongoing piece of business, part of our core franchise for us being part of that. This did not.

And so that's all about evolution of a market, and that's how we've talked about this market. And so there's still counterparties out there looking at both sides of this, the morbidity side as well as on the asset side and no predictions, as we haven't made all along, and we'll continue to talk to counterparties, but the market is developing in some small ways.

Your next question comes from the line of Alex Scott from Barclays.

I wanted to circle back on comments you made about the Fairwind capital and how it may build over time. I mean one of the things that I thought was notable about this transaction was the best estimate reserve was actually worse than the stat reserve. And so getting rid of it might help the capital generation on a go-forward basis. And I just wanted to understand how you're viewing that? How quickly does that $2 billion margin progress, just given it is, I guess, longer Group LTC?

Yes, Alex, this is Steve. I can handle that. And you're thinking about the model right. If you look at the block pre-transaction, we still thought that Fairwind was going to be kind of capital self-sufficient. We felt good about that with the combined block. Given that we've reinsured a block that had negative margin and therefore, would run off if we hit our best estimate assumptions going forward, needing a little bit of capital for that part of the block. We are going to generate more capital in Fairwind with what's remaining than pre-transaction. So it's going to run off over the life of the block. So it's going to be over several decades.

But what I will tell you is we did bring RBC down to 300% to execute on this, which is below the 350%. That's going to build back up in just the coming years. It's not going to take long for kind of that reserve margin to come through earnings and build capital back up in Fairwind. So we feel like that's a pretty temporary situation, and then we will build excess capital. It was kind of implied in my comments that that is something, given the remaining block is even less risky, that is something we'll have to evaluate down the road, just how much of that excess capital we want to build when those margins release.

Got it. That's helpful. And then when I think through holdco cash, still at a strong level even after paying this RBC ratio in Unum America is still in a strong place relative to where it's been over time. How do you think about capital deployment and the opportunities there, particularly when you consider continued risk reduction in Long-Term Care?

Yes. Thanks, Alex. A couple of things there I made comments on. One is we still have to get to closing this transaction. So that will take place later in the year. So these are estimates of where we'll land. We still will sit in a strong excess capital position either way. I think the building capital coming from our core franchise has been good. The generation is good across the franchise. And as you've seen us do, putting it back to work is important. One of the things that you saw in this transaction is we used some of that holding company cash to execute on Long-Term Care. I think we've also said around that with the excess capital position, it gives us flexibility in terms of managing this exposure. We chose to do that with this transaction. I think as you've seen the risk profile change of the liabilities we have, we may not need to do that next time around, but once again, those are things in the future that we'll have to deal with. This was a unique block that we were very happy to transact on, and we're very happy that we still sit in a very good holding company capital position.

Yes. The only thing that I'd add, Alex, is we came into the year saying we wanted to really replicate the deployment strategy that we had last year, where we look at how much we're going to generate during the year. We deployed that much capital last year. We're still planning on deploying that much capital this year. So I don't think our deployment strategy itself changes at all with kind of our view of it coming in. We're just going to have a little bit less excess capital as we get to the end of the year.

Your next question comes from the line of Tom Gallagher from Evercore ISI.

So just another question on the holdco cash. Since this was a use of $600 million or so of holdco cash, should we assume future deals would also draw down some of that excess? Or because I'm thinking about it specifically with Fairwind, the buffer looks even larger now relative to what it had looked like. Is that going to be excess that might fund future deals? And anyway, yes, if you can comment on how do we think about the Fairwind versus the holdco and the plan going forward?

That's fair enough, Tom. I think as we've said all along, transactions will look different, and we have plenty of funding sources from different spots. This transaction, given the nature of what Steve took through around the reserves and capital in Fairwind, we had to bring some holding company cash. That may not be true next time because when you look at Fairwind, the excess position we sit in is pretty significant, not a lot less than what we had going into the transaction. So it's hard to say exactly how it will look because it's hard to say what the block will look like, but we're in a different spot now after this transaction, I should say, after we close this transaction than today. So in today's transaction, $650 million of holding company cash, I still think it's a great use. It doesn't necessarily mean we'd have to bring that kind of money or any money to the next transaction.

Yes. It kind of gets back, Tom, to what we've been talking about. We think about pricing based on our views of the best estimate, but you have to think about the funding based on just the stat reserves that you have stacked up relative to that best estimate. And this was just a block that had statutory reserves that were about $700 million less than our view of the economic reserve. So that capital had to come from somewhere. If you look at the remaining block in Fairwind, that is not the case. We have considerable funding sources in that given the relationship between the statutory reserves and our best estimate for what's left.

Just for my follow-up, so the -- is it reasonable to think you would look to execute Group LTC deals going forward? It's a different type of risk much longer duration, probably a lot lower risk, but more out in the future. So it's a little hard for me to wrap my head around to think about how counterparties would look at that. And is that something that you're making progress on, I guess, is my question. And is that a block that's profitable? If you kind of peel back the onion, is that generating positive cash flows within Fairwind?

Yes. So let me start with the overall, and then I'll turn it over to Steve. But when you think about overall in terms of where we are, we look across all our blocks and including up until the point where we got to this transaction, talking to counterparties across all the different liabilities. And one of the things the team has done a good job on over the last couple of years is being able to parse the different liabilities with different counterparties, both the asset side and the morbidity side. That continues. So that's not something that's going to start newly. That continues over time. It is a different dynamic. And you highlighted the 2 things, Tom, which is, one, it is a younger book of business. Two, the risk profile is very different. And so you've got to look at your counterparties and they have to get the same sense of what you have out there today.

And then also on the group side, I'd just go back to the announcement last year in terms of shutting off new lives, and that has caused a different set of dynamics in that block where we saw more lapses than we have seen in the past. So there is something organically that's happening in that block of business as well. Steve alluded to that in his comments. And we'll have to just monitor how that goes. So those are the 3 things I'd say about Group Long-Term Care that just makes it very different. And I'm sure we'll have more discussions on that.

Yes. The only thing I'd add, Tom, is just to kind of think picture the financial model for that group business, what's left. When you set a best estimate reserve, that pretty much would say that going forward, that's about a breakeven block. I mean that's really how you're going to set your best estimate reserve. And so given that we have pretty significant reserve margin on a statutory basis, that does imply that there'll be stat earnings on that block if it plays out consistent with our best estimate reserve, which obviously is always a big if. But that is why we think that RBC will build in Fairwind over time because we do believe that there will be some statutory earnings in that legal entity.

Your next question comes from the line of Tracy Benguigui from Wolfe Research.

I'm curious if the $125 million PLA volatility cover was a prerequisite for Fortitude Re to take this more risky block? Or if you did this to push down the negative cede given this go around, you're not doing internal dividend restructuring and IBI risk transfer.

Yes. Thanks, Tracy. It's Steve. I'll take that. It's hard to look at one component of the transaction and say that, that's the one thing that allowed us to execute on a transaction. It's really the collective. And so yes, we do have a cover that you did see in the materials. It's really, there were a couple of assumptions where we couldn't quite get into agreement on that assumption set with the counterparty. And so in essence, as we look at it, we were open to do that to get the deal completed. What I will say is that's more of a long-term structure. It really looks at the experience over a very long period of time. And in fact, the first settlement is 5 years out. And then from that point, you kind of monitor it going forward. So I would say it was kind of a long-term protection that the counterparty wanted and was just part of the overall economics that we looked at and that they looked at to be able to get a deal signed.

Okay. I'm also curious if it's the same or different retrocessional reinsurer versus the last deal. I'm just thinking if it's the same counterparty, was it quicker to get the deal done given the familiarity?

Well, I'd just take you back to the -- we went into this process looking and talking to all counterparties. So multiple asset managers, multiple people focused on morbidity risk. Those are people we still talk to today. So this was not just to go back and do the second round with them. And when you talk about the retrocessionaire being with Fortitude Re is certainly -- we're familiar with them in terms of how they manage the first block. And so I think that does give us some comfort, but we did not preclude other counterparties as part of that transaction. Ultimately, we got to the best deal was with them as a counterparty, and that's where we ended up.

No. I guess I just -- I need to clarify, did Fortitude Re use the same retrocession partner for the biometric risk?

Yes, they did.

Your next question comes from the line of Nathan Satterfield from Jefferies.

When looking at this transaction and the last one, I mean, they seem to be similarly sized. What's really the binding constraint here? Is that you guys and your comfortability in transacting on these blocks? Is it Fortitude Re and other counterparties? I guess that's my question is, why not do a bigger transaction?

Yes, it's a fair question. And I think when we look at it, as we said, we're looking at all different parts of the block of business and what we go into. Ultimately, the size, which did end up being similar, was to reinsure all of the rest of the ILTC in Fairwind. So it was much more about what that profile looked like as opposed to -- we weren't limited by size. I don't think our counterparties were necessarily limited by size. It just made sense in terms of that's a block of business that you can get your arms around specifically because of the entity it sits in, because of the legal entity, all the details behind it. And so that's why it happened at that size around that was -- it was complete in terms of the ILTC in Unum America and then ultimately had been reinsured to Fairwind.

Yes. The only thing on that one is it's not always just size. It's also just the complexity of underwriting the deal. When you start to get into multiple legal entities and expand the block, you start to have to look at a lot of different policy forms and just kind of legal requirements of those policy forms. They can all be a little bit different. And so a counterparty really has to underwrite all of that. And so this was kind of that nice bringing together the complexity, the size and the price we were able to get, this was kind of the right deal for us to be able to execute.

Makes sense. And then following up on a question that was asked earlier, I guess to rephrase it, at what point could LTC be just retained or, to say another way, what's the long-term view of LTC now that you've gotten rid of one of your riskier blocks?

Yes. I appreciate that question and it's something that we evaluate. I think we've been very consistent to say Long-Term Care is very different than everything else we do. So we would like to remove that risk from our balance sheet overall. So we've taken a couple of steps into that. At the same time, we've also been very clear to say we'll only do so if it makes sense from a shareholder perspective. And so you balance those 2 together. And so we feel good about where we are in the franchise overall, how we're able to manage it, what we're doing in the closed block. So we don't think we have to do something here, but it's something we would like to do, given the right market conditions.

And so I appreciate the question, but I think this is something we'll continue to manage going forward and continue to talk about our closed block is something that's just very different than the Unum franchise, which has -- continues to grow and be a very strong entity.

Your next question comes from the line of Mike Ward from UBS.

Congrats. Forgive me, I don't think we've gone through this, but can you just sort of quantify the expected impact on operating earnings? I think there's some lost NII.

Yes, Mike, it's Steve. I can take that one. First of all, we need to evaluate the total impact once we get closed and run it through everything. But the 2 things that are kind of obvious based on how we're structuring the deal. One is we are using holdco cash, and so there is going to be some foregone net investment income on that. And then also, we are going to take on some additional debt service, as we're planning on financing the tax benefit. That's going to roll off over the next 2 to 3 years, as we're able to realize that tax benefit, but that will also be a little bit of drag. Both those things would be in Corporate. What we'll do, though, is as we get closer to close and all the numbers are completely settled down, we'll give a new view as we go into 2027, kind of what the profile is.

Okay. And then just on the retained ILTC business, is the -- it sounds like potentially the New York domicile is kind of what may have separated a chunk of the business you're retaining from this deal? And should we think about the New York business as like conceivably transactable or just or not?

Yes. I think, Mike, from your perspective, it was just -- it's a different part of where the organization is. We were focused on the Unum America liabilities that were ceded through Fairwind. But beyond that, it's hard -- these are all things that we'll look at overall. It's hard to say something. We think that all of it can be addressed. And in fact, last year, as we ceded that to our PLA entity, we thought that, that was a good move overall, which we would have talked about back later last year. And so we continue to think about all these blocks in terms of what are the actions that are appropriate for those blocks of business, and we'll continue to do so.

Your next question comes from the line of Ryan Krueger from KBW.

On the Group LTC, we can now see the reserve margin independently and it's pretty significant. Can you give us some, I guess, at least at a high level, what are the really big differences between your best estimate reserve assumptions and the statutory required reserve assumptions that are, I guess, specifically for Group LTC given the level of reserve margin that you hold?

Yes, Ryan, it's Steve. Honestly, that's pretty tough to quantify because if you think about those 2 reserves, they really, at this point, operate completely independent. When you look at the best estimate, that is our current best view of the liabilities. So we keep that current with our claims experience and what we're seeing within the block over time. The statutory reserves, those were set at pricing. And so some of that pricing is going to be decades ago. And so it's fair to say most of the assumptions are going to be different at this point between what was locked in, in the statutory reserve versus what's in our best estimate reserve.

I think the important thing is, in aggregate, the mechanics of that locked-in reserve is building a reserve that's well in excess of our current view of the liability. But it's tough to do an attribution of really the components and to quantify that.

Understood. I guess maybe thinking about it, I guess, one other way. So I mean, in terms of the excess reserve, the reserve margin and if your best estimates are correct, that will just get your ability to release that will come through really, I guess, really slowly over time. But when it does get released into excess capital in Fairwind, that would be when you would have the -- I guess, you could consider taking some of the excess capital out in the future. Is that the best way to think about it? Because I assume it won't get released until it becomes excess capital.

That's right. That's right. I mean, pretty much -- if you think about the protections that we had before in Fairwind, about half of it was excess capital that was more fungible in the moment versus the reserve margin. Kind of what we've done with this deal is we've almost monetized some of the negative margins that was in there, and we've used the excess capital to help do that. Looking forward, you can see really all of the protection is in margin at this point. So that's less fungible, but will come out just over the life of the block, and then that will convert to excess capital, and then we'll have more discretion over what we want to do with that. But I think the key is we view both of those things as protections of any changes we might have in our best estimate assumption or just any deviation of experience versus what our best estimate is. We can use that for both of those situations to help protect us and keep the balance sheet where we want it to be.

And we have reached the end of our question-and-answer session. I will now turn the call back over to Rick McKenney for closing remarks.

Great. Thank you. I'd like to appreciate everyone joining us this morning on short notice. Clearly, very excited about this transaction. We'll look forward to talking to you in roughly 3 weeks as we take you through our second quarter results and as we follow up with questions around that. But thank you for joining us this morning. And operator, that ends today's call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to Unum First Quarter 2026 earnings. [Operator Instructions]

I will now hand the conference over to Matt Royal, Investor Relations. So Matt, please go ahead.

Thank you, and good morning to everyone. Welcome to Unum Group's first quarter 2026 earnings call.

Please note today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results. Yesterday afternoon, Unum released our earnings results and financial supplement for the first quarter of 2026. Materials are also available on the Investors section of our website. Also, please note references made today to core operations sales and premium, including Unum International, are presented on a constant currency basis for improved comparability period-to-period.

Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and Chief Financial Officer, Steve Zabel. Following remarks from Rick and Steve additional members of management will join and participate in Q&A, including Tim Arnold, who heads our Colonial Life and Voluntary Benefits lines, Chris Pyne for Group Benefits; and Mark Till, who heads our Unum International business.

Now let me turn the call over to our President and CEO, Rick McKenney.

Great. Thank you, Matt. Good morning, and thank you for joining us. We are very pleased with a solid and encouraging start to 2026. It is one that reflects strong execution across the business for both the top and bottom line, greater capital deployment and continued progress in management of our Closed Block. Core operations performed well with earned premium growth of over 5% adjusting for the transactions. After-tax adjusted operating earnings of $353 million and after-tax adjusted operating EPS of $2.14 is up nearly 10% from a year ago.

Leading the way our group -- our U.S. group business had a standout quarter with sales up 22% and persistency is strong at 92%. Combined, this drove premiums up approximately 5%, specific to our group lines. The top line also translated to the bottom line as we saw record earnings in Group Life, bringing total U.S. group earnings to over $220 million and with a very high ROE.

Within the group portfolio, this quarter, it was clearly the Group Life business, which outperformed, but not to be overshadowed, our group disability business showed consistent strength with high returns and good long-term disability fundamentals. As we pay careful attention to pricing and risk selection at the employer level for new and existing customers, our team continues to do an excellent job helping people get back to work and fulfill our purpose.

These results reinforce what has long been true for us. We have built our business on disciplined pricing and underwriting, strong customer relationship management, which is key to high persistency and continued focused investments and capabilities that differentiate Unum in markets. It is particularly important where technology and human support come together at moments that matter most. It is also another quarter in which we delivered on the consistency and execution that our customers and shareholders expect from us.

To achieve this, we have been deliberately investing in technology-enabled solutions that help us win, retain and grow business by making it easier for employers and their employees to engage with their benefits. This is evident in this quarter's results with the success we're having in providing solutions and services that resonate with our customers. In recent years, employers have placed increasing importance on managing employees' leaves.

The expansion of paid family and medical leave programs has provided another avenue to leverage our leave management leadership position and reach more people. Our digital-first Total Leave platform combined with our traditional insurance products and technologies such as HR Connect, delivers a best-in-class experience to our clients, which in turn contributes to the high levels of satisfaction and persistency exemplified this quarter.

Extending from our leading group businesses is a very successful and broad-reaching supplemental and voluntary product business. These lines of business saw a 20% sales growth in the quarter. We see employers looking at the broader benefits package more often as these products leverage the same digital tools and employers know they can depend on Unum across their benefit needs.

Taking our Unum US business in totality, we delivered strong before tax earnings of $338 million and an ROE of 25% in the quarter. At Colonial Life, momentum continues to build. The business delivered a record earnings quarter supported by premium growth in line with expectations, attractive returns and continued benefit from disciplined execution and strong relationships in the worksite market. Colonial Life is an important component of our reach and able to get to employers of different sizes that are looking for high-quality solutions to help take care of their employees.

Looking internationally, after significant growth on top and bottom line over the last several years, Unum International produced mixed results this quarter. Strong performance in Poland, where growth continues at an exceptional pace was offset by benefits pressure in the U.K. Our market position and know-how gives us confidence that we can actively address macro market dynamics and we are excited about the long-term value growth and contribution of our international businesses.

Overall, core operations are in excellent shape heading into the rest of the year. As we refine how we present and focus our earnings on an ongoing basis, we'll also continue to provide transparency into our Closed Block. This remains an area of active and deliberate management. Importantly, results this quarter reflect tangible progress in reducing both the size and the risk profile of the block.

As we announced late last year, we discontinued new employee coverage on existing group cases. The response was well received by clients, particularly among employers who had not recently evaluated the cost and value to their employees of this legacy offering within their broader employee benefits package.

Because this product was last marketed in 2012 and provides benefits well beyond an employee's working years, our engagement this quarter led some employers to voluntarily cease their coverage. As a result, 7% of all group LTC cases closed during the first quarter, meaningfully reducing our exposure. Importantly, this reduction in footprint was achieved with clarity and transparency for our clients. As our customers' evaluation continues, we expect additional case closures going forward.

Beyond that, our Fairwind protection remains at a robust $2.2 billion. The external reinsurance transaction we completed last year continues to perform well and the elimination of new employee tail risk is fully in place. We continue to evaluate a broad set of options to further mitigate LTC exposure, including risk transfer, and we are encouraged by our progress and the opportunities ahead. The actions we are taking are methodical, deliberate and effective. Each step improves the risk profile and allows us to keep our focus where it belongs, growing and strengthening our core business.

Turning to the balance sheet. Our portfolio continues to perform well in the current environment and remain solidly investment grade. Our team has done a good job over the last several years, increasing our overall credit quality at a time when you weren't getting appropriately paid for the inherent credit risk. Additionally, our capital position remains very strong with RBC at 460%, which is over 100 points above our target range and holding company liquidity is strong at approximately $1.7 billion.

With solid capital generation, we remain committed to our capital deployment framework, investing in our business for growth, both organically and inorganically, and then returning capital to our shareholders through dividends and share repurchases. Our outlook calls for the redeployment of roughly $1.3 billion, which is roughly what we generate in a year.

During the first quarter, we repurchased approximately $400 million of shares, taking advantage of attractive prices to accelerate a portion of our planned repurchase. This reduced our public float by approximately 3% in 1 quarter. After paying out $78 million in dividends in the first quarter, we will also look to increase our dividend rate in the coming months, heading into our annual meeting. Our delivery of investing in growth and deployment plans are intact.

Looking ahead, we remain confident in our 2026 outlook, which consists of delivering 4% to 7% top line growth, 8% to 12% EPS growth, attractive returns on equity in our core operations and continued strong capital generation and deployment. The environment remains supportive. Our sales pipelines are building as we move through the year. Digital connections with our customers continue to deepen and our teams remain intensely focused on execution.

Most importantly, our purpose of helping the working world thrive throughout life's moments continues to guide our teams. Our growth and our culture over the long-term. This year, we were pleased to be named one of the world's most ethical companies for the sixth straight year. This all comes together to generate the results of today and the long-term value creation we are building for customers, employers and shareholders.

I'm happy now to turn the call over to Steve to walk through the numbers in more detail. Steve?

Great. Thank you, Rick, and good morning, everyone. The first quarter of 2026 was a strong start to the year with many of the expectations we laid out in our outlook meeting emerging across our businesses, resulting in after-tax adjusted operating income per share of $2.14. Notably, Group Life and AD&D, along with Colonial Life had record levels of earnings and group disability met our expectations.

Alongside the strong margins we saw, top line trends were ahead of our expectations with sales growth of 14.4%, group persistency increasing 2.7% year-over-year to 92% and core premium growth of 3.9%. While premium growth is slightly below our 4% to 7% full year expectation, we had expected this to accelerate and build throughout the year. Adjusting for the runoff of the stop-loss business and the transactions executed last year, core premium growth would have been just over 5%.

Before moving on to our segment results, I will remind you that this is the first quarter reporting under our new definition of after-tax adjusted operating earnings, which excludes the Closed Block. While the Closed Block's earnings are no longer represented in our headline adjusted after-tax operating income, I will spend some time later in the call to talk about key trends in that business. Diving into our quarterly operating results across the segments, the Unum US segment produced adjusted operating income of $337.9 million in the first quarter of 2026, compared to $329.1 million in the first quarter of 2025.

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. Overall, long-term disability results are consistent with the assumptions embedded in the models that underpinned our guidance last quarter and reflect continued progress as the line continues to normalize.

With that said, the quarter did include higher incidents in the short-term disability product line compared to the same period a year ago. Specifically, paid family and medical leave experience was somewhat elevated in newer PFML states and modestly pressured in existing jurisdictions, reflecting continued investment in the attractive leave opportunity discussed earlier. As PFML remains a maturing market, our standard 1-year rate guarantees provide flexibility to respond quickly. Excluding PFML, group disability experience was solid and within expectations supported by stable incidents, strong recoveries and a rational pricing environment.

Results for Unum US Group Life and AD&D include adjusted operating income of $115.1 million for the first quarter of 2026 compared to $69.2 million in the same period a year ago. The benefit ratio decreased to 61.8% compared to 69.3% in the first quarter of 2025 driven by lower incidents. This result was extremely favorable compared to our outlook of 70%, and we've now seen multiple years of better-than-expected results, averaging in the mid- to high 60s.

We believe that this moderate level of outperformance could continue to persist. Adjusted operating earnings for the Unum US supplemental and voluntary lines were $116.2 million in the first quarter, a decrease from $140.7 million in the first quarter of 2025. The decline in earnings was driven in part by last year's long-term care transaction, which ceded a portion of our IDI business, but also by unfavorable underlying experience in that line.

