Market Overview

Unum Group Reports Second Quarter 2018 Results

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Unum Group (NYSE:UNM) today reported net income of $285.5 million
($1.29 per diluted common share) for the second quarter of 2018,
compared to net income of $245.1 million ($1.07 per diluted common
share) for the second quarter of 2017.

Included in net income are net after-tax realized investment gains and
losses on the Company's investment portfolio. Excluding net after-tax
realized investment gains and losses, after-tax adjusted operating
income was $287.6 million ($1.30 per diluted common share) in the second
quarter of 2018, compared to $240.4 million ($1.05 per diluted common
share) in the second quarter of 2017.

"Second quarter results for the Company were solid, with continued
favorable fundamentals driving our core business segments," said Richard
P. McKenney, president and chief executive officer. "We benefitted from
good premium growth and overall favorable benefits experience, combined
with a lower tax rate."

"During the quarter, we accelerated our reserve studies for our
long-term care block of business," added McKenney. "Given the current
market sentiment around this line of business throughout our industry,
we will look to finalize this work in the third quarter to provide
greater clarity to our shareholders."

RESULTS BY SEGMENT

We measure and analyze our segment performance on the basis of "adjusted
operating income" or "adjusted operating loss", which differ from income
before income tax as presented in our consolidated statements of income
due to the exclusion of net realized investment gains and losses and
certain other items. These performance measures are in accordance with
GAAP guidance for segment reporting, but they should not be viewed as a
substitute for income before income tax or net income.

Unum US Segment

Unum US reported adjusted operating income of $251.1 million in the
second quarter of 2018, an increase of 1.3 percent from $247.8 million
in the second quarter of 2017. Premium income for the segment increased
4.3 percent to $1,416.3 million in the second quarter of 2018, compared
to premium income of $1,357.7 million in the second quarter of 2017. Net
investment income for the segment declined 4.4 percent to $196.5 million
in the second quarter of 2018, compared to $205.6 million in the second
quarter of 2017.

Within the Unum US operating segment, the group disability line of
business reported an 11.7 percent decline in adjusted operating income
to $81.6 million in the second quarter of 2018, compared to $92.4
million in the second quarter of 2017. Premium income in group
disability increased 2.1 percent to $608.4 million in the second quarter
of 2018, compared to $596.0 million in the second quarter of 2017, with
growth in the in-force block resulting from improved persistency and
prior period sales growth. Net investment income declined by 7.8 percent
to $108.9 million in the second quarter of 2018, compared to $118.1
million in the second quarter of 2017, due to a decrease in the level of
invested assets, a decline in portfolio yield, and lower miscellaneous
investment income. The benefit ratio for the second quarter of 2018 was
76.2 percent, compared to 76.5 percent in the second quarter of 2017,
due primarily to lower claims incidence in the group long-term
disability product line, partially offset by higher claims incidence in
certain of our group short-term disability products. Group long-term
disability sales were $41.0 million in the second quarter of 2018, a
decline of 13.7 percent from $47.5 million in the second quarter of
2017. Group short-term disability sales were $23.6 million in the second
quarter of 2018, a decline of 13.9 percent from $27.4 million in the
second quarter of 2017. Persistency in the group long-term disability
line of business was 90.6 percent for the first half of 2018, compared
to 89.3 percent for the first half of 2017. Persistency in the group
short-term disability line of business was 87.7 percent for the first
half of 2018, compared to 85.7 percent for the first half of 2017.

