UNM - Earnings call transcript Q1 2018

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Operator

Good day and welcome to the Unum Group 1Q 2018 Earnings Conference Call. Today’s call is being recorded. At this time, I now like to turn the conference over to Mr. Tom White. Please go ahead.

Tom White

Great. Derrick. you, Thank and conference everyone, the quarter first Good for welcome Unum. earnings call XXXX morning, to

Our will fact. are not remarks statements of are today current include forward-looking or historical which statements, that

on materially As actual and these statements. our to concerning a Information filings results results that cause appears in Regarding also results XX-K differ forward-looking report could result, Commission the Statement factors and in differ fiscal are the suggested from ended Form Cautionary located XX, might with Forward-looking and our by these in Securities Risk year Factors Exchange titled sections Statements XXXX. the annual for December

Simonds our are on CEO, Life; President turn also for the comments. supplement over Tim CEOs and the McKenney; Participating Unum Investors call business Our you of obligation they financial well Mike of are Closed his SEC UK; U.S.; revise section remind to that A And of Rick Colonial as Investors Peter I'll now statistical O'Donnell Jack the as the most no the forward-looking and included Rick Steve made, comparable be and for presentation statements the Unum's Arnold CFO, in the date measures we call any can be for Unum in of filings Block. statements. Zabel McGarry; and conference as reconciliations found morning's publicly our undertake for GAAP presentation in in found in measures only in this section. to or I directly for non-GAAP segments, any of update website, our our call website. today's can speak today's the

Rick McKenney

range XXXX that’s for solid income morning, had realized a with share operating Adjusting of $X.XX, after-tax in gains fund our XX% adjusted operating $X.XX. first losses quarter from well XXXX quarter for we and XX% the favorable the core everyone. expected growth of of over first Great. first to past And XX% and increasing earnings net business to Thank share adjusted start experience from last XXXX. while Tom, year, the the Premium continuation good in XX.X% showed overall net income and the a for quarters. the you, of to per per We within over income assessment base several our many saw investment in of X.X% to segments of experienced core our $X.XX. guarantee grew quarter, In increased trends businesses, improvement. a the we’ve our benefits slight operating

investments ago the remained and ratios both These in year with paying customer to and experience. are growth leading recent reflect business expense in-line in our productivity from they the business strong quarter generate dental the acquisitions example for U.S. growth U.K. we’ve investments seen and Our and in the stronger off our and

We continue in acquisitions leave on to acquisition executed growth in our and U.S. Europe small to operation lines, to we of our management for a look Polish supplement which a core company. with in intended the business

on the the by a Block, was block. before on these in performance that franchise businesses flat is consistency care, Closed and we we of Unum X% economy from making offset in results continues very in our but returns see nearly In level remain segment operating improve premium and long-term UK I encouraged tax adjusted our settled be the Colonial which company. we’re in benefit footprint. impacts continuing year-over-year. seeing, U.S. slightly disability the Life's in down, remained in performance good first basis. earnings quarter. a and strong driving quarter loss cash the the tremendous creating flow This quarter-to-quarter see results were local see quarter you the by exception. relative income was performance posted with we’re higher Unum In for volatile the in closed fourth basis. did currency our block I’m can pleased no expand Our weaker year, last the geographic good value UK lower we’re ratio. ratio feel a executing in a is it much saw growth to increasing of with to leading the an but can and continue and volatility sluggish quarter, investments well our of mortality this plus with lower effects quarter elevated claims very to This earnings Overall, to long-term The to the the

I long-term of better and and will value seek their duration. the of for find financial watch in employees, position to each We needs we focus company we we’re and This significant creates quarter, business that trends with about both businesses good to return The flow. very expand earnings allow just ways to strong us continue forward This our reiterate direction enable our their of performance of shareholders. statutory to continue employers for would yielding to necessary our to core us our cash our opportunities feel strong the to our longer-term but segments will will strategic business in presence taking actions capital the historically serve markets. to strong in drive our these flexibility the flexibility how our fourth going these continue did as to shareholders. manage have markets, the over

the it me cover turn quarter. details first let to Jack? Now, of Jack the to over

Jack McGarry

Rick you, morning good Thank everyone. and

growth earnings in-line Following expectations off our on solid the is for per start year. XXXX Rick's comments, with with to share a

we along detail another assets sales, reserve a ratio have quarter backing U.S., to will continued in line. portfolio this in level primarily resulted in capital a disability across from overall line income in favorable third Unum growth saw lower expected group less the performance. quarter net persistency, yield the with update investment the X.X% million lower yields resulting this Beginning continue this the with good the net our major the of XXXX by lines. assets lower of investment positive and to and update trends income to U.S., are several adjusted operating due financial This yield. in line puts pressures for portfolio income first generated and Unum income Within declined quarter in business $XX on trends with back premium our statutory Now, good pressure very in pressure The of for provide on steady benefit Lower I reserves trend quarters. IBNR the business. next on quarter, the to

line. with improvement premium income the encouraging to the in trends are However, by We saw persistency, levels group these ROE benefit capital lower disability past accreted for the line ratio. given and for increasing further in the trends disability also improved sales adjusted group X.X%

