Unum Group Q1 FY2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to Unum First Quarter 2026 earnings. After today's prepared remarks, we will host a question-and-answer session. I will now hand the conference over to Matt Royal, Investor Relations. So Matt, please go ahead.

Thank you, and good morning to everyone. Welcome to Unum Group's First Quarter 2026 Earnings Call. Please note today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results. Yesterday afternoon, Unum released our earnings results and financial supplement for the first quarter of 2026. Materials are also available on the Investors section of our website. Also, please note references made today to core operations sales and premium, including Unum International, are presented on a constant currency basis for improved comparability period to period. Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; and Chief Financial Officer, Steve Zabel. Following remarks from Rick and Steve additional members of management will join and participate in Q&A, including Tim Arnold, who heads our Colonial Life and Voluntary Benefits lines, Chris Pyne for Group Benefits; and Mark Till, who heads our Unum International business. Now let me turn the call over to our President and CEO, Rick McKenney.

Great. Thank you, Matt. Good morning, and thank you for joining us. We are very pleased with a solid and encouraging start to 2026. It is one that reflects strong execution across the business for both the top and bottom line, greater capital deployment and continued progress in management of our Closed Block. Core operations performed well with earned premium growth of over 5% adjusting for the transactions. After-tax adjusted operating earnings of $353 million and after-tax adjusted operating EPS of $2.14 is up nearly 10% from a year ago. Leading the way our U.S. group business had a standout quarter with sales up 22% and persistency is strong at 92%. Combined, this drove premiums up approximately 5%, specific to our group lines. The top line also translated to the bottom line as we saw record earnings in group life, bringing total U.S. group earnings to over $220 million and with a very high ROE. Within the group portfolio, this quarter, it was clearly the Group Life business, which outperformed, but not to be overshadowed, our group disability business showed consistent strength with high returns and good long-term disability fundamentals. As we pay careful attention to pricing and risk selection at the employer level for new and existing customers, our team continues to do an excellent job helping people get back to work and fulfill our purpose. These results reinforce what has long been true for us. We have built our business on disciplined pricing and underwriting, strong customer relationship management, which is key to high persistency and continued focused investments and capabilities that differentiate Unum in markets. It is particularly important where technology and human support come together at moments that matter most. It is also another quarter in which we delivered on the consistency and execution that our customers and shareholders expect from us. To achieve this, we have been deliberately investing in technology-enabled solutions that help us win, retain and grow business by making it easier for employers and their employees to engage with their benefits. This is evident in this quarter's results with the success we're having in providing solutions and services that resonate with our customers. In recent years, employers have placed increasing importance on managing employees' leaves. The expansion of state family and medical leave programs has provided another avenue to leverage our leave management leadership position and reach more people. Our Digital First total leave platform combined with our traditional insurance products and technologies such as HR Connect delivers a best-in-class experience to our clients which in turn contributes to the high levels of satisfaction and persistency exemplified this quarter. Extending from our leading group businesses is a very successful and broad-reaching supplemental and voluntary product business. These lines of business saw a 20% sales growth in the quarter. We see employers looking at the broader benefits package more often as these products leverage the same digital tools and employers know they can depend on Unum across their benefit needs. Taking our Unum US business in totality, we delivered strong before tax earnings of $338 million and an ROE of 25% in the quarter. At Colonial Life, momentum continues to build. The business delivered a record earnings quarter supported by premium growth in line with expectations, attractive returns and continued benefit from disciplined execution and strong relationships in the worksite market. Colonial Life is an important component of our reach and able to get to employers of different sizes that are looking for high-quality solutions to help take care of their employees. Looking internationally, after significant growth on top and bottom line over the last several years, Unum International produced mixed results this quarter. Strong performance in Poland, where growth continues at an exceptional pace, was offset by benefits pressure in the U.K. Our market position and know-how gives us confidence that we can actively address macro market dynamics and we are excited about the long-term value growth and contribution of our international businesses. Overall, core operations are in excellent shape heading into the rest of the year. As we refine how we present and focus our earnings on an ongoing basis, we'll also continue to provide transparency into our closed block. This remains an area of active and deliberate management. Importantly, results this quarter reflect tangible progress in reducing both the size and the risk profile of the block. As we announced late last year, we discontinued new employee coverage on existing group cases. The response was well received by clients, particularly among employers who had not recently evaluated the cost and value to their employees of this legacy offering within their broader employee benefits package. Because this product was last marketed in 2012 and provides benefits well beyond an employee's working years, our engagement this quarter led some employers to voluntarily cease their coverage. As a result, 7% of all group LTC cases closed during the first quarter, meaningfully reducing our exposure. Importantly, this reduction in footprint was achieved with clarity and transparency for our clients. As our customers' evaluation continues, we expect additional case closures going forward. Beyond that, our fair wind protection remains at a robust $2.2 billion. The external reinsurance transaction we completed last year continues to perform well, and the elimination of new employee tail risk is fully in place. We continue to evaluate a broad set of options to further mitigate LTC exposure, including risk transfer, and we are encouraged by our progress and the opportunities ahead. The actions we are taking are methodical, deliberate and effective. Each step improves the risk profile and allows us to keep our focus where it belongs, growing and strengthening our core business. Turning to the balance sheet. Our portfolio continues to perform well in the current environment and remains solidly investment grade. Our team has done a good job over the last several years, increasing our overall credit quality at a time when you weren't getting appropriately paid for the inherent credit risk. Additionally, our capital position remains very strong, with RBC at 460%, which is over 100 points above our target range and holding company liquidity is strong at approximately $1.7 billion. With solid capital generation, we remain committed to our capital deployment framework, investing in our business for growth, both organically and inorganically, and then returning capital to our shareholders through dividends and share repurchases. Our outlook calls for the redeployment of roughly $1.3 billion, which is roughly what we generate in a year. During the first quarter, we repurchased approximately $400 million of shares taking advantage of attractive prices to accelerate a portion of our planned repurchase. This reduced our public float by approximately 3% in one quarter. After paying out $78 million in dividends in the first quarter, we will also look to increase our dividend rate in the coming months heading into our annual meeting. Our delivery of investing in growth and deployment plans are intact. Looking ahead, we remain confident in our 2026 outlook, which consists of delivering 4% to 7% top line growth, 8% to 12% EPS growth, attractive returns on equity in our core operations and continued strong capital generation and deployment. The environment remains supportive. Our sales pipelines are building as we move through the year. Digital connections with our customers continue to deepen and our teams remain intensely focused on execution. Most importantly, our purpose of helping the working world thrive throughout life's moments continues to guide our teams. Our growth and our culture over the long term. This year, we were pleased to be named one of the world's most ethical companies for the sixth straight year. This all comes together to generate the results of today and the long-term value creation we are building for customers, employers and shareholders. I'm happy now to turn the call over to Steve to walk through the numbers in more detail. Steve?