Turning to premium and sales. Our top line trends remain healthy. Unum US premium grew 3.3% with support from high levels of persistency. Excluding the impact from the runoff of the stop-loss business and our transaction last year, Unum US premium grew just over 5% year-over-year.

Our pipeline for future growth remains strong. Unum US quarterly sales were $335.1 million compared to $277.5 million in the first quarter of 2025. Total group persistency of 92% increased sequentially from the fourth quarter and from the same period last year, reflecting the enduring relationships we are able to create with our customers.

Moving to Unum International. Adjusted operating income for the first quarter was $30.9 million compared to $38.7 million in the first quarter of 2025. And below our outlook for earnings in the low $40 million range.

The International segment's benefit ratio was 71% compared to 66.5% in the year ago period driven by unfavorable experience in the U.K. business. Adjusted operating income for the Unum UK business was GBP 20.4 million in the first quarter, compared to GBP 29.5 million pounds in the first quarter of 2025. The results reflect underlying claims performance, including a benefit ratio of 72.9% compared to 76.1% a year ago. The change in benefit ratio was primarily due to a larger average claim size in our group long-term care disability business in 2026. International premiums continue to show growth, increasing 8.1% and are supported by healthy persistency levels and sales growth of 5.5%. Premium growth was broad-based with U.K. premium growing 6.5% and Poland premium growing 15.2%.

Next, adjusted operating income for the Colonial Life segment of $127.8 million in the first quarter was a record, and increased from $115.7 million in the first quarter of 2025, driven by strong benefits experience and underlying premium growth. The benefit ratio of 46% compared to 47.7% in the year ago period and was better than our expectation of the range of 48% to 50%.

Premium income of $472.7 million compared to $457.3 million in the first quarter of 2025 and was driven by strong sales in the prior year and stable persistency. Sales in the first quarter of $106.3 million were up slightly from the prior year. Colonial Life produced strong returns, including ROE of 19.2%.

I will now provide an update on the Closed Block focusing less on the earnings results and more on key business trends and balance sheet health. Long-term Care's results this quarter were largely influenced by employers' decisions to cease coverage following the discontinuation of new employee enrollments on existing GLTC cases that we announced in the third quarter of last year and that was effective in February of 2026.

As a result of these decisions, we saw elevated GAAP accounting volatility from these closed cases, which is acutely seen in the headline segment earnings results. Despite the margin in these closed cases, which reduced current period GAAP earnings, we are very pleased to reduce the associated exposure and tail risk in the block.

In addition, first quarter results included amortization of reinsurance costs related to the LTC reinsurance transaction that closed in July of 2025, which did not impact the year ago period. Outside of these impacts, underlying experience trends remain in line with expectations. Combined with the underlying benefits experience, the NPR increased 10 basis points to 97.6% on a sequential basis.

Other key considerations for monitoring the Block health include our Fairwind protection remaining stable at approximately $2.2 billion and continued success with our premium rate increase program with our achievement rate sitting at approximately 15% for our current program.

Then lastly, for the Closed Block, our alternative investment portfolio, which mainly supports LTC and an annualized yield of 6.7% in the quarter, below our long-term expectation of 8% to 10%. We typically see seasonality in first quarter marks due to the timing of receiving year-end statements and therefore, we remain confident in the construction and resiliency of this portfolio.

I'll end by covering our capital position. In the quarter, capital metrics across the board remain robust. Holding company liquidity stood at $1.7 billion and traditional RBC at 460%, both above our long-term targets and consistent with our expectations. These levels keep us on track to achieve our full year outlook of 400% to 425% RBC and $2 billion to $2.5 billion of holding company liquidity.

Our robust capital position is supported by statutory after-tax operating income of $314 million in the first quarter, positioning us for our full year expectation of $1.4 billion to $1.6 billion of total capital generation. This cash generation model paired with our strong position enables our durable approach to deploying capital to our shareholders. In the quarter, we took the opportunity to execute a dynamic approach to share repurchase buying back around $400 million of stock.

While we are constantly evaluating our capital deployment plans, we view these actions as a pull forward of our plan and remain on track to repurchase $1 billion of stock this year, representing all of the free cash flow we plan to generate. Our thoughtful share repurchase, paired with our common stock dividend of $78.4 million put first quarter deployment just under $0.5 billion, underscoring our ongoing focus of executing prudent capital management.

So all in all, it is a solid start to the year for the company. The encouraging top line trends and strong margins across many of our products illustrate the high-quality nature of our business. This paired with our continued active management in the Closed Block and opportunistic acceleration of share repurchases, provides us with healthy optimism for the remainder of the year and positions us well to execute against our goals.

I will now turn it over to Rick for his closing comments before going to your questions.

Thank you, Steve. And overall, you heard from both Steve and I that we delivered a strong first quarter. It reinforces both our near-term momentum and our confidence in the company's long-term positioning as we move through the year.

Before we move to Q&A, I want to recognize an important leadership transition for our company. After more than 4 decades at Unum, Tim Arnold has decided to retire in July. Tim has been a highly respected leader with a significant impact on our Voluntary Benefits businesses, particularly at Colonial Life, where he has been the President for the past 11 years. Tim is one1 of the few people who has lived in each of our 4 major locations and has impacted the people and the communities he has served. We are grateful for his many contributions and the legacy he leaves behind.

We're also very pleased with the planned leadership transition, including the appointment of Steve Jones. Currently, Colonial Life's Head of Market and Field Development as the next President of Colonial Life. This reflects the depth of our management team and our focus on continuity and long-term growth. We will look forward to Steve joining us on this call in the future.

So with that, operator, we'd be happy to take questions we have out there.

[Operator Instructions] Your first question from the line of Alex Scott with Barclays.

First one I had is on the paid family medical leave. I wanted to see if you could provide a little more color on what you're seeing in that product line as you move into new states and -- just help us understand if we should expect to continue to see some pressure there until we hit another renewal cycle or what you saw in first quarter is a little more one-off in nature?

Yes. Thanks, Alex, for the question. It's Rick. I just wanted to just say that this is an important part of the overall mix. And so when we think about it, we think about it, it's been consolidated in our group disability results, which, as you can see, very high returning business. And so this is a new developing area, which is one we've been talking about for a long time. But certainly, we can give us some more details behind that, which is just an extension, as I mentioned, of our leave business.

But maybe, Chris, will give some more context in terms of the dynamics in the paid family medical leave currently.

Sure. Thanks, Rick. And thanks, Alex. Ultimately, this is an exciting time in our business. If you think about PFML and the states that have come on over time and most recently, Minnesota and Delaware were added 1/1, and then Maine will come up in the first quarter this year. This is an expansion of a business we're in, giving more employers the requirement to be covered for short-term disability on the employee side, but also adding coverage for family events where people need to be away from work.

So it really fits the work and the investments we've made in the leave business where you bundle products and services to make sure that we can be that partner to employers as they manage their workforce for both regulated events and also just what they want to provide in terms of flexibility for their employee population.

When states come on, we deal with it like any other new line of business coming on in a state. And you can see some pressure from pent-up demand that happens at times. We manage it. The good thing about PFML is it is high-frequency type coverage like short-term disability. It gets credible quickly. You can see how the experience emerges, and it is short in terms of rate guarantee. So normally, a 1-year rate guarantee gives us the opportunity to reprice, and we've been doing that at current, and we'll continue to do that. It also can give you a little bit of lift in sales. Normally, that's been small enough to just be absorbed into our business because it's one state at a time. And obviously, our disability business is quite large. When you have 2 or more or it's a larger state, it can show up a little bit, and that does provide a little bit of tailwind in sales.

But I would bring you back to -- this is the business we're in. This is the business that employers need our help with. So it's an exciting time. When new states come on, that is part of it. As prior states mature in terms of how the experience plays out, that's given us more information, and we'll continue to adjust price and manage that business very well, which is part of our heritage.

That's all helpful. Second one I had is on long-term care. Could you talk about those in-force management actions that you're taking? And just the 7%, can you tell me about what portion of the policies had that renewal that occurred this quarter? And how much are you expecting to renew that you're working on some of these actions with through the rest of the year? So how do we think about that 7% potentially growing to a larger percentage of the total group LTC?

Yes. Thanks, Alex. Let me just provide a little bit more context around our LTC actions. And we've been taking now for several years. As we said, it's been methodical addressing different parts of our book of business. That includes rate increases, which we've been doing now for a long period of time, also includes the capital actions we've taken behind Fairwind over the last several years and then, most recently last year, on the risk transfer that we did as part of that.

And then in the third quarter, we took some actions around new lives on group cases. And I think that, that has some impacts that we've started to see coming out there. And Steve, maybe you can take us through some of the details of [indiscernible] what we saw specific to this quarter?

Yes. Yes. So I would go back to last year when we notified our employer base that we were going to be no longer accepting new lives on existing cases. And what that did is it really -- it really started a lot of conversations with our employer groups just about the value of the program, the future of the program. You get into the discussions about kind of what we're looking for going forward around our rate increase program. And it's just a point in time where they evaluate their entire employee benefits package and how the LTC plans might fit into that.

And so as a result of some of those discussions, we did have much higher levels of employer level terminations of those cases. We did quote that about 7% of our cases did terminate in the first quarter. That equates to approximately 30,000 actual lives on a net basis that would have ceased coverage during that period of time.

And so as we think about just ongoing communications with our customers, that's part of the conversation. We will continue to have those going forward. I would say, as we look forward, first quarter is probably the most acute that we feel the impact, but we could see future terminations on some cases as those conversations continue.

I would just pull it back up, though. I know there's a lot of GAAP accounting noise on this one. But at the end of the day, we're having good conversations with our clients. As a result, we've reduced risk exposure, tail risk on that book of business, and we just view it as another part of us thinking about how to manage this business going forward.

Your next question from the line of Tom Gallagher with Evercore ISI.

First question is just on how to think about guidance over the balance of the year. I heard your comment on Group Life and AD&D, how you think that's probably going to trend somewhat favorable relative to initial assumption. I don't know, can you just dimension have you changed anything for the other businesses? It does seem like international is running somewhat adverse.

And I guess group disability, the loss ratio sounds like it might be more toward the high end of the range, if I'm reading you correctly on this PFML issue, assuming that persists for a bit. But can you just talk about how you're thinking about the different businesses over the balance of the year?

Yes. This is Steve. I mean I would zoom up and just say we feel very comfortable in the guidance range that we've given based on what we've seen in the first quarter, the drivers of some of the margins in the first quarter and how we look to the back half of the year. I'd start with we feel great about growth within our core businesses, and that's a real driver then of bottom line. So everything we're seeing commercially would very much support the top line growth that will drive the earnings that we have in that outlook.

We did have some variances against kind of original expectations in the first quarter. You mentioned Group Life, that was a great result for us. We do think that there's a possibility that will continue to be somewhat favorable to the 70%. But as you know, Group Life can be very volatile. So we'll just have to see how the year plays out.

International benefit ratio was a little bit higher. There was kind of some one-off things around just the average size of new disability claims. We don't believe that will persist. That will be a watch area for us though, and we'll monitor that as the year goes on.

Colonial had a great quarter. Really, everything from a benefit ratio perspective was very positive. We have a lot of different products within that, and there's usually a little bit of offsetting of performance. But this quarter, everything was very positive.

And then there are some other lines where we had some variations, including group disability. But they were all within our range going into kind of planning for that ultimate outlook. So Tom, at this point, we're 1 quarter in. And so I'd say we still feel very good about the broad outlook range that we gave at the beginning of the year.

Got you. The -- my follow-up also long-term care. Can you give a little bit of color for how big of the -- how big are the group LTC reserves relative to the total of, we'll call it, $14 billion or so?

And did you -- when you had a 17% reduction from nonrenewals, can you provide a little more transparency what did that do to reserve levels versus the capital that make up the $2.2 billion of excess over best estimates in Fairwind?

Yes. Tom, so one it wasn't 17%. We had a 7% reduction in cases in the first quarter due to employers ceasing the coverage in their plans. What I would tell you is kind of from a statutory reserving perspective, we did release reserves in the first quarter of the year and felt very good about that.

I kind of zoom back a little bit and just think about the protections that we have in Fairwind generally. And mechanically, what happens is we release those statutory reserves and those, in essence, flow into excess capital in Fairwind. And when you think about our definition of protections in Fairwind, it's a combination of the margins that we have in the reserves and the excess capital. It was pretty much neutral. And so the way I think about it is we still have $2.2 billion of protections in Fairwind on a block that's smaller.

And so net on net, feel like we have more relative protection in Fairwind for the remaining block there. We haven't really disclosed the split between GAAP and individual -- or sorry, group and individual statutory reserves. And so that's something we can consider going forward. There is a lot of demographic information about the split between individual and group in our annual investor packet that we send out as part of that call.

Our next question from the line of Suneet Kamath with Jefferies.

Just wanted to start out congratulating Tim Arnold on his retirement, but I did want to ask him a question.

Just on the voluntary business, we're starting to see some reports of states telling insurance companies to lower premiums on certain products. Just wondering if you're seeing any of that in terms of your business.

Yes, Suneet, this is Tim. Thank you so much for the congratulations on the retirement. I appreciate that.

There have been states throughout the last 10, 15 years who've had loss ratio requirements that differ. And so it's not something new that we're working through, but we are seeing a couple of additional instances where states are inquiring about loss ratios and just trying to make sure that the products are performing as they were originally priced.

Got it. Okay. And then I guess turning to Unum US. I mean the 20% sales growth was pretty strong. I think most of it is from the core market. But can you just kind of unpack that a little bit? How much of that is sales to existing customers versus new customers? And any comment on kind of the natural growth that you typically talk about on these calls?

Yes. Suneet, actually, we'll let Chris get into that. But I think it would be helpful to actually talk about sales around the horn because I think we had a really good sales quarter in the U.S., but I think that, that was other places as well. So Chris, do you want to start us off and maybe we'll ask Mark and Tim talk a little bit about sales as well.

Great. Thanks, Suneet. Yes, strong sales in the quarter, 20% growth. And we're thrilled as we look at that sales growth that we can continue to tie back to where we've made investments and capabilities. No surprise, HR Connect and connecting to the platforms of choice, hugely popular with our new sales and also growing existing sales when that type of connection is in place. Total Leave is a huge driver of decisions that people make, and they buy a bundle when they do that for both Total Leave and HR Connect type platforms.

I want to also reinforce that we've got a very strong marketing alignment in terms of going out and finding the right types of prospects, so that we know where to spend time and energy and our brokers and consultants are focused on the right things when it comes to making a difference for their client base. That's an exciting partnership, and it's nice to see that alignment all the way through the sales funnel.

You referenced that new sales for small and mid-customers are really strong. That was -- there's a little bit of tailwind with PFML in that space, but even when you strip that out, new sales for small and mid-customers are really strong, nice to see that growth year-over-year. First quarter is a little bit more volatile. It's a small quarter for us in terms of our national client group. And that we did -- again, we did see some tailwind from PFML in the large space with Maine coming on, 51, which we credit the -- which we see in the quarter.

But overall, the fundamentals of where we're winning tied to capabilities, winning on new and growing our business have been really positive, great start to the year. So thanks for asking.

Tim, do you want to follow up?

Yes, sure. I'll start with the Unum VB side of the house. Extremely strong sales in the first quarter, up 24% year-over-year. New sales were at a record level. In the VB business on the Unum side, the first quarter is the biggest quarter of the year. So it's particularly comforting to see the business get off to a plus 24% start -- that bodes well for the remainder of the year.

On the Colonial Life side, sales were a little sluggish in the quarter. However, I would just bring you back to the fourth quarter where sales growth was almost 10%. I think we had a little bit of a soft pipeline coming into 2026. But I would tell you the fundamentals and the leading indicators remain very strong. Recruiting is very strong. We like the number of sales managers we have in the organization and the performance that they are demonstrating. We saw strong sales in the quarter from new clients and also from large case clients, had a little bit of weakness in the existing client sales base.

And Ashley Mader and the sales team are working hard to get that back on track. And we believe that the remainder of the year, there's reason to be optimistic. If you look at the gap between where we finished the first quarter at Colonial Life and where we thought we would be, it's about 1% of total annual sales. So we certainly think that, that is recoverable.

And then if I may, Suneet, since you started the question with my retirement, I'd be remiss not to say I'm extremely excited about Steve Jones. I have the opportunity to work with him now for 2.5 years since he joined Colonial Life as the Head of Sales and Marketing Support, field market development. He is an incredibly strong leader. He's led 2 other P&Ls in his career. And I think this transition is going to be extremely smooth. He's very much aligned to all the things that we've been doing, and he's got some ideas of his own that I think are pretty exciting. And so really, really happy to have Steve in the role moving forward.

Good. Thanks, Tim. And Mark, let's talk a little bit about international.

Yes. Thanks, Rick. If you look at international as a whole in dollars, sales were up 14%. As we know, the U.K. is the predominant part of that. So if I perhaps touch on local currency sales in the U.K., they were up 15% on the quarter. I always think sales are a function of the proposition that you have and the way in which the brokers in the U.K. market view you. We've been investing hard in broker service, digital propositions. It was last week that actually an independent survey by NMG on brokers rated us the #1 for Net Promoter Score, and we led the market in pretty much every major capability, whether that's relationship management, claims management, absence management, rehab, product, value-added service.

Those are the things that contribute to the growth in the business. We also got some data last week that said that in 2025, we were the #1 writer of new business in the U.K. market. So I think we've got some confidence that we have the support of the brokers and the propositions to be able to drive the growth and sales in the business over time.

Good. Thanks, Mark. There you have it, Suneet. I mean I think it is a broad-based story. And so I don't want to focus on just the USP. Sales looked very good across the enterprise in the quarter. Thanks for the question.

Your next question from the line of Jack Matten with BMO.

Just one follow-up on the group LTC actions. I guess would you say that Unum is incentivizing its group customers in any way to terminate their cases? Or do you plan to offer any incentives there? Or is it really just these terminations are an outcome from kind of more normal course conversations around things like rate increases?

Yes. This is Steve. Absolutely no incentive. This is a unilateral decision that a group HR Director makes when they're looking at their entire benefit package for their employees and just evaluating the value of the different pieces of that package. And so we're obviously here to have that conversation with them and discuss their options with their plan, but there's absolutely no incentive coming from us.

And from our perspective, the key is for us to continue to serve those customers that remain in force, and that's what our team is focused on. But we're also there to help give a little bit of education and help an administrator through their decision.

Got it. That makes sense. And then my follow-up is on the international business and I think some of the pressure you talked about in UK Group LTD. Can you just unpack a little bit more? Was that more frequency or severity issue? And do you view any of the trends there is something that could persist for a period of time? Or do you view it more as just kind of a one-off this quarter?

Yes. This is Steve. I can cover that one. It definitely was for the quarter, an average size for the long-term disability business over there. And really, the size of new claims is a function of just those individual claims that come in based on diagnosis, based on occupancy, based on the industry. And so we have a lot of data to say those types of claims when they come in, this is the reserve that we need to set up.

And so you just -- you get into some of these quarters where it's just the mix of those claims drive a higher expected size of claims than what you would have expected. So really nothing to do with the incidence counts specifically there. I will say we've seen that in the U.S. business as well over time, and they tend to just be kind of anomalies that you see in a quarter. And so right now, we would view it as just some first quarter volatility. But obviously, we're going to need to look at that as the year plays out and see how that impacts our view of the outlook for the business.

Your next question from the line of Joel Hurwitz with Dowling.

First, Rick, in your prepared remarks, you mentioned that you were, I think, encouraged by opportunities and progress that's been made on further risk transfer. Can you just elaborate what you're seeing in the market? And I guess, any optimism in getting another deal done this year?

Yes. Thanks, Joel. And as I talk about that, I look back to the transaction last year, it's been just over a year since we announced the transaction, closed at midyear last year. Very happy with how that performed, how that went through close, and we think it's just a good overall impact to the risk transfer. We've talked a little bit about what's happening on the group side today. But we are looking across the book with different counterparties to think about what are other ways that we can use reinsurance and risk transfer to help mitigate that.

So coming off of a successful 2025, we also, at that time, said we're deal ready. We're ready to go for the next tranche. It's just about finding the right counterparty. So we have the preparation and the teams are ready to do that. We have a strong desire to remove this risk, which we have been very consistent on, and that's in multiple forms in terms of taking the risk across the enterprise.

And on the risk transfer side, the market is constructive. I think we've used that term constructive before. There are a number of players out there that might take on this type of risk, lots of interest that's out there, but getting interest to be actionable takes some time because it does take a good, qualified counterparty who's willing to do the work. But there are a number of people out there willing to take the biometric risk.

And I think part of the development we saw a couple of years ago is the ability of companies to parse the risk between the biometrics and the asset management side, which is such an important piece as well. And there are a number of players out there thinking about the biometric side. There are many players out there thinking about the asset side of it, and then how do you bring it all together.

So I'd put it with the same category, it's constructive where the team is active, does not necessarily mean any deal will come to fruition. This is still complicated hard work, and we're going to do the right thing in terms of shareholders as well when we take off that risk. And so -- but we're working hard at it. And I think that we'll continue to have this to be a priority in the company to remove the risk of LTC from the balance sheet.

Great. And then just shifting to Group Life. Just I guess, can you unpack the experience? Was it all essentially frequency? And then just given -- I think it's been a little over 2 years now of continued strong results in Group Life. When does that get reflected back in pricing? Or is the benefit ratio in the 60s for this line sort of the new normal now?

Yes. So in the quarter, it was definitely just incidents. These tend to be lower face amount type policies in Group Life. So normally, when you see kind of fluctuations in overall benefit ratios, it's just going to be driven by the number of claims that we receive in a period. And that's definitely what we saw in the first quarter, very, very low number of claims submitted.

When I kind of zoom back a little bit, if you go back and you look at the average benefit ratio in this line going back many quarters, it's been kind of in that high 60% range. So this quarter was really an anomaly and doesn't necessarily change our view of the block significantly. I did make a comment that looking forward, it may be in that high 60% range benefit ratio. But I would say from a market and a pricing perspective, we'll take it into account, but it is just 1 quarter of very, very good performance, and we have to see that play out for longer really before it impacts pricing in a big way. And like all of our products, we look at this in a bundled way as we're working with our cases. And so we'll look at the overall economics of the case. And over time, it could factor in. But right now, I think it's too early.

Yes. I think that's an important point, Joel, when you think about it, it is that bundling factor. We've been talking about that a lot on the group disability and the great results we've seen there. It's more than just the stand-alone product line, what's doing. It's more about the relationship, our risk selection, all those different things that come in. And as we've talked about leave management and the wrapper around that, that's all important. So it's good to look at it. We're very happy with the results, but it's really hard to predict in terms of where that's going to go or how the market will factor some of that in.

Your next question from the line of Wes Carmichael with Wells Fargo.

I wanted to come back to the group LTC for a second on the terminations and the 7%. Just looking at the statutory annual filings, I think the group LTC reserves around $7.5 billion at the end of 2025. So just curious, Steve, does that imply that the reserve releases are in the neighborhood of, call it, $500 million, $525 million? Or is there any help you can give us on the impact on the statutory front?