The group life and accidental death and dismemberment line of business
reported adjusted operating income of $67.2 million in the second
quarter of 2018, an increase of 10.3 percent from $60.9 million in the
second quarter of 2017. Premium income for this line of business
increased 7.3 percent to $429.7 million in the second quarter of 2018,
compared to $400.6 million in the second quarter of 2017, primarily due
to prior period sales growth and favorable persistency. Net investment
income declined 2.2 percent to $27.2 million in the second quarter of
2018, compared to $27.8 million in the second quarter of 2017, primarily
due to a decline in yield on invested assets, partially offset by an
increase in the level of invested assets and higher miscellaneous
investment income. The benefit ratio in the second quarter of 2018 was
70.3 percent, compared to 70.6 percent in the second quarter of 2017,
driven primarily by favorable experience in the accidental death and
dismemberment product line and a lower average size of group life
claims. Sales of group life and accidental death and dismemberment
products declined 8.4 percent in the second quarter of 2018 to $54.5
million, compared to $59.5 million in the second quarter of 2017.
Persistency in the group life line of business was 90.9 percent for the
first half of 2018, compared to 87.7 percent for the first half of 2017.

The supplemental and voluntary line of business reported an increase of
8.3 percent in adjusted operating income to $102.3 million in the second
quarter of 2018, compared to $94.5 million in the second quarter of
2017. Premium income for supplemental and voluntary increased 4.7
percent to $378.2 million in the second quarter of 2018, compared to
$361.1 million in the second quarter of 2017. This increase was
primarily driven by growth in the voluntary benefits product line from
higher prior period sales and continued growth in the dental and vision
product line from expanded distribution. Net investment income increased
1.2 percent to $60.4 million in the second quarter of 2018, compared to
$59.7 million in the second quarter of 2017, due to an increase in the
level of invested assets and higher miscellaneous investment income,
which was partially offset by a lower portfolio yield. The benefit ratio
for the individual disability product line was 50.0 percent for the
second quarter of 2018, compared to 51.2 percent for the second quarter
of 2017, due primarily to favorable claims activity and mortality
experience. The benefit ratio for voluntary benefits was 43.3 percent in
the second quarter of 2018, compared to 43.4 percent for the second
quarter of 2017, reflecting generally consistent claims experience
between the two periods. The benefit ratio for dental and vision was
69.4 percent for the second quarter of 2018, compared to 72.3 percent
for the second quarter of 2017, primarily driven by a lower average
claim size. Relative to the second quarter of 2017, sales in the
individual disability line of business increased 39.0 percent in the
second quarter of 2018 to $18.9 million. Sales in the voluntary benefits
line of business declined 3.4 percent in the second quarter of 2018 to
$47.9 million. Sales in the dental and vision product line totaled $11.8
million for the second quarter of 2018, an increase of 13.5 percent
compared to the second quarter of 2017. Persistency in the individual
disability product line was 90.5 percent for the first half of 2018,
compared to 91.0 percent for the first half of 2017. Persistency in the
voluntary benefits product line was 76.4 percent for the first half of
2018, compared to 76.2 percent for the first half of 2017. Persistency
in the dental and vision product line was 85.2 percent for the first
half of 2018, compared to 82.0 percent for the first half of 2017.

Unum UK Segment

Unum UK reported adjusted operating income of $27.6 million in the
second quarter of 2018, a decline of 4.5 percent from $28.9 million in
the second quarter of 2017. In local currency, adjusted operating income
totaled £20.4 million in the second quarter of 2018, compared to £22.6
million in the second quarter of 2017.

Premium income increased by 9.5 percent to $138.9 million in the second
quarter of 2018, compared to $126.8 million in the second quarter of
2017. In local currency, premium income was £102.1 million in the second
quarter of 2018, an increase of 3.0 percent from £99.1 million in the
second quarter of 2017, primarily driven by higher persistency and
growth in the in-force block resulting from prior period sales. Net
investment income was $32.1 million in the second quarter of 2018, a
decline of 3.3 percent from $33.2 million in the second quarter of 2017.
In local currency, net investment income was £23.5 million in the second
quarter of 2018, a decline of 9.6 percent from £26.0 million in the
second quarter of 2017, due primarily to lower yield on fixed-rate bonds
and lower investment income from inflation-linked bonds. The benefit
ratio in the second quarter of 2018 was 76.7 percent, compared to 75.6
percent in the second quarter of 2017, due primarily to unfavorable
claims activity in the group life and supplemental product lines,
partially offset by the impact of inflation-linked decreases in benefits.