Great. Thank you, Rick, and good morning, everyone. The first quarter of 2026 was a strong start to the year with many of the expectations we laid out in our outlook meeting emerging across our businesses, resulting in after-tax adjusted operating income per share of $2.14. Notably, Group Life and AD&D, along with Colonial Life had record levels of earnings and group disability met our expectations. Alongside the strong margins we saw, top line trends were ahead of our expectations with sales growth of 14.4%, grew persistency increasing 2.7% year-over-year to 92% and core premium growth of 3.9%. While premium growth is slightly below our 4% to 7% full year expectation, we had expected this to accelerate and build throughout the year. Adjusting for the runoff of the stop loss business and the transactions executed last year, core premium growth would have been just over 5%. Before moving on to our segment results, I will remind you that this is the first quarter reporting under our new definition of after-tax adjusted operating earnings, which excludes the closed block. While the closed block earnings are no longer represented in our headline adjusted after-tax operating income, I will spend some time later in the call to talk about key trends in that business. Diving into our quarterly operating results across the segments, the Unum US segment produced adjusted operating income of $337.9 million in the first quarter of 2026, compared to $329.1 million in the first quarter of 2025. Group disability adjusted operating earnings of $106.6 million in the first quarter of 2026 reflect a benefit ratio of 63.7% compared to 61.8% in the year ago period and an improvement from 64.2% in the fourth quarter of last year. Overall, long-term disability results are consistent with the assumptions embedded in the models that underpinned our guidance last quarter and reflect continued progress as the line continues to normalize. With that said, the quarter did include higher incidents in the short-term disability product line compared to the same period a year ago. Specifically, paid family and medical leave experience was somewhat elevated in newer PFML states and modestly pressured in existing jurisdictions, reflecting continued investment in the attractive leave opportunity discussed earlier. As PFML remains a maturing market, our standard one-year rate guarantees provide flexibility to respond quickly. Excluding PFML, group disability experience was solid and within expectations supported by stable incidents, strong recoveries and a rational pricing environment. Results for Unum US Group Life and AD&D include adjusted operating income of $115.1 million for the first quarter of 2026 compared to $69.2 million in the same period a year ago. The benefit ratio decreased to 61.8% compared to 69.3% in the first quarter of 2025 driven by lower incidents. This result was extremely favorable compared to our outlook of 70%, and we've now seen multiple years of better-than-expected results, averaging in the mid- to high 60s. We believe that this moderate level of outperformance could continue to persist. Adjusted operating earnings for the Unum US supplemental and voluntary lines were $116.2 million in the first quarter, a decrease from $140.7 million in the first quarter of 2025. The decline in earnings was driven in part by last year's long-term care transaction, which ceded a portion of our IDI business, but also by unfavorable underlying experience in that line. Turning to premium and sales. Our top line trends remain healthy. Unum US premium grew 3.3% with support from high levels of persistency. Excluding the impact from the runoff of the stop loss business and our transaction last year, Unum US premium grew just over 5% year-over-year. Our pipeline for future growth remains strong. Unum U.S. quarterly sales were $335.1 million compared to $277.5 million in the first quarter of 2025. Total group persistency of 92% increased sequentially from the fourth quarter and from the same period last year, reflecting the enduring relationships we are able to create with our customers. Moving to Unum International. Adjusted operating income for the first quarter was $30.9 million compared to $38.7 million in the first quarter of 2025 and below our outlook for earnings in the low $40 million range. The International segment's benefit ratio was 71% compared to 66.5% in the year ago period driven by unfavorable experience in the U.K. business. Adjusted operating income for the Unum UK business was GBP 20.4 million in the first quarter compared to GBP 29.5 million in the first quarter of 2025. The results reflect underlying claims performance, including a benefit ratio of 72.9% compared to 