for the quarter claim quarter the had that quarter The more The and the vision by the at increased operating slightly quarter business year XX.X% seeing in generally group and for year in ago, voluntary mixed, the first group increased driven group year of benefit in to For quarter. stable quarter group first recovery growth while XX.X% increased vision dental the partially life by in ago quarter, XX.X% the quarter line. life growth sales by ADND in disability adjusted XXXX, in improved increasing in the lines lines, to experience the more in product first quarter, million large increased first business and first pace group the year-over-year. the of a overall line sales with quarter to operating quarter, the slight voluntary the group XX.X% waver to offset from sales life to for It’s the improved ago over can product our to disability first rapid we’re a the adjusted X.X% LTD to benefits with to Risk and from are increases premium incidence grow positive our income was very to increasing than good of were line lowest persistency. vision primarily a an These individual were U.S. in was the $XX.X benefit disability in improved believe in Premium due for quarter. Sales quarter sales solid the experience first and The dental benefits the the lines. first part first in lines ago income ratio for that benefits of by in trends claims increase dental offsetting the ADND consistent in relative and favorable our were due X.X% group healthy news for line. improved lines XX% quarter, growth driven our line individual worth primarily ratio by voluntary in most the voluntary $XX.X XX.X% our Sales X.X%, our customer generate the in in line. year decline while in from group the investments another favorable STD supplemental additional we experiences. line increase XX.X% therefore expense in disability the income ratio our benefit operating ratio due subject in our of in the and the and year year XX.X% typically million, disability noting experience ago first from Unum year group to Premium lower volatility. line. The ago strong X% produced with quarter. income and good in quarter a continued

this largely With year levels quarter Premium XX.X% ago to pleased favorable persistency start the In life flat especially first in of The this earnings year. of in basis persistency local in on adjusted XX% U.K. UK the first be quarter business LTD X.X% We’re sluggish from XX.X% income XX.X% year group the Unum impacted see Unum currency from U.K. the our first quarter, year-over-year increasing for to and XX.X% in the we to XX.X% XXXX, £XX.X saw quarter, to increased the year. lines improved at stronger generated was million. to group first up operating environment persistency by economic at XXXX, slightly to ratio for of the last by a quarter, remained from the quarter XX.X% while the quarter. last benefit last continues the group compared XX.X% year.

lines product were and illness in more group While we claims favorable in see group sales driven large uptick Unum relative saw life currency, the to that an XXXX, of experience first made a comparison. encouraged in for sold disability we business last XXXX. experience in declined year for XX.X% difficult quarter critical in the quarter very the UK local primarily one case by first to the LTD

first core supplemental by for unfavorable experience produced the the elevated though Colonial offset first business quarter of saw XX.X% slightly group Life at the the with trends quarter income sickness, across line sales case, in and market and Benefits line below we and solid we Excluding relative experience first in the XX.X% that remain again was the income single adjusted saw growth increasing X.X% first life by quarter operating quarter. very premium the was improved as Colonial the LTD accident, to ago in million at of quarter in favorable quarter $XX encouraging trends year Top disability partially of X.X% the for this the lines. and life favorable experience XXXX. line.

in board evident primarily look for our our for system. to Life and momentum related continues sales products categories colonial and expenses life growth the across X.X% was strong for efforts. dental Sales operating continued expansion momentum accelerate increasing to the with quarter. initiate for in to to Colonial Colonial of quite was as our and growth investments distribution first first the the addition, territory the Sales growth cost territory product with be timing our we quarter, rollout expansion all the expense the of ratio We Life unfavorable in in the sectors. market In due vision

make stable strong remain investments quarters, over future For for risk by generating our an These experience. through strategic several adjusted well-managed of Life businesses highlighted and disciplined of core for quarter return and encouraged the generating the business returns XX.X% management as trends trends the UK expenses are in first operating Unum growth sales favorable with segments, the by levels, of persistency XXXX. overall U.S., on strong us Colonial Unum growth are past we in we equity our we consistency

compared more ago $XX.X Closed million the new to $XX.X quarter year to the declined Block, lower size ago had adjusted XX.X%. partially care individual year, in first operating than driven quarter, maintenance improved long-term year disability as loss increased favorable challenging quarter from higher of to first resolutions offset XX.X% claim the benefit quarter to was benefit to compared income year product The due interest the ago quarter business of the ratio favorable experience the in quarter, the to claim the the much in line, Moving first this adjusted expected, the In significantly by XXXX in million to by adjusted new line quarter in the this that interest a average due of first XX.X% in XX.X% Benefits ratio was quarter. to mortality. ran which claims.

of higher ratio addition, policy negatively In impacted level the terminations. was loss quarter by this lower

We the in of continue future. we appropriate to confident line these I’m and level volatility expect strategies place experience high will in continue a the this to manage in that businesses. have it

the rate program, effective our care are yields we over block embedded long-term our with expectations realizing is We which new to reserves. long-term way to care term. the portfolio long-term money continues manage continue The we believe trends good the to most for have the the see care exceed we overall increase long in

However, these quarter, bond in rates but new for spreads yield this favorable were we're closer higher. us will when the time begin watch grade getting remains in to assumptions a Interest first money area. the more to

We which good feel to our two date We GAAP care relate included reserves. premium revision state rate continue approvals for received, actual assumption with assumptions in to approvals monitor to obtaining long-term ways, progress in compared regulators. those about our of increases XXXX both in progress we the this to of

present the and in will actual premiums on approvals realize future received. spot additional value quantify lending based of we we elections First, the

For the our track with on assumption measure, this XXXX are we estimates in set.