Sales increased by 12.3 percent to $28.3 million in the second quarter
of 2018, compared to $25.2 million in the second quarter of 2017. In
local currency, sales for the second quarter of 2018 increased by 4.0
percent to £20.6 million, compared to £19.8 million in the second
quarter of 2017. Persistency in the group long-term disability line of
business was 86.9 percent for the first half of 2018, compared to 86.4
percent for the first half of 2017. Persistency in the group life line
of business was 84.1 percent for the first half of 2018, compared to
80.8 percent for the first half of 2017. Persistency in the supplemental
line of business was 92.3 percent for the first half of 2018, compared
to 91.3 percent for the first half of 2017.

Colonial Life Segment

Colonial Life reported a 3.4 percent increase in adjusted operating
income to $84.6 million in the second quarter of 2018, compared to $81.8
million in the second quarter of 2017. Premium income for the second
quarter of 2018 increased 5.1 percent to $395.4 million, compared to
$376.3 million in the second quarter of 2017, primarily driven by sales
growth. Net investment income totaled $40.2 million in the second
quarter of 2018, compared to $36.7 million in the second quarter of
2017, primarily driven by an increase in the level of invested assets
and higher miscellaneous investment income, partially offset by a
decline in portfolio yield on invested assets. The benefit ratio in the
second quarter of 2018 was 51.0 percent, compared to 51.3 percent in the
second quarter of 2017, due primarily to favorable experience in the
life line of business.

Sales increased 13.6 percent to $132.4 million in the second quarter of
2018 from $116.6 million in the second quarter of 2017, driven by the
introduction of a new dental product and increased sales in all existing
products and market segments. Persistency in Colonial Life was 78.1
percent for the first half of 2018, compared to 78.7 percent for the
first half of 2017.

Closed Block Segment

The Closed Block segment reported adjusted operating income of $29.6
million in the second quarter of 2018, compared to $32.6 million in the
second quarter of 2017.

Premium income for this segment declined 3.9 percent in the second
quarter of 2018 compared to the second quarter of 2017, primarily due to
policy terminations and maturities for the individual disability line of
business. Premium income for long-term care was generally consistent
with the year ago quarter due primarily to rate increases on in-force
business offsetting policy terminations. Net investment income increased
1.6 percent to $345.6 million in the second quarter of 2018, compared to
$340.0 million in the second quarter of 2017, primarily driven by an
increase in the level of invested assets and higher miscellaneous
investment income, which partially offset a lower portfolio yield on
invested assets. The interest adjusted loss ratio for the individual
disability line of business was 82.9 percent in the second quarter of
2018, compared to 82.3 percent in the second quarter of 2017, due
primarily to a reduction in the claim reserve discount rate to recognize
the impact on future portfolio yields from an increased level of
miscellaneous investment income. During the second quarter of 2018
individual disability benefits experience was favorable relative to the
year ago quarter due primarily to a lower average size of new claims.
The interest adjusted loss ratio for the long-term care line of business
was 96.9 percent in the second quarter of 2018, compared to 89.4 percent
in the second quarter of 2017, due primarily to higher claims incidence.
An update on the Company's reserve adequacy review for its long-term
care business is provided in the "Other Information" section below.

Corporate Segment

The Corporate segment reported an adjusted operating loss of $35.5
million for the second quarter of 2018, compared to an adjusted
operating loss of $37.6 million for the second quarter of 2017.

OTHER INFORMATION

Shares Outstanding

The Company's weighted average number of shares outstanding, assuming
dilution, was 221.1 million for the second quarter of 2018, compared to
228.2 million for the second quarter of 2017. Shares outstanding totaled
218.7 million at June 30, 2018. During the second quarter of 2018, the
Company repurchased approximately 2.5 million shares at a cost of
approximately $100 million.

