Unum Moves LTC Below the Line, Pitches 'Cleaner' Core Business at UBS Conference

February 9, 2026 · by Fintool Agent

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Unum Group CEO Rick McKenney and CFO Steve Zabel made their case for multiple expansion at the UBS Financial Services Conference today, defending the company's decision to move its troubled Long-Term Care closed block below the line and arguing the core business deserves a higher valuation.

"Because this is a special item below the line, we won't get into all the detailed nuances, which really don't matter ultimately to the longer term strength of this block of business," McKenney said. "I think that's really good for us to be spending time... to talk about the core business and how excited we are about growing the company." 1

The accounting presentation change, announced alongside Q4 earnings last Friday, resets Unum's 2025 adjusted operating EPS to $7.93—down from the previously reported $9.46—by excluding closed block results. From this lower base, management guided to 8-12% EPS growth in 2026, targeting $8.60-$8.90 per share. 2

The Reporting Overhaul Explained

The mechanics of the change are significant. Beginning in Q1 2026, Unum will exclude closed block earnings entirely from its adjusted operating income metrics. 3

CFO Steve Zabel explained the rationale at the conference: "What we'd like to do is really be able to present our core businesses for what they are, which is a very stable, consistent generator of cash that's available to redeploy, and do that so that the market can really digest the performance of that on a standalone basis." 4

The company made three related adjustments:

1. LTC as special item: All closed block earnings now reported below the line
2. Reinsurance accounting simplified: Non-contemporaneous reinsurance gains/losses moved to segment results
3. Equity reallocation: Decreased closed block allocated equity, increasing investment income at core segments 5

Management emphasized this doesn't signal capitulation on the LTC strategy. "Our investment allocation and portfolio management hasn't changed, our risk management hasn't changed, and the fact that we want to reduce that block, that has not changed," Zabel said. 6

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Core Business: 4-7% Premium Growth Expected

Beyond the accounting changes, management used the UBS stage to highlight the growth trajectory of the core business.

"We talked about growing premium in a range of 4%-7%. When you think about that, off a $10 billion base, we see good growth coming over the course of 2026 across many of our lines," McKenney said. 1

Leave Management as Growth Driver

Unum positioned Leave Management as a key differentiator. The company now has over 2 million people on its leave platform, capitalizing on the proliferation of state-mandated paid leave programs.

"Employers need somebody to manage this piece for them, and it leads very well right into our short-term disability, long-term disability. So it fits in the overall package," McKenney explained. 2

Group Disability: Benefit Ratio Normalization

The conference addressed the elephant in the room—normalizing group disability margins. Management set a 62-64% benefit ratio target for 2026 and projected long-term normalization around 65%, up from the unusually low 57% seen in 2024.

"The history of that block is it had a Benefit Ratio that was more in the low 70s if you go pre-pandemic," Zabel acknowledged. "We do think the normalization will be right around 65%. That's gonna occur over 2-3 years." 3

Even at 65%, the business generates 20%+ returns on equity, management noted—defending it as a sustainable margin despite competitive pricing pressures. 4

Capital Return: 100% of Earnings to Shareholders

Unum's capital deployment story remains compelling. The company returned $1.3 billion to shareholders in 2025 ($1 billion buybacks + $300 million dividends) and plans another 100% payout in 2026. 5

"We're at a point where we're buying back more than double what we used to," Zabel noted, referencing the ~$400 million annual buybacks pre-pandemic. 10

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The Multiple Expansion Pitch

An investor question cut to the heart of the story: Unum's stock has gone from $20 to $80 over five years, but still trades at ~8x earnings vs. historical 12x multiples.

McKenney's answer was direct: "One of the things is the action we took around the Closed Block. I'm not sure the rest of our business really was representing the multiple that it deserved because of the overshadowing of the Closed Block." 1

The CEO argued the reporting change will allow investors to properly value the core business: "As we see the growth in the business, the underlying returns, and the ROE being generated by our business, it dictates a much higher multiple." 2

Stock Reaction and Context

Unum shares traded at $72.02, down 3.4% on the day, as investors digested both the Q4 earnings miss and the conference commentary.

The Q4 miss ($1.92 EPS vs. $2.11-2.12 consensus) stemmed from higher group disability claims and weak segment performance. The stock bounced 5.1% on the Feb 6 earnings call before giving back gains.

Note: FY 2025 net income and EPS were significantly impacted by LTC reserve assumption updates and pension settlement charges, which are excluded from the redefined operating basis.

LTC Protections Reiterated

Management reiterated confidence in the LTC closed block protections:

• $2.2 billion in reserves and capital at Fairwind subsidiary 14
• No capital contributions since 2023 commitment 15
• $4 billion in LTC reserves transferred via Fortitude Re and internal reinsurance transactions in 2025 16
• Full runoff effective February 1, 2026—no new employee coverage on existing group LTC cases 17

"We've said we will not put more capital in that Closed Block. Three years ago, we said that statement. We still hold to that today," McKenney emphasized. 18

What to Watch

The key question is whether the reporting change unlocks the multiple expansion management is targeting. Success depends on:

1. Core earnings stability: Can Unum deliver 8-12% growth without LTC noise?
2. Group disability margins: Will the 65% benefit ratio terminus hold, or are there further headwinds?
3. Leave Management traction: Can this become a meaningful growth driver vs. competitor offerings from Aflac, Metlife, and The Hartford?
4. M&A execution: The Generali UK and Beanstalk Benefits deals signal appetite for capability-driven acquisitions 19

Wall Street consensus currently sits at $8.81 EPS for FY 2026—toward the midpoint of guidance.*

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*Values retrieved from S&P Global