Yes. What I'll tell you on that one, you can't just kind of use averages to think about what a statutory reserve release might look like just because -- the policies are in different ages. There's different benefit coverages. And so it's kind of hard just to do that.

What I'll tell you is on a net basis, the statutory reserve release, it was less than $100 million. It was significant, but it wasn't something that would change a capital plan or change the way we think about protections on the balance sheet. We're very happy. For us -- the main thing is we're very happy reducing the risk exposure, but not a big capital impact, I would say, in the quarter. But as you said, the reserves on these are going to be positive for statutory purposes. So there will always be a reserve release.

Yes. That's helpful. And I totally acknowledge the reduction in risk along -- sorry, was it something else?

No.

Okay. Just a second question, I guess, moving to Unum US. Just on expenses, and I think I asked about this last quarter, and you guys had hinted that maybe there is some potential operating leverage coming. But any thought on how you can improve the expense ratio going forward in Unum US?

Yes. I mean we kind of think about it in the aggregate and kind of take it to the top of the house of the consolidated operating expense. I think the comments that we made is our expectation for 2026 is going to be -- that's going to be relatively flat with maybe some improvement as we work our way through the year. We are driving productivity within the organization, which we think is important, but we're also investing back into what we're trying to do commercially. And so I think if you want to look for this period in 2026, I think it will be a pretty neutral story, all things being considered.

Your next question from the line of Ryan Krueger with KBW.

I had a question on the traditional group persistency improvement of about 3 points year-over-year. Can you just talk about the, I guess, the dynamics that you think led to that, both from a market perspective and maybe anything you have specific?

Yes. Thanks, Ryan. It's Chris. Persistency is really strong. We're thrilled with the beat we had with persistency. And we do think it reflects very directly the investments we've made in capabilities. We've got historical evidence that continues where there's a spread in persistency in terms of higher persistency where you've got either HR Connect technology investments and/or Total Leave, and we expect that trend to continue.

Couple that with the fact that we talk about consistent and transparent discussions around price. And when things are going really well, we'll make sure we set the price on a go-forward basis in a way that reflects good value to us and fair value to the consumer. Employers appreciate that. It shows up in terms of persistency, and we can keep customers with a modest rate reduction going forward at very high margins, that's a good day.

And when you tie that to full bundle, lots of different products, lots of services that we provide, including fairly significant and from a volume perspective, intense things like managing leave, customers value our -- what we do for them, and we feel the persistency, while not always going to hit the high that we had this quarter, it is going to be a real kind of key to growth in the future.

The next question from the line of Mark Hughes from Truist.

Flip side of that, I think supplemental and voluntary persistency, perhaps down a little bit, I think still within the normal range. Any strategies to see a similar improvement like you've seen in the core group disability, Life and AD&D?

Tim, do you want to take that.

Go ahead, Tim. Talking about the voluntary business. I would start with the wrapper though, because those things that Chris talked about are important overall in terms of the digital connections we have, et cetera. But our voluntary business does have a little bit lower persistency at the employee level.

And Tim, maybe you can talk a little bit about that.

Yes. Yes, Rick, that's right on. That's exactly where we experienced the pressure in the quarter. So as we continue to attach the voluntary benefits business on the Unum side to our lead program and to our platform partnerships with through HR Connect and Broker Connect and things of that nature, we're seeing improving persistency on the employer choice side.

We had what I would describe as volatility in the first quarter on what we call member lapses. So policyholders who are either changing employers or for whatever reason, dropping their coverage. The overwhelming majority of those are changing employers. And so we're taking a deeper look at that just to make sure that we are fully understanding it and then we'll put together any actions that are necessary to bring that back. But we think a big part of it was just some volatility in the quarter.

Yes. I mean I might just underscore Tim's point, it's a really good one. Those conversations when you're in talking holistically about the human capital management platform and Leave and the full portfolio, we have the chance to talk about how to make sure that ongoing enrollments remain strong and we get persistency lift over time. So glad Tim, let him with that.

Appreciate that. And then the corporate outlook for the balance of the year, what do you expect in terms of the corporate loss?

Yes. This is Steve. I would say mid-40s loss is probably about where I peg it. It was a little bit light. The losses, I think, a little bit light this quarter, but that would be probably where I would estimate it being going forward for the year.

Your next question from the line of Pablo Singzon with JPM.

One more question on Unum International where you referenced macro dynamics in the U.K. Was that related to inflation potentially picking up again, economic outlook or something to do with the underlying risk experience that you had already commented on?

Mark, I don't know if you picked up the question, but I was talking about just the macro environment and if that's causing some of the benefits, and you specifically highlighted inflation. So it's a little hard to hear. So...

Yes. I mean I think it's fair to say that the macroeconomic environment in the U.K. is not as strong as it has been for the last couple of years. We have some slightly higher inflation. The Bank of England has yet to respond with higher interest rates and actually sent some very calming messages saying that it wasn't going to do that.

But there has been a little bit of a slowdown in -- we saw in 2025 in existing employers adding lives to schemes. But actually, that picked up in quarter 1, '26. So at the moment, I would say I think there's a mood is a little bit lower, but not lots of sign that the economic activity is much lower.

Yes. The other thing that I'd add, Pablo, I think you maybe have a specific question about was the benefit ratio somehow influenced by some of our policies that are inflation linked. And I would say that that's not a significant contributor this quarter. It's more just around the average size of some of the claim's submissions.

Yes. And then second question, U.S. supplemental. 1Q was below the quarterly run rate that you had provided before. I think it was 120 to 130 and the loss ratio was the high end of your range. Can you give us an updated outlook there?

Yes. There's not really anything in there specific that I would say would be recurring. We still feel really good about kind of the quarterly outlook that we give for supplemental and voluntary. IDI claims were a little bit higher for the quarter. We saw a little bit of volatility in voluntary benefits, but nothing that we're looking to really continue as we proceed through the remainder of the year. So not really changing our viewpoint on ongoing earnings there.

Your next question from the line of Tracy Benguigui with Wolfe Research.

Most of my questions are asked. So just one for me. I appreciate you clarifying that $100 million of reserves for the group LTC case exits was not material enough to move the needle on capital. So just taking a step back, can you share what you need to see to reallocate some of your $2.2 billion of LTC protection into excess capital?

Yes, it's Steve. We feel really good about leaving the protections down in Fairwind right now. We don't really have any other needs for that capital necessarily. We would have the ability to dividend some of that at the holding company. But as everybody knows, we have plenty of excess capital at the holding company to have flexibility to do what we need to do. So right now, we think the most prudent thing is to leave that protection down in Fairwind. That also possibly could support a transaction in the future. So we just think it's a good use of capital right now, Tracy.

Your next question from the line of Mike Ward with UBS.

Just wanted to go back to the paid family medical. I'm just wondering if you're able to kind of like help us size the actual underwriting business that you've gotten from the state leave management programs just because that -- you've spoken about this for a couple of years, but I kind of understood it was like a fee-for-service kind of model.

Yes. Mike, it's Chris. Thanks for the question. And when you talk about leave, there is an element that is fee-for-service, and that's -- somebody can have us outsource their corporate leaves and FMLA, which is the federal leave job protection component. But where the PFML that generally gets most of the discussion, and there are different flavors is when a state has a mandatory plan and they provide for a private option.

We very much like to play in those spaces, and we have an offering that will be compliant with the state requirements, and we can incorporate that into the broader short-term disability and long-term disability play. It ties in with leave management in total, helping employers keep track of what their different employee populations are eligible for because inside of one employer, obviously, you have multiple states frequently and different rules apply to different people.

But really, it's the insured component of not just the leave associated -- a paid leave associated with the medical claim the employee has, but also an event that a family member may have where they need to take time away and they also get insurance cover for that.

When you -- maybe to just size it, it's still less than 10% of our overall disability book. And normally, when one state comes on at a time, it doesn't have that much impact. I think this quarter, as we referenced, we had 2 larger states that -- Minnesota being a little larger and Delaware that showed up a little bit in the loss ratio and also new sales coming on can have an effect in a smaller quarter like the first quarter or when Maine comes on. But in general, that's the element of PFML that we're talking about outside of the fee-for-service leave management business that you historically know.

Okay. And then is it -- like are you seeing -- is it parental leave? Or is it more so that sort of family member that is ill that needs care? And is there anything that prevents that from becoming a long-term claim if it's a family member?

Great question. So think about -- so your short-term disability long has forever been -- maternity has been the most prominent claim in short-term disability. That now gets extended for the birth mother and also the paternity leave associated with it. So a mother can go longer than historically, just the element of giving birth and the time after birth. There -- frequently, there are a set number of weeks that they're eligible to stay out. And then there is a paternity factor, which has become a very meaningful bonding element of family medical leave that is real, but there's also a cap on that.

Same with family members. So if you have a sick parent or sick child or some reason you're taking time away from work, all of these things are capped. So they're eligible to be used, but they very much have a tail. That's part of what we do for employers is we actually keep track of how long somebody has been away from work, what they're eligible for, how long they can be paid. And then our part of our job is to tell them when they've exhausted that cover.

And I think, Mike, the important thing is all of that can be priced for, right? And so that's how you respond to changes that might emerge in that book. It's very short tail and the pricing cycle is very short as well.

Our next question from the line of Wilma Burdis with Raymond James.

The lapses in group LTC. Can you just go into a little bit more detail? Was it one large account that left? Or was it a lot of small accounts? Maybe just kind of give us some visibility there. We're trying to evaluate just -- is the product just not as attractive as it once was? I know you mentioned that it is still attractive, but maybe just give us a little bit of color there? Or was it just kind of one big account and just help us think about how we should think about it going forward?

Yes, it's Steve. I think kind of a good articulation of it is we did have 7% of cases terminate. So it was definitely broad-based. It wasn't that there were a couple of major accounts in there that terminated their plan. It was more broad-based. And it's just based on kind of the value that an HR Director views with their budget of how they spend their money because many of these tend to be funded by the employer. And so that's just a decision that they're making as they think about the broader benefit package.

And then we haven't seen as many of your peers lean into buybacks to the extent that Unum did this quarter. Can you just talk about how you guys' view that kind of tactical buybacks going forward?

Yes. When we think about -- I appreciate that, Wilma, it's very consistent with the things that we've talked about overall in terms of taking our overall generation and then with a similar amount of deployment, $1 billion over the course of the year was our plan is our plan currently. And we just saw the opportunity to actually buy more. We sit in excess capital. So it was not challenging to make that decision, and we were opportunistic in the market.

But I think one of the things we said we want to be dynamic in that share repurchase. We showed that in the first quarter. We're not changing the longer-term outlook on that, but we want to make sure we're taking advantage of different things that we see in the market, and we did that in the first quarter. So very happy to retire 3% of our shares in the quarter, and we'll see what the future quarters look like as well.

We have reached the end of the Q&A session. I will now turn the call back over to Rick McKenney for closing remarks.

Great. Thank you for joining us today. We do appreciate the engagement. So we will be out there upcoming opportunity to connect. We would note that our annual meeting will be held on May 21. You can all dial in for that as well or send questions. Thanks for your time. Please do send Tim Arnold a note. I'm sure he would appreciate it, and congratulations to him.

And that concludes today's call. Thanks, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

Great. All right. Thank you, everyone, and thank you to Unum for joining us today. So we have Rick McKenney, CEO; and Steve Zabel, CFO of Unum Group. Thank you guys again for being here.

So I figured we could maybe kick off with sort of a broad 2026 outlook overview and your confidence heading into the year.

Great. Thanks, Mike. I appreciate UBS for having us at the conference today. We've had a good series of meetings over the course of the day, meet with people. Good to have a chance to chat about where we are going into the year.

We released our earnings and our outlook on Friday, so this is relatively fresh to go through that. I talked about a number of things that we're looking forward to as we get into 2026. I'd start first with the top line expectations for the company, continuing to grow premium as we have over the last several years. We talked about growing premium in a range of 4% to 7%. When you think about that off a $10 billion base, we see good growth coming over the course of 2026 across many of our lines. That actually translates through with good margins into an earnings per share growth in the 8% to 12% range. And so as we look out over the course of 2026, so we're actually happy with the trajectory we've got.

And I think we'll do a lot of things that you've actually seen from Unum out over the last several years, including good capital generation that we've had. And we expect to return that capital to shareholders through both dividends and share repurchase to the tune of about 100% of what we are actually earning over the course of the year. And so we think that's a good way to be shareholder-friendly as we look at deploying that capital we've earned on very good business. I think our excitement comes out of we had some good momentum on the top line coming out of the fourth quarter. And so we look to continue those relationships, leveraging the investments we've made over the last several years and continue to take that into 2026 and beyond.

Great. Thank you. Maybe drilling down into group disability. I think that one of the bigger questions and themes that we talk about is we believe the business to be cyclical. But there's also developing market dynamics. Of course, competition. You had mentioned 1 point of pricing in '25. Just curious, what you're seeing in terms of claim activity and market dynamics? And what gives you confidence in your target?

Sure. Maybe I'll start with the overall market and turn it to Steve to talk about some of the specific dynamics. I mean, I think the important thing when you think about our group disability business, it's part of an overall package that we bring to employers today. So it's not just about the singular group disability case. But it's importantly -- it's been one of our strengths for a long period of time. And when we look at the market today, particularly to disability, but even more broadly across group benefits, we like our positioning overall. And we're finding the market to be actually rational in terms of the pricing that we see out there across the competition.

It is a competitive market, no doubt about it. But as long as we're all within a range of pricing that makes sense to our customers, we think we'll do very well given the connections that we've invested in directly to the employers' HRIS systems and the other pieces. So we feel good about the competitive environment, how we compete in going to market. Maybe, Steve, you can talk about some of the product dynamics that we're seeing?

Yes. No, that's great. And I kind of take us back to 2024 when we saw really, an evolution of some of our experience within group disability. We had very low incidents, lower than what our expectations would have been and then also saw a continuation of our recovery rates. And that combined actually got us to a benefit ratio that was in the high 50s.

And as we were coming into '25 we knew that, that wasn't sustainable. And the guidance that we gave to the market was something that would be more in the low 60% benefit ratio range. And that's really how the year in total played out, the full year benefit ratio was around 62.5%. It was a tad bit higher in the fourth quarter. We saw some specific things around levels of mortality in that block of business. But as we look forward, we really do feel like the claims experience that we've seen over the last year will continue into next year. The one thing that we do think is -- we're going to adjust prices a little bit as we go through the year. And so we did set a range of 62% to 64% for the benefit ratio for group disability in 2026.

The other thing that we get asked a lot is, okay, so you had a really good year in '24. You saw a little bit of normalization in '25. What's the trajectory of the benefit ratio, what that might look like. Because the history of that block is it had a benefit ratio that was more in the low 70s if you go pre-pandemic. And so we get asked about just where do we think the terminus point on this might be.

And so we thought it would be good last week to give a little bit of clarity, at least how we're feeling about it. And that's as we look over the next several years, we do think the normalization will be right around 65%. That's going to occur over 2 to 3 years, so it's going to take some time. And that's mostly going to just be driven by pricing and what we think we'll need to do both with new business pricing, but then also as we think about renewals.

So we feel good about that. That still generates a 20-plus return on equity on that business line, which we're really happy about, obviously. Also gives us what we need from a pricing strategy to really continue to grow, like Rick said, because we do think that our businesses, we can grow by 4% to 7% longer term. We're in the bottom end of that range in 2025, but we definitely are building momentum as we get to '26.

Is there -- maybe just drilling down on to that. So there's the pricing dynamic claim activity, though. Is there anything in the data or the experience this year, if you were to ask, why now, right, in terms of getting more comfort? I know we have the pricing, but is there anything that you're seeing underlying in claim activity that's giving you more confidence?

Yes. No, I think we've seen really consistent claiming experience over the last couple of years specifically from a recovery perspective. And if you go back to some of the historical benefit ratios, really, the step change has been improvement in our recovery rates. And that's the know-how that we bring to this discipline every day, back at the home office, it's setting expectations with claimants and employers about for the specifics around every claim, how we can get that person back to work in the most effective way.

And so we saw a really -- a pretty consistent improvement over the last really 10 years at this point that we think is sustainable. Incidents has bounced around a little bit. It was really good in '24, more even with expectations probably in '25, which we think will continue. And then kind of early days in January, we mentioned this on the call. Really, what we're seeing in January is pretty supportive of the outlook that we put out there and the benefit ratio range that we put out there on our call Friday.

Okay. Pivoting -- we can come back to the U.S. core business. But pivoting to Closed Block. There was another piece of news that you guys put out on Friday, fully closed and below the line. Wondering if you could sort of walk us through the rationale and the mechanics of this?

Sure. Yes. And I'll probably just start with our Closed Block strategy and how we run that business, specifically long-term care. Because there's a few things about it that will create volatility with just quarter-to-quarter earnings. We feel great about our investment portfolio. That will continue as far as how we have our asset allocations to support the liability. But there can be period-to-period fluctuations, specifically in the alternative asset portfolio.

And then we'll also continue to work towards shrinking the footprint of that block. And either through transactions inorganically, that can create volatility period to period. It can change margins on that line of business. But then also as we work with group cases specifically, we have had some terminations over the years which can create some fluctuations.

And so that strategy is not going to change going forward. But what we'd like to do is really be able to present our core businesses for what they are, which is a very stable, consistent generator of cash that's available to redeploy and do that so that the market can really digest the performance of that on a stand-alone basis. And so what we're going to do going forward is have our core businesses and our Corporate segment, which, in essence, is debt service, and some of the income on our holding company cash be what we report on from an operating earnings and operating EPS, how we give guidance, all of those things.

Then when it comes to the Closed Block, it will be below the global line. It's a special item. It will be in all of our reporting. But we're going to really talk to it, I think, how the market looks additive, what are the capital needs there and just what are the capital dynamics, what are the protections we have on the balance sheet, how are we executing against our LTC strategy, and we'll continue to do that. But we'll do it in a way that will really isolate the ongoing core operations and the performance from what's going on with the Closed Block.

And I think that's how the market values us of the traditional multiple against our really good core businesses and then any capital requirements that there might be for LTC. So we're just going to begin reporting that way. But our strategy hasn't changed. Our investment allocation and portfolio management hasn't changed. Our risk management hasn't changed. And the fact that we want to reduce that block, that has not changed.

And to that end as well, we also talked about last week that ending the year, the protections behind that Closed Block business between reserves and capital that we have at our entity Fairwind stands at about $2.2 billion. So the protections, as Steve talked about, are there. They're consistent, and we think they're there to protect us from any adverse deviation we might see over the coming years. And importantly, we've said we will not put more capital in that Closed Block 3 years ago. We said that statement, we still hold to that today.

Great. In terms of schematics, I think one of the things that is kind of lingering and just wondering from an earnings perspective, GAAP component, right? If I were to just delete the Closed Block earnings from adjusted earnings, not fully getting to sort of the guidance range. So I was just wondering the different components of that, if you could briefly speak of that?

Yes. Definitely, when you think about kind of the base of 2025, it, in essence, is we're not really restating. We reset what the EPS would be on the new basis and gave that in the earnings release and on the call so you had a good baseline for the 8% to 12%. We're doing a couple of other things in conjunction with making this change. One is we've had some historical transactions which create for GAAP, deferred gains and losses that get amortized in over time. We are going to take a piece of that related to the individual disability income part of our LTC transaction last year. And we're going to put that kind of with the business line, which is in our recently issued business. It's part of supplemental and involuntary. So that's a little bit of additional earnings.

But then we also thought about kind of how we think about excess capital and also how we think about debt service. And we want to keep the income on that excess capital even though it's behind the Closed Block kind of as part of our core operation allocation. But we're also carrying the full load of our debt service on all of the debt. Because when you think about the cash generation to pay for and serve that debt, that's all in our core operations. So that better matches off kind of the total economics of what we're doing there. And honestly, there wasn't a lot of value created from just the absolute GAAP earnings. What's more important is we're able to articulate just the stability of the balance sheet there and just the strategy that we have to mitigate the risk of that block.

So if I think about it, right, we have less GAAP versus stack confusion going forward. We have less questions at fireside chats. And then in terms of the GAAP optics of a potential risk transfer, bring those together? And then if I think about the reserve actions from last quarter too. Just curious, sort of how does this -- what does this change going forward as we think about risk transfer or other sort of potential activity? Or is it more of just a cleanup?

Well, when I look at it, it's -- as Steve said, our strategy has not changed. And so it doesn't change what we're trying to do across, and managing very closely the block of business does not change in terms of our desire to actually use reinsurance to remove this risk overall from the balance sheet. And so I don't think it's really that.

I think the things you said are really important -- and Steve was articulating as well -- is because this is a special item below the line, we won't get into all the detailed nuances which really don't matter ultimately to the longer-term strength of this block of business, which we would do on a quarterly basis. And I think that's really good for us to be spending time in, as you say, a fireside chat to talk about the core business. So how excited we are about growing the company and doing things we've been doing for a long period of time and really having the investor community be focused on our growth there at the returns that are industry leading to take the company forward.

Great. So pivoting back to the core business now. Leave management, I think that's been sort of a topic for a couple of years now. Wondering if you guys could update us on the landscape kind of in that world in that industry?

Yes, sure. So leave management has been important to us. We've been talking about it now for several years. We started investing in platforms behind managing leaves for employers going back 6, 7 years in terms of the overall. And when you think of leaves that are happening, it really makes a lot of sense for us to be managing that on behalf of our employers. We do so at scale. We can do it if it's an employer that has people in different states. We understand the requirements of that.

And what you've seen over the last couple of years is really a proliferation of new leave types, whether that's paternity leave, elder care leave, many, many different types, different in each of the 50 states. And so the employers need somebody to manage this piece for them. And it leads very well right into our short-term disability, long-term disability. So it fits in the overall package. And we've invested in the technology to do a really good job at that.

What you've seen over the last -- it's actually been a number of years, but you're hearing about it more today -- are states that are putting in leave programs. You have a number of them out there today that mandate that people will need to use leave management. It could be done by the state or it might be done by the private sector. And so when there is a private sector choice, we want to be the ones to manage that as well. And so you're hearing more about it. We've been in it for a while. I think we lead on that front. We have over 2 million people on our leave platform, our new leave platform today. We do it at scale, and we want to continue to see this be a growth part of our business.

And the important thing when you weave it into the overall offering that we have is if you're a human resource professional, this is a big item that you've got to manage on a daily basis. And if we can do an excellent job at this, the conversations about adding other types of services for them, including our disability products, dental insurance, life insurance, all those things make sense in the overall bundle. So leave, we think, is a really important entry into the business. And it's something we've been active on now for the last several years, even though you're probably hearing more about it from a market perspective over the last 1 or 2.

Maybe I'm going to skip over a question and go to the technology side because you mentioned it. On your earnings call, you sort of mentioned some of your new technologies and digital capabilities helping close ratios. Wondering if you could help us -- you and I sat down a year ago, talked about this a little bit. But today, right, thinking about it from both sides, the claim management, new business, but new technologies at Unum?

Yes. So I talked a little bit about the new technology side on the leave management piece. That's one of those technologies that connects with the customers. But maybe, Steve, if you could talk about our HR Connect platform, which really embeds us in the HR technology?

Yes. Kind of our guiding light is to look at each market that we're in, in each jurisdiction, really think about what do we need to solve for from an employer and employee perspective. And we've identified a few things that are real pain points. Leave management is one, so we've developed our own state-of-the-art platform there.

