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Unum Group (UNM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 showed resilient core performance but mixed headline results: adjusted operating EPS of $2.09 missed consensus $2.15 by ~$0.06, while revenue of $3.38B beat $3.31B consensus; core segments delivered 21.4% adjusted operating ROE, while LTC assumption updates weighed on GAAP results . Estimates from S&P Global: EPS $2.15*, revenue $3.31B*.
  • Management completed the annual reserve review, raising GAAP reserves by $377.8M after tax, largely from removing LTC morbidity/mortality improvement assumptions and ceasing new lives on legacy group LTC contracts; statutory impacts are de minimis and no capital contributions are expected .
  • Capital remains robust: RBC ~455% and holding company liquidity ~$2.0B; YTD capital return ~$980M, and buybacks at the top end of the $0.5–$1.0B range with ~$300M dividends expected for 2025 .
  • Near-term EPS headwind: lower alternative investment income and higher LTC net premium ratio (97.6% vs 94.9% in Q2) reduced Q3 ATOI by ~$0.10 per share, with a similar drag expected in Q4 .
  • Strategic de-risking continues: the Fortitude Re LTC/IDI deal closed in Q3; protections at Fairwind remain ~ $2.0B; actions simplify modeling and support additional LTC risk transfers—potential catalysts alongside sustained low-60s disability benefit ratios and 70% group life ratio guidance .

What Went Well and What Went Wrong

What Went Well

  • Core earnings power and ROE: core segments delivered 21.4% adjusted operating ROE with steady premium growth and strong margins, underscoring durable profitability . CEO: “We delivered solid top and bottom-line performance across our core businesses… confident in our ability to drive long-term growth and create lasting value.”
  • Capital return and balance sheet strength: RBC ~455%, holdco liquidity ~$2.0B; YTD returns ~$980M; on track for top-end buybacks and ~$300M dividends in 2025 .
  • Segment execution: Colonial Life AOP up 2.8% YoY ($116.6M); Unum International premiums +14% with sales +30%; Unum US Supplemental & Voluntary AOP grew despite IDI cession .

What Went Wrong

  • EPS miss and mix: Adjusted EPS $2.09 missed consensus due to lower alternative investment income and higher LTC net premium ratio; management estimated ~$0.10 per-share drag in Q3 with similar in Q4 . EPS consensus $2.15*.
  • LTC assumption update drove GAAP volatility: $377.8M after-tax GAAP reserve increase from removing morbidity/mortality improvement and ceasing new lives on group LTC; boosted NPR to 97.6% from 94.9% in Q2, signaling lower future GAAP margins in LTC . CFO: actions reduce modeling uncertainty but lower protections from ~$2.6B to ~$2.0B while remaining robust .
  • Pressure pockets in benefits ratios: Group Disability benefit ratio 61.3% (up YoY) on lower LTD recoveries and higher STD claim size, and Group Life benefit ratio 66.0% (up YoY) on higher average claim size; UK benefits ratio up on LTD claims and inflation-linked benefits .

Financial Results

Consolidated Results vs YoY, QoQ, and Estimates

MetricQ3 2024Q2 2025Q3 2025Vs. Est.
Total Revenue ($B)$3.22 $3.36 $3.38 $3.31*
GAAP Diluted EPS$3.46 $1.92 $0.23 N/A
Adjusted Operating EPS$2.13 $2.07 $2.09 $2.15*
Adjusted Operating ROE (Core)22.8% 20.9% 21.4% N/A

Estimates marked with * are values retrieved from S&P Global.

Interpretation:

  • Revenue beat: $3.38B vs $3.31B* (benefit from core premium growth) .
  • EPS slight miss: $2.09 vs $2.15* on alt investments and LTC NPR increase (~$0.10 drag), expected similarly in Q4 .

Segment Adjusted Operating Income (AOP) and Premiums

SegmentQ3 2024 AOP ($M)Q2 2025 AOP ($M)Q3 2025 AOP ($M)Q3 2024 Premiums ($M)Q3 2025 Premiums ($M)
Unum US363.3 318.2 334.9 1,723.5 1,755.4
Unum International40.3 41.6 38.8 246.6 281.1
Colonial Life113.4 117.4 116.6 441.9 456.5
Closed Block34.2 3.9 14.1 216.8 195.0
Corporate(49.4) (31.7) (47.7) ——

Notes:

  • Unum US AOP sequentially improved; Supplemental & Voluntary AOP up YoY; Group Life and Disability ratios increased YoY on mix and claim dynamics .
  • International premiums +14% with UK premiums +7.6% (LC) and sales +27.3% (LC); AOP down YoY on higher LTD claims and inflation-linked benefits .
  • Closed Block AOP pressured by lower alternative returns and higher average new LTC claim size; NPR increased to 97.6% .

Key Benefit Ratio/KPI Highlights

KPIQ3 2024Q2 2025Q3 2025
Unum US Group Disability Benefit Ratio (ex updates)59.1% 62.2% 61.3%
Unum US Group Life Benefit Ratio (ex updates)65.0% 69.7% 66.0%
Unum US Voluntary Benefits Benefit Ratio (ex updates)45.8% 44.3% 46.2%
Colonial Life Benefit Ratio (ex updates)47.6% 48.3% 48.2%
Unum UK Benefit Ratio (ex updates, LC)69.5% 75.0% 73.8%
LTC Net Premium Ratio94.6% (YE’24) 94.9% 97.6%