important over the the we of note may over which is years implementation faced block. it life as in timing impact value of total recognize number minimal increases and the to on However, that the a the of be

the year we recognize any expectation. incorporated premium The premium in second actual measure GAAP approval the is pattern will increases, into to the rate specific for compared reserve

in X we measure, received of effect on as as that to ratio for X optimistic over reverse near reported anticipated. approvals from the future improved the has current our approvals we increasing in rate those we have a will loss that the regulators and premium by period had the timing ratio years increases quickly longer-time of our X% these work believe actuarially recent to Based over approvals prudently. not in blocks phased our years. estimated been remain received need For best this and understand loss to originally increase forecast estimate of the will past originally implementation pressure with justified We the manage and than This have carriers next X%. for premium increases

have the we the first the quarter as consistent over quarters. several past seen So, view one we results in with total,

remain Closed Our care continue lines line our long-term core business well, particularly operate to while Block the volatile. results,

on, companies. traditional Moving our insurance earnings to deliver from we levels continue statutory of U.S. healthy

adjusted results after-tax long-term earnings $XXX.X from compared year year and the statutory last impacted the to an benefited update was ago to disability, fund it year's million in guaranteed a tax earnings quarter. statutory IBNR totaled quarter, first solid from overall, rate the This year while operating by a the assessment, start perspective. and million, lower but For $XXX was

our insurance quarter ratio XXX%, in capital company's million. shape. Our companies holding cash for our At U.S. while life $XXX remains capital very position end, above slightly traditional the risk-based good totaled was at

is need $XXX million. shareholder expense for and annual Our interest dividends approximately

continue strong So, ratios. to maintain coverage very we

as of Our we stock quarter. remained the repurchased of million to on XXX shareholders return on of another pace in capital

interest lot going common levels increase meeting. There the be stock to board will impact given potential Our annual of ratios RBC an dividend target at a the tax and the in of is forward upcoming considering reform.

range I than any we We the of assumptions. their factor rather capital to NAIC pretax the and our their had to which agencies really levels in that strong due capital revisions changes In a maintain us enhance topic for to the to will that projected have engaged growth materially we and on We of the XX% you per I’ll tax what tax base given they have adequacy you believe short, capability rating strength enable discussion. $X.XX use are good reiterating since also after this the scenarios RBC the remind our I’ll healthy adequacy. from A. changes from in often rating metrics, for stress our those the our from model which level for benefits closely capital stronger not dialogue to reform final case, will will the by flows, operating over wait that In to operating targeted financial use and share. earnings most on with our proposed typically company. adjusted decisions of year-end the impact recover and XX% financial adjusted up cash earnings appropriate is on remain agencies formulas per own expectations of year. remind share of wrap and continue views XXXX

Now, I’ll Rick for his closing back turn comments. the call to

Rick McKenney

you, solid it first Thank was the All-in-all, for a company. quarter Jack. Great.

our We’re we’re we the growth opportunities encouraged confident by to see to markets businesses core continue are in we we have place the strategies and by in operating in in be producing are and successful. our excited trends

will move now We to questions. your

begin to So, I’ll question-and-answer ask period. the the operator

Operator

Thank you. Autonomous [Operator ahead. question with And from go Eric Bass to we first will Research. Please now Instructions] our

Eric Bass

change long-term us give just reserves? a could changes some you on or sensitivities what trends rates, sense some Hi, to had first the was changes claims as or provided sensitivities changes to provide and impact on similar interest I thank things how of the just morbidity there, care could be I mortality you. long-term in for you to care side. hoping in a questions Guess couple reserves

Jack McGarry

sensitivity do We testing. Yes.

the out come a lot of depends and same, also mortality not the but of with shape it. not it persistency on the only morbidity, level of have We and on

question the publicly is complicated have interest disclosed a more we rate So, in significantly it not those. change and

Eric Bass

the Got about reserves, think gauge the $X.X billion I'm total a I so what I it. I disclosed between given reserves, trying GAAP it thinking mean to seems may and levels of is change different question, your size large, GAAP and in saw way. in your the is of you you've incidence quarter, be way a trending what pretty first which to saw was XXXX elevated what have experience like in cushion they if still that LTC of think? a exhaust you claims, would rates your were about statutory kind mortality only you that consistent assumptions and with are, issue do remained

Jack McGarry

I go annual work, process process. We’ve need mean started our through. through the it’s a going we to so we’re

in lot in We do will and reserves claim new review I different between had quarter were wanted world say would at statutory pretty on point increase still We in that billion approvals. there results. was million our those the we’ve has that our margin thorough on based request would aberrations be approvals increase the expect where we're small and a the both draw quarter plan historically, first $X.X filing. that have also line from GAAP of perspective. anticipate and bogey’s much volatility to significant doing we from by look XXXX have to mortality is point assumptions rate those years a reserves. both reserves, we which quarter or would out margins additional current forever. directions unfavorable I exceeded experience as GAAP regular of indicative results and our the the give year. We particularly is in We the assumptions. overly the directions. those the through in in had that built a expect room point is want And with of the what is mortality outstanding went to volumes range We investment well couple our still I end we on-claim first the that over of stage to I certainly $X.X of our ongoing our We we’ve the as mortality, states that original have to material. very quarter seen build claim first rate first a being a very favorable actually – last out mean to for third as I’d

from and be at will request. round to we of those another assumptions we expect as increase filed We benefits get additional looking rate update

So, is there. lot there a of room

rate margin increase So, I can we between the there, GAAP a stat got end where work but very solidify to opportunities, in good through we go there are, feel and our is before gap [ph] is a the there to margin where we up. reserves

Eric Bass

the the just of of just are, on on Thank far approval filed you. that round the rate on increases made been process on increase can side, point you an rate for? last you the sort update has are And you through provide how

Steve Zabel

This is Steve Zabel.

may the of what adjustments we We’re we any just over premium value of through had of receive. XX% benefit kind XXXX program, way and the present kind our originally that by the measured in anticipated additional

So, had we we how we about about approval the on construct. through feel that’s that the would good far reserve in process what and original be assumed, pretty

Jack McGarry

there are word note Yes, that receive though request of outstanding on. the that I’d billion yet we still probably X.X to is plus on top

Eric Bass

you. thank Okay,

Rick McKenney

Thanks Eric.