76.1% a year ago. The change in benefit ratio was primarily due to a larger average claim size in our group long-term disability business in 2026. International premiums continue to show growth, increasing 8.1% and are supported by healthy persistency levels and sales growth of 5.5%. Premium growth was broad-based with U.K. premium growing 6.5% and Poland premium growing 15.2%. Next, adjusted operating income for the Colonial Life segment of $127.8 million in the first quarter was a record, and increased from $115.7 million in the first quarter of 2025 driven by strong benefits experience and underlying premium growth. The benefit ratio of 46% compared to 47.7% in the year ago period and was better than our expectation of the range of 48% to 50%. Premium income of $472.7 million compared to $457.3 million in the first quarter of 2025 and was driven by strong sales in the prior year and stable persistency. Sales in the first quarter of $106.3 million were up slightly from the prior year. Colonial Life produced strong returns, including ROE of 19.2%. I will now provide an update on the closed block focusing less on the earnings results and more on key business trends and balance sheet health. Long-Term Care's results this quarter were largely influenced by employers' decisions to cease coverage following the discontinuation of new employee enrollments on existing GLTC cases that we announced in the third quarter of last year and that was effective in February of 2026. As a result of these decisions, we saw elevated GAAP accounting volatility from these closed cases, which is acutely seen in the headline segment earnings results. Despite the margin in these closed cases, which reduced current period GAAP earnings, we are very pleased to reduce the associated exposure and tail risk in the block. In addition, first quarter results included amortization of reinsurance costs related to the LTC reinsurance transaction that closed in July of 2025, which did not impact the year ago period. Outside of these impacts, underlying experience trends remain in line with expectations. Combined with the underlying benefits experience, the NPR increased 10 basis points to 97.6% on a sequential basis. Other key considerations for monitoring the block health include our Fairwind protection remaining stable at approximately $2.2 billion and continued success with our premium rate increase program with our achievement rate sitting at approximately 15% for our current program. Then lastly, for the closed block, our alternative investment portfolio, which mainly supports LTC, had an annualized yield of 6.7% in the quarter, below our long-term expectation of 8% to 10%. We typically see seasonality in first quarter marks due to the timing of receiving year-end statements and therefore, we remain confident in the construction and resiliency of this portfolio. I'll end by covering our capital position. In the quarter, capital metrics across the board remain robust. Holding company liquidity stood at $1.7 billion and traditional RBC at 460%, both above our long-term targets and consistent with our expectations. These levels keep us on track to achieve our full year outlook of 400% to 425% RBC and $2 billion to $2.5 billion of holding company liquidity. Our robust capital position is supported by statutory after-tax operating income of $314 million in the first quarter, positioning us for our full year expectation of $1.4 billion to $1.6 billion of total capital generation. This cash generation model paired with our strong position enables our durable approach to deploying capital to our shareholders. In the quarter, we took the opportunity to execute a dynamic approach to share repurchase, buying back around $400 million of stock. While we are constantly evaluating our capital deployment plans, we view these actions as a pull forward of our plan and remain on track to repurchase $1 billion of stock this year representing all of the free cash flow we plan to generate. Our thoughtful share repurchase, paired with our common stock dividend of $78.4 million put first quarter deployment just under $0.5 billion, underscoring our ongoing focus of executing prudent capital management. So all in all, it is a solid start to the year for the company. The encouraging top line trends and strong margins across many of our products illustrate the high-quality nature of our business. This paired with our continued active management in the Closed Block and opportunistic acceleration of share repurchases provides us with healthy optimism for the remainder of the year and positions us well to execute against our goals. I will now turn it over to Rick for his closing comments before going to your questions.