Capital and Balance Sheet

MetricQ3 2024Q2 2025Q3 2025
RBC Ratio~470% ~485% ~455%
Holdco Liquidity ($B)$1.39 $1.96 $1.98
BVPS ($)$59.36 $65.76 $64.56
BVPS ex-AOCI ($)$74.15 $77.62 $77.39
Shares Repurchased (Qtr)3.7M; $202M 3.8M; $303M 3.2M; $253M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating EPS (FY)FY 2025≈ $8.50 EPS (as of Q2) “Positioned to achieve full-year outlook”; Q3 and Q4 each ~($0.10) drag from lower alts/LTC NPR Qualitative reaffirm; noted Q3/Q4 drags
Group Disability Benefit RatioH2 2025/Q4 2025Low 60s (prior) Low 60s; Q4 ~62% Maintained
Group Life Benefit Ratio2025≈ 70% (outlook) ≈ 70%; Q3 better at 66% Maintained
Share RepurchasesFY 2025$0.5–$1.0B range Tracking to top end of range Raised to top end
DividendsFY 2025N/A≈ $300M expected Set level
Capital MetricsYE 2025N/AExpect RBC > 425% and holdco liquidity > $2.0B Set targets

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Technology/AI & platformsFocus on core growth, capital deployment; no AI emphasis HR Connect and Total Leave differentiating; AI tools aiding teams and customer experience Increasing emphasis on digital/AI enablement
LTC risk transfer strategyQ2: Closed LTC/IDI reinsurance; capital strength Further de-risking via assumption updates; $2.0B Fairwind protections; pursuing additional transactions Continued de-risking, setup for future deals
Macro/regulatory (rate actions)Capital robust; outlook fine-tuned Expanded actuarially justified LTC premium increases (PV ~$523M); state-by-state process 3–5 years More aggressive rate action incorporated
Product performanceSolid core growth across segments GD benefit ratio low-60s; GL ~70%; SV strong; UK premiums +7.6% (LC), Poland strong growth Steady with pockets of volatility
Capital returnsQ2 revised buybacks to top end On track for top-end buybacks and ~$300M dividends; cash conversion ~100% (buybacks+dividends) Shareholder returns accelerating

Management Commentary

  • CEO Rick McKenney: “We delivered solid top and bottom-line performance across our core businesses… we remain committed to disciplined execution and confident in our ability to drive long-term growth and create lasting value.”
  • CEO: “While our strategic actions necessitate higher GAAP reserves, we are pleased that they position us to… support further risk management through premium rate increases… reinforce our confidence that no future capital contributions will be necessary.”
  • CFO Steve Zabel on EPS drivers: “Third quarter adjusted after-tax operating income per share was $2.09… reflecting strong core business returns… [but] lower alternative investment income and… higher net premium ratio… decreased quarterly earnings by approximately $0.10; we expect a similar effect in the fourth quarter.”
  • CFO on LTC assumptions: “We fully removed the morbidity and mortality improvement assumption ($850M reserve increase) and ceased adding new employees on existing group LTC contracts ($200M), partly offset by expanded premium rate increases (~$525M).”

Q&A Highlights

  • Statutory impact and Fairwind: LTC GAAP reserve changes have “de minimis” statutory impact; protections remain ~ $2.0B; no capital contributions expected; YE RBC > 425% and liquidity > $2.0B targeted .
  • Premium rate increases: Expanded actuarially supported LTC rate actions (PV ~$523M) expected to phase over 3–5 years; process consistent with prior successful approvals .
  • Group Disability/Life outlook: GD benefit ratio anchored in low 60s (Q4 ~62%); GL around 70%, with normal volatility .
  • Capital deployment: On pace to top-end of $0.5–$1.0B buyback range in 2025; ~$300M dividends expected; M&A remains capability-focused .
  • Closing group LTC to new lives: Decision reduces block size and modeling complexity despite foregone positive cash flows; aligns with strategic goal to shrink closed block .

Estimates Context

MetricConsensus*ActualResult
Adjusted EPS (Q3 2025)$2.15*$2.09 Miss
Revenue (Q3 2025)$3,314M*$3,378M Beat

Values marked with * are retrieved from S&P Global.

Implications:

  • Revenue beat reflects steady premium growth across core lines (US +1.9%, Colonial +3.3%, International +14.0%) .
  • EPS miss tied to non-core drivers: lower alternative investment income and higher LTC NPR; management expects similar ~$0.10 headwind in Q4 .

Key Takeaways for Investors

  • Core machine intact: Low-60s GD and ~70% GL benefit ratios with mid-single-digit underlying premium growth (ex stop-loss runoff/IDI cession) support high-teens to low-20s core ROE through year-end .
  • Near-term EPS headwind transitory and identifiable: ~$0.10 drag from alts/NPR likely repeats in Q4; watch alternatives performance and LTC cohort capping for quarterly volatility .
  • LTC de-risking advances optionality: Removing improvement assumptions and ceasing group LTC new lives simplifies the block; protections remain ~$2.0B; expanded rate actions provide a future cash tailwind, aiding potential risk transfer negotiations .
  • Capital return momentum: Tracking to top-end buybacks ($1.0B) plus ~$300M dividends in 2025, supported by strong statutory earnings and liquidity; cash conversion near 100% (buybacks+dividends) .
  • Watch into Q4/2026: Focus on sustainment of GD recoveries, GL claim severity, UK benefit ratios normalization, and execution of LTC rate increases; any additional LTC risk transfer announcements would be a positive stock catalyst .
  • Valuation setup: Revenue beat/AOP stability vs small EPS miss from known items suggests underlying fundamentals firm; narrative likely driven by continued core margin durability and capital deployment cadence .

Additional Detail and Data Sources:

  • Q3 2025 8‑K earnings release and statistical supplement .
  • Q3 2025 press release .
  • Q3 2025 earnings call transcript .
  • Prior quarters’ press releases for trend analysis: Q2 2025 ; Q1 2025 .