Just the kind of interface that you have between carrier and employer just around kind of billing and who's actually insured and what benefits that they're provided. We've developed a solution where we're, in essence, in the ecosystem of these employers' HRIS systems, whether it's Workday, UKG, ADP. And we're able to, in essence, give an employee an experience through their own HR system when they do business with us and we provide the benefits for them. That also carries through to the employer and how they can manage their workforce. In essence, they can do that through their own system, but still communicate real time with us because of that connection. So that's been a real win. If you get that and Total Leave together, that can really be a game changer from an HR professional's perspective.

But then we're doing some other things just around your basic portal interactions that we have with insureds. If you switch over to Colonial, we've spent a lot in technology, a platform called Agent Assist, which really helps those agents not only get leads, cultivate leads, organize themselves, give them tools, give them approaches to be able to sell into the small employee part of the market and make them more productive, more effective.

And then you go over to the U.K., we have a platform called Help@hand. It's something that really became a problem for employers when the national health system over there became very, very difficult to work with. Employees were not able to actually get in to see physicians, even just general practitioners to just care for kind of their basic needs. So this is, in essence, a virtual doc that we provide to those employers that have our other products and services. And that's been a real home run with those employers to be able to add value to their employees.

And so we kind of look at each market that we're in to see how can technology be implemented not just for technology but to increase either the productivity of our folks or the experience for both our employer and our employee clients. And so I think we've really made strides. We're leading the market in a lot of those areas, and it continues to just create a stickier client, which is very important as you move from wanting to have it be a pricing discussion every time you're talking to an employer to be more of an experience discussion and just how they and their employees experience us as a company.

And I would just add to it. I know we have some of our teams listening to the call, so I want to be inclusive across all different things we're doing. So we've got Broker Connect that we have out there. Across in the U.K., Unum Connect, My Unum here in the U.S., Gather helping our folks across Colonial Life. So technology has been a big investment across the board, as Steve said, to work with our customers, our HR departments and to help people to manage their leaves in a very seamless way.

I thought you're going to say Unum GPT, maybe.

No.

But that is -- sort of my next question is, and it layers on to the technology discussion. But obviously, AI is a fascinating tool. Wondering -- it's probably not integrated across the entire spectrum of all the products, maybe. But curious, where do you see it as having the most impact at Unum and then for these products?

Yes, it's a great question, Mike. We think about -- across two different pillars. One is kind of on that go-to-market strategy, how we're using AI to connect with our customers in a seamless way, a very quick way. The second piece is how do we use it with our employees to drive efficiency and effectiveness as you bring the knowledge base to them.

We've been investing in AI for the last 5-plus years with a dedicated team that we've had. That dedicated team has really morphed into focusing on our most complex and challenging issues that are somewhat unique to our industry or to Unum. And I think what we've embedded over the last couple of years are also using third-party solutions to integrate into our overall servicing platform. So that's really been an important new piece that we've had to bring those third parties in with the knowledge and the know-how. And then, of course, leveraging the technology coming off of the hyperscalers are all part of the ecosystem that we're driving from an AI perspective.

Great. And I should note if anyone in the audience has any questions, feel free to raise. We've got one question from Ron. Right here.

There's a microphone coming to you, Ron.

Yes, just a sec, sorry.

So earlier, you talked about how that 65% loss ratio may be a lid for the next few years. If we get unemployment up to 5.5%, 6%, do you think the full year loss ratio could still -- forget quarterly volatility -- could still stick at that 65%? Or a garden variety slowdown, you can still hit that?

Yes. I mean, we've seen over cycles that unemployment doesn't necessarily drive fluctuations in the benefit ratio. We might see a little bit of a tick up in submissions. But these are all adjudicated. They need to be claim eligible. They need to have the right diagnosis and the right occupations to actually be eligible to go on claim.

So we actually don't see a lot of fluctuation in our actual paid that we accept liability for those claims. And so I don't see that as being a big risk. When we think about unemployment levels, probably the thing we're looking at the most is just what that means to employment roles out there with customers. And we've seen through the pandemic that we can still grow the company in those types of environments. But at the same time, that can be a little bit of a headwind if unemployment levels get higher than maybe what we would expect coming into the year. But our expectation is pretty consistent with what you'd see consensus out there coming out of different firms. And we still feel really good about a 4% to 7% top line growth rate.

We do in our group lines expect kind of a natural growth that we talk about that's coming off of employment levels and payrolls. Because also, it's about wage inflation as well. So between those two, it could be somewhere in the range of around 2.5%. That's just for our group lines. When you blend it into the overall, it's going to be more on that 1%, maybe 2% lift or headwind. We've seen the lift as well. So if you go back to when we saw some pretty rapid wage inflation, we've got a little bit of a tailwind there. And so that's how we think about the dynamics of the employment market and what that might do.

Maybe just extending on the sort of economic scenario in the U.S. You guys touch a lot of different employers. Wondering if you could help us understand their sentiment? And any sort of gauge on their view of their labor supply and demand these days?

Yes. So when you think about our company, we're kind of after that stage. So I think our insights into that are probably less than others' because we're dealing with people once the people are on the books and making sure that they're being protected along the way. But what we've seen is in the underlying data is actually, that natural growth that we've talked about, that lift between wage inflation and payrolls has been pretty consistent over that period of time.

So the sentiment piece is a little bit harder for us to judge. But certainly, people are very focused on the benefits. And that's one of the things that came out of the pandemic is employers realize they need to make sure there's some base level of coverage for their employees in the event of a disability and importantly, in the event of death. So I think when you think about the desire to have a good benefits package, that persists, regardless of what sentiment looks like. People know that, that's table stakes. If you want to have a good workforce, you've got to make sure you have good benefits.

Thinking about the topic of GLP-1s and sort of life expectancies. Super fascinating, I think. Can you share your latest views on those developments and any other health advancements and how they can impact the business?

Yes. I'll hit on that one. It's really consistent with how we think about all kinds of different medical advancements. First of all, usually anything that is pro health and pro the population at large being healthier, that's going to benefit our business by nature. A lot of our claims are going to be related to cardiac issues and other things that definitely, drugs like GLPs can increase the health in those areas for the general population.

But I'd also say consistent with any other types of medical trends that you may see, until we really see it come through our insured population and actually see it in our experience, it's more of we're monitoring. We're not thinking about it from a pricing perspective or kind of setting long-term expectations. It would need to really work its way into our customer base and into our experience before we would change our viewpoint of how our businesses are going to run economically.

So we're encouraged. I think it's a great thing for society over the long term to reduce obesity and some of these other issues. But at the same time, I'd say we're cautious to really see how that plays out over a longer period of time.

And I think in a general sense, if you think about it, a healthier population is good across our business lines. So whether it's group disability, long-term care even, and even group life, a healthier population is a good thing for us and for the individuals.

Yes. It's definitely fascinating. I would also open up the line digitally for any questions, too. So pivoting to capital. You guys bought back $1 billion in '25, another authorization for '26. I do think that we should acknowledge just the magnitude of that as being historic and occurring at the same time as you guys executing historic actions on the long-term care business. But just wondering if you could talk a bit about why you're still projecting to end '26 well above your targets? And the outlook for capital deployment.

Yes, sure. Let me just talk about the capital generation that we see. I mean, the good part about our company is the capital generation that we have and then the ultimate conversion has been very strong. And so it was a very active year in terms of looking at a number of different types of transactions, reinsurance, et cetera.

But I think also through that time, the capital generation has been excellent overall. And so we were happy in 2025 to deploy $1 billion back to shareholders through both $1 billion of share repurchase, but I also want to minimize the $300 million of dividends as well. And so kind of 100% conversion back to our shareholders. The other piece you mentioned is we still sit on a very strong capital position, ended the year 430% RBC. You actually -- 440%.

440%.

Yes, I don't want to leave that 10-point. 440% RBC and cash levels of $2.2 billion. We had $2.2 billion, $2.3 billion. So we're really strong from a capital perspective. We'll have to look at how we do that. And maybe, Steve, you can talk about our view into 2026 and how we see that playing out?

Yes. I mean really, our statutory cash generation is pretty consistent as we look into '26 is what we accomplished in '25 and really pretty consistent with how we think about margins within the GAAP earnings for the company. It is kind of interesting. If you kind of go back to pre-pandemic and kind of all the noise there and the adjustments we made to our capital deployment. We used to buy back about $400 million of shares on a pretty routine basis. And so we're at a point where we're buying back more than double that. And I think that's a real reflection of the growth in the capital generation of this company of where we were going into the pandemic and where we are today.

And so I think we have a lot of flexibility right now. '26, the guidance we gave would be another year of 100% conversion of cash generation back to shareholders. We think that's a really nice level for us right now. And obviously, something that we'll continue to evaluate as time goes on, but really happy with where we are today.

All right. Do we have a question? One more question, please.

So I know Rick and Steve, you guys aren't in the habit of taking victory laps, but the move from $20 to $80 in the stock inside of 5 years, it's all about the execution of you two and the team under you, obviously. It's one of the great recovery stories, and under the caption of what will you do for me next. For those of us who have followed you since your '89 IPO, we remember you trading at 12x instead of 8x. So there's one more 50% move in the stock in my humble opinion, all things equal.

If only 20 points of that will come from long-term care, my math -- not your math -- the other 30 points of multiple expansion, where should that be coming from? Where is the market not giving that to you now? Where do you think it might come from over the next several years?

Yes. I mean, I would look at the market representing. I mean, one of the things is the action we took around the Closed Block. So I'm not sure the rest of our business really was representing the multiple that it deserved because of the overshadowing of the Closed Block. We're hoping some of these moves will actually take that away.

And so as we see the growth in the business, the underlying returns and the ROE being generated by our business, it dictates a much higher multiple. And so we're looking forward to be able to talk more about that, and that's our expectation over the course of 2026. But it's going to come from our core lines of business that we have today have been running very well, and they'll get more of -- more attention as we look forward.

Yes. And I also think as we build momentum just around growth generally -- and fourth quarter was a good example in Colonial, where that's been kind of a slower recovery than maybe our Unum U.S. and our U.K. business coming out of the pandemic. You're really starting to see more growth momentum in all of these businesses. And so I actually think Colonial is one that's probably undervalued right now, just as we're building back up to the growth that we had pre-pandemic there. And so I think we just need to keep executing on the strategy, continue to do what we've been doing and ultimately, I think we'll be able to show the growth potential on the margins that I think will get the market to a different place.

Thanks, Ron. That was a good one. Maybe on growth, right? And we haven't really talked about this, but -- and I would imagine your stance is similar, but inorganic growth opportunities, not a ton of assets out there. But in terms of bolt-ons, anything that's changed in the last year in terms of your view or what you might look to?

Yes. So we've been pretty consistent over the last several years that to do a transaction where we bring in something similar we have, a consolidating transaction is not that exciting to us. We want to do something that helps us to grow, and so the places that we're looking are going to be more of the capability-driven growth that we've seen.

And actually, we did 2 transactions last year. So we actually bought Generali's U.K. business to consolidate with ours, and we think we can run that well and use that partnership. The other is we bought a company called Beanstalk Benefits. Back to the integration around leave management and other pieces that come in, it really is to work with our customers as they go through, for example, a leave process to bring them the right surrounding needs that they have, vendors, et cetera, to make that offering even better. And so we'll look at those type of transactions. They weren't needle movers in terms of the capital outlay, but we think they can integrate really well to what we're trying to accomplish.

Okay.

That's also a really good example of where some of the new AI technology can help the customer experience. That's one where we know what kind of leave the person is going out on. And it's almost like an embedded coach where we can help them along the way and point them to not just all these solutions, but the most relevant solutions in one place so that it makes their experience much more guided, much more seamless and help them through whatever event they're going through in their own life.

And we think that's probably where the most opportunity is, is around bringing more services. The product set is pretty much set. It's some of those services and bundling those in a way that we can kind of expose those at the right point in time because we know what their current situation is, and we can apply that guidance.

And the last piece I'd add too, similar to -- I mentioned the Generali deal last year -- is we actually want to expand, the place we would look to acquire to get more scale would be in the U.K. and Poland. And so those are good businesses today. We just want them to be bigger, faster because we think that we can execute. So we'll continually be in the market looking for how do we build those out through M&A.

Great. Just because we have an extra minute here. In the U.S. business, outside of disability, you sort of spoke about the competitive dynamic, I think, in disability. But if we think about supplemental and voluntary, I wouldn't think there's a change in the level of competition in group life and AD&D, but just wondering if we could sort of touch on some of those non-disability areas from a competitive dynamic standpoint?

Yes. I think it's as we talked a little bit about earlier, those things are brought out together in the market. And so if you look at it, particularly the group lines are together, leave management's key lead in some of those things, and then voluntary benefits can come along behind that as well as dental as part of the overall package as we go out to the customers.

And so these are always competitive markets. But I think that if you do a good job with the overall package, you surround it with the right technology and you bring the know-how and the employee -- or centricity that we have and the employee centricity, I think we'll continue to do a good job. So we're very competitive on each of those fronts. We do a good job overall, but we're always looking for more growth in those areas.

Great. Any other questions in the audience? Well, I think that about sums it up.

Great.

Any last words or...

Well, I'd just like to thank UBS for having us here. Thank you, Mike, for your support. Thanks for the questions from our audience. And thank you all for joining us today. So we look forward to seeing you in different events over the course of 2026.

Thank you, guys.

Thank you.

Hello, and welcome to the Unum Group 4Q 2025 Results and 2026 outlook. [Operator Instructions] I will now turn the call over to Matt Royal, Investor Relations. You may begin.

Thank you, and good morning, and welcome to Unum Group's Fourth Quarter 2025 Earnings Call. Today, we'll be discussing full year 2025 results, along with highlights from the fourth quarter. We'll also use the time to discuss our outlook for 2026. As such, we've extended our time today to allow for the additional presentation and discussion.

Please note, today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results.

Yesterday afternoon, Unum released our earnings press release, financial supplement and webcast presentation for today's call. All of those materials may also be found on the Investors section of our website.

Also, please note, references made today to core operations sales in premium, including Unum International, are presented on a constant currency basis for comparability period to period. Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and Chief Financial Officer, Steven Zabel. Following the remarks from Rick and Steve, additional members of management will participate in Q&A, including Mark Hill, who heads our Unum International business; Tim Arnold, who heads our Colonial Life and Voluntary Benefits lines; and Chris Pine for group benefits. Now I'll turn the call over to Rick.

Good morning, everyone, and thank you for joining us. 2025 was a year of disciplined operational performance across our core businesses, sustained investment in digital capabilities that create differentiation for Unum and decisive progress in the Closed Block, materially improving its risk profile. We delivered for customers, advanced our strategy and closed the year with strong capital and liquidity.

On the earnings front, for full year 2025, adjusted EPS was $8.13. This was down year-over-year and below our expectations going into the year. The primary driver of the softer outcome for both the quarter and the year was higher-than-expected benefits experience. That experience varied in total and by line throughout the year. We'll dig into our benefits experience more, but throughout the call today, you'll hear more about our leading franchise in group benefits that has grown notably over time as we serve employers and their employees.

As we have grown, we have done so profitably as our core operations delivered approximately 20% return on equity. This reflects durable earnings power supported by disciplined underwriting, solid persistency, a focused product mix and a sales force that appreciates building relationships with clients. Those fundamentals have been true for many years. And combined with strong risk management and capital management, we remain excited about the opportunity moving into 2026.

As we look at the top line, this opportunity is demonstrated by a growing premium base and customer relationships. Core operations premium grew within our expected range at nearly 4.5%, excluding transaction impacts, and included a 3.1% premium growth at Colonial Life and 10% in international. Given our healthy persistency and the ongoing demand from employers who value integrated benefits, we are well positioned to deliver premium growth within our long-term target range of 4% to 7% in 2026.

A key enabler of that performance is the progress we're making in digital. Today, over 1/3 of our core premium base is associated with customers experiencing 1 of our leading digital capabilities. The idea is simple, connect our benefits to the HR platforms employers already use and wrap those connections with an experience of service, expertise and empathy. The execution, particularly when building at scale, is complex, but our teams are up to the challenge. HR Connect, Broker Connects and Total Leaves strengthened the employer link. MyUnum, Gather and the U.K.'s Help at Hand, make enrollment and administration easier while adding value-added services. And AI-enabled tools help our teams respond faster and with higher quality. Where these capabilities are adopted, we see stronger engagement and persistency, and we pair that digital momentum with paying attention to the fundamentals across the enterprise.

In group disability and group life in the U.S., we maintained strong pricing discipline and risk selection and returns remain attractive and industry-leading. In Colonial Life, we continue to strengthen our independent distribution model. improving agent productivity through better digital tools and workflow. This supported steady premium growth, strong returns and sales that finished the year at a multiyear high, which included double-digit growth in the fourth quarter.

In International, we also delivered double-digit premium growth, reflecting a sharper broker experience in the U.K. and continued progress in Poland. So while 2025 had some variability and reported benefits experience, the underlying earnings power remains resilient, and our strategy continues to translate into durable growth and meaningful long-term value creation. This growth also flows through to our capital generation, conversion to free cash flow and deployment.

Consistent with our deployment philosophy, 2025 was the year in which we grew the company organically and made 2 small acquisitions. At the same time, with our continued strong statutory earnings, we were able to increase our dividend 10% and buy back $1 billion of our shares. That combination effectively returned to shareholders what we generated in the year.

We ended the year with robust capital levels of 440% risk-based capital and $3.2 billion -- $2.3 billion of cash at the holding company. 2025 will also be remembered as a year where we reached some pivotal moments in addressing the Closed Block. It dates back many years, but in 2023, we provided additional funding to our Fairwind entity and stated at that time that no further contributions would be necessary. 3 years later, our position remains unchanged.

Today, we have $2.2 billion of protection between reserves and capital to guard against any future adverse development. As you've heard before, a consistent part of our Block management has been to seek price increases over time where appropriate. With our steady and mature approach, we have crossed the $5 billion mark in cumulative premium rate increases since initiating our program.

Finally, in 2025, we completed an external reinsurance transaction that ceded roughly 20% of long-term care reserves, coupled with an internal reinsurance action that reduced potential capital volatility. Combined, we reduced LTC reserves by more than $4 billion in total through these transactions.

Our progress in 2025 has meaningfully strengthened our risk profile while maintaining strong capital protections, and we remain focused on further reducing legacy exposures to drive the focus to our leading employee benefits franchise.

We're excited about how we're positioned entering 2026. We are starting the year in a real position of strength. That is true in our market position and reputation, the depth and expertise of our team and, of course, the financial flexibility to capitalize on opportunities when they present themselves. Our performance is grounded in purpose, helping the working world thrive throughout life's moments, delivered through the right balance of digital connection and human empathy. With our continued investment in technology, we expect a good year of growth in 2026. Across the company, we see top line growth in the range of 4% to 7%, with meaningful contributions from each part of the enterprise. This stems from both new sales and persistency, driven by the connections we have developed over the years.

With disciplined focus on our margins, our EPS will return to growth of 8% to 12%, driven by our high ROE businesses. And finally, we continue to return value to our shareholders in a consistent manner as we have done over the last several years with an increasing dividend and share repurchases of approximately $1 billion. Steve will now take you through the quarter details, and then we'll cover our 2026 outlook.

Great. Thanks, Rick, and good morning, everyone. While earnings in the fourth quarter were below our expectations, our top line continues to grow and the franchise remains strong. Core operations sales finished the fourth quarter on firm footing after a slower-than-expected first half and were up 1.1% in 2025 over the prior year. This included Colonial sales increasing 10% in the quarter over a year ago and 5.3% for the full year. We were also pleased with our persistency results, and we continue to see high levels across our businesses, including U.S. group persistency of 90.2%.

Considering all this, core operations premium in the fourth quarter increased 2.9% compared to a year ago and finished up 3.7% for the full year. When we adjust for the runoff stop-loss business and the ceded IDI business from the LTC transaction, core premium grew approximately 4.5%. This growth is consistent with our outlook from last February and within our long-term expectation of 4% to 7% annual premium growth.

So then turning to margins in the quarter, results across the franchise generally performed lower than our expectations. This was reflected in Unum US group disability with a 64.2% benefit ratio in the fourth quarter, which was above our expectations, driven by lower average size of recoveries and lower-than-expected mortality on our climate block. Despite this, we continue to be pleased with the high returns our business generates. In both the quarter and for the full year, adjusted ROE for our core operations was approximately 20%, a good reminder of the underlying earnings power of our business even when margins show volatility and are pressured in certain quarters.

Altogether, these factors produced after-tax adjusted operating earnings of $322.3 million for the quarter or $1.92 per share and $1.4 billion or $8.13 per share for the year. These GAAP earnings translated to full year after-tax statutory earnings of $1.1 billion, which exclude the impact of reinsurance transactions.

This result was below our expectation of $1.3 billion to $1.6 billion coming into the year and largely reflect lower-than-expected margins experienced in our GAAP results. However, our overall capital generation model still provided immense levels of capital optionality enabling us to execute against our capital deployment priorities. Consistent with our priority of continued organic investment and capabilities, the full year adjusted operating expense ratio finished in line with expectations.

Outside of organic investments, we executed 2 small transactions for our core business, closed our first long-term care risk transfer transaction and returned approximately $1.3 billion to shareholders through share repurchases and dividends.

Our capital generation and strong excess position enabled this high level of capital flexibility in 2025, allowing for a wide range of capital uses, which will continue into 2026.

I'll now briefly review our 2025 results by segment, provide updates on the Closed Block strategy and then shift to our 2026 outlook. In Unum US, before tax, adjusted operating income was $289.7 million in the fourth quarter, 13.1% less than the prior year quarter, and full year adjusted operating income decreased 11.6% from 2024 to $1.3 billion. In group disability, adjusted operating income was $102.3 million in the fourth quarter and $479.8 million for the full year, a decline of 22.8% from 2024. This year-over-year decline represents a normalization of our group disability benefit ratio after historically low benefit ratio of 59% in 2024.

This normalization, paired with volatility throughout the year, led to a group disability benefit ratio of 64.2% in the fourth quarter and 62.4% for the full year.

Reported full year premium of $3.1 billion was nearly flat, and adjusting for the runoff of our stop-loss business, premium increased nearly 3%.

For Group Life and AD&D, fourth quarter adjusted operating income increased 11.1% to $91.9 million and full year adjusted operating income decreased 7.3% and to $319.4 million. Favorable levels of mortality counts led to a benefit ratio of 64.8% in the fourth quarter and 67.5% for the full year. Full year premium increased 4.9% to $2.1 billion due to favorable sales while persistency remains strong.

In our supplemental and voluntary lines, adjusted operating income declined 8.2% to $95.5 million in the fourth quarter and were flat at $472.7 million for the full year. Fourth quarter results were impacted by higher benefits experienced across all product lines. Excluding the impact of reinsurance, premium growth was strong, growing approximately 5.5% for the full year.

Moving to Unum International. Underlying earnings in the fourth quarter declined 11.7% to $33.2 million from the prior year, and declined 3.5% to $152.3 million for the full year, driven mainly by a favorable claims experience in U.K. group disability. Healthy sales and persistency bolstered double-digit top line growth as fourth quarter premiums grew 11.5% to $283.9 million and full year premium increased 10% to $1.1 billion.