Operator

from comes question with JPMorgan. Bhullar Jimmy next Our

Jimmy Bhullar

good morning. Hi

current that long-term past comments the the given versus stay, uptick over pace you percent of the stay you in again is on the this getting price if your that the care, the question couple of a about years? to it level that hikes, to just level First, around loss reasonable expect you the XX-ish more saw of expect the think do on ratio

Jack McGarry

happens you that reserves. on thing quarters be. to and reserve quarter two what or basis it XX frankly to is is that what that exactly point increase ventured in probably is I happens one where we the, I assumptions I this The higher means that expect, level, a though it the of would what volatile have remind at would is really that Yes, for so going the impact relative think given in rate timing predict than muted

Jimmy Bhullar

it last moves hikes Okay, obviously [indiscernible]. of like likely where higher track and given price the showed pace quarter those, it but more every just than year, on around of sort was the number

Jack McGarry

Yes, I have and track I probably uptick. would would think it that an to expect continue. higher seen we

Jimmy Bhullar

assumptions better even achieving are you bit but actually a then beyond adjusting which this assumptions that little the year, are the the grade and over you doing least adjust than assumptions steepness investment up your are or And for next a amount your go recently, maybe have those? think I the years how it you deal do few been about you thinking your yields will see adjusting assuming in you would thinking at we about up, when and if decent

Jack McGarry

mean part of our know, process. annual review You that I would be

helped but have to last You interest signs returning levels normal lock the depend rising, and know one things that’s are interest been that view of of be us, have to end last at of would do the some shown have the because environment. rates it because where and spreads year be. credit with are future which encouraging a the things will on that of be the where more lot again has we credit peg to will we is It rates it in with one rates to going we what the

Jimmy Bhullar

like competitive disability of you terms are they repricing competitive conditions in in prices behavior with lastly raising trends their in talk if but done And lot about the what you on, seeing been then market a and it have of seems companies just the market? are the cycles, just last few market, years, could

Rick McKenney

turn to to me Yeah, a Jimmy, market? the bit little it Mike let talk over about

Mike Simonds

in you appreciate chase I sales persistency that and most the in is you proposition employers mid-sized out data spot, think we If Jack the you to it know X% do two there, value cited, going saw say also group midmarket, in is a to resonate, that would Thanks the see, I and and we as digit don't highlighted, the where quarter, business good that’s had increases to pressure Rick we certainly but sales saw of is the market I’d lost our And the a for that in that the we to mid-market. terms Rick. on they and I where competitive Good Jimmy middle question agree of cost. points and clients think which that there looking in insurance frankly it though and competitive pick continues our that where did would growth the market market? first take not you say both I’d morning, to that as predictability we high interest have business, was single are we best we're best our lost interest loss saw stability also, new clients is

with So, probably us end some quite market package the we smaller insurance in sales our as I there, acutely light helping we’ve there our in XQ of looks really the case really optimism. but the large of feeling business. we capabilities new one say, quarter employer in our in pipeline out and overall, for market would dental and encouraged the as most vision rolled well and That’s the cautious is growth is are outlook us the group line. We're encouraging.

market, own. I we’re holding than our but competitive more So, think

Rick McKenney

think proposition the don't I we Jimmy today. you I that’s value for within see are would we Mike well highlights, That’s that the I competitive think good given market. that’s pricing and a thing anybody that’s, think say where of too and range of we’re it is, one very Yes, I market, a or place us, do aggressive terms is the but way overly always of competitive norm being outside in in

Jimmy Bhullar

Thank you.

Operator

Thank you.

Lee question next Humphrey from Our with comes Dowling & Partners.

Humphrey Lee

Good morning question. and you my thank taking for

years over your remarks long-term reverse Jack, elevated on care. talked follow the loss ratio in will about prepared you X to Just to up years. next the X

mean implement XX% next you ratio as years loss you the XX% above to these your of years range increases? the do that kind over remain rate will X to X So,

Jack McGarry

to is about dissipate ratio the that to years. X from the that talking feeling rate and we’re the years actually lag loss next X% was seeing I X% approved on what pressure over premium Actually, we’re X that which increases, from would the now

So, pressure. it is X% X% or

Humphrey Lee

loss to you X X XX% So, so the remain I mean years? to over above above guess to your X% your years do X% XX% target, it the next will to pressure ratio, XX%

Jack McGarry

Yes.

You up look matter again, underlying of at because but will loss will the try now predict X% the range specific it to a and not in, we're I to the catch X be of that be years going better, and X% where we see am what is at goes. assumptions, we're no to ratio going will X going to know, reserves. loss to I the look years ratio mean, rate pins from increases.