Thank you, Steve. And overall, you heard from both Steve and I as we delivered a strong first quarter. It reinforces both our near-term momentum and our confidence in the company's long-term positioning as we move through the year. Before we move to Q&A, I want to recognize an important leadership transition for our company. After more than four decades at Unum, Tim Arnold has decided to retire in July. Tim has been a highly respected leader with a significant impact on our voluntary benefits businesses, particularly at Colonial Life, where he has been the President for the past 11 years. Tim is one of the few people who has lived in each of our four major locations and has impacted the people and the communities he has served. We are grateful for his many contributions and the legacy he leaves behind. We're also very pleased with the planned leadership transition, including the appointment of Steve Jones, currently Colonial Life Head of Market and Field Development, as the next President of Colonial Life. This reflects the depth of our management team and our focus on continuity and long-term growth. We will look forward to Steve joining us on this call in the future. So with that, operator, we'd be happy to take questions we have out there.

Your first question from the line of Alex Scott with Barclays.

First one I had is on the paid family medical leave. I wanted to see if you could provide a little more color on what you're seeing in that product line as you move into new states and just help us understand if we should expect to continue to see some pressure there until we hit another renewal cycle or if what you saw in first quarter is a little more one-off in nature.

Yes. Thanks, Alex, for the question. It's Rick. I just wanted to say that this is an important part of the overall mix. When we think about it, it's been consolidated in our group disability results, which, as you can see, is a very high returning business. This is a new developing area, which we've been talking about for a long time. It is an extension of our leave business. Chris, perhaps you can give some more context in terms of the dynamics in the paid family medical leave currently.

Sure. Thanks, Rick. And thanks, Alex. Ultimately, this is an exciting time in our business. If you think about PFML and the states that have come on over time, most recently Minnesota and Delaware were added January 1, and then other states have followed. This is an expansion of a business we're in, giving more employers the requirement to be covered for short-term disability on the employee side, but also adding coverage for family events where people need to be away from work. So it really fits the work and the investments we've made in the leave business where you bundle products and services to make sure that we can be that partner to employers as they manage their workforce for both regulated events and also what they want to provide in terms of flexibility for their employee population. When states come on, we deal with it like any other new line of business coming on in a state. You can see some pressure from pent-up demand that happens at times. We manage it. The good thing about PFML is it is high-frequency type coverage like short-term disability. It gets credible quickly. You can see how the experience emerges and it is short in terms of rate guarantees. So normally, a one-year rate guarantee gives us the opportunity to reprice and we've been doing that, and we'll continue to do that. It also can give you a little bit of lift in sales. Normally, that's been small enough to just be absorbed into our business because it's one state at a time. And obviously, our disability business is quite large. When you have two or more states come on it can show up a little bit, and that does provide a little bit of tailwind in sales. But I would bring you back to—this is the business we're in. Employers need our help with it, so it's an exciting time. When new states come on, that is part of it. As prior states mature in terms of how the experience plays out, that gives us more information, and we'll continue to adjust price and manage that business very well, which is part of our heritage.

That's helpful. Second one I have is on long-term care. Could you talk about the in-force management actions that you've taken? And the 7%, can you tell me about what portion of the policies had that renewal that occurred this quarter? And how much are you expecting to renew that you're working on some of these actions with through the rest of the year? How do we think about that 7% potentially growing to a larger percentage of the total group LTC?

Yes. Thanks, Alex. Let me just provide a little bit more context around our LTC actions. We've been taking them now for several years. As we've said, it's been methodical addressing different parts of our book of business. That includes rate increases, which we've been doing now for a long period of time, also includes the capital actions we've taken behind Fairwind over the last several years. And then most recently, last year on the risk transfer that we did and then in the third quarter, we took some actions around new lives on group cases, and I think that has some impacts that we've started to see come out. Steve, maybe you can take us through some of the details of what we saw specific to this quarter.

Yes. So I would go back to last year when we notified our employer base that we were going to be no longer accepting new lives on existing cases. That really started a lot of conversations with our employer groups about the value of the program and the future of the program. You get into discussions about what we're looking for going forward around our rate increase program. It's just a point in time where they evaluate their entire employee benefits package and how the LTC plans might fit into that. As a result of some of those discussions, we did have much higher levels of employer level terminations of those cases. We quoted that about 7% of our cases did terminate in the first quarter. That equates to approximately 30,000 actual lives on a net basis that would have ceased coverage during that period of time. As we think about ongoing communications with our customers, that's part of the conversation. We will continue to have those going forward. I would say, as we look forward, first quarter is probably the most acute that we feel the impact, but we could see future terminations on some cases as those conversations continue. I would just pull it back up though. I know there's a lot of GAAP accounting noise on this one. But at the end of the day, we're having good conversations with our clients. As a result, we've reduced risk exposure and tail risk on that book of business, and we just view it as another part of us thinking about how to manage this business going forward.

Next question from the line of Tom Gallagher with Evercore ISI.

