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In accordance with General Instruction B.2 of Form 8-K, the information in this report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any of Unum Group’s filings under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 2 Safe Harbor Statement and Non-GAAP Financial Measures Certain information in this presentation 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 our 2018 outlook for sales, premium income, operating earnings, and operating return on equity, under current market conditions, as well as about weighted average risk-based capital ratios, holding company cash and marketable securities and share repurchases are subject to numerous assumptions, risks, and uncertainties, many of which are beyond our control. 31 High Yield Our allocation to high yield has remained very consistent over time at roughly 7% of invested assets. 47 Employers are more committed to benefits than ever, but need help with cost, administration, and employee engagement Consumer need for financial protection is growing, but they don’t understand our products well Technology enabling new distribution and offerings, but insurance is highly regulated and complex Interest rates remain a pressure point, but disciplined re-pricing can offset over time Competition increasing with new carriers filing benefits products, butbuilding delivery capabilities takes time and scale Unum US MARKET TRENDS. 56 Colonial Life BUSINESS SNAPSHOT Primary Products ● Accident, Sickness and Disability ● Life (Term, UL, WL) ● Cancer and Critical Illness Market Share.
● #6 Voluntary Carrier with 6% market share ● Product Sales: - #2 in STD and Cancer - #3 in Accident - #3 in Hospital Indemnity, UL & WL and Critical Illness Size and Scale ● Over 80,000 clients served ● Over 3.8 million policies in force ● Over 10,000 career agents and 14,000 brokers under contract.Market share based on Eastbridge U.S. Worksite /Voluntary Carrier Sales Report for 2016 1 Last Nine Months Ending September 30, 2017 2 Last Twelve Months September 30, 2017. 58 Colonial Life continues to deliver, strong, consistent results, driven primarily by strong premium income growth and diligent expense management. 2018 is expected to deliver slightly lower earnings growth, driven by accelerating investments in our future growth. Investments in distribution expansion, partnerships, digital capabilities, and service offerings support our ability to capitalize on marketplace opportunities and achieve our growth objectives. Talent development, bench strength, and diversity/inclusion are essential to our growth. While changing market dynamics and growing technology requirement pose risks to our plan, the increasing need for our products and services combined with strong execution will allow us to stay ahead of the market.
Colonial Life KEY MESSAGES. 59 There is opportunity for continued territory expansion We opened 3 new territories in 2017 and expect to continue adding 2-4 new territories per year for the foreseeable future. We will continue to invest in broker and public sector support resources to ensure we continually drive execution excellence. In addition, we are working to continuously enhance our agent experience and deliver on growing expectations for technology and tools. We expect to build on the success we are seeing with our 2017 territory expansion. We are encouraged by our overall recruiting and new agent success. Colonial Life TERRITORY EXPANSION.
60 Despite maintaining industry leading persistency, customer persistency remains a key area of focus. We are focused on the customer experience and are investing in people, process and technology to drive higher levels of engagement and satisfaction at the employer and consumer levels. Examples include, enhanced: ● Communications ● Plan Administrator website ● 3rd Party Platform integrations ● Digital capabilities ● Alternative payment capabilities ● Streamlined operational processes Most policyholder lapses are due to employees leaving their employer.
We are continuing to identify opportunities to maintain the consumer relationship in the event of an employee leaving their employer. Colonial Life PERSISTENCY AND RETENTION. 61 Expand Colonial Life’s market position and distribution opportunities by integrating competitive, best-in-class, dental and vision products into our portfolio. A dental vision offering provides our distribution a leading capability to compete in the employer core benefit market. On track to launch our individual dental PPO in 1Q18 for the small case market. Plans to launch group dental and vision PPO plans in 2019.
Dental opens the door to other products to help grow overall sales and increase persistency Dental is the second top-selling employee paid product. 69% of employers offer dental coverage as a workplace benefit Dental is a high-touch, well-understood product. Colonial Life LEVERAGING DENTAL. 62 Colonial Life MILLENIALS Millennials are a growing share of the workforce. Studies indicate that Millennials value face-to-face consultation when purchasing insurance. Millennials value the types of products and advice Colonial Life offers. Over 35% of Colonial’s YTD 2017 sales were to Millennials.
Colonial Life has demonstrated success in attracting and retaining Millennial talent. Colonial’s Millennial talent has grown by 40% over the last 4-years and now represents over 1/3 of our workforce. 63 Colonial Life 2017 YEAR-TO-DATE RESULTS Our 2017 YTD sales demonstrate the success of our strategic initiatives and investments in sales leadership, distribution effectiveness and sales support ● Solid sales fundamentals through third quarter 2017: - New account sales up 8.6%, Existing account sales up 4.3% - Direct sales up 1.2%, Broker channel sales up 8.2% - Sales to Core. 66 Unum UK BUSINESS SNAPSHOT Primary Products ● Group Income Protection ● Group Life ● Supplementary and Voluntary products: Group Critical Illness, Dental, Individual Income Protection (Closed) Market Share ● #1 Group Income Protection (38%) ● #5 Group Life (9%) ● #3 Group Critical Illness (14%) ● Dental: 20-25% market share Market Scope ● Over 10,000 employers served ● 1.7 million employees insured (inc. Over 170,000 dental customers) 1 Last Nine Months Ending September 30, 2017 2 Last Twelve Months September 30, 2017.