Rick McKenney

Humphrey think I ratio, we’re one bit that media loss through will trying but aspect perspective it’s and a that years, of long-term next that a that’s isolate there, know. it issue value but to comes pressure most little is an we of from a that lag overall get over now couple little that that will and I where it and the we think expected, a value be would one back just just getting lag isolating the we’re people

Humphrey Lee

a would in like be, just elevated to how one-time Life as how about an remain in supplementary think high the I in opposed about then there basis as expenses what visibility gears guess expenses Got I And near-term? quarter general as the in the group expenses investment-related talked and and voluntary, Okay. the these expenses of to should as would ongoing we Colonial it. shifting well nature, guess much quarter you is some in

Rick McKenney

so investing trying the Humphrey an we’re expenses is will looking at overall in highlight important our So, to That and continue. part. business that’s what we’re

our to spend out effectively business run will when we continue customers, to at to there, we there. the have look the opportunities money invest it ability more grow to So, money serve we to the

macro how we’re with level, highlight U.S. in specific very businesses will On maybe each the that continuing it’s and of level. at go I the we Mike, investment terms So, around Unum we’re because the about will and maybe start of grow company. a to to talk think of areas I investing interesting our you

Mike Simonds

for over U.S. Yes, perspective sort several you last Humphrey, Good and an Unum gradual improvement thanks morning expense of it. are the Rick, appreciate years. a seeing from

experience, actually from in we’ve services client you provide we to helping provider flip the it strategy, feel I and starting the materialize Tim we're expense And of maybe of sort the the of the and you rollout, as employer, kind Life about network investments and leaves, and in the we continue the that putting making about ratio. to out sort invest and to invest are position back And I experience, sub-fall year-over-year, burden well we very the is in which already flat you. were vision country then great those our client plan we and two take full some country sales of Colonial business that and of good so ongoing here for quarter aggressively sort dental that benefits that in of pipeline. particularly the Tim around disability, into investment good half business similar see around given the think in I’ll manage surfacing both in to is to as on that Arnold our the our in administrative I our our the growth I group gone to build the continue continued to investments of market see relive investments level expanding think know of solid I regions of you

Tim Arnold

Yes, great, thank you Mike.

of we market good experience with very we dental in there. thoroughly seeing product, first related the good adoption very seeing flowing We're in our but that. off dental the support market in from late expenses the and kicked adoption client that number then offering, investments had pleased to investments and quarter for making the a investments up really distribution expansion, which technology results of quarter first that, in are making the we’re nice we're ramp We and to

balance So, and think we moderate would we influenced also over year. bit a first by was ratio timing issues to our the expect quarter of expense some little the

Rick McKenney

Tim and Great the U.K. thanks Peter in

Peter O'Donnell

investing bit future, like expense for very and obviously running Actually, in timing, little of we what of little expect talked of a efficiency perspective a both out initiatives but have given ratio the so economy we of Tim strongly our we growth. with at guess are continuing here. to the a a in-line come the continuing I colleagues actually looking a core to be We Yes. opposite my little strongly performed bit back prudently bit point have from so I the business of quarter. number invest that and low bit about, positive the perform expectations to

Rick McKenney

Thanks Peter.

I loss all efficiencies, room efficiency businesses think bit, all last not of move us a you're that so of the big that your seeing investment those for our of been businesses, make. most part may lot for Humphrey coming to but you're a to answer seeing several of a creating down overall continue our investments, that pay the still little ratios question, we're the they’ve we're to years I think going with is moderate about for talking but over

Humphrey Lee

Got Thanks. it.

Rick McKenney

Humphrey. Thanks

Operator

with Next, Riley we will B. move Randy to Binner FBR.

Randy Binner

of area. care Hi follow-ups have thanks. in a the I couple long-term

the First an of comment there's were that quarter. aberration new first mortality a claims in trends all, and the earlier

have about in So, first Would quarter. trends? first unusually an the as the quarter? high, in that those But make been flu what claims mortalities you've the aberration understood you due to characterize

Jack McGarry

would so highly the first quarter. February. was of I It come the say aberration all month over levelly in of in claim the Yes, concentrated didn't

February deviations continued submissions were month than it claims It in being to main, down chance outside standard down the the of there. settle the settled XXX% in And from settle new May but actually March. less of Our above still They so since. down. is of two

say of as period would aberration an So, and would make the thing two-week in opposed in me happened fact a to most a spike middle it’s that February. that would the that trend. of be spike you That in

Randy Binner

period? Okay. two-week but was why? know you an there's no unusual – It just don't

Jack McGarry

the can the you be that – margin to. And people tipped we it had improved the mortality, scales speculate never they just as at have flu and will No. there, but able

there [indiscernible]. certain already is it with So,

Rick McKenney

seen pinpoint mean if at is spikes we to history the look It Randy, you in I past. have hard

be we as through by since spike, comes and bit of at come can increases then. that what Sometimes it time it, things tick-up down said, has lot a it but a and pinpoint news, to hard it’s a rate a was those there’s Jack saw we spikes caused too speculating little were and and things the in

Randy Binner

may margin the flu pushed But on some in? be flu, folks

Rick McKenney

be. Could

Randy Binner

LTC kind it to, lower I on fourth the was similar if wanted you of set just, little the it yield that yield in And treasury level, maybe I think quarter Okay. it block a mentioned than back now. the I the of quarter the Jimmy XX-year was was, the fourth is bit assumption look XXXX, was right pretty to think XXXX, I

because years fast So, that know something and and of to be have start you a would then of wait higher, at kind that to need as it if to and end the in we it, that like can four visibility or forward one-year risk-free earn then use that higher. trending this rate five to of XXXX, five? inflicting do end years would you up that would if trending you start is you on you the When for be you know, up would year year need