First question is just on how to think about guidance over the balance of the year. I heard your comment on Group Life and AD&D, how you think that's probably going to trend somewhat favorable relative to initial assumption. Can you just mention have you changed anything for the other businesses? It does seem like international is running somewhat adverse. And I guess, group disability, the loss ratio sounds like it might be more toward the high end of the range, if I'm reading you correctly on this PFML issue. Assuming that process for a bit, can you just talk about how are you thinking about the different businesses over the balance of the year?

Yes, this is Steve. I would say we feel very comfortable in the guidance range that we've given based on what we've seen in the first quarter, the drivers of some of the margins in the first quarter and how we look to the back half of the year. I'd start with we feel great about growth within our core businesses, and that's a real driver of bottom line. Everything we're seeing commercially would very much support the top line growth that will drive the earnings that we have in that outlook. We did have some variances against original expectations in the first quarter. You mentioned group life. That was a great result for us. We do think that there's a possibility that will continue to be somewhat favorable to the 70%. But as you know, group life can be very volatile, so we just have to see how the year plays out. International benefit ratio was a little bit higher. There were some one-off things around just the average size of new disability claims. We don't believe that will persist. We'll monitor that as the year goes on. Colonial had a great quarter. Really everything from a benefit ratio perspective was very positive. We have a lot of different products within that, and there's usually a little bit of offsetting performance. But this quarter, everything was very positive. And then there are some other lines where we had some variations, including group disability, but they were all within our range going into planning for that ultimate outlook. So Tom, at this point, we're one quarter in. I'd say we still feel very good about the broad outlook range that we gave at the beginning of the year.

Got you. My follow-up also long-term care. Can you give a little bit of color for how big are the group LTC reserves relative to the total of, we'll call it, $14 billion or so? And did you—when you had a 7% reduction from nonrenewals, can you provide a little more transparency on what that did to reserve levels versus the capital that make up the $2.2 billion of excess over best estimates in Fairwind?

Yes. So it wasn't 17%. We had a 7% reduction in cases in the first quarter due to employers ceasing the coverage in their plans. From a statutory reserving perspective, we did release reserves in the first quarter of the year and felt very good about that. Zooming back a bit and thinking about the protections we have in Fairwind generally: mechanically, we release those statutory reserves and those in essence flow into excess capital in Fairwind. When you think about our definition of protections in Fairwind, it's a combination of the margins that we have in the reserves and the excess capital; it was pretty much neutral. So the way I think about it is we still have $2.2 billion of protections in Fairwind on a block that's smaller. Net-net, we feel like we have more relative protection in Fairwind for the remaining block. We haven't really disclosed the split between GAAP and individual versus group statutory reserves, and that's something we can consider going forward. There is a lot of demographic information about the split between individual and group in our annual investor packet that we send out as part of that call.

Our next question from the line of Suneet Kamath with Jefferies.

Just wanted to start out, congratulating Tim Arnold on his retirement, but I did want to ask him a question. Just on the voluntary business, we're starting to see some reports of states telling insurance companies to lower premiums on certain products. Just wondering if you're seeing any of that in terms of your business?

Yes, this is Tim. Thank you so much for the congratulations on the retirement. I appreciate that. There have been states throughout the last 10 to 15 years who had loss ratio requirements that differ, and so it's not something new that we're working through, but we are seeing a couple of additional instances where states are inquiring about loss ratios and just trying to make sure that the products are performing as they were originally priced.

Got it. Okay. And then, I guess, turning to Unum US, the 20% sales growth was pretty strong. I think most of it is from the core market. But can you just kind of unpack that a little bit? How much of that is sales to existing customers versus new customers? And any comment on kind of the natural growth that you typically talk about on these calls?

Yes, Suneet. Actually, we'll let Chris get into that. But I think it would be helpful to talk about sales around the horn because we had a really good sales quarter in the U.S. and other places as well. Chris, do you want to start us off and maybe we'll ask Mark and Tim to talk a little bit about sales as well?

Great. Thanks, Suneet. Yes, strong sales in the quarter, 20% growth, and we're thrilled. As we look at that sales growth, we continue to tie it back to where we've made investments and capabilities. No surprise, HR Connect and connecting to the platforms of choice are hugely popular with our new sales and also growing existing sales when that type of connection is in place. That is a huge driver of decisions that people make and they buy a bundle when they do that for both total leave and HR Connect type platforms. I want to also reinforce that we've got a very strong marketing alignment in terms of going out and finding the right types of prospects so that we know where to spend time and energy and our brokers and consultants are focused on the right things when it comes to making a difference for their client base. That's an exciting partnership, and it's nice to see that alignment all the way through the sales funnel. You referenced that new sales for small and mid customers were really strong. There's a little bit of tailwind in PFML in that space, but even when you strip that out, new sales for small and mid customers were really strong—nice to see that growth year-over-year. First quarter is a little bit more volatile. It's a small quarter for us in terms of our national client group. We did see some tailwind from PFML in the large space with Maine coming on which we see in the quarter. But overall, the fundamentals of where we're winning tied to capabilities, winning on new and growing our business have been really positive. Great start to the year. Thanks for asking.