In Colonial, adjusted operating earnings declined 7.2% in the fourth quarter to $113.9 million and for the full year declined 0.7% to $463.6 million. Life claim count volatility and higher expenses due to sales growth led to lower margins in the fourth quarter. The benefit ratio of 48.3% in the quarter and 48.1% for the full year were elevated over 2024, but in line with our outlook.

Fourth quarter sales increased 10% to $203.9 million, the largest amount of quarterly sales since 2019, and full year sales increased 5.3% to $56.3 million, one of our largest years ever additionally, favorable persistency also benefited top line growth with full year premium increasing 3.1% to $1.8 billion.

The corporate segment produced a loss of $51.1 million in the quarter as staffing and IT costs were elevated. For the full year, the segment produced a loss of $171.6 million compared to the full year loss of $191.2 million in 2024.

So then moving now to the Closed Block segment. Adjusted operating income was $21.1 million in the fourth quarter and $63.5 million for the full year, in line with the guidance provided in the third quarter. Regarding LTC fourth quarter performance, claim counts were in line with our expectations and the net premium ratio decreased slightly to 97.5% from 97.6% sequentially. And then finally, our alternative investment portfolio, which largely backs the long-term care block, generated $25.9 million in income, translating to an annualized return of 7.6%. This marked the strongest yield achieved in 2025 and reflects positive momentum compared to the full year yield of 6.4%.

Since inception, our diversified alternative portfolio has produced returns in line with our long-term expectation of 8% to 10%.

I'll now move to our Closed Block strategy. As Rick mentioned, we've made significant progress over time reshaping our Closed Block. On this journey, we've established a track record for executing on prudent risk management actions such as seeking actuarially justified premium rate increases and maturing our interest rate hedging program. On top of these successes, we further advanced our strategy in 2025 through 3 notable achievements. First, the reduction of $4 billion of LTC reserves through the execution of our risk transfer transaction with Fortitude Re and our internal funds withheld reinsurance transaction. Second, the removal of our morbidity and mortality improvement assumptions, derisking our assumption set and increasing predictability of the block. And then lastly, the discontinuation of new employee coverage on existing group long-term care cases, which was effective February 1 of this year, resulting in the entirety of the block being in full runoff.

To conclude, we're pleased with our actions in 2025 to derisk the block and continue to work toward our stated objective of fully mitigating this risk. These actions continue to reinforce our expectation that we will no longer need to contribute capital to support LTC reserves of view first established in 2023.

So then before moving on from the Closed Block and diving into the outlook, one change I want to call out as we enter 2026 is a change in our go-forward presentation of adjusted operating income. Beginning with first quarter results in 2026, we will exclude Closed Block earnings from our adjusted operating earnings measurements. Going forward in our disclosure, you will see a special item that encompasses the entirety of Closed Block earnings. As such, adjusted operating earnings will now be presented as the combination of our core businesses and our corporate segment.

This change aligns with the actions we took in 2025 to reduce the footprint of our legacy Closed Block and provide sharper focus on the core business. As we continue to shrink the footprint of the Closed Block, we view the potential for increased earnings volatility that would otherwise distort our reported results. One recent example of this increased volatility in recent years is when we experienced GLTC case terminations, which drove GAAP losses. While this outcome is positive for the Block longer term, the GAAP earnings impact may present a different result. In conjunction with this change, we also took the opportunity to holistically consider and adjust for 2 related impacts. First, we will no longer present noncontemporaneous reinsurance and the cost of gain -- and the cost or gain of reinsurance as a special separate item. The related non-Closed Block amortized reinsurance gain and impact of noncontemporaneous reinsurance will move to segment operating results above the line, which impacts our individual disability line of business.

Then second, as part of this broader evaluation, we considered our methodology for allocating GAAP excess equity across our reporting segments. The result of this was a decrease in the allocated Closed Block equity and a corresponding increase in the ongoing operations. A function of our view that adjusted operating results are no longer supported by the Closed Block, and therefore, the corporate-owned excess should be represented in our reported results. Ultimately, this will drive higher investment income across our other reporting segments, starting in the first quarter.

So putting this all together, our 2026 adjusted EPS growth will be presented off of a redefined 2025 base of $7.93, which excludes Closed Block results and related items. For additional detail, we have added a slide in the appendix that illustrates the bridge from historically reported to our newly defined basis.

Okay. Turning to the ongoing monitoring of the Closed Block, we've refreshed our disclosure, as you can see here. We introduced these metrics during our fourth quarter 2023 earnings call to highlight the most relevant indicators of Closed Block health and performance. Given the change in presentation of Closed Block earnings, which was formerly used to help assess claim trends in the period, we would note that the NPR, paired with the remeasurement line, better captures near-term claims experience. When considering our view of no additional capital required for the Block, our protection metric serves as a way to assess loss absorption capacity. This quarter, we took the opportunity to revise presentation of this metric to fully be on a pretax basis aligning the treatment of both excess capital and reserve margins.

Ultimately, these 4 metrics provide a comprehensive outlook of the Block. As such, going forward, we will continue to provide details on a periodic basis.

I will close by affirming that none of these reporting changes impact our commitment to our strategy of reducing the footprint and capital demands of the Closed Block.

So moving to the outlook for our core operations, I will start with our view of business growth and earnings power and discuss how that translates to capital generation. The key themes of our 2026 outlook are strong top line growth, stabilizing margins and robust capital return levels. Top line results are expected to grow more in line with our long-term expectations and above what we achieved in 2025.

While core sales in 2025 were lighter than anticipated, persistency was better than expected. As we enter 2026, we believe we can benefit from both strong sales growth and persistency in our core businesses.

From a margin perspective, group disability was a main part of our story in 2025 as it normalized from the historically high levels of margins in 2024. While volatile in 2025, we believe that we will still see a stabilizing benefit ratio of 62% to 64% in 2026, which still provides a very strong return on equity of greater than 25%. Combining these trends with our capital position and plans to repurchase approximately $1 billion of shares in 2026, we expect adjusted after-tax operating earnings per share in the range of $8.60 to $8.90 for full year 2026, representing growth of approximately 8% to 12% over our redefined 2025 result of $7.93 per share.

I will now turn to our expectations for top line growth, returns and underwriting margins across our core businesses. Starting with Unum US, we expect premium growth to be between 4% and 6%. As Rick mentioned, we will see continued tailwinds to our premium growth as a result of the success of our digital platforms. So to quantify the impacts, I note that for customers that utilize our HR Connect platform, we see close ratios that are roughly double when HR Connect is part of the experience, and persistency at levels 2% to 4% higher than non-HR Connect customers. The benefit ratio outlook is relatively consistent from what we achieved in 2025 for Group Life and AD&D, but grading up slightly for group disability, which we expect to be in a range of 62% to 64%.

[indiscernible] preliminary first quarter indicators are broadly consistent with our assumptions and supportive of this outlook. Notably, through our financial planning process, clarity on the long-term benefit ratio outlook has emerged. As a result, we do not expect the group disability benefit ratio ultimately to be greater than 65% when considering normal volatility. This result translates to a robust ROE in the mid-20s.

Underlying this future steady state is the expectation that our underlying claim trends are sustainable and that the move to a longer-term target is primarily influenced by expected pricing dynamics, which contributed a little under 1% point to the ratio increase in 2025.

Lastly, with the change I mentioned earlier to individual disabilities amortization of the deferred gain, we now expect supplemental and voluntary earnings to be in the $120 million to $130 million range per quarter, including an expected benefit ratio range of 48% to 50%.

So altogether for Unum US, these results drive healthy expected ROEs this year, in line with the 22.6% we experienced in 2025.

So I'll shift now to Colonial, where our outlook for top line growth and underwriting margins is quite consistent with 2025 results. Strong persistency and our building sales momentum will enable top line growth to continue in the [ 2.2% ] to 4% range. When paired with consistently strong margins ROEs will continue in the high teens range, reflecting our benefit ratio expectation of 48% to 50%. Then in International, high levels of top line growth continues after 10% growth in 2025. While the second half of 2025 saw margins can track below our expectations, we do expect the benefit ratio to return to a range of 70% to 72% in 2026. This will result in earnings power for the International segment in the low $40 million range quarterly, delivering high teens ROEs.

So adding it all up for the total company, this translates to healthy premium growth in the 4% to 7% range, in line with our long-term expectations, attractive ROEs and after-tax adjusted operating earnings per share in the range of $8.60 to $8.90, representing growth of approximately 8% to 12% with momentum building throughout the year. Consideration for the quarterly pattern of earnings reflects the realities of the seasonality of higher expenses in the first quarter, along with the growth of our in-force block and impact of capital management throughout the year.

Finally, included in this outlook is our expectation that the Corporate segment will reduce quarterly losses consistent with the fourth quarter's result of approximately $50 million, and that our adjusted operating expense ratio for full year will be approximately 22%. Executing against this outlook will position the company very strongly in 2026.

So now turning to capital. The strong returns our business provides enables high levels of free cash flow conversion. Capital generation in 2026 is expected to be in the $1.4 billion to $1.6 billion range when considering our statutory earnings of $1.2 billion to $1.4 billion, international dividends of $100 million to $125 million and other service fees of $75 million to $100 million. After considering debt service of approximately $200 million, this leads to free cash flow generation of $1.2 billion to $1.4 billion.

For deployment back to our shareholders, our 2026 plans remain consistent with 2025. We expect to repurchase approximately $1 billion of stock and grow our common dividend per share by 10%, deploying approximately $300 million. Combined, this brings expected capital deployment to shareholders to approximately 100% of the free cash flow we generate, a target we now expect to achieve for a second straight year.

Finally, I will finish with our expectations of capital flexibility at the end of 2026. We expect capital levels to continue to be robust and well above levels needed to support our current ratings. As such, our outlook includes a risk-based capital in our traditional subsidiaries to be 400% to 425%, holding company liquidity to be $2 billion to $2.5 billion and ample leverage capacity under 25%. While current metrics are well above these requirements to remain an A-rated company with our rating agencies, we will ensure a prudent approach to capital management. As such, we do not plan for immediate changes to our capital position, but rather will gradually manage metrics down over time.

So to wrap up my prepared remarks, we are happy with the progress we made in 2025. While earnings ended the year below expectations, there were plenty of bright spots to be encouraged by, including strong top line growth in our core business, significant capital return to our shareholders and many actions taken to reduce our LTC risk and exposure, including our first external long-term care reinsurance transaction. All these items position us well as we enter 2026. We remain optimistic for the year and ready to execute against our plans to continue to deliver on our promises to our customers, create a desired workplace for our employees and deliver industry-leading margins for our shareholders.

So I'll now turn it over to Rick for his closing comments before we go to your questions.

Thank you, Steve. I would like to wrap up today's comments by stepping back and reflecting on what our company has delivered over the last decade. Strong and consistent top line growth has translated into value creation. This has been possible with a very resilient business model and a team that is brought into our purpose.

Core operations premium has grown at a 4% compound annual growth rate to $10 billion, even through the disruption of the pandemic. Additionally, book value per share, excluding AOCI, compounded at 8% to over $78 per share, doubling where it was 10 years ago. These through-the-cycle results demonstrate the impact of disciplined growth, strong risk management and consistent execution across time, and it reflects the essence of our purpose-driven strategy, serve more employees, deepen our relationships with employers and brokers and consistently convert that growth into premiums, earnings and long-term value creation.

We'd now like to take time to take your questions. So I'll turn it back to Mark for the Q&A session.

[Operator Instructions] And our first question comes from the line of Wilma Burdis with Raymond James.

Could you go a little more detail on the drivers of the group's disability loss ratio and the outlook into '26? What gives you the confidence for the result to stay strong this year?

Yes, Wilmna, thanks for the question. I think Chris will start, let's talk a little bit about the market and what we're seeing out there as we think about this year, how we executed next year and then maybe back to Steve to some of the underlying dynamics, getting a little deeper than what he had in his prepared remarks. Chris?

Yes. Thanks, Rick. Thanks moor the question. Right now, we continue to experience a marketplace that's so receptive to the type of problems that we've made investments in around lead management, connecting to the human capital management platforms of choice. And the conversations are really centered around what we can do to help HR teams run more effectively, more efficiently help their companies thrive Obviously, price across the bundle, whether it's group insurance submental health, whatever it might be, there is a discussion around like striking good deals, but we feel it's a very favorable environment to go at with our pricing discipline, talk about capabilities, talk about the problems we're solving, understand that prospect really well. And again, that could be a prospect on the new side or one of our current customers, and really show them how we could be a key partner going forward. So it gives us a lot of confidence in the discussion around price, and that's why we think we can drive those loss ratios into the future.

Yes. And then Wilma, I'll talk a little bit about just what we saw in the quarter. And the -- how we're thinking about the outlook and just the projections more of a multiyear basis. And so first of all, I'd just start, it's normal to see some quarter-to-quarter volatility. We were actually really pleased with how the full year turned out. We had an overall annual loss ratio of just over 62% for the year. ROE greater than 20%. And so for the year, we feel pretty good and it was pretty consistent with our expectations coming into the year.

In the quarter, what we did see though were a couple of things. First of all, I'd start with the recovery rates that we saw were still consistent with really what we've seen throughout the year and what our expectations would be. So that's really been consistent as the entire year plays out. It's just the number of people that we can get back to work has been in our expectations.

What happened specifically, I'd say, in the fourth quarter. One, the size of recoveries of those recoveries were about 5% lower than maybe what our expectations would have been. So it was really just the mix of those people that did recover and go back to work. But then the other thing that was very different, and this is similar to our group life block, where we saw very low mortality in the working world. We saw lower mortality counts for our LTD claim at block. And just to kind of size that up that they were a little over 10% lower than what we would have expected for the quarter and what we've seen really for the year. So that was a bit of an anomaly that we think is just quarterly volatility.

And so then we step back and we think about going forward, we're obviously getting the question a lot just around our thoughts on the longer-term benefit ratio and group disability. And our thinking here is, for the near term, including 2026, we think that benefit ratio will operate in the 62% to 64% range. And then we do think that it will gradually, over the next few cycles, light up to that 65% range. We think that will probably be kind of the maximum. We'll still have quarter-to-quarter volatility there. What I'll tell you is the confidence in that path is really that we feel great about the claims performance. We do continue to think that, that's very sustainable. We're going to have quarter-to-quarter volatility, but we do think that, that underlying risk management is going to be consistent.

We also think, though, that there is an active pricing dynamic, and Chris did mention that, whether it's new pricing coming in on new cases or just how we manage the in-force block that it is going to continue to impact how we think about benefit ratios going forward. And so we're trying to give a little bit more guidance. And what I'd tell you is that's what our planning assumptions would indicate as we just run the planning process going forward. We'll have to see ultimately how pricing strategy does play out. But Chris said it, what we're seeing in the market, it hasn't really changed our thinking generally on the performance of this block, but we do know that there'll be price adjustments as we go through the next few years.

So I just kind of step back and say, longer term, the economics are great on this block. We still are going to have margins in the mid-teens supporting the 25% plus ROE on this block of business. So very happy about it. Now we -- the market was looking for maybe a little bit more clarity about the longer-term trajectory. And so I wanted to give a little bit more on that as part of the earnings call.

Very helpful. I absolutely love the decision to move Closed Block below the line and looking forward to not discussing those quarterly fluctuations with you in the future. But could you give us a little bit of color on how you view the '26 EPS outlook on an apples-to-apples basis? It looked favorable compared to my prior expectations, but it's a little bit tough to compare given the reporting change.

Yes. I think generally, it comes down to a few things. One is, we do think we're going to be able to start growing top line growth at a higher rate. And you'll see that with our expectation. We grew about 4.5% in '25. We do think that will pick up as we're going into '26 across all of our core businesses. So we do think we're just going to generate more core business premium margin. And then we're also looking at just benefit ratio levels and by and large, other than some of the dynamics that I discussed, we think those will be pretty consistent as we go into next year.

We're going to continue to have very disciplined expense management and really think about what kind of technical capabilities and innovation we can bring to make sure that we're doing the right thing around expense management. And then there's obviously a fair amount of capital deployment that builds into that outlook. And so when you bring all those things in, we feel good about an 8% to 12% EPS growth rate given the new definition of how we're thinking about adjusted operating earnings.

And our next question comes from the line of Alex Gut with Barclays.

I just wanted to follow up on the decision to move the definition of operating earnings. And it doesn't change anything economically and we'll still be able to analyze some of the LTC below the line. But what I thought was interesting about it is it does seem to be an extension of this being prepared for life after LTC and you took the charge, lined it more, hopefully, with where reinsurers are at. You've closed the block, now you've made a decision to move it into below the line or whatever. So would potentially make a deal look a lot cleaner as you complete it? And so I'm just wondering, is that the right read on this? What are you seeing in the reinsurance market that's maybe motivating you to do some of these things? And do you potentially have the opportunity to do a bigger piece of the block or will need to just continue to be bite size?

Yes. Thanks, Alex. It's Rick. Just to take you through, I think you captured it well as we've been actively working on this block of business for many years, but certainly, over the last several, it's been a steady drumbeat of things that we're doing to really put LTC behind us. Many things you talked about in terms of improving the profitability around that block with the rate increases, the work that we did to put capital behind it to make the statement that we are not putting any more capital into this business. And then as you talked about 2025 was a pivotal year in terms of doing our first reinsurance transaction, doing an internal reinsurance transaction and all the things that we talked about coming out of the third quarter with the group life -- I'm sorry, the group LTC, et cetera.

So a very steady thing that we're doing. And this move is, I think, part of that. And then the last piece you talked about is what's next. And it's something we've been talking about pretty consistently is we want to continue to take the opportunity to get out of this block of business, to do so through reinsurance and be active in the markets around that. And so you asked, does this make us do anything different? Not really. I think that we are still on the same path of how we're going to look at different parts of the block of business that we want to look at reinsurance to use. We are still in active discussions. We have been in active discussions for a period of time. And we're continually talking to counterparties about what are the ways to take this out.

And so you asked about the sizing of a transaction. Those are all on the table in terms of things that we can look at to continue to work through this. But I think you captured it well. This is something we haven't stopped on because we've changed the reporting how does the reporting looks, does not mean we are changing anything about our activity around the strategic management of the block, including all the things we've done previously.

And we're going to stay on that. So that's a key part of our overall strategy is continuing to put LTC behind us.

Got it. That's helpful. The next one I wanted to ask is on artificial intelligence. We're getting a lot of questions from investors around this and related to group benefits, a lot of it's around your client base and if they have layoffs and so forth. And so I'd be interested if you could comment at all about like the types of industries you're exposed to, if you've done any work or putting any thought behind how relatively more or less exposed you are? And maybe even just broader thoughts on risks and opportunities related to AI?

Yes. No, thanks, Alex. We are continually monitoring what's happening in the macroeconomic conditions when you think about it. I think we've also talked about our book of business and what we see from a natural growth, which is the increase in -- that we see in payrolls and wages and how that fits into our overall block of business. And I think this is part of that question that we look at. And the awareness that we have and the balance that we have across the portfolio of different types of industries that we're actually covering, different types of workers that we're covering, I think is very well balanced across the piece. And so when we think about the potential labor impacts that AI can bring to the markets, when we look at that business mix that we have today, we think it's early. So our performance has remained consistent across the industries. Our book is well diversified. And so that helps mitigate localized or specific sector shifts that you might see over time. And I think that this is kind of a common phraseology, but history does success that these advancements will reshape the nature of work rather than reduce it or eliminate it. And so certain roles may diminish, new functions will emerge, all those pieces, and we'll be there to take care of those individuals at that time and what we look at.

So I think it's very early on that front. And the last thing I'd say, too, is our mix by type of work, and one of the things that we talk about is protecting people isn't for any 1 particular level in the organization. Our mix is probably 60-40 white collar, blue collar, and so we're going to make sure we're taking care of different people at different times. And so it's a fair question, but I think it's very early, and it's one we're definitely on top of.

And our next question comes from the line of Suneet Kamath with Jefferies.

Just wanted to follow up on the -- you kind of answered the question, Rick, in terms of what you guys are doing. But what are you seeing in the marketplace? Are there more counterparties that are looking for this type of exposure? I mean we've seen a couple of deals, but I'm just trying to figure out like how much interest is there in these type of liabilities?

Yes. And I take you back to some of the commentary we made coming out of the transaction. Clearly, back when we did this transaction early last year, we saw more interest coming up from different types of counterparties. That could be people that are interested in the morbidity aspects of the book, people that are very interested in the asset side of the book of business. And so that definitely picked up over that period of time. And we see it ebb and flow continually, but there still is a lot of interest out there continuing, and we just watch the markets. And so we're, as I say, having active conversations with multiple people, and we'll continue to do that. It does tend to ebb and flow. We'll manage this over the longer term. I don't want people to think that there's anything imminent on that front, but there still is interest, certainly on the asset side, but on the morbidity risk side as well.

Okay. And then I guess on the capital, I fully appreciate the 100% capital return based on what you're generating. But to your point, it still leaves you with a sizable excess holding cash -- holding company cash position and RBC well above target. So I know you want to manage this down over time. But I guess what's the time frame that we should be thinking about in terms of kind of getting to those target RBC and holdco liquidity levels?

Yes. Sure, Suneet. I think when you think about the -- you have to go back to what our uses are and our potential uses of deployment, first of all, grow the business. And so we can put more capital into growing the core franchise. That's what we're going to do first and foremost. Acquisitions, which we'll do so on a -- certainly a disciplined basis, thinking about how we put capital to work there. And so those are 2 things that we'd like to put it to work on.

As you've seen over time, our capital has been in a very strong position. And so I wouldn't put a time frame around it. We're going to address this as we look at plans every year. We kind of gave you our 2026 plan that we have today. And as we look at future years, we'll do the same. But we feel very good about the position that we're in today about our -- how much we're deploying back to shareholders and, at the same time, sitting on a very robust capital base.

And our next question comes from the line of Jimmy Bhullar with JPMorgan.

So maybe first, if you could just comment on what you're seeing in terms of competition in the market? And it seems like everybody has had very good margins in disability. And recently, some of the companies have mentioned that they're seeing some price reductions with 01/01/26 renewals. So just talk about what you've seen?

Yes, Jimmy, it's Chris. I would start with traditional competitive market continues. There's no question. There is a real interest in this business. It's a great business, as Rick and Steve have described, and we really feel great about the strategy that we've deployed to operate well in that market. I don't think it's abnormal competition. And I don't see abnormal kind of drops in the market that caused you to change your approach. We're going to go back to our disciplined pricing approach, understanding risk. We know that with the capabilities we've built, we can be much more intentional about the companies that we promote our products to because they'll respond really well and they're ready to take advantage of things like modern lead management on a modern system where they've made an investment in a platform that's important to them. We can show them how we can make that decision even smarter. And then wrap it with a bundle of the best financial protection products out there that do really well for their employees. And that's a nice kind of combination.

Our team has been running this play for several years. We get better at it. The investment in capabilities gets deeper. And it just deemphasizes that price part of the conversation. To your point, we're aware that people have healthy businesses, and we stand prepared to compete both on new business and on renewals. And we're seeing success. I might point out the second half of the year was really our strongest from a sales and [indiscernible] perspective. So we feel really good going into 2026.