Rick McKenney

We certainly XX-year similar in credit kind to which XXXX, move in tight [ph] flat up, we over should of interest have but see I picked answered think exceeded and rates started up a very the years wider, the Randy we change hopefully. that. you or see so move spread, in spreads Jack and XX we stay you and time XX-XX path that would back

I as period it and says we today forward stay we future, through that it, and to go at the have might what now that continually path we what and up we're go goes we look track our that’s terms then saw every to and of that for is what’s would sit a we’re kind will what forward, what picked. every of then, we flat not we It a choose look as start that into path here so, and for but seeing path time, so we to we year to year in of hopeful that And like. trend the that here we assumptions give in and and beholden you think will, stand forward we so XXXX look a as we look do

Randy Binner

minus about XX, this think there probably just to something So, then is or XX? XX,

Rick McKenney

still I that it spread in indicating right tight No, terms how a XX-XX just very is is. unusual it I of think number. is am that

then the XX XX gain out So, XX of might as you to some might see little wider continues will if in actually move a spread see expect the bit you the spread you as well. up, that credit and XX well

much that XX-year very view would it’s treasury a be. still So,

Randy Binner

Okay. much. you Thank Got it. very

Operator

Please go We’ll Evercore. Tom next move Gallagher to with ahead.

Tom Gallagher

the on how thought at ballpark quarter on Can a in morning. the you the ratio? you care that you quantify long-term benefit benefit of Good mortality for favorable least the quarter? comment was Can much

Jack McGarry

they into Yes. I quarter or assumptions going by to talking mean we are specific far about didn’t. and get not how benefitted

partial know what the You in policy incidence we a to terminations. offset as saw around hold

Tom Gallagher

described ratio this are is, of continues But and loss think very elevated see think looking XXX for you below north I - and you Jack question or we we little the seasonal XQ, normal away still do at I here favorable, claims my submission in a that bit it’s the if mortality goes guess if that?

Jack McGarry

that not going things I think good forever to to on things and the bad hard speculate it’s I’m away. that. go mean, It’s, stay

assumptions bunches quarter So, we’ve and by to volatility had that continue? expect would around of

Tom Gallagher

And accelerating would Okay. from what this then big the based right prompt seeing strategy you are you’re see or this just plays new are round completing or you where, with to but rate you are say is increases see of still XXXX of and wait standpoint, the you consider XXXX, you it now, still kind on can fresh how a bigger right what you know increase I out a something before guys in there? rate would considering process now, plan, consider thinking

Steve Zabel

we part made is changed our just of of this previous those block the new of rate, to understand need that any do may at back Steve. what to may It that it look actuarily is we increases. review, so we those all want strategy states action because go frankly justified as have to the compare our with be well we part through, because they has influence what we we whole would magnitude that and develop as states against Yes, filings the Tom, to assumption rate picture, until with not potential to of a expected,

round, if is and it’s review. there another our say in finalize would that we will I So, conjunction with wait-and-see assumption

Jack McGarry

extent along with Tom would currently, review refreshed that’s new the to rate assumptions. I creates to a the go situation where assumption are we ground of would that adverse increases there be that that Yes, to expect reiterate would I

Tom Gallagher

strong the that, it you you. you Got capital considering a you would is taking here, wait approach cash any shakes you of alternatives have? that a the say you are cash your company is holding terms do you're that options that know of just you depending know of aggressive and level, could thinking there contemplation And in your is is or, and how what just see there, how with more much on year the rest holdco out something more return given curious on

Jack McGarry

flexibility. with position cash the of have very Yes, that in puts us it’s lot great good to a a

good agencies the across with is to are do, this isn't in agencies. position uncertainty the with the perspective how to would a You that have whatever the from year happens feeling NAIC it’s it more likely know to you what going respond given returning risk-based year on a the to around and react aggressive My the the board is, environment but be particularly us around, capital, in what’s great happening probably factors, that. capital capital know to rating it to rating puts

Rick McKenney

buildup company We’ve seen earnings. I is all factor. of the the more cash good think really statutory a

side, that side dividend generate watching and that on to a built-up. on the our of core businesses cash. it’s return has been increasing so capital factor and pretty repurchase stock has dividends common the more been share shareholders Our we’ve It and consistent

maintain articulates it of flexibility that. some Jack the have think that is right to will it good as, move things throughout year as we I and

Tom Gallagher

Unum lot sneak and for looks others, you one and if sense. up and in like long-term the curious both went incurred supplements, just comment for industry. lot terms driving last claims one the looking underlying makes of up was an XXXX of factors, give Thanks, for can that just It Unum help just anomalous in thoughts a and increase you all if that? for incurred The, less care any on several much year-over-year. in. just I was That whatever XXXX like reason through in what’s delta XXXX, went could or claims could double-digit about it XXXX a a any then on anything

Jack McGarry

look years to annual think you in consistently expected. you before those like at was around XXX% the XXXX. at for is Yes, XXXX it returned forms actual look for I that and that pretty if a has periods, XXXX XX% us outlier. XXXX the been the XXX%, It running to

stat look trendline at at pretty of a you I when would really couple consistent because wouldn't the XXXX if statutory that. pick would forms, forms. we look the XXXX say other I over with being So, as I outlier. were pay of much on out to things the the I increase too attention the

run First the over run million, reserves, of about claim out XXX of out the period negative. entire that our was disabled all,

working strength two pretty and you by level during if and are increased million XXX steady. our on those offset out current and very also for things We claim reserves, that reserves reserve period, good same based so

I those ratios. impact think gross on forms see can you the XX% are other thing net increase. to the increases Show of a rate

a on kind XX% running of So, in we’re net. range gross to

with take you think XXXX at, you and And pretty been so, look have if mean things consideration I I steady. into

Tom Gallagher

you. helpful Got Thanks. color. That’s

Rick McKenney

Thanks.