Capital Management

At June 30, 2018, the weighted average risk-based capital ratio for the
Company's traditional U.S. insurance companies was approximately 385
percent, and cash and marketable securities in the holding companies
equaled $1,160 million.

Book Value

Book value per common share as of June 30, 2018 was $43.20, compared to
$41.21 at June 30, 2017.

Update on Long-term Care Reserve Analysis

During the second quarter of 2018, the Company accelerated the work on
its long-term care annual reserve analysis, which is now anticipated to
be completed in the third quarter of 2018. When completed, this work
will incorporate the Company's most recent experience and will include a
review of all assumptions. The review will also utilize internal and
external data and an outside consulting firm for quality assurance and
industry benchmarking. Subject to completion of the work, the Company
believes that it may need to increase its reserves for long-term care as
part of its third quarter 2018 closing process. Although there is work
to be completed and it is still assessing its assumptions, the Company
currently expects that any increase will likely be predominately a GAAP
event and will likely not exceed $750 million after-tax.

The Company does not expect that any potential reserve increase will
impact its ability to execute its capital deployment plans, including
its share repurchase strategy. Consistent with its past practices
regarding trading windows, the Company does not expect to execute on
share repurchases until the result of the reserve review is announced.
The Company currently intends to resume share repurchases of
approximately $100 million per quarter beginning in the fourth quarter
of 2018 and continuing into 2019. The Company will continue to exercise
strong and proactive management of the long-term care business by
pursuing actuarially-justified premium rate increases and ensuring
appropriate levels of capital.

Outlook

The Company continues to expect after-tax adjusted operating income
growth per share, excluding any impact from an increase of its long-term
care reserves, for full-year 2018 to be within the range of 17 percent
to 23 percent.

NON-GAAP FINANCIAL MEASURES

We analyze our performance using non-GAAP financial measures. A non-GAAP
financial measure is a numerical measure of a company's performance,
financial position, or cash flows that excludes or includes amounts that
are not normally excluded or included in the most directly comparable
measure calculated and presented in accordance with GAAP. The non-GAAP
financial measure of "after-tax adjusted operating income" differs from
net income as presented in our consolidated operating results and income
statements prepared in accordance with GAAP due to the exclusion of net
realized investment gains and losses and certain other items as
specified in the reconciliations in the Financial Highlights section
below. We believe after-tax adjusted operating income is a better
performance measure and better indicator of the profitability and
underlying trends in our business.

Realized investment gains or losses depend on market conditions and do
not necessarily relate to decisions regarding the underlying business of
our segments. Our investment focus is on investment income to support
our insurance liabilities as opposed to the generation of realized
investment gains or losses. Although we may experience realized
investment gains or losses which will affect future earnings levels, a
long-term focus is necessary to maintain profitability over the life of
the business since our underlying business is long-term in nature, and
we need to earn the interest rates assumed in calculating our
liabilities.

We may at other times exclude certain other items from our discussion of
financial ratios and metrics in order to enhance the understanding and
comparability of our operational performance and the underlying
fundamentals, but this exclusion is not an indication that similar items
may not recur and does not replace net income or net loss as a measure
of our overall profitability.

Information reconciling the Company's outlook on after-tax adjusted
operating income growth per share to the comparable GAAP financial
measure is not provided. The only amounts excluded from after-tax
adjusted operating income are those described in the preceding
paragraphs. The Company is unable to predict with reasonable certainty
realized investment gains and losses, which are affected by overall
market conditions and also by factors such as an economic or political
change in the country of the issuer, a regulatory change pertaining to
the issuer's industry, a significant improvement or deterioration in the
cash flows of the issuer, unforeseen accounting irregularities or fraud
committed by an issuer, movement in credit spreads, ratings upgrades or
downgrades, a change in the issuer's marketplace or business prospects,
or any other event that significantly affects the issuers of the fixed
maturity securities which the Company holds in its investment portfolio.