Okay. And then on your comments on margins sustaining, I guess, in the 60s. I think if you look longer term, disability generally been a pretty good business even prior to COVID. And in those days, it used to be a 70% plus loss, benefits ratio business for most companies with still very good returns. And I think you and most other companies were surprised as pre-COVID margins improved as much as they have, now they're starting to somewhat normalize. But what's different about the business now versus before that wouldn't cause margins to maybe go back to what they used to be? Like why does it just settled in the mid-60s, why shouldn't it go into 70 because that still is a fear legal return in the context of this industry?

Yes. Yes, this is Steve. What I would tell you is it wasn't COVID that necessarily created a step change in the margins that we have in this business. I mean the biggest driver of improvement in our book of business is around the rate that we can get people back to work and recover. And so we did specific things. We increased our capabilities over that period of time in several areas that we think that, that improvement is sustainable and isn't something that just happened during kind of an unusual time during COVID.

So we've seen that stabilize over the last couple of years, and we definitely think that, that is achievable going forward. We continue to have very steady incidence rates. And as Chris mentioned, I mean, the pricing continues to be very reasonable out there. And so we'll run kind of our normal process that we do every year as we go through our new pricing renewal process, but that's something that we've been doing for years. So I don't view there as being pressured that we revert back to something that was pre-COVID because we've actually taken actions during that time and feel that we have a very sustainable performance within our operational areas to maintain it.

And so that's why we feel confident that kind of the new norm for us will be somewhere in that mid-60s range. And what we see right now in our projections that benefit ratio would not go above 65% other than maybe some quarter-to-quarter volatility.

Yes. And Jimmy, it's Chris. I might add having been doing this a long time. I remember the days when the table stakes to get in on an RFP where geez, can you meet the provisions of the contract. And whether you are a high-quality carrier or certainly newer entrant, that was the market you had to achieve, and it was a little bit easier to make sure you had filed the right provisions and then could enter the RFP and -- but sometimes turn into more of a price competition. The world's changed a lot. We went through COVID. That was just what was going on in the world. But as a business, all the elements that Steve mentioned or foundationally changed the way we can execute for sure. And then you layer in almost a new set of table stakes around are you welcome to come into the therapy? Can you do the lead services that are required. Do you have the tech connections to make it work? Are you able to run the enrollment solutions that are required by the customer? So that that sophisticated customer who knows what they're looking for. That's who we're targeting, and we're able to provide a more modern set of solutions that make it much more difficult to just enter and make it a commodity sale.

Yes. And I think you and some of the peers, not all of them, they're generally ahead in terms of lead management and capabilities, but it just seems like everybody else is investing in that, too. So the question is whether it gets competed away down the road or not, but I guess we'll see?

Well said. We look forward to that challenge because these things are -- they're real. And when you're thinking about leave for sure, is very definable, but technological connections, if they don't show up the way they promise, that gets realized pretty quickly, and we feel good about what our customers are experiencing, and I'll leave it at that.

And your next question comes from the line of John Barnidge with Piper Sandler.

My first question is on the investment portfolio. Can you talk about exposure to software in investment portfolio that exists after moving maybe the Closed Block below the line because I know there's some alternatives that go through that?

Yes. Great. Thanks, John. This is Steve. Yes, we feel really good about our position. I'll size it up a little bit and then kind of let you know how we're feeling. We have less than 1% in our borrowing fund portfolio. And what I'd tell you, it's in our investment-grade bond portfolio, very well managed. They're integrated software providers, and so they tend to have a more stable credit profile and business profile. Really no leverage loan types of structures in our portfolio. So we have pretty vanilla investments in some of the really large integrated software providers.

And then if you look at our alternative asset portfolio, that's right around 0.5% maybe in that portfolio. And again, the types of investments we're making there, we feel really good about it. Obviously, we're going to monitor this. It obviously is on our watch list. But what I'll tell you is we feel good about how we're positioned and kind of the part of the broader software allocation where we really play, we feel good about.

My follow-up question is on the international business. It looks like there were some unfavorable claims resolutions and higher incidents in the group long-term disability product line. Can you maybe talk about that? That sounds like maybe some frequency, and I don't know of severity, but love to hear more.

Love to hear more. Yes, John, maybe we'll turn it to Mark Till just talk about the market of what we're seeing in the U.K. and then back to Steve to talk about the specifics that you asked. Mark?

Yes. Thank you, Rick. The U.K. market at the moment is generally pretty buoyant as a place to do business. As you can see that in our in our top line growth in the business, premium income up 8% for the year. There has been a little bit more volatility in the claims incidents at the moment, which Steve can talk a bit about. We've got several government initiatives at the moment that are designed to try and improve the general health of the workforce. So we've got something called Keep Britain Working that's coming. And so these things should be positive for our business more generally. But maybe, Steve, you want to talk about the claims?

Yes, sure. Yes, absolutely, John. The current quarter was one of the more challenging quarters that we've seen for a while in the international segment. It's performing actually very strong over the last few years, I would say. So it's been a very good business, great top line growth with very stable margins. This quarter, we saw a couple of things. One, we saw a higher number of just new disability claims and really no concentration from a geography or industry or anything like that. But we did see a tick up in just accounts of our disability claims. And then we also saw something similar to what we saw in the U.S. where some unfavorable volatility and just the size of the claims we terminated, we're pretty happy with the counts of those that recovered and got people back to work. It was just lower size than maybe what we would have expected.

I just kind of pull back over the longer term and across really all the product lines in international, we do expect the U.K. to contribute to the international benefit ratio being in the low 70s. So feel great about the business, very cash generative. And we had kind of a tough quarter. We'll just have to see how that plays out as we get into 2026

And our next question comes from the line of Tom Gallagher with Evercore ISI.

First question is, how much of your alternatives portfolio will be put into discontinued operations after the earnings change? And how much is going to remain in the close -- in the open block and still report it as operating earnings?

And then I guess, a related question, would another risk transfer deal, Rick, be an event that may cause you to reevaluate your excess capital deployment plans or no? Is that not something that you think would be on the table?

Yes, Tom, this is Steve. I'll take the easy one. It's pretty straightforward. The vast -- well, first of all, let me clarify. We're not putting the Closed Block in the discontinued operations. That's kind of a specific accounting designation. We're, in essence, taking those operations and just excluding them from our definition of adjusted operating earnings. It's subtle, but it's a difference. But yes, basically, the entire portfolio backs the long-term care block. We have some other legacy, but it's de minimis. So that is the way to think about it is the earnings that come off of our alternative investment portfolio will now be below the line.

The second part of your question, Tom, was around the excess capital that we have and LTC transactions. It's hard to tell until you have a transaction in front of you. We are very happy about the the really little capital impact that the first transaction had to us. So we're going to have to see when we get closer to the finish line on that, but we're not holding back capital specifically for that type of event. I think we're managing our capital way. And the thing that Steve mentioned in the comments, we still have a lot of leverage capacity as well.

So we've got firepower to do both, but I would say, we also want to be clear that as we remove this legacy exposure, we want to ensure that these transactions that we're focused on that our shareholders will also view them that being in the best interest of the company. We want to make sure we're doing things that are smart overall for the long term. We clearly have a bias to removing this legacy, but we're going to do so in a shareholder-friendly way. So I want to make sure people understand that we're going to be very thoughtful about any transactions we might do in the future.

And then just my follow-up is, I guess, one of the big concerns that I hear from investors is they see every other day, you get a big layoff announcement from another company. And at least the perception is that this is going to translate into disability claims, that there's a strong correlation. I guess -- so my related question is, when you look at the broad or number of corporate announcements for layoffs, have you seen any increasing claims in those clients that you have? Is that something that you've looked into?

And then maybe could you also comment on whether it actually is a real correlation when you've looked at your own claims experience in periods of higher unemployment?

Yes. I think it's a good question, Tom. We talked to Alex's question a little bit about just the overall employment base. When you think of disability particularly, I understand that these are for people that have a condition where they can't work. And so when we look at it, sometimes in a recessionary environment, you'll see an increase in submitted claims. People are our of work and they're looking for it, but we only pay on that are truly valid claims. So we might see higher submitted, but we generally see maybe very, very different -- very, very small changes you see in the paid claims. And so we would expect to see that in this type of environment. We might see a little bit higher submit, we haven't to date, so a lot of these announcements are are just coming out in their announcements. We haven't seen that come through our book at all to date. But over time, we're going to be very good about paying claims of people that are truly valid. And so we just don't expect necessarily to see that come up.

And our next question comes from the line of Joel Hurwitz with Dowling.

I wanted to start on Group Life. The experience has been very favorable for you and others. I guess what are the drivers of you assuming a reversion back to the 68% to 72% target in '26 is? Is it pricing? Or are you assuming a normalization in mortality trends from what you've experienced recently?

Yes, this is Steve. I would say it's more of the latter. If we step back a little bit, we are going to continue to guide at the 70% benefit ratio. It doesn't appear as though there's anything structural kind of in the mortality market post-COVID. We continue to be very happy with the group life performance. We've had another good quarter in the second quarter coming off of a pretty good year generally, definitely just driven by lower accounts of mortality. The average size of the mortality in our block is really consistent period to period. So that's usually not a driver.

What I'll tell you is, in the fourth quarter specifically, that lower mortality was very consistent with what we saw in the group visibility line. So just generally, it seemed like that was a fourth quarter trend the kind of working life type of mortality was just lower than what the normal expectation that you would see. So this benefit ratio can bounce around quite a bit from quarter-to-quarter. Our full year benefit ratio was 68% for the year. And so we feel good about, I guess, the assumption that we put out there of 70%. And we'll just have to see how the year actually plays out.

Got it. Then shifting to Colonial, sales up 10% was a real positive in the quarter. You've been talking for a few quarters now about actions that you've been taking, but I wanted to see if you could provide more color on the sales this quarter, the outlook for 26 sales? And I guess, if sales are improving, is there potential upside to that top line growth outlook? I mean you did 3% premium growth in '25 off of a lower sales base. So if sales improve, can we see something above the top end of that 4% range?

Yes. Thanks for the question. This is Tim Arnold. I really appreciate you pointing it out the strong quarter that we had on life from a sales perspective. As Steve mentioned, the sales overall up 10%. As we think about leading indicators, we're also very pleased that new agents who joined us in the fourth quarter were up 14% and sales from those agents were up 14% in the quarter for the year. We were up 22% in new agents and sales from those new agents were up 25%. The success was really broad-based as well. If you look at public sector, which I've commented before is our most profitable sector. Sales there were up 13.5% in the quarter. Sales through the broker channel up 12% in the quarter. Large case, our value prop points to resonate across all market segments, large case was up almost 20% in the quarter. We're also encouraged by the success of the agents who joined us over the last 3 years. The agents who joined us in 2024 had sales increase of 20% in the fourth quarter and 11% for the year. And the agents joints us in '23, had sales up 11% in a quarter and 10.5% for the year. So really like where we are from a footprint perspective, we like the leading indicators that we have.

All of our regional areas hit their plan in the fourth quarter. So we like the success we're seeing there. We're having real strong success with the products that we've introduced over the last few years. So we're pleased with that. And as Chris pointed out earlier, relative to Unum US. Plenty of Life is having a lot of success with our technology platform partnerships as well. We talked about agent assist in the past, which is our agent productivity tool. We're making a lot of progress there on agent adoption. In fact, all of the cases that were new clients written in the fourth quarter or submitted through the Agent Assist app, which not only helps our agents with their productivity, but also improved productivity in our home office areas as well.

So as we look at '26, we're pleased with the momentum that we've built, especially over the back half of '25. We're pleased with the staffing we have. We're pleased with the number of new people we've been able to add and the number of agents we've been able to retain and the success they're having. So is it possible? I think I was asking the second quarter earnings call last year. Is it possible to get in the range, Tim, because you're 3%and you get to 5% and thankfully, the sales team is delivering and we did get into that 5% range of sales growth for the year. So I would say that we're optimistic about the year, but we need to see how things play out.

And our next question comes from the line of Tracy Benguigui with Wolfe Research.

Good morning. You ended the year with $1.1 billion of statutory earnings. I believe last quarter, you talked about $1 billion for the first 9 months of the year. So that implies about $100 million in the fourth quarter. I'm thinking like group disability trends are normalizing. So what is driving the improvement in the statutory earnings to $1.2 billion to $1.4 billion in 2026?

Yes. This is Steve. Yes, there are a couple of things that kind of was that impacted, I'd say, as we were closing out the year a little bit about cleanup on some of our reinsurance transactions that probably caused a little bit of volatility in that. And frankly, just kind of how we round some of the numbers. So we still felt good about fourth quarter generation.

I will tell you, though, it was a little bit short of what our expectations would have been given a lot of what we saw in the GAAP results really flowed through from challenges in some of the margins, really flowed through to what we saw in the statutory results as well. So it was a little challenged, was a little bit short of our expectations, and for the full year, we also came up a little bit short from our cash generation. But what was good is, I mean, we've stuck to the capital deployment expectations that we set for the year and really converted 100% of that generation into deployment.

As we look towards 2026, the outlook that we put out there for statutory earnings and related cash generations, again, is anchored upon how we think about the margins that we've generated in our gap income projections as well and the outlook that we gave there. So we do think that there's going to be some places that we are going to generate more earnings. Again, it kind of gets back to through the top line growth of our core businesses as we think about driving productivity within the organization and then some stabilization and some of the benefit ratios. So it's really just a flow-through as well going into '26.

And I just wanted to be sure, the net investment income allocation to other segments that begins in the first quarter of '26, can your exercise of redefining the 2025 EPS to $7.93 just for comparison purposes? Did that include that exercise as well, reallocating investment income? And if you could size that for us?

Yes, it did not. That change is really just being made prospectively. And so the only thing that we really recast the 2025 EPS for was the redefinition of just adjusted operating earnings and what we did with the Closed Block generally. And then just from size and it up, that changes about $5 million a quarter probably in that range, and it's going to be very distributed throughout the core businesses as we think about just allocating excess assets that are in the corporate kind of portfolio amongst the businesses. So it's going to -- when you look at individual lines, it's going to be probably not even really negligible. But when you add it up, it's going to be about $5 million a quarter.

And our next question comes from the line of Mark Hughes with Truist.

On persistency, it sounds like you're seeing improvement. You mentioned the HR Connect gives you a higher persistency. I think you also talked about AI-enabled tools. How much improvement are you expecting in 2026? And what is driving the persistency when we look at those or consider those different factors?

Yes, Mark, it's Chris. Yes, persistency, we hit it in the opening comments from Rick. And really, you're right on target when you talked about the new -- or the investments we've been making for years that really do tie us into customers differently. That would naturally show up in 2 ways. One is new prospects close ratio. The other is when people are experiencing it, they feel really great about how we can help them run their businesses better, and that shows up by them sticking around longer.

Maybe just a tiny bit of history on persistency and generally, '24 was a remarkably high persistency year. '25 we knew it was going to revert back to a little bit of normalization. We exceeded target and '25 felt good about that. And then the outlook for '26, which is in our plans, we really feel good about. And that is foundationally based in the fact that we continue to attract more customers, put them into the block where they are coming for the right reasons around capabilities that we can deliver solving big problems like lead management, going deep on technology. I talked a little bit about it before with Jimmy's question around when you're actually making their lives easier because information flow and things they need to run their business from staffing and return to work perspectives are showing up in modern kind of ways to fit their environment, they want to stay. And then we take our normal traditional disciplined approach around the full benefit package that we offer them. We're transparent around loss ratios that we need to achieve. We talk about stable pricing for them and their employees over the long term.

And again, you just end up in a very logical and thoughtful discussion with long-term clients, which is showing up, as Rick said before, in higher persistency went tied to new investments.

Appreciate that. And then the lower average size of recoveries on the disability business. Have you seen that in the past? Is that tied to any government policy perhaps? What do you think is driving that?

Yes. I don't think it's any one thing other than just -- it just depends on who actually recovers and goes back to work and the size of the claim reserve we have up on them. We've seen in the past bounce around a little bit, but I think this quarter, it was low enough that we wanted to call it out. It was a little bit out of the norm. I don't think it's tied to anything structural, and we don't see it being tied to anything kind of programmatic. It's just something that period to period, you'll see fluctuations in size of new claims. You'll see fluctuations in the size of recoveries. And it just so happened in the fourth quarter. The size of recoveries was lower than we'd expected that also just the level of mortality in our claimant block was lower than we would have expected as well.

And our next question comes from the line of Jack Matten with BMO Capital Markets.

Just a follow-up on the strong persistency trends in group benefits. I guess in an environment with strong persistency, but maybe less growth in new sales, is that something that's out to a near-term kind of margin benefit for Unum? I guess in other words, is there is tortilla a new business penalty that's less of a headwind in the current environment?

Yes, Jack, it's Chris. I'll start. First, I'd like to kind of look ahead toward what we are really excited about a strong sales outlook for the coming year. In any given quarter, you have puts and takes [indiscernible] really strong 2024. We saw some nice sales in the third quarter of this year, which, both combined, contributed to a strong second half. We have lots of new logos coming through. And then tied to persistency, we think the block growth that we put out there north of 5% is a really strong outlook. And it comes with great margins, as Steve has been talking about.

So I just step back, and I appreciate your question, but really feel good about the combination of ways we're going to grow this business and doing it in a really healthy way. And again, we know it's found actually tied to a long-term strategy based on investment in technology and other services.

Got it. And then maybe on the supplemental and voluntary business, can you just unpack this quarter -- or what you saw this quarter on the claims side? And maybe just talk about what gives you confidence in the stronger earnings run rate outlook for next year?

Yes. Voluntary benefit is kind of interesting. It's actually several business kind of embedded within that one product line. There's life business in there. There's other types of -- critical illness, accident health. I would say it was not really any maybe one line that really drive of the loss ratio. It was a little bit up, obviously, from what we saw last year, which was very, very strong. We also had a really good quarter in the third quarter. So it was elevated a little bit from those 2. But still, I think it came in about 48.5%, something in that range. That's pretty consistent with what our expectations would be. And it's going to bounce around within 1% or 2% as you go quarter-to-quarter. So there's probably nothing specific that I would spike out on that one.

And our next question comes from the line of Josh Shanker with Bank of America.

Well, thank you all for letting the call run so long and giving me an opportunity. I appreciate it. There's a couple of companies that have had some issues in medical stop loss and one of them said that they've seen a rise in cancer among young people that's caused some of those issues. Are you seeing anything in that sort of cohort and experience that's causing any changes in how you price disability or group life business?

Yes, Josh, it's Rick. Let me try that. So we are familiar with the stop loss business. We exited that business going back a couple of years ago. And so what -- we've heard similar things. We monitor across the board in terms of what we're seeing in the working lifetime. And I'd say that the particular that diagnosis in the U.S., we have not seen a big change in terms of younger mortality coming from specifically cancer diagnosis. Understand our is mortality within the working lifetime. So as you see trends within that, you're not expecting much in the way of mortality over that work in lifetime, particularly at younger ages. So it's something we would watch, but nothing has really stuck out to us that would be coming through in our group life block. As you saw, we had good group life results really over the course of the year.

And it doesn't exist in disability either, that some get the diagnosis doesn't kill them, but it takes them out of the workplace for a certain period of time? I'm not asking your numbers. I'm trying to just cover whether it's true, the trend, and it's an issue at all?

Yes. I think we just haven't seen it coming into our book of business. And so that is a real diagnosis. Cancer is a large component of what we see from a long-term disability perspective. It's an important thing that we can help people through and get them back to work. But what you're talking about on the more acute younger ages, certainly, there's news about it, but we have not seen that come in specifically into our books. And you just see that our submitted levels on the LTD side are group life mortality levels, both still LTD in line and on the group life side, have been favorable.

And our next question comes from the line of Wes Carmichael with Wells Fargo.

I had a question on group disability, but maybe from a little bit of a different angle. I know everybody focuses on the benefit ratio. But if I go back a couple of years to the outlook from 2023, I remember there was a slide on efficiency and investments you were making. I think you showed the expense ratio peaking in 2023 and declining post that. So I know you continue to invest in this business and lead management, et cetera. But just curious as we go forward, is there a point where you think expenses can kind of inflect and we can get some operating leverage in the segment?

Yes. I appreciate the question, Wes. It's something that you've heard throughout the conversation today about the amount of investment that we're making. And so we've continued to see great opportunities. So we've continued to invest. And we did -- you -- 2023, as you talked about that, we saw that inflection point somewhere in that range. I think it's moved out a little bit. But what we're expecting as we look into 2026 is you will see our operating expense ratio come down. And that's inclusive of a lot of investment, but also good productivity that we're going to see coming out of our teams and across the business. So we do think there is operating expense leverage that we will see in the coming years. But you're right, it's because of the investments that we've been making that has delayed that a little bit.

Yes. And what I would add is we always are driving productivity within the organization and there's times that we decide to invest back in either within -- back into our people to support our operations or also our technology. And yes, we would expect going forward, maybe not immediately in '26, but over time, we would see that stabilize and then go down over time as I think we'll see that productivity really overwhelm some of the investments that we're making back into the organization.

Great. That's helpful. And just maybe a follow-up on LTC and premium rate increases. I just wanted to see if there's any a real update on how the program is progressing? I know there was a pretty sizable request that was put in for 2023, but I just wanted to see how that was performing and any other updates on that?

Yes. We feel really good about that program, really coming -- in closing out the year, we just expanded the program back in the latter half of last year when we made our assumption update around our best estimate assumptions. And so we've launched that additional expansion along the way, we're at about 15% achievement approval for kind of the expanded program. And so we feel good about it. I'd say the regulatory environment continues to be very open to this discussion. Similar to what I've kind of commented on in the past, it's turned into a kind of administrative process, just working with the states and getting them what they need to support the request that we put in. But I would say, generally speaking, that's been a pretty stable environment for us, and we continue to make really good strides. And I think Rick mentioned it, we topped $5 billion of value as far as what we've been able to achieve really over a decade plus with those programs and have a really good team that's working with regulators to be able to get those approved.

And our next question comes from the line of Tom Gallagher with Evercore ISI.

The paid family leave, is that a real opportunity for you guys? Like how big of a business is that? I see that new states are rolling out paid family leave. How big of an opportunity is that? I think -- I view that as sort of just a separate market. So what do you think on that?

Yes, Tom, it's Chris. Paid family leave, it is a very kind of an important and interesting topic that we've been very active in. I do think of it as part of 2 things that we are really expert in leave and short-term disability. So when you think about lead management, which is really important for our employers and the capabilities we bring, and you think about their intention to help cover not just when an employee has a sickness or an accident that needs to be away from work, but maybe when a family member needs additional support and that employee needs to be paid and have job protection away from work, paid family medical leave is a real thing, and it does expand the number of events that we cover. So where you've seen states take a specific action to put in programs that are very specific, we're a player there. And a lot of those states, this past quarter, Minnesota and Delaware put in programs that allowed for a private insurance option. And again, we are thrilled to be able to offer that to current clients, maybe their current STD class, where the relationship gets bigger on that line because we're covering more events, but also the other lines that go with it. We sell bundles and we keep that customer, but also new customers who are looking for the PFML solution, and we're able to step in and show them we're expert at that, but also write other lines of business.