Tim, do you want to follow up?

Yes, sure. I'll start with the Unum voluntary benefits side of the house. Extremely strong sales in the first quarter, up 24% year-over-year. New sales were at a record level. In the voluntary benefits business on the Unum side, the first quarter is the biggest quarter of the year. So it's particularly comforting to see the business get off to a plus 24% start that bodes well for the remainder of the year. On the Colonial Life side, sales were a little sluggish in the quarter. However, I would just bring you back to the fourth quarter where sales growth was almost 10%. I think we had a little bit of a soft pipeline coming into 2026. But I would tell you the fundamentals and the leading indicators remain very strong. Recruiting is very strong. We like the number of sales managers we have in the organization and the performance that they are demonstrating. We saw strong sales in the quarter from new clients and also from large case clients, had a little bit of weakness in the existing client sales base. The sales team is working hard to get that back on track. We believe that the remainder of the year, there's reason to be optimistic. If you look at the gap between where we finished the first quarter at Colonial Life and where we thought we would be, it's about one percent of total annual sales. So we certainly think that is recoverable. And if I may, since you started the question with my retirement, I'd be remiss not to say I'm extremely excited about Steve Jones. I have the opportunity to work with him now for 2.5 years. He joined Colonial Life as the Head of Sales and Market Development. He is an incredibly strong leader. He's led other P&Ls in his career. I think this transition is going to be extremely smooth. He's very much aligned to all the things that we've been doing. Really, really happy to have Steve in the role moving forward.

Good. Thanks, Tim. And Mark, let's talk a little bit about international.

Yes. If you look at international as a whole in dollars, sales were up 14%. As we know, the U.K. is the predominant part of that. If I touch on local currency sales in the U.K., they were up 15% on the quarter. I always think sales are a function of the proposition that you have and the way in which the brokers in the U.K. market view you. We've been investing hard in broker service and digital propositions. Last week an independent survey by NMG rated us number one for Net Promoter Score, and we led the market in pretty much every major capability, whether that's relationship management, claims management, absence management, rehab product, value-added service. Those are the things that contribute to growth in the business. We also got data that said that in 2025, we were the number one writer of new business in the U.K. market. So I think we've got some confidence that we have the support of the brokers and the propositions to be able to drive sales growth in the business over time.

Good. Thanks, Mark. I think it is a broad-based story, and so I don't want to focus on just the US. Sales looked very good across the enterprise in the quarter. Thanks for the question.

Your next question from the line of Francis Matten with BMO.

Just one follow-up on the group LTC actions. I guess what you said that Unum is incentivizing its group customers in any way to terminate their cases? Or do you plan to offer any concessions there? Or is it really just these terminations an outcome from more normal course conversations around things like rate increases?

This is Steve. Absolutely no incentives. This is a unilateral decision that a group HR director makes when they're looking at their entire benefit package for their employees and just evaluating the value of the different pieces of that package. We're obviously here to have that conversation with them and discuss their options with their plan, but there's absolutely no incentive coming from us. From our perspective, the key is for us to continue to serve those customers that remain in force, and that's what our team is focused on. But we're also there to provide education and help administrate through their decision.

Next question from the line of Joel Hurwitz with Dowling.

First, Rick, in your prepared remarks, you mentioned that you were encouraged by opportunities and progress that's been made on further risk transfer. Can you just elaborate what you're seeing in the market? Any optimism in getting another deal done this year?

Yes. Thanks, Joel. As I talk about that, I look back to the transaction last year—it's been just over a year since we announced the transaction closed at midyear last year. We are very happy with how that performed and how it went through close, and we think it had a good overall impact on risk transfer. We are looking across the book with different counterparties to think about other ways we can use reinsurance and risk transfer to help mitigate that. Coming off of a successful 2025, we also said we're deal-ready. We're ready to go for the next tranche. It's just about finding the right counterparty. We have the preparation and the teams ready to do that. We have a strong desire to remove this risk, which we have been very consistent on, and that's in multiple forms in terms of taking the risk across the enterprise. On the risk transfer side, the market is constructive. There are a number of players out there that might take on this type of risk, lots of interest, but getting interest to be actionable takes some time because it requires a qualified counterparty who's willing to do the work. There are a number of players thinking about the biometric risk and the asset management side and how to bring it all together. So it's constructive, and the team is active, but it does not necessarily mean any deal will come to fruition this year. This is still complicated, and we'll do the right thing for shareholders when we take off that risk. We're working hard at it and it will continue to be a priority to remove the LTC risk from the balance sheet.

Great. And then shifting to Group Life, can you unpack the experience? Was it essentially frequency? Given it's been over two years now of continued strong results in group life, when does that get reflected back in pricing? Or is the benefit ratio in the 60s for this line sort of the new normal now?