CONFERENCE CALL INFORMATION

Members of Unum Group senior management will host a conference call on
Tuesday, July 31, at 8:00 a.m. (Eastern Time) to discuss the results of
operations for the second quarter. Topics may include forward-looking
information, such as the Company's outlook on future results, trends in
operations, and other material information.

The dial-in number for the conference call is (888) 224-1005,
for U.S. and Canada (pass code 8765711). For international, the dial–in
number is (323) 794-2093 (pass code 8765711).
A live webcast of the
call will also be available at www.investors.unum.com
in a listen-only mode. It is recommended that webcast viewers access the
"Investors" section of the Company's website and opt-in to the webcast
approximately 5-10 minutes prior to the start of the call. The Company
will maintain a replay of the call on its website through Tuesday,
August 7. A replay of the call will also be available by dialing (888)
203-1112 (U.S. and Canada) or (719) 457-0820 (International) – pass code
8765711.

In conjunction with today's earnings announcement, the Company's
Statistical Supplement for the second quarter of 2018 is available on
the "Investors" section of the Company's website.

ABOUT UNUM GROUP

Unum (www.unum.com)
is one of the leading providers of employee benefits products and
services and the largest provider of disability insurance products in
the United States and the United Kingdom.

SAFE HARBOR STATEMENT

Certain information in this news release constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are those not based on
historical information, but rather relate to our outlook, future
operations, strategies, financial results, or other developments and
speak only as of the date made. These forward-looking statements,
including statements about anticipated growth in after-tax adjusted
operating income per share and any potential reserve increase, are
subject to numerous assumptions, risks, and uncertainties, many of which
are beyond our control. The following factors, in addition to other
factors mentioned from time to time, may cause actual results to differ
materially from those contemplated by the forward-looking statements:
(1) sustained periods of low interest rates; (2) fluctuation in
insurance reserve liabilities and claim payments due to changes in claim
incidence, recovery rates, mortality and morbidity rates, and policy
benefit offsets due to, among other factors, the rate of unemployment
and consumer confidence, the emergence of new diseases, epidemics, or
pandemics, new trends and developments in medical treatments, the
effectiveness of our claims operational processes, and changes in
governmental programs; (3) unfavorable economic or business conditions,
both domestic and foreign, that may result in decreases in sales,
premiums, or persistency, as well as unfavorable claims activity; (4)
legislative, regulatory, or tax changes, both domestic and foreign,
including the effect of potential legislation and increased regulation
in the current political environment; (5) investment results, including,
but not limited to, changes in interest rates, defaults, changes in
credit spreads, impairments, and the lack of appropriate investments in
the market which can be acquired to match our liabilities; (6) a cyber
attack or other security breach could result in the unauthorized
acquisition of confidential data; (7) the failure of our business
recovery and incident management processes to resume our business
operations in the event of a natural catastrophe, cyber attack, or other
event; (8) execution risk related to our technology needs; (9) increased
competition from other insurers and financial services companies due to
industry consolidation, new entrants to our markets, or other factors;
(10) changes in our financial strength and credit ratings; (11) damage
to our reputation due to, among other factors, regulatory
investigations, legal proceedings, external events, and/or inadequate or
failed internal controls and procedures; (12) actual experience in the
broad array of our products that deviates from our assumptions used in
pricing, underwriting, and reserving; (13) changes in accounting
standards, practices, or policies; (14) effectiveness of our risk
management program; (15) contingencies and the level and results of
litigation; (16) availability of reinsurance in the market and the
ability of our reinsurers to meet their obligations to us; (17)
ineffectiveness of our derivatives hedging programs due to changes in
the economic environment, counterparty risk, ratings downgrades, capital
market volatility, changes in interest rates, and/or regulation; (18)
fluctuation in foreign currency exchange rates; (19) ability to generate
sufficient internal liquidity and/or obtain external financing; (20)
recoverability and/or realization of the carrying value of our
intangible assets, long-lived assets, and deferred tax assets; and (21)
terrorism, both within the U.S. and abroad, ongoing military actions,
and heightened security measures in response to these types of threats.