So state by state, and we've seen it over about 10-plus a dozen states so far, there has been opportunity. What I would say though is, the opportunity going forward is not equal in each state. If a state is not going to put in some sort of a regulated mandate, PFML will not look the same as it has, where you see Minnesota, Delaware soon to be Maine put in programs. It doesn't mean it's not an important topic, it doesn't mean we don't work with larger employers for corporate leaves and things that they want to put into place for protecting their employees and their workforce. But it is part of the disability business, it's part of the lead business. You've seen us kind of think about it more as absorbing it into the normal business flow that we've got. We've done that successfully. We will continue to manage the business like other insurance products, where we'll look at utilization, we'll look at loss ratios and we'll mention over time and focus the employer and the employee on having that great experience so that we can handle that bundle, again, with pay family medical leave, other services. And you've seen the states where that has been in play. And then going forward, not every state is equal and it won't be quite the robust addition of new states as we look out over the years.

Got you. And can you provide any numbers like what percent of your total disability business this is and what kind of growth rate you're seeing?

Yes. I think that it's probably best to just look at our very large book of disability business and say, the way it has flowed in, and again, we've seen all the way back to New York and Massachusetts through the most recent quarter, there are quarters where it is in the numbers. It does flow through, and we'd like to think about it as just something we can manage by absorbing it into the business.

That concludes our question-and-answer session. I will now turn the call back over to Rick McKenney for closing remarks. Rick?

Great. Thank you. We do thank everybody for taking the time today this morning. We will be out of a series of events where we'll be able to answer more questions. Any follow-up, Certainly, the team will be here to do that. and we'll be out as early as Monday actually to talk to you. So we do appreciate you joining us today, and that does conclude the call.

That concludes today's call. You may now disconnect.

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Unum Group 3Q 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Matt Royal, Head of Investor Relations. You may begin.

Thank you, Bella, and good morning to everyone. Welcome to Unum Group's Third Quarter 2025 Earnings Call, which will include a discussion of our annual reserve assumption review. Please note that today's call may include forward-looking statements, and actual results, which are subject to risks and uncertainties, may differ materially and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results.

Yesterday afternoon, Unum released our third quarter earnings press release and financial supplement. Those materials, which include an overview of the GAAP reserve assumption update and updates to key sensitivities, may be found on the Investors section of our website, along with a presentation of the most directly comparable GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation.

References made today to core operations, sales and premium, including Unum International, are presented on a constant currency basis.

Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; Chief Financial Officer, Steve Zabel; Tim Arnold, who heads our Colonial Life and Voluntary Benefits Lines; Chris Pyne for Group Benefits; and Mark Till, CEO of Unum International.

Now let me turn it over to Rick for his comments.

Great. Thank you, Matt, and good morning, everyone. We appreciate you joining us today. Our third quarter results underscore the strength of our core businesses, which have delivered consistent performance throughout 2025. Year-to-date solid premium growth, which is up 4%, and disciplined execution continue to drive industry-leading margins and robust capital generation. We will get to the details of our assumption updates, particularly on the Closed Block, which in aggregate increased reserves and had an after-tax impact of $378 million. The changes there include a series of actions we are taking to continue to manage the block while still affirming our view of no additional capital contributions needed behind this business.

Turning to the details of the quarter. We delivered another solid performance across the board from top line growth to bottom line profitability. While earnings per share of $2.09 fell below our overall expectations, this is primarily due to volatility in the Closed Block. Importantly, our core businesses have exceeded our most recent expectations and continue to demonstrate healthy margins and strong returns.

Our core business profitability trends are underscored by continued discipline in pricing and risk selection as we show continued strength in both group disability and group life. Each have shown very favorable levels of earnings power. And we are particularly pleased with the premium growth across our core segments, which grew nearly 4.5% excluding transactions. This includes Unum US growth of nearly 4%, Colonial Life up over 3% and International delivering 10% growth. This growth is supported by high levels of persistency and sales growth of 12% in the quarter and reflects the strength of our market position and the value employers place on our offerings.

That is true for new customers, but even more so from existing clients that support our very high persistency trends. Our growth is enabled by the success of key technology initiatives like HR Connect and Total Leave, which continue to differentiate us in the market. These platforms create deep connections with employers and employees who value a high-quality digital experience, backed by the expertise and empathy of our team, who are supported by the AI tools we are equipping them with. This combination of technology and human touch is driving stronger engagement and retention, and employers increasingly use as a trusted partner for integrated benefits solutions.

Delivering on our purpose and growing the number of people we protect is highly motivating to our team. It is also deeply rooted that we do so with an eye to profitability and long-term growth. Our disciplined approach to pricing and risk selection, combined with consistent execution, translates into solid product returns. Return on equity for our core operations continues to be near 20% as margins across our lines remain above historical levels.

These results demonstrate the strength and scale of our core operations and our ability to deliver sustainable margins and maintain expense discipline. Combined with our Closed Block, in aggregate, our return on equity is 11.3%. The stability of our core operations supports our ability to take strategic actions to advance our Closed Block strategy and reduce the associated overhang of this legacy business.

The third quarter began with the successful closing of our milestone long-term care reinsurance transaction with Fortitude Re. We ceded 20% of our LTC reserves. The transaction showcased our ability to execute in the market, and we are actively pursuing additional opportunities with third parties to remove this risk. Meanwhile, we continue to actively manage the block from within. We implemented several actions in conjunction with our annual assumption review that derisks the block and strengthen its long-term stability.

While Steve will go into more detail on these changes, I'll stress that while our strategic actions necessitate higher GAAP reserves, we are pleased that they position us to reduce the size of our existing group policies, remove an area of modeling uncertainty and supports further risk management through premium rate increases. Altogether, these steps reinforce our confidence that no future capital contributions will be necessary.

Turning to the balance sheet. Our investment portfolio continues to perform well. We have derisked the portfolio, improved credit quality and positioned ourselves for future market cycles. Our portfolio maintains an A- average rating with historically low exposure to below investment-grade securities. Our overall position, combined with strong underlying statutory earnings of approximately $300 million, resulted in holding company liquidity of $2 billion and an RBC ratio of over 450%, both well above targets.

This robust level of capital provides tremendous flexibility to pursue our strategy and return capital to shareholders. Through the first 9 months of the year, we have returned nearly $1 billion to shareholders, including $750 million in share repurchases and $230 million in dividends. Our capital priorities have not changed: first, to invest in strategic initiatives that strengthen our core businesses; second, to pursue selective M&A opportunities that complement our capabilities; and third, to execute on shareholder-friendly actions through increasing dividends and share repurchases.

These priorities reflect our disciplined approach to building franchise value and delivering long-term returns. Underpinning these strong financial results is our team that is relentlessly focused on protecting more people and exceeding customer expectations in time of need. Our digital-first disciplined approach is driving favorable operating trends as we advance our market-leading positions and prepare for continued growth into 2026.

With that, I'll turn it over to Steve for some more details on the quarter. Steve?

Great. Thank you, Rick, and good morning, everyone. As Rick mentioned, we're pleased with the results of our core business, which continues to show strength and sustainability for both top line trends and margins.

In the quarter, core operations premium grew 2.9%, which does include the impact of both the ceded IDI business from our LTC reinsurance transaction and the runoff of our sold stop loss business. When adjusting for these impacts, premium growth exceeded 4% driven by strong persistency that continue to outpace our expectations. Additionally, while a smaller sales quarter, results were robust with core operation sales growing 12.2%. This provides good momentum as we enter the fourth quarter, our largest sales quarter, and we remain confident in our full year outlook for core operations sales to be relatively consistent with last year.

Third quarter adjusted after-tax operating income per share was $2.09, down from $2.13 in the same period last year, reflecting strong core business returns of over 20% that did normalize from the historic highs we saw throughout 2024. Additionally, the results of our annual reserve assumption review that we completed in the third quarter resulted in an overall net increase in reserves of $478.5 million pretax or $377.8 million after tax across our product lines.

In our core businesses, the impact was favorable with reserve releases totaling $162 million pretax. In addition, the review recognized the recent elevated incidence experience in our long-term care business. It also reflected the implementation of several strategic actions within the block, which helped reduce the long-term care risk profile and further advance our Closed Block strategy. As I outline results for each segment, I'll provide additional detail on the impacts of the assumption update in my overview.

So starting with Unum US. The segment produced adjusted operating income of $334.9 million for the third quarter of 2025 compared to $363.3 million a year ago. Not included in adjusted income is the impact of our third quarter assumption update, a $147.7 million reserve release driven primarily by $105.8 million of group disability releases. The group disability release reflects the favorable recovery trends in long-term disability, and we continue to believe recent levels of recoveries are sustainable.

Reflecting these positive recovery trends, group disability produced adjusted operating earnings of $133.5 million in the quarter compared to $156.7 million a year ago. While down year-over-year, results this quarter reflect a benefit ratio of 61.3%, in line with our low 60s guidance, driven by continued strong recoveries. This translated to an ROE greater than 25%.

Adjusted operating income for group life and AD&D was $88.1 million, which exceeded our expectation but was lower than last year's high watermark of $94 million. The benefit ratio of 66% outperformed our outlook of approximately 70%, driven by lower overall incidents including favorable trends in AD&D. We continue to expect a 70% benefit ratio for this business with normal period-to-period volatility.

Our supplemental and voluntary lines showed a year-over-year increase in operating income driven by growth in our voluntary benefits business. Growth in this segment was despite the impact of our ceded IDI business that was part of our long-term care reinsurance transaction. Adjusted operating income of $113.3 million was above the $112.6 million a year ago and slightly exceeded our expectation of approximately $110 million that we communicated following the transaction.

So then wrapping up the discussion on Unum US. Top line trends were healthy, sales grew 16.1% and premium increased 1.9% but was impacted by factors such as the ceded IDI premium for the long-term care reinsurance transaction and the runoff of our stop-loss business. Adjusting for these items, premium increased nearly 4%. Specifically for group disability, adjusted premium growth would have been approximately 3%.

While sales were strong in the third quarter, it is a smaller sales quarter for Unum US and therefore persistency was a key driver for premium growth as it has been all year long. Persistency for total group was 89.8% compared to 92.5% a year ago and above our expectations coming into the year.

Now shifting to Colonial. Adjusted operating income of $116.6 million was above the $113.4 million from the year ago results, driven by growth in the business as evidenced by a premium that grew 3.3% from prior year. Underlying the premium growth was persistency of 78.7%, which was 70 basis points higher than a year ago. In addition, sales increased 3.1% in the quarter, further demonstrating continued improvement in momentum. Finally, the results of the reserve assumption update resulted in reserve releases of $8.9 million driven by favorable morbidity trends.

Then for the International segment. Adjusted operating income totaled $38.8 million compared to $40.3 million in the prior year period. Unum UK results reported in pounds of GBP 26.3 million were slightly below our expectation of the upper GBP 20 million range with results primarily driven by higher disability claims in the quarter. Top line results for our International segment continued to trend favorably with premium growth of 9.5%, including 18.7% in Poland and sales growth for the segment of 24.9%. Finally, results of the annual assumption update resulted in $5.4 million of reserve releases.

Before touching on Closed Block earnings and the related assumption update, I'll briefly cover the Corporate segment, which produced an adjusted operating loss of $47.7 million, slightly improved from the prior year results of $49.4 million driven by higher investment income, which was partially offset by onetime expenses from our recent M&A activity.

Rounding out the segments, the Closed Block produced adjusted operating income in the quarter of $14.1 million, which was below $34.2 million in the year-ago period driven by a combination of lower alternative investment income and unfavorable average new claim size in the long-term care line of business. Alternative investment income in the quarter was $21.7 million or an annualized yield of 6.5% compared to our outlook of 8%, putting our year-to-date annualized yield at 6.2%. Additionally, LTC experience this quarter continued to be impacted by the higher new claim size dynamic that occurred in the second quarter, though to a lesser extent. I will note that claim counts for the quarter were in line with the expectations established under our updated reserve assumptions.

Turning now to the reserve assumption update impacts for the segment. Closed Block reserves increased $640.5 million, of which $643.1 million was attributable to long-term care. As highlighted in the earnings release, I will distinguish the changes into two categories: those representing regular assumption refinements to our liability cash flows and those that are onetime nonrecurring in nature and help advance our Closed Block strategy over the long term.

In terms of the liability assumption refinements, incidents has rebounded from the significant lows we saw throughout the pandemic and in recent periods have been elevated above our long-term assumptions, leveling out over the past year. While we continue to believe that some of this is delayed incidents that we did not see during the pandemic, we have increased our go-forward incidents assumptions. This resulted in an increase of reserves of approximately $300 million.

Importantly, with this update and with the experience seen in the third quarter, we believe that incidents counts are normalizing from the elevated levels we've seen over the past few years. In the same period of time, we have also seen consistently elevated disabled claim mortalities within the same experience set, resulting in a decrease in reserves of approximately $200 million. Taken together, these updates represent a net reserve increase of approximately $100 million.

I'll now move to the second category of impact which, as I mentioned, make up the bulk of the reserve increase and reflect onetime nonrecurring actions that derisk our long-term assumptions and align with our broader strategic objectives. First, we fully removed the morbidity and mortality improvement assumption, which added approximately $850 million to reserves. The decision to fully remove this key variable follows actuarial analysis through the post-COVID period. While evidenced through pre-COVID experience, we've elected to remove the assumption as a result of the significant reduction and then rebound of incidents in the most recent periods, which has heightened modeling uncertainty.

Next, as part of our ongoing efforts to align our portfolio with long-term strategic priorities, we took action to discontinue adding new employee coverage on existing group long-term care cases effective February 1, 2026. As a reminder, we closed our group business to new cases in [ 2020/12 ] and have not written new group cases since that time. However, we historically allowed employers to enroll new employees to those existing cases. New employee pricing has been based on more recent assumptions, therefore, those coverages have been profitable and contributed margin to our business.

As a result of our decision, we have fully removed the estimated future margin of new employees from our reserve assumption, which increased our reserves approximately $200 million. We believe this is a sound decision that will benefit our company and stakeholders by minimizing future risks and supporting our strategic priorities.

Finally, after considering all liability assumption changes, we have also reexamined our rate increase plans and assumptions. As a result, we have expanded our program, which reduced reserves by approximately $525 million. We have been very pleased with the success of our premium rate strategy over time and feel confident in achieving this updated target.

In addition to changes I've described to the GAAP reserves, which were reflected in current results below the line, the assumption updates also resulted in an increase of the future lifetime loss ratio or net premium ratio from 94.9% to 97.6% sequentially. This change decreased Closed Block quarterly earnings by approximately $10 million following the update. This impact will continue in future quarters. Considering this change, combined with the impacts of lower alternative investment income in the quarter, earnings per share in the quarter were impacted by approximately $0.10. We expect a similar effect in the fourth quarter.

Despite the GAAP reserve impact, the statutory reserve impact, which will be finalized in the fourth quarter, is expected to be minimal, if no capital contributions needed. In addition, our long-term care protections, which consists of statutory reserves above best estimate reserves plus the excess capital at Fairwind, remained robust at approximately $2 billion. While this is a decrease, we see significant value in the trade-offs and substantial benefit of having fully dissolved and removed several assumptions.

As demonstrated this quarter, the protections not only provide substantial flexibility to manage assumption refinements but also affords us optionality. We remain firmly in a position to proactively manage the block and pursue strategic initiatives, and we are confident that no future capital contributions to support LTC reserves will be necessary.

Ultimately, these updates do not change our capital outlook. In the quarter, capital metrics across the board remain robust. Holding company liquidity stood at $2 billion and traditional RBC at 455%, both well above our long-term targets and consistent with our expectations. As we approach the end of the year, we remain confident in our outlook of ending the year with greater than 425% RBC and holding company liquidity above $2 billion.

Through the first 9 months of the year, we have returned just under $1 billion to our shareholders, comprised of $750 million in share repurchases and $230 million in common stock dividends. In the third quarter alone, we repurchased $250 million of shares and paid $78.3 million in dividends. As we close out the remainder of the year, we remain on track to repurchase shares at the top end of our previously announced range of $500 million to $1 billion. In addition, we expect to return approximately $300 million to shareholders through dividends. These actions position us to deliver a total capital return of approximately $1.3 billion to our shareholders in 2025, underscoring our ongoing commitment to enhancing shareholder value.

Our robust capital position is enabled by our strong statutory earnings power, which mirrors the strong GAAP margins we saw in our core businesses. Adjusting for the onetime items related to closing our milestone LTC reinsurance transaction, normalized after-tax statutory income was approximately $300 million, demonstrating continued cash generation of our business model.

So before wrapping up the commentary on the quarter, I'll spend a few minutes on our investment portfolio. Our portfolio's after-tax net investment gain totaled $101.2 million for the quarter and was almost entirely attributable to closing of our long-term care transaction. As a reminder, in previous quarters, since announcing the deal, we recognized investment losses through a mark-to-market. However, gains are only recognized at closing, driving this quarter's results.

The investment portfolio remains well positioned. Our portfolio's average rating is A- and both below investment-grade exposure and watch list securities are at historical lows. I already discussed this quarter's alternative portfolio's performance, but we'll reiterate that while recent results have been lower than our long-term expectation, the portfolio provides immense value for our long-term care ALM strategy and has produced returns of 9% since inception.

In summary, this quarter stands as a testament to our strength and strategic focus. Our core business continues to deliver robust margins and healthy top line growth, fueling strong earnings and capital generation. The decisive actions we've taken in the Closed Block demonstrate our commitment to proactive management of this business. Our capital position remains exceptionally strong, enabling us to invest in growth, return value to shareholders and pursue new opportunities as they arise.

As we look ahead to the fourth quarter and into 2026, we are energized by our momentum and confident in our ability to deliver sustainable results for all of our stakeholders. Unum is well positioned for the future and we remain focused on driving innovation, operational excellence and long-term value.

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 wrap up our comments, I'd like to shine a light on our core franchise that has continued to lead in the employee benefits space for many years. We have and will steadily invest in the capabilities that will build our future and bring leading solutions to our customers.

There will understandably be discussion on the actions we have taken this quarter. Importantly, with our growth trajectory and the capital to back it up, we head toward the end of the year and into 2026 excited about our prospects.

We can now turn the call to questions, and I'll turn it over to Bella to take your questions.

[Operator Instructions] Your first question comes from the line of Ryan Krueger with KBW.

My first question is more on the statutory side of the LTC assumption review. I know the overall impact is limited, but can you give us any more color on some of the moving parts that impacted stat, whether it be how to think about some of the changes that you did make, how it came to stat and kind of the offset from the future premium rate actions?

Sure, Ryan. This is Steve. Yes, I'll kind of break it down a little bit because when you think about the reserve charge, it really impacted the entire block of business. And as you know, we have about 80% of the block in Fairwind. And the way to think about it in Fairwind is the adjustments that we made, including the future rate increase adjustment that we made, really just flows through to the protections that we have there really did not impact our reported stat reserving levels within Fairwind. They're well in excess of the best estimate reserve that we would have there.

Then we do have 20% of the block in our Tennessee company. As you recall, we reinsured the New York block over into the Tennessee company, released quite a bit of capital in the process of doing that. We did reflect these updates as well as other updates around interest rates and what we've been doing around hedging. It did have a slight impact to what we would view as our statutory reserving levels as we go into the fourth quarter.

I will remind, we've gone through really the work to understand changes in our best estimate to statutory reserving. We'll report those in the fourth quarter. But we have a really good handle of the impacts, and we do think that those are going to be pretty de minimis and really not impact our capital plans at all.

And then one follow-up. You originally planned to upstream $200 million of capital out of Fairwind following the LTC transaction. I think it sounds like maybe you're going to keep it in there now, but can you give us some thoughts on the rationale there?

Yes. I'm not sure we ever stated that, that was our intent. But we obviously were going to consider whether that's what we would want to do as we're going into the year-end process. I would say our view right now is we would leave it in Fairwind at this point. We feel really good about the protections we have there at $2 billion. And I just think that's probably the prudent thing to do. So that would be our current intent.

Your next question comes from the line of Tom Gallagher with Evercore ISI.

First question is just on the $500 million in change of the actuarial justified rate increases. Based on how you've laid it out, it looks like those are directly linked to the removal of the morbidity and mortality improvement assumptions and also the change in group life contracts. Is that a fair way of looking at it, that those are the main drivers of the rate increase requests?

Yes. We look at all of the assumption changes. And as we've done in the past, when we change our best estimate assumptions, we'll flow that through to how we think about the projection of the blocks and what would be actuarially justified. I mean, I think, Tom, the context you can put it in, the normal just experience updates that we made to our assumptions, it was fairly small. And so it's reasonable to say that, that probably hasn't impacted our rate increase program as much, but it's more just because of the magnitude of the adjustments themselves. But those will all flow through to our thinking as far as the rate increase program.

Got you. And then can you -- I guess when you see a big change like this, you wonder what's sort of behind it, what's driving it. So was there anything in the experience you've been seeing in your block that would warrant these long-term assumption changes to morbidity and mortality? Or was this more due to future uncertainty and prudence?

Or was this more to get in line with what peers are assuming? Because I guess what I wonder is, if I'm the regulator seeing this request, is this viewed as if a management team is just becoming more prudent, are they still likely to approve it, I guess, is the thing I'm grappling with.

Yes. Tom, again, I'd break it down into two pieces. Just the adjustments that we made through just the cash flow assumptions for both morbidity and mortality, that was based on what we've seen over the past several years on -- we've talked about that quite a bit as far as the higher incidents that we've seen coming out of COVID. We've also seen higher mortality in part of the block. And so that's really just reflecting that into our longer-term assumptions.

I think the key here is coming through COVID, that created a lot of uncertainty in how we view our experience set generally. And so we were comfortable for those basic assumptions that it's been reflected in our experience here long enough. It's time to go ahead and make that change.

I would say specific to morbidity improvement, we're now several years beyond the pandemic. And we have observed morbidity improvement prior to COVID. We felt really good about that assumption. The trend hasn't really fully reemerged, I would say, in recent experience. And so when we just look at that and we look at some of the uncertainty and volatility that we've seen in incidents, and mortality becomes very tough to model it and so it's created some modeling uncertainty.

And so there's a lot of actuarial judgment around this, but we did think based on the experience that we've seen, this was the right time to go ahead and make this change and derisks our assumption set. It's one of the largest sensitivities that we had to the protections for the, block. And so it just felt like the right time to go ahead and make that change. And regulators, they'll take that into account as we're going through the rate increase process. I would say we base all of our assumption changes on the experience that we've seen, and we think it's very supportable in all the moves that we would make. So I don't have any concern about that process.

Your next question comes from the line of Joel Hurwitz with Dowling.

First, a couple on the Fairwind protection and PDR. On the PDR, I believe there was morbidity improvement included in that. How does this change, impact that? And I guess, what's actually left to the PDR given the reinsurance transaction and movement in interest rates?

And then just on the $2 billion of protection, can you now provide color what portion of that is excess reserves versus capital?

Yes. I'll make a couple of points. I'll reiterate the comments I made earlier about how the assumption changes to the best [ element ] kind of flow through to Fairwind. And just think about it as the pro rata piece of that block, it kind of dollar for dollar affected how we think about the protections. The best estimate reserve went up. The reported reserves for statutory purposes really didn't change because those are currently in a locked-in position because that reserve exceeds the premium deficiency reserve calculation.