68 2017 YTD September results are stable in a very challenging environment ● Sales up 11% on prior year with strong growth in Dental and Critical Illness. ● Earned premium growth of 2% despite pricing strategy on interest rate sensitive products. ● Profit lower than 2016 due to lower natural growth from wages and staff increments, lower NII and claims volatility. While long term growth opportunities are significant, there continues to be some short-to-medium-term headwinds ● Brexit is driving a high degree of political and economic uncertainty. ● The UK interest rate outlook has deteriorated post-Brexit. ●Employers are cost-sensitive and limiting business investments ●GDP growth is expected to remain positive and avoid recession, although lower than previous projections.
Unum UK DOING WELL IN A CHALLENGING ENVIRONMENT. 70 Optimal Financial Management – Deliver focused rate increases in interest rate sensitive products, targeting increased small case sales and optimizing investment returns. Monitor and mitigate environmental challenges – e.g.
2017 challenges to insured workforce, wage growth and claims volatility likely to continue. Diversification of product portfolio – Continue strong momentum in strategic growth areas of GCI and Dental, increase participation rates and find new sustainable profitable revenue streams. Expand distribution – Continue to invest in digital capabilities to drive sustainable medium and long term growth and identify alternative distribution opportunities. Ease of doing business – Complete and embed enhanced admin capabilities, drive digital strategy forward to maintain customers being at the heart of everything we do. Unum UK 2018 KEY PRIORITIES. 71 Brexit continues to generate significant uncertainty and ambiguity in our market place and the economic outlook.
Lower economic growth, wage inflation and interest rate outlook continues to have a negative impact on our growth expectations in the short to medium term. We continue to monitor and adapt our plans accordingly to respond to the external challenges. Our investment portfolio is defensively positioned, our operational performance is solid, and we continue to invest in technology and proposition enhancements.
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We will differentiate ourselves based on outstanding customer service. The workplace remains an attractive place to distribute insurance products in the UK and the non-interest rate sensitive product markets are showing significant growth.
We are well positioned to capitalize on future growth opportunities as Brexit negotiations are resolved and the operating environment improves. Unum UK WELL PLACED TO DEAL WITH UNCERTAINTY. 77 Closed Block KEY MESSAGES We have achieved rate increase approvals for 85-90% of the estimated value embedded in our LTC GAAP reserves. We have exceeded our LTC new money yield targets while maintaining our aggregate investment credit profile.
Better than expected interest margins have offset an elevated interest-adjusted loss ratio. Since our 2014 reserve update, the cumulative LTC interest-adjusted loss ratio has been 89.7%, which is at the upper end of our 85-90% range. Our outlook is the loss ratio will likely be elevated. Closed Block IDI performance has been stable. This block’s distributable earnings has retired the Northwind debt as scheduled; 26% of debt remains outstanding and is expected to be fully retired in 2020. 78 Closed Block PREMIUM RATE INCREASE PROGRAM We have made significant progress on our current rate increase program, and reserves have no value estimated for future rate increase programs. We have had success in larger, more complex states since last Investor Day.
However, phasing in approvals and the remaining undecided states are taking longer than we anticipated. Policyholder election rates for landing spot has been over 60%. This significantly reduces the future benefit growth rate and positively contributes to reserve margins. We continue to participate and influence NAIC activities regarding driving consistency in state approaches to approval process.
79 Closed Block LTC LOSS RATIO AND RESERVE OUTLOOK Reserve Adequacy studies complete; we feel comfortable with our position. Since our 2014 reserve update, the cumulative LTC interest-adjusted loss ratio has been 89.7%, which is at the upper end of our expected 85-90% range. Our outlook is the loss ratio will likely be elevated. While the loss ratio is expected to remain elevated, rate increase expectations contribute positively to our reserve margin and we believe we will ultimately exceed our reserve estimate. Investment margins have offset loss ratio pressure.
However, our long term new money assumptions are a watch area. We unilaterally benefit from higher interest rates as the majority of our block is indemnity; meaning benefit levels are not impacted by care cost inflation rates. Stat Reserves exceed GAAP Reserves by a comfortable margin ($1B).
Recently prescribed NAIC guidelines for LTC cash flow testing are not expected to have an impact on our Stat Reserve levels. NY cash flow testing results are expected to result in contributed capital to our First Unum company at a level similar to prior years and in line with our capital deployment plan. 81 Overall Closed Block earnings are expected to remain consistent in 2018 compared to 2017. Over the long term, we expect gradually declining income trends for this segment as these closed blocks of business wind down. We will continue to execute on our well-defined strategy of implementing long-term care rate increases, efficient capital management, improved financial analysis, and operational effectiveness. Longer term, there are a number of external factors which will dictate the performance of these blocks of business, particularly in the long-term care block.
Closed Block SUMMARY. 87 Appendix RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Non-GAAP Financial Measures We analyze our performance using non-GAAP financial measures which exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. GRAPHIC 3 a2018outlookmeetingfinal001.jpg begin 644 a2018outlookmeetingfinal001.jpg MCX 02D9)1@! 0( E '4 #VP!#,' @,' @,# P,$ P,$!0@%!00$ M!0H'!P8(# H,# L.' PL-#A(0#0X1#@L+$!80$1,4%145# 7&!84&!(4%13 MVP!# 0,$!
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