For further discussion of risks and uncertainties which could cause
actual results to differ from those contained in the forward-looking
statements, see Part 1, Item 1A "Risk Factors" of our annual report on
Form 10-K for the year ended December 31, 2017, and any subsequently
filed Form 10-Q's. The forward-looking statements in this news release
are being made as of the date of this news release, and the Company
expressly disclaims any obligation to update or revise any
forward-looking statement contained herein, even if made available on
our website or otherwise.

               
Unum Group
FINANCIAL HIGHLIGHTS
(Unaudited)
 
 
($ in millions, except share data)

Three Months Ended June 30

Six Months Ended June 30
  2018     2017     2018     2017  
Revenue
Premium Income $ 2,221.0 $ 2,142.2 $ 4,471.0 $ 4,285.1
Net Investment Income 623.6 620.5 1,225.9 1,222.9
Net Realized Investment Gain (Loss) (2.6 ) 8.1 (4.8 ) 19.1
Other Income   48.3     51.2     97.8     101.4  
Total Revenue   2,890.3     2,822.0     5,789.9     5,628.5  
 
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits 1,804.1 1,752.0 3,612.0 3,501.0
Commissions 273.5 261.3 555.8 531.5
Interest and Debt Expense 42.4 39.9 82.6 79.7
Deferral of Acquisition Costs (165.7 ) (153.2 ) (335.0 ) (315.3 )
Amortization of Deferred Acquisition Costs 140.2 138.3 291.7 279.8
Other Expenses   441.0     422.1     886.9     859.9  
Total Benefits and Expenses   2,535.5     2,460.4     5,094.0     4,936.6  
 
Income Before Income Tax 354.8 361.6 695.9

 

691.9
Income Tax   69.3     116.5     136.9     216.9  
 
Net Income $ 285.5   $ 245.1   $ 559.0   $ 475.0  
 
PER SHARE INFORMATION
 
Net Income Per Common Share
Basic $ 1.29 $ 1.08 $ 2.53 $ 2.08
Assuming Dilution $ 1.29 $ 1.07 $ 2.52 $ 2.07
 
Weighted Average Common Shares - Basic (000s) 220,776.7 227,454.4 221,335.7 228,437.0
Weighted Average Common Shares - Assuming Dilution (000s) 221,062.7 228,178.7 221,820.2 229,273.8
Outstanding Shares - (000s) 218,681.9 226,102.1
 
Reconciliation of Non-GAAP Financial Measures
 
Three Months Ended June 30
2018   2017  
(in millions) per share * (in millions) per share *
Net Income $ 285.5 $ 1.29 $ 245.1 $ 1.07
Excluding:
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of
$(0.5); $3.4)
  (2.1 )   (0.01 )   4.7     0.02  
After-tax Adjusted Operating Income $ 287.6   $ 1.30   $ 240.4   $ 1.05  
 
* Assuming Dilution
June 30
2018 2017
(in millions) per share (in millions) per share
Total Stockholders' Equity (Book Value) $ 9,446.4 $ 43.20 $ 9,316.6 $ 41.21
Excluding:
Net Unrealized Gain on Securities 224.5 1.03 558.2 2.47
Net Gain on Hedges   266.8     1.22     304.5     1.35  
Subtotal 8,955.1 40.95 8,453.9 37.39
Excluding:
Foreign Currency Translation Adjustment   (268.8 )   (1.23 )   (297.1 )   (1.31 )
Subtotal 9,223.9 42.18 8,751.0 38.70
Excluding:
Unrecognized Pension and Postretirement Benefit Costs   (498.7 )   (2.28 )   (460.7 )   (2.04 )
Total Stockholders' Equity, Excluding Accumulated Other
Comprehensive Income (Loss)
$ 9,722.6   $ 44.46   $ 9,211.7   $ 40.74  

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