So the PDR has become less of a consideration. We think more about what our stated statutory reserves are versus that best estimate reserve. You are right. As part of the transaction, that did impact what the calculated PDR would look like because it was older age, and that's where a lot of the margin was built in with the PDR itself. But at this point, when we think about margins to the business, we think more about our best estimate reserve and where our reported locked-in statutory reserves are.

Yes, sorry. And the last part of that, none of these changes really impacted excess capital within that protection calculation. The change from the $2.6 billion to the $2.0 billion would all be related to the best estimate reserve.

Got it. Okay. And then shifting gears to group disability, can you just provide some more color on what you saw in the quarter in terms of incidents and recoveries? And then on the actuarial assumption review, just, I guess, what gives you comfort for further reserve releases in this business? I think this is the fifth straight year that you've had a positive assumption review in that business. And any statutory benefit from that change?

Yes. There's a lot in there. Let me kind of click through them. So first of all, we're very pleased with the group disability benefit ratio within the quarter. Internally, from management's point of view, we've been in the range all the year when it comes to the benefit ratio right around the 62% range. This quarter is a little bit lower.

I would say, first half of the year. We had a couple things with incidents that our cost was a little bit inflated, whether it was count or it was average size. That all kind of settled down in the third quarter. I would say recoveries have been very consistent throughout the year and right on our expectations. And we continue to think that operationally, those are very sustainable.

When you think about the GAAP reserve assumptions, we do want to see some time pass before we go ahead and adjust the recovery assumptions within that reserve. We've now seen several quarters at a higher level of recoveries. And we went ahead and took the opportunity to adjust that assumption in the current period for GAAP. That's something that we'll consider in the fourth quarter for our statutory reserves, but we'll have to work through that. And anything that we would do there, we'd record in the fourth quarter. I would say it might give us a little bit of a tailwind but doesn't really impact how we think about our capital outlook.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

It seems like the actions you guys took with the LTC block this year do position you better for potential future risk transfer deals. So if you could just comment just relative to just discussions in the market and the potential for additional transactions with the block.

Yes. Elyse, it's Rick. Just to talk about the market first in general. I think we've said it's been constructive in terms of dialogues that are out there. People that are interested, as we said, it ebbs and flows in terms of who's interested because it is something that needs some more detailed modeling, some better understanding. But we feel like the market is constructive around that and we're really happy to get our transaction done earlier in the year.

More specifically, when you think about these actions that we've taken, we've said pretty consistently that a counterparty is going to be looking at the details. So they're going to be forming their own views of what things look like. And with all that being said, I think that some of these assumptions that we have changed, sometimes they can garner discussions in those negotiations. And so it's always good to be on a simpler basis, and I think that's what we saw as part of these actions.

And then the last thing I'd say is we haven't discussed it more in detail in the Q&A, but the removal of new lives also makes it simpler in terms of what somebody -- a counterparty would need to model. So on the margins, it probably is a little bit easier. But I would say that our counterparties that we're talking to and have talked to for a long time know the details, and they form their own views around what these risks look like. And so I think it's all part of the context.

So it's a good question and I appreciate the question. We're going to stay active on it, as we've said. This is something we want to continue to do, to reduce the size of this block. And we'll stay active in the markets to help us do that.

And then my second question was just a follow-up on the group disability side, right? So you guys saw better results in the Q3. I think you had been guiding to around a 62% benefit ratio in the back half. So does it feel like the Q4 could potentially be better relative to that guide also? And then can you just give us some initial thoughts on '26? Does it feel like you'll still be kind of in the low 60s there?

Yes. So I would say 62% is good of an estimate as any for the fourth quarter. There will be volatility around that. And so we, again, kind of feel like each quarter this year, we've been in that range of normal volatility around kind of what our expectations were. And it was a little bit better in the third quarter, but we think 62% is still a good planning assumption as we head in the fourth quarter. And then we'll talk more about 2026 as we get into our outlook discussion for next year.

Yes. I'd just add to that, too. When you think about these levels, 62%, as we're talking about low 60s, this is a very high-returning business for us. And so making sure we continue to do that, the team is working on that. And I'd just remind, even with that range that Steve talked about in volatility, this is all at very high margins. And so we're very happy with the results we saw this quarter and actually that we've seen all year.

The next question comes from the line of Alex Scott with Barclays.

I just had a follow-up on disability. I wanted to get your views on just the pricing environment as we're heading into the enrollment period. And also maybe even just reflecting on the pricing environment over the last couple of years that will be earning in because of the longer duration nature of some of these contracts. I mean, do you have any kind of visibility on just the trajectory of sort of what's already happened over the last couple of years that will be earning in next year?

Yes, Alex. It's Chris. Thanks for the question. The competition is out there. We've talked about it before. It's still a normal competitive environment. We also -- even the display loss ratio conversation that's been going on, we're operating at these levels because disability is a cornerstone product for what we do getting to the lead management side, it gets you into the connection to HCM platforms.

So the conversation isn't all about price. As you step back and you think about how we work with our customers, we're very transparent on price. We renew case by case. But they look for long-term stability. And when you're doing things like solving problems around lead management and you're connected into their HCM platform and you can show them what a fair returning price is, there are some up, some down, but it does present a reasonable and fair pricing environment I think we've seen over the past period and we'd expect to continue.

Got it. Just listening at some of the peers' earnings calls, I think it sounded like there was some pressure on lead management across the industry this quarter. So I was just interested what you're seeing there, if there's any kind of repricing activity going on. Any kind of way we should think about from that this quarter?

Again, it's Chris. Lead management is a major topic that we all do talk about quite a bit. I think there, you kind of got us into it in the first part of the question around disability pricing. That's part of it. Then you get some elements of pricing around what are people getting for the fees for services. That's a little bit more granular. And then I think the third part is those states that have incorporated a new paid family medical leave plan where private options exist, and we very much participate in that, that's kind of core a core element of our lead management program. It's part of our Total Leave offering.

As they come on, you set a price and then you manage it over time. You take a look at the experience. You make adjustments. This is just a very normal thing we do. Obviously, we're equipped to manage that as part of our overall disability block, So it kind of absorbs in. But I think that might be what you're referencing in terms of some of the maturing of the business. It's maybe the new PFML states. And we work through that very normally.

Your next question comes from the line of Suneet Kamath with Jefferies.

I wanted to come back to the premium rate increases related to the reserve review, the $523 million. Can you just unpack that a little bit and just provide some color around how this compares to what you've asked for in the past? And sort of over what time frame are you assuming that you would get these increases?

And I believe in the past, you kind of had a number and you put a haircut on it for a potential that you wouldn't get what you asked for. Just wondering if there's an element of that baked in here.

Sure, yes. So I would say our approach is very consistent to the approach we've taken in the past any time we change our estimate assumptions that we look at that, we flow that through our future cash flows, and then we look at the different blocks of business to really understand what's actuarially supported. And then we go state by state. And we really look at past experience that we've had in those states.

Different states approve these differently as far as the pace, the significance. And so we overlay that to that aggregate premium rate request and then we come up with what our best estimate is. And we've gone through the same process. And that affects the timing as well as the magnitude of what we think should be expected. It's very consistent with what we've historically done. I think we're over $5 billion of present value of approvals that we have gotten over time.

So in the context of that, this adjustment, I think, is pretty manageable. I think the time frame of getting these approvals will be fairly consistent with what we've seen in the past. It usually takes 3 to 5 years anytime we have new request to kind of work its way both through the review process, the administrative process, the implementation process and then, ultimately, the effective date of the premium increase. And so I would view this as very much consistent with the playbook that we've historically run.

And I would say, we feel like we've been very successful in the past. And so we'll go through the process like we've done in the past and feel pretty confident of our ability to be able to meet that. I will say, more recently, there's been times where we've actually overperformed that assumption a little bit. We did that last year with some large states. And so we try to be prudent with the best estimate that we set but also make sure it's a very reasonable estimate. And we feel like we've done that this time around as well.

Yes, I'd just add to that. This is a very mature process for us. And the team knows exactly how they're going to go about it and then what they're going to do, who they're going to talk to over what time frame. So we feel very confident about achieving these rate increases.

Okay. And then I guess on group disability, one of the things that we've been hearing from other companies is around recoveries and how they're just not as strong as they have been over the past few years. Just kind of want to get a sense of what you're seeing there. Any big changes? And just any color would be helpful.

Yes. Thanks, Suneet. I mean, our team does do an incredibly good job of managing our group disability block, taking care of our customers, getting people back to work. And so when we look at that, we've talked a little bit about we had a really strong recovery year last year, and it's been very stable as we look at over the course of this year. I think what's important is the process hasn't changed when you think of what we do and how we go through that. And so I wouldn't highlight those similar things.

I think we do see, and you can see on the incident side some volatility as people submit claims. But when it comes to recoveries, our teams just doing a good job of managing this over the longer term. And I'd also caution the read across to other companies and what they see on recoveries particularly in a given quarter because I think that dynamic just isn't going to be consistent across the industry. So we feel good about where they are. Team has done a great job. Loss ratio, 61.3%. Incorporating all those things that Chris talked about, and we feel good about it.

Your next question comes from the line of Jack Madden with BMO Capital Markets.

Just one on capital management. I guess now that we're through the assumption review, you're still running with a very healthy level of excess capital. I guess, could we see a level of share buybacks potentially ramp up next year? And then maybe other uses of cash that you think could come into play?

Yes, sure. Thanks, Jack. And I think when you think about our capital deployment plans, they've been very consistent. We've been increasing our share repurchase over time. So maybe I'll talk a little bit about this year. I think it's probably a little bit early to talk about what we're seeing into next year.

And the first thing I'd highlight is the strong capital generation. And so with that, you can see that building in the balance sheet. And as we redeploy that back to customers, you're starting to look at cash conversion ratio that's close to 100% between share repurchase and dividends. And so we feel good about that there.

But I'll take you back and say, first and foremost, we want to put our money back into growing the core operations, how do we take these good franchises we have and just allow them to grow faster. And so that's where the cash and capital is going to go first. Second, on the M&A front, inorganically, how can we grow. We'll certainly pursue items in the market. I think we've been consistent to say these will look more like capability acquisitions as opposed to a big block deal or something like that. So we're going to put money there when we need to.

And then you get back to what we've done with share repurchase over the last couple of years, and we've seen that ramp up. And I think Steve said in his comments and I've reiterated, we started the year at a range of $500 million to $1 billion. We're at the top end of that range. We feel good about that as we wrap up 2025. And then we'll have to see what we do in the future because we are in a good capital position. We are in a strong capital position, and it gives us ample flexibility to do the things that we want to do.

Got it. A follow-up on the premium growth outlook, especially for Unum US. I think you've been running kind of like in the 3% to 6% range on an underlying basis this year. I guess just wondering how sustainable you see that? And are you seeing any changes in kind of that natural growth rate regarding employment and wage levels given that we've seen some signs of potential labor market softening in recent months?

Yes. I'll just start at the macro from a premium side and the growth in the company. We'll hear from each of our businesses around that because I think it's very insightful in terms of what they're seeing. I think when you think about our premium growth overall, we feel good at just continuing to engage with customers, taking on -- protecting more people. And you talked about the natural growth. We are still seeing natural growth, and we're seeing that somewhere in the range of 3%, plus or minus. So we're still getting good natural growth behind the block. The concerns that you hear about are usually one-off in terms of what you see in the market. So we're just not seeing that in our block today.

But it's helpful to hear from each of our business lines. And maybe we'll start off in the U.S. Chris, do you want to talk a little bit about how we're feeling about premium growth and the trajectory?

Yes. Thanks, Rick. Yes, we remain very excited about the premium growth. Sales in the quarter were obviously quite good. There is some volatility, small quarter for -- smallest quarter over the year, as Rick pointed out the outset. And we did have a couple of large wins that presented some positive volatility, which we're excited about but wouldn't expect to continue every year. Fourth quarter, rick guided to flattish sales, which makes sense and we're excited about that, but it's coupled with really strong persistency.

And persistency has been going up through the course of the year, where we see both close ratio on new and retained customers that are tied to our strategic investments. There's a lot of good logic as to why they're coming to us, why they're staying and also why we'll get a fair price over time. And those things add up to put us in that strong premium growth range that you referenced. And we expect that to continue, and we're really excited about it.

That's good. Tim, do you want to talk about Colonial Life and voluntary?

Yes. I'll start with VB on the Unum side. When you think about the industry growth rate, most of the resources we have suggest the industry growth rate in the 4% to 6% range on sales. For the last couple of years, on the Unum side, we've had double-digit sales growth and that's led to some pretty strong premium growth. In the first quarter this year, we had a really strong quarter again. The second quarter was a lot softer.

LIMRA indicated midyear that first -- sorry, sales for the first half of the year were a bit sluggish for the entire industry, but we see that rebounding in the third quarter, and we have expectations that 2026 will also rebounded to the range we've provided before. Strong persistency on the Unum side led to a 5.6% earnings premium growth in the quarter. So we feel good about that. Also early indications on the 1Q pipeline looked pretty strong, especially in large case for Unum. So we continue to believe that we can perform as we have over the last few years.

On the Colonial Life side, sales momentum has been improving. Growth rates are better subsequently each quarter of 2025. Our sales organization is now fully staffed and we have a high degree of confidence in their ability to execute. Our value continues to resonate with strong growth in our strategic initiatives, including cross-brand sales and Gather, which as a reminder, our proprietary HR and Benefits platform.

Fundamentals on the Colonial side are also really, really good with recruiting of 29%. Sales from those new agents, up almost 36%. Offices that were established in 2025, new district offices, we have 20% more of those than we did last year. And sales from those new offices are up 75%. As Steve pointed out in his comments, persistency was also up 70 basis points from last year. So that led to earnings -- sorry, earned premium growth of 3.3%, and we see that continuing into '26.

Exciting. Mark?

Okay. Yes. I mean, just very briefly on International results. We're pleased with the top line growth that we've seen. Poland remains a very buoyant market with strong growth potential. We can see that translating into sales growth in Poland of 17% in quarter, premium growth of 19%. UK market has been steady for new business this year. We've seen good growth in quarter 3 with sales up 25%, and that's off the back of new business in both core and large case, offset a little bit by slightly lower new lines on existing schemes.

Persistency in both countries has been good. In the U.K., we've hit a record 91.8%, so that's an increase on the prior year. And premium growth overall in the U.K. for the quarter was 7.6%. And I think sitting behind all of this really is the very strong customer satisfaction that we're seeing, which is at a record high for the business. And I think that's off the back of the investments we've been making in technology, both customer-facing from the employer and the employee perspective as well as the experience we're offering for our brokers. So I think we're feeling pretty buoyant about how the market is playing out in both countries at the moment.

Fair, Mark. And Jack, as I wrap it up, I'd just say like when you think about our premium growth, you represented the ranges. You view 3% to 6% in that range. You get to 5%. You're talking about $0.5 billion of new premiums that we're bringing on. These are done at good margins as you've heard about, and you've seen from discipline. And it's really part of our engine. So when you think about the enterprise and the people we have, to your focus, we are focused on premium growth because we think that's all in line with our purpose, do it at a good price. And we'll see the overall enterprise growth. So I appreciate the question.

Your next question comes from the line of Wilma Brides with Raymond James.

One question for you. Why do you guys report earnings on Closed Block and LTC given that the block has lost capital over time?

I missed the last part of your question.

Yes, can you repeat that?

Given that the block has lost capital over time.

Yes. Wilma, you keep cutting out. Sorry.

Okay. Sorry. My question is, why do you guys report earnings on Closed Block and LTC given that the block has lost capital over time?

Well, I'll try to answer that question. I mean, as part of kind of the overall organization, clearly we have the requirement to report earnings for the entire entity. And so we do that. We have put LTC and Closed Block status. So from a segmentation perspective, we think that's the right thing to do. And then I think the key for the long-term care block, obviously, is cash generation or cash deployment. And so we try to be very disclosive just around kind of how we think about the capital needs of that block. And clearly, right now, we're in the position that there really are no capital needs for that block and we don't foresee that going forward. And so that's kind of how we think about the type of information that would be meaningful to investors, and we try to focus on that.

Yes. I'd just reiterate that. On the statutory side, we do kind of follow what you're talking about, which is we kind of split it into two and talk about our Closed Block separately and distinct from our core operations. And we think that's a better disclosure. But from a GAAP perspective, it's in the segment and earnings we need to report on.

And then I guess just my takeaways on the assumption review are that it doesn't have any cash impact. Ultimately, it will add cash generation given the rate increases that you're seeking. And then I guess, third, just to remove assumptions that are going to reduce the risk of future charges. Do you think that's fair?

I think that's the right way to think about it. And just generally speaking, when you think about the assumptions set itself, we've created less risk around some of the assumptions, which maybe are less controllable around morbidity improvement. And we've bolstered some of the assumptions specifically around rate increase, which we think are more controllable and things that we can execute against and generate value and, you're right, generate cash generation directly from those actions that we can take. So I think your model is good, like how you're thinking about it.

Your next question comes from the line of Wes Carmichael with Autonomous Research.

I had a follow-up question on the assumption review. But is there a way to size each of the gross impacts of the removal of morbidity improvement and the removal of mortality improvement? I know there's somewhat offsetting, but I wonder if you could provide the gross impact there.

Yes. Wes, we haven't disclosed that. And part of the reason is they're so interchanged with each other, where when you think about the drivers or the cause of both morbidity and mortality improvement, it comes back to fundamental health trends that you would see in the population and specifically in our insured population. And so it's kind of tough to pull those apart and think about them independently in our view. And we've historically seen those really move together. And so we did remove both of them as part of this assumption update but really view those as kind of one concept and one assumption that we need to get comfortable with.

Got it. And maybe just one more follow-up on LTC. But on the net premium ratio, should we think about that increase to the NPRs is expected to increase the volatility in quarterly earnings and the Closed Block segment, I guess, is most of the -- or more of the cohorts become capped under LDTI? I know you gave some insight on 4Q, but just wondering how you're thinking about overall volatility on a quarterly basis.

Yes. No, it's a good point. And just to kind of step back a little bit, the NPR did increase as part of the assumption review. And so therefore, future margins, expected margins are going to be less with LTC, and we kind of talked about that being one of the drivers in the third quarter as well as going forward. I would say, generally speaking, the more capped cohorts you get, probably the more volatility you're going to see within the results. But that's something that we'll just have to see how it plays out, and it's very dependent on just variations against our expected results and which cohorts those are in.

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

Most of my questions were asked. Just a few quick follow-ups. When you conduct your fourth quarter statutory reserve review, it will be helpful to understand if you're looking at similar factors both on the experience side and the strategic update. Or are you just looking at a subset of those factors?

Yes. Tracy, I can answer that right now because we've already really evaluated that, where every change that we have made for GAAP, we have factored into our view of what the results of the statutory work is going to be. So we kind of already know the results as of 9/30 and understand what the results are going to look like. It's just that from a regulatory basis, we report on any kind of adjustments we make in the fourth quarter. But I would consider the work to pretty much be done as far as understanding the impacts of the changes we made in the third quarter to statutory results. We just won't book them until the fourth quarter.

Perfect. And just another follow-up on what's driving some of the experience adjustments on the morbidity improvement assumption. Does any of that reflect some of these medical advances we're seeing like GLP-1?

Yes. I would say we are not able to kind of draw straight line between any causes and how we think about the assumption itself. It more comes down to you go all the way back to pre-COVID, we had really good data that would support the assumption that we made at that point. There's been just a lot of volatility through COVID. And as we kind of come out of that period of time and also seeing some of the elevated incidents, it's harder to really model and there's just more modeling uncertainty around being able to support that assumption. And so we really just made the choice to go ahead and remove that assumption completely.

I think it's -- Tracy...

I was talking more about the $200 million improvement, not the drop of the future morbidity or mortality improvements.

Around -- yes, I'm sorry, around mortality. Yes. So I would say we haven't probably seen a direct cause and effect there. But we have seen improved mortality in certain segments of that block, and we just went ahead and reflected that. It's hard to attribute it to any one thing. It's just it has built up over time, and we feel confident now that we should go ahead and change our longer-term assumptions.

Yes. I think important to that, Tracy, is GLP-1s or just drugs in general, I mean, that actually lend to better health incomes. We don't factor that in until we've really seen that coming through our block. And so it's early for that. When you think about that, it's hard to project exactly how that will impact. We think it's probably good that there's better healthier populations across a number of our products. But we really wait until we see it before we factor those type of things in.

Our next question comes from the line of Maxwell Fritscher with Truist.

I'm on for Mark Hughes. Just one for me on the government shutdown. Any update there? And are you seeing any effect on new disability awards?

Yes, Maxwell, this is Chris. Right now, we are all systems go and no particular impact. We kind of have a playbook we have ready for government shutdowns. And generally speaking, it doesn't really hit and play out in reality. So I think we're living that right now. But we're ready if anything changes, but all systems go right now.

And your next and last question is from Josh Shanker with Bank of America.

In terms of thinking about the review, you made an interesting comment about that you're closing the existing group contracts to new cases, but also the cases that you were adding were actually beneficial and that cost you about $200 million in the review. If they were a positive, which just comes to me as a surprise given the cost of capital and whatnot, why take them out? And maybe I can answer my own question, if people are looking at this Closed Block, maybe you need to stop adding cases. What was the motivation of taking off something that was benefiting the trends over time?

Yes. First, Josh, it's Rick. Let me clarify when you talk about cases. We were not writing new cases, and so that's first foremost. We actually closed that down back in 2012. What we're talking about is if you think about an employer, so you have to think about a group construct for any of our products, where when a new employee joins the company, they get added on to the roles of their health care or even our types of products on group disability, group life, et cetera. And so that was happening as well on the group contracts around LTC.

As we've looked at it over time and we think about it, we decided to actually curtail that in terms of allowing new employees onto those contracts. That's the decision that we've made as we work our way through that. And so I think that, that's really the dynamic that you're seeing coming through the reserves. These were profitable business. But understand, we go back to our strategy. And our strategy is to reduce the size of our Closed Block. We're doing that through multiple ways, through reinsurance, and then this is another way we will reduce ultimately the size of our Closed Block. So these were profitable customers coming on to the roles given the fact that our new pricing is much different than the pricing a long time ago, but we still made that trade-off decision to stop new lines coming on to these contracts.

So you're foregoing positive cash flows and business because you simply want to make the book smaller?

That is correct. I think if you look at the course of this call today, we spent a lot of time talking about our Closed Block. When you think about our company, we are about protecting people during their working lifetime, and long-term care is not in tune with that. And so that's why reducing that block and having that out of our strategic focus is important to us. And this is one small piece. It's not actually overly material to the size of the block, but we think this is a good action to take something out. So that is a trade-off that we'll make.

This concludes our Q&A session. I will now turn the call back over to Rick McKenney for closing remarks.

Yes. Thank you, Bella, and I appreciate everybody staying on with us today. Certainly a lot to go through in this quarter, and I'd highlight just the underlying operations and what we've got going forward as we look to the end of the year and into 2026. We're excited about it.

And we'll be out talking to a number of investors here over the coming weeks. We look forward to seeing you out there at a number of conferences, both Steve and I. And we'll talk to you soon. Thanks, and this concludes our third quarter call.

Ladies and gentlemen, thank you all for joining, and you may now disconnect. Everyone, have a great day.