In the quarter, it was definitely incidents. These tend to be lower face amount type policies in group life. When you see fluctuations in overall benefit ratios, it's typically driven by the number of claims we receive in a period, and that's what we saw in the first quarter—very low number of claims submitted. Zooming back, if you look at the average benefit ratio in this line going back many quarters, it's been in that high 60% range. This quarter was an anomaly and doesn't necessarily change our view of the block significantly. Looking forward, it may be in that high 60% benefit ratio range, but it's too early to change pricing materially based on one quarter of very, very good performance. Like all our products, we look at this in a bundled way when working with cases and evaluate the overall economics of the case. Over time, it could factor in, but right now it is too early.

And that's an important point. When you think about it, it's the bundling factor. It's more than just the standalone product. It's about the relationship, our risk selection and all those different things that come in like leave management and the wrapper around that. That's all important. We're very happy with the results, but it's hard to predict how the market will factor some of that in.

Your next question from the line of Wesley Carmichael with Wells Fargo.

I wanted to come back to group LTC for a second on the terminations in the 7%. Looking at statutory annual filings, I think group LTC reserves were around $7.5 billion at the end of 2025. Does that imply the reserve releases are in the neighborhood of, call it, $500 million, $525 million? Any help you can give us on the impact on the statutory front?

You can't just use averages to think about what a statutory reserve release might look like because policies are of different ages and have different benefit coverages. On a net basis, the statutory reserve release was less than $100 million. It was significant, but it wasn't something that would change a capital plan or change the way we think about protections on the balance sheet. We're very happy reducing the risk exposure, but it was not a big capital impact in the quarter. Reserves on these will generally produce releases for statutory purposes, so there will be reserve release activity over time, but this quarter's amount wasn't massive.

That's helpful. Second question on Unum US: any thought on how you can improve the expense ratio going forward in Unum US? You hinted last quarter there may be some potential operating leverage.

We think about it in aggregate. Our expectation for 2026 is that operating expense will be relatively flat with maybe some improvement as we work our way through the year. We're driving productivity within the organization, which is important, but we're also investing back into our commercial activities. So for 2026, it's probably a pretty neutral story all things considered.

Our next question from the line of Brian Kruger with KBW.

I had a question on the group persistency improvement of about three points year-over-year. Can you talk about the dynamics that led to that both from a market perspective and anything unit-specific?

Persistency is really strong. We're thrilled with the beat we had with persistency, and we do think it reflects very directly the investments we've made in capabilities. We have historical evidence that continues where there's better persistency where you've got either HR Connect, technology investments and/or total leave, and we expect that trend to continue. Couple that with the fact that we have consistent and transparent discussions around price. When things are going really well, we'll set the price on a go-forward basis in a way that reflects good value to us and fair value to the consumer. Employers appreciate that. It shows up in persistency, and we can keep customers with a modest rate reduction going forward at very high margins. That's a good outcome. When you tie that to the full bundle and the various services we provide, including significant contributions from managing leave, customers value what we do for them, and we believe the persistency while it may not always stay as high as this quarter, will be a key to growth in the future.

The next question from the line of Mark Hughes with Truist.

Flip side of that, supplemental and voluntary persistency perhaps down a little bit in the quarter. Any strategies to see similar improvement like you've seen in those core group disability, life and AD&D?

Do you want to take that?

I'll start with the wrapper because those things that Chris talked about are important overall in terms of the digital connections we have. Our voluntary business does have a bit lower persistency at the employee level. Tim, maybe you can talk about that.

Yes, that's exactly where we experienced the pressure in the quarter. As we continue to attach the voluntary benefits business on the Unum side to our leave program and platform partnerships with HR Connect and brokers, we're seeing improving persistency on the employer choice side. In the quarter, we had volatility in what we call member lapses—policyholders who are either changing employers or for whatever reason dropping their coverage. The overwhelming majority of those are people changing employers. We're taking a deeper look to fully understand and will put together any actions necessary to bring that back. We think a big part of it was just some volatility in the quarter.

I would underscore Tim's point: those conversations when you're talking holistically about the human capital management platform and leave and the full portfolio give us the chance to talk about how to make sure ongoing enrollments remain strong and drive persistency over time.

Your next question from the line of Pablo Singzon with JPMorgan.

One more question on Unum International, where you referenced macro dynamics in the U.K. Was that related to inflation potentially picking up again, the economic outlook, or something to do with underlying risk experience that you had already commented on?

Mark, I don't know if you picked up the question, but I was talking about the macro environment and if that's causing some of the benefits and you specifically highlighted inflation.