Operator

Alex to Sachs. Goldman Next, we’ll Scott go with

Rick McKenney

Good morning, Alex.

Alex Scott

morning. Good Thanks.

the is of they at had [indiscernible] that the in looking offset isolated positive the potentially the entity LTC question in you there the some there, you to are are rate could have core the your long sort very in I businesses regulators care other it on of businesses? to look the some guess what’s results with and on premium going increase and in of the of that purely or care term environment, finding business legal is discuss the a and context pressure of just other long-term you some captive, any just at, you have how First

Steve Zabel

Alex. and Steve is this Yes, thanks for the question

regulations, stuck a of this had you I aspect to really the you positive on own, standalone the perspective. the conversations products the their stand product need think that regulators are products. and the at look to contract of basis with we’ve they is letter to on for need which a premiums sufficient says from very those need a The

So, regulators consumers rate mean of might lifetime sometimes does is businesses that, how a from care but performing, perform, how at bit efficiencies. influence little our hear loss increases, to and to project mean profitable more we we that to ratios how will block around do these some premiums does a that what look comments favorable more long-term around the what that strictly that and

regulators and very and last a basis. So, it over I say to years, very generally has engaged looking this X standalone the need I regulators on around think increases care conversations by have understand the are in been large where do business. with significant improved for the the line think at of long-term environment rate X discussion constructive around approve to

Alex Scott

second could I than peak you care, had the much experience so new you have deeper the just years much you you, getting amount of the XXXX have now long-term closer greater you level think question of with looking greater, statistical in that’s was are claim sort you're that it to you ago? the levels, coming in few claim the data could a significance into of on when where I or And was discuss is lifetime relative of getting activity individual have just the of to at and block the sort

Jack McGarry

years the few was I data than a ago. it certainly greater now is mean

is go. think still I a to there long way

claims XXs, the the that as claim around trends side when and what mortality later about side talk those about on on actually known and XXs know will durations. reserve either You be there’s not particularly experience you in the much life active in nor

the old building, ages. the And a at in care long very is credibility haul. business So, long-term but particularly it’s

Alex Scott

amount to current opposed disability, as and sneak at you have expect trended visibility of how I you coming on favorability how the of you that’s think Thanks. some And down? they more ratios slow when that could and would of when been, claims group of if that’s characterize sort benefit the and reserves one I any about sort claims maybe from deserve the on development the period just have favorable in claims if to from on can all the the favorable

Jack McGarry

think claim pretty there development, caught historically Yes, with assumptions I was claims and mean, much that. of particularly I some have kind favorability up

in So, is, in-line our assumptions where of think are reserve ratio terms I we well and our where loss are.

So, I any I don't get but it to reverse, expect it wouldn't expect better to either.

Rick McKenney

environment I would to add that we also working prices. closely and and increasing has come that, one is, have but been that. thing our has about price, The team with and low justify so a through we been years last customers is talked rate several taking have to the

we're the what were you think several prices pointing Over are. last are happy now years, and I very those

Alex Scott

very you much. Thank

Rick McKenney

Alex. Thanks

Operator

comes question next John Our Nadel from UBS. with

John Nadel

Hi, good morning.

still know instance XX%. care think claims anything near-term long-term ratio of guys that is like has but down a of the be reserves Unum don't the we I a that of picture business on about of should I really question, pennies, seeing I their last know may happen more why Unum’s you and to you was quarter, cost with stock we're different long-term a some couple I were loss doubling expectations, than the do pennies. from higher versus at big all So, Jack something approach terms just care more think GE elevated could to guess this of that don't couple you and occurred what not specific of in quarter vastly feel GE reasons is for

that think not of sense last quality adequacy and I that reserve is you that with my the confidence your of are are you quarter. adopting, investors your far, did same level reserves exhibiting so

sounds concerned reserve drop clearly you underlying are like your and or robust coming but what So, premium from that in increases assumptions? underlying bit this are rate review seeing as like review assumptions else things you with a the diverge where annual slower, as are most currently about back you start it process

Jack McGarry

terms will of we the increases history than review, bring the we’re as we’ve a care with X marketplace's We’ve a and has the GE this has as writer unique us were to the we have, and all, changed margin expectation bulk well our care of of position life between there reinsurer, block. basis, Yes, one-time quarterly our annual premiums still group more business came and as expectation, comprehensive business employer and you vast long-term on do block managed continue about that between it more the know is talking up a you difference put in of the on in business between it. and that basis that think care lapse think the age we’ve very I not funded, reviews from know is a rate you And I a is is keep we space. John, GE, out the as and that conservative between on perspective, our a continually over different at position of and on the our two than increase difference being manage after reserve XXXX we block the our business, long-term to into my both billion side paid direct share XXXX margin fact long-term actively perspective difference group increasing individual done and on block, may from an rate half reserve to how the but a in speed space in it investment our designs, the plan this that opposed very care it of of in long-term we’re even has of charges, said

John Nadel

testing If LTC tell one cash know morbidity long? premium reserving, you you just in improvement do assume Okay. do I question you deficiency you you assume could can I appreciate or ask assume improvement, for testing, the flow really whether and how morbidity how improvement do. much I specific and if more your response, weather on us

Jack McGarry

and against assume I’m actually those We assumptions, our the which on reserve assume and I'm it. of improvement specifics going us improvement, both we get for get not mortality to going not morbidity goes into morbidity particulars into improvement. to what but

John Nadel

Okay.

you’re assume reflecting mortality that morbidity improvement if that time? then might So, over would out generally it fair the they two improvement reflecting also you're wash or might to be

Jack McGarry

directions. different go It’s not a washout, but in they

John Nadel

Yes, understood.

thanks. Okay

Operator

ahead. Instructions] Suneet Citi. [Operator next move Kamath We Please will with to go

Suneet Kamath

Humphrey's was X to XX% premiums that, points Hi, follow to thanks X want good on should reverse, guess I just points up question outlook The timing in morning. gave, I of kind to that low ratio related first. about that that Investor embedded this your correct? of was you assuming loss I’m that the Day, that the knew the at you so is

Jack McGarry

you were. Yes, was about, more of parsing XXs of think trend you I the is work knew wind that coming of quantify both have historical have we more low level we been a they We think would terms was of know what the a expect and some to where what the how drivers pressure, that done pressure in out of there know around I that to next over years.

Suneet Kamath

Okay. All right.

points the back were if recall. to to just making Investor think I you go So, Day, I two then

one you said a order charge you then took million basis, that be sort was GAAP around on made were similar wouldn't point of that, pretty one think of is I relatedly impact. all and in were what XXX kind this have a past, of year, I suggesting on statutory magnitude, it you charge would be think that only which know of would basis I if then this any was I be you believe am after-tax it take sure an you’ve I year, and it if next and to made to but the taken Jack a fluid, you kind point you

and about from make of away are that, right that you're stand a statements; So, and us, months them? just a, few I’m just that, still sure by want kind I but those want we b, two to

Jack McGarry

comes I exceeded rate statements, what made through reiterate our you places. is margin there go know and front to GAAP from reserves three we’ve our between right those are that statutory I would One, assumption. the in going we're the to good where different have work, now interest is

portfolio this we it expected well where at point to be in today reserve margin. is assumptions that above our So, rate creates our

with. have The rate as set room new and that well assumptions expected between refile new second that rate of we And you might of already we assumptions one increase know billion expectations $X.X both have results. increases still refresh our of terms we been based come is, GAAP increases opportunity filed difference our we on have, in any year-end up the rate have, in stat at billion as to to reserves and the $X.X

margin tell through we’ve would reserves I right are you between So, that now a current to but GAAP work, where go of reserves there is is our what stat are. where lot I answer the can’t because our the got reiterate and

Suneet Kamath

years, years, investment mean would up, is all investment rates these maybe assumption are it extra think grading take helpful? to margin it, and it have sense but then kind question your be else to get of the and it we you’ve investing would sort about been just that margin I just sheet because two about take around, that how to you over of would think if return that X% for know is that of if again, on of any kind things last it think long five additional how the it about equal, I eroded, up, we you’ve long moving built time balance Okay, one grade and don't bogey,

Jack McGarry

to Yes, difficult say. that’s I say I would mean

They meaningful to with So, will interest of we there. has on be that but there. that decent the continue and the margins that’s impact has know margin have things new will work there, It’s rates. we created mean the to those one money a investments consider, an you been of are have cash I that it and flow impact, rates will

Suneet Kamath

I could helpful. think I the additional just point John's that mean, assumptions, Okay. stock, any these of of color I on to mean, give I think would I you the think be on some trajectory certainly

Jack McGarry

Understood.

Operator

Ryan Krueger Woods. move next we’ll to with Bruyette & Keefe, And

Ryan Krueger

guess a I morning. have good somewhat thanks I similar Hi, of question.

given built Suneet, your have want maybe statutory you're but in care the you that impact long-term forward, a changes view to management I forward? affected and said I be over confident confirm any time margin not past that any capital to basis just John would As in going still pretty to plans you upon the going confidently guess that reserves to

Rick McKenney

reserve going that to we're We our are react we tuning reiterate seen need Again, and will answer. be, for assumption experience a of to to define through the where right for lot is there go that can the we’ve space we we again emerging. would between we now where need but to before fine work been the

Ryan Krueger

understood. you. Okay, Thank

Operator

closing speakers any further time. the additional no this or in like questions have turn our over conference the queue to to I’d back we remarks. at And for

Rick McKenney

just We It want to Yes, your everybody questions thank on long-term thank morning. joining you. care. this is for hear I Rick. us

We has it have, through we’re working said. as Jack

and will and that we articulate best we’ve continue at – as We're we and that we see number those to well. questions factors continue trends conferences answering will do to be to your just of out see past the of out there, make as the We about done the going can, all that. we’re in your insurance answer we sure

So, thanks for your XXXX call. our will time this morning complete and that earnings

Operator

conclude thank And for once does call. their again participation. everyone that We today's

disconnect. may now You

Unum (UNM) 2 May 182018 Q1 Earnings call transcript