I think it's fair to say that the macroeconomic environment in the U.K. is not as strong as it has been for the last couple of years. We have slightly higher inflation. The Bank of England has yet to respond with higher interest rates and actually sent some calming messages indicating it wasn't going to do that. There has been a little bit of a slowdown in 2025 in existing employers adding lives to schemes, but that picked up in quarter one of 2026. At the moment, I would say the mood is a little lower, but there's not a lot to suggest economic activity is much lower. The other thing to note is that the benefit ratio pressure this quarter was more related to the average size of new disability claims rather than general inflation effects or broad policy linkages.

The other thing I'd add, Pablo, is that while some of our policies are inflation-linked, that's not a significant contributor this quarter; the main issue was the average size of some of the claim submissions.

Second question, U.S. supplemental: Q1 was below the quarterly run rate you provided before, I think it was $120 million to $130 million, and the loss ratio was at the high end of your range. Can you give us an updated outlook?

There's nothing specific that we would say is recurring. We still feel really good about the quarterly outlook we give for supplemental and voluntary. IDI claims were a little high for the quarter. We saw a little bit of volatility in voluntary benefits, but nothing that we expect to continue through the remainder of the year. So not changing our view on ongoing earnings there.

Your next question from the line of Tracy Benguigui with Wolfe Research.

I appreciate you clarifying that roughly $100 million of reserves for the group LTC case exits was not material enough to move the needle on capital. Taking a step back, can you share what you would need to see to reallocate some of your $2.2 billion of LTC protection into excess capital?

We feel really good about leaving the protections down in Fairwind right now. We don't have other needs for that capital at the moment. We would have the ability to dividend some of that up to the holding company, but as everybody knows, we have plenty of excess capital at the holding company to have flexibility. So right now, we think the most prudent thing is to leave that protection down in Fairwind. That also could support a future transaction. We think it's a good use of capital right now.

Your next question from the line of Michael Ward with UBS.

Going back to paid family medical leave: can you help us size the actual underwriting business that you've gotten from the state leave management programs? You've spoken about this for a couple of years, but I understood it was like a fee-for-service model historically.

Mike, when you talk about leave, there is an element that is fee-for-service—organizations can outsource their corporate leaves and FMLA administration. But where PFML gets most of the discussion is in states with mandatory plans that provide a private option. We like to play in those spaces and have offerings that will be compliant with state requirements, and we can incorporate that into the broader short-term disability and long-term disability play. It ties in with total leave management—helping employers keep track of employee eligibility because inside one employer you often have employees in multiple states with different rules. PFML is the insured component covering paid leave associated with a medical claim or family member events. To size it, it's still less than 10% of our overall disability book. Normally, once that comes on it doesn't have much impact. This quarter, as referenced, we had two larger states that showed up in the loss ratio and some new sales coming on, which affected results in a smaller quarter like the first quarter. But in general, that's the insured element of PFML we’re discussing, outside the fee-for-service leave administration business.

Is PFML mostly around parental leave, or are you seeing more family care claims? Is there anything that prevents it from becoming a longer-term claim if it's for a family member?

Good question. Short-term disability historically had maternity as the most prominent claim, and PFML extends that for the birth mother and paternity/bonding leave. A mother can go longer than historically for the time after birth, and maternity/bonding leave can be meaningful but there are caps. Same with family members—there are limits on how long someone can be away from work under PFML. Part of our job for employers is to keep track of how long somebody has been away, what they're eligible for, how long they can be paid, and to tell them when coverage is exhausted.

And importantly, all of that can be priced for, and pricing cycles are short. So you can respond to changes that might emerge in that book.

Your next question from the line of Wilma Burdis with Raymond James.

On Group LTC, can you give a little more detail—was it one large account that left or many smaller accounts? Is the product less attractive than it once was, or was this a one-off?

It was broad-based. We had 7% of cases terminate; it wasn't a couple of major accounts. It was more employers evaluating the value of the product within the context of their overall employee benefits package. Many of these plans are employer-funded, and HR directors weigh how to allocate their budget. So the terminations were generally distributed across cases rather than concentrated in a few large ones.

We haven't seen as many peers accelerating buybacks to the extent Unum did this quarter. Can you talk about how you view tactical buybacks going forward?

When we think about capital deployment, it's consistent with our plan of redeploying roughly what we generate annually. We saw the opportunity to buy shares in the quarter because we were in an excess capital position, so it was not challenging to make that decision and we were opportunistic. We showed we can be dynamic in repurchases. We're not changing the longer-term outlook, but we will take advantage of attractive market opportunities as they arise. We were happy to retire about 3% of our shares in the quarter and we'll evaluate future quarters similarly.

We have reached the end of the Q&A session. I will now turn the call back over to Rick McKenney for closing remarks.

Great. Thank you for joining us today. We do appreciate the engagement. We'll be out there with upcoming opportunities to connect. We would note that our annual meeting will be held on May 21. You can dial in for that as well or send questions. Thanks for your time. Please do send Tim Arnold a note. I'm sure he would appreciate it. And congratulations to him. That concludes today's call. Thanks, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.