8-K
Unum Group (UNM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 9, 2023
| UNUM GROUP | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Delaware | 001-11294 | 62-1598430 |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1 Fountain Square
Chattanooga, Tennessee 37402
(Address of principal executive offices) (Zip Code)
(423) 294-1011
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, $0.10 par value | UNM | New York Stock Exchange |
| 6.250% Junior Subordinated Notes due 2058 | UNMA | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 7.01 Regulation FD Disclosure.
On March 9, 2023, Unum Group (the "Company") made available a Supplemental Exhibit to illustrate the anticipated changes to the presentation of the Company's prior period financial results as a result of the modified retrospective adoption, effective January 1, 2023, of Accounting Standards Update No. 2018-12.
In 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts”. This update significantly amends the accounting and disclosure requirements for long-duration insurance contracts. The Company adopted this update effective January 1, 2023 using the modified retrospective approach with changes applied as of January 1, 2021, also referred to as the transition date.
This information is being made available to provide investors with additional information regarding the expected impact of the accounting standards update to the Company's financial results and the presentation thereof prior to the Company's earnings release for the quarter ended March 31, 2023. A copy of the Supplemental Exhibit is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference and furnished herewith.
In accordance with General Instruction B.2 of Form 8-K, the information furnished pursuant to Item 7.01 of 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 the Company’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.
Item 9.01 Financial Statements and Exhibits.
| (d) Exhibits. | |
|---|---|
| 99.1 | Supplemental Exhibit (Unaudited) of Financial Results as Adjusted for Accounting Standards Update for Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12). |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Unum Group | |||
|---|---|---|---|
| (Registrant) | |||
| Date: March 9, 2023 | By: | /s/ J. Paul Jullienne | |
| Name: | J. Paul Jullienne | ||
| Title: | Vice President, Managing Counsel, and | ||
| Corporate Secretary |
Document
Unum Group
Supplemental Exhibit for ASU 2018-12
TABLE OF CONTENTS
(in millions of dollars, except share data and where noted)
Unaudited
| Page | |
|---|---|
| Financial Highlights | 1 |
| Capital Metrics | 2 |
| Consolidated Statements of Income | 3 |
| Consolidated Balance Sheets | 4 |
| Financial Results and Selected Statistics by Segment | |
| Unum US | 5 |
| Unum International | 6 |
| Colonial Life | 7 |
| Closed Block | 8 |
| Appendix toSupplemental Exhibit | 9 |
| See "Appendix to Supplemental Exhibit" on page 9 for a summary of significant items and page 9.2 for a reconciliation of our non-GAAP financial measures. | |
| N.M. = not a meaningful percentage |
Unum Group Financial Highlights - Adjusted for ASU 2018-12
We adopted ASU 2018-12 using the modified retrospective approach effective January 1, 2023, with changes applied as of January 1, 2021, also referred to as the transition date. Below and on the remaining pages we are providing 2021 and 2022 financial data adjusted for our modified retrospective adoption of this update.
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Consolidated U.S. GAAP Results¹ | ||||||||||||||||||
| Premium Income | $ | 2,410.2 | $ | 2,388.9 | $ | 2,416.0 | $ | 2,401.4 | $ | 9,616.5 | $ | 9,475.0 | ||||||
| Adjusted Operating Revenue | $ | 2,998.2 | $ | 2,963.5 | $ | 3,043.7 | $ | 2,994.4 | $ | 11,999.8 | $ | 11,931.1 | ||||||
| Net Investment Gain (Loss) | 6.6 | (4.4) | (4.1) | (13.8) | (15.7) | 76.7 | ||||||||||||
| Total Revenue | $ | 3,004.8 | $ | 2,959.1 | $ | 3,039.6 | $ | 2,980.6 | $ | 11,984.1 | $ | 12,007.8 | ||||||
| Net Income | $ | 289.2 | $ | 510.3 | $ | 367.3 | $ | 240.4 | $ | 1,407.2 | $ | 981.0 | ||||||
| Net Income Per Common Share: | ||||||||||||||||||
| Basic | $ | 1.45 | $ | 2.55 | $ | 1.83 | $ | 1.19 | $ | 7.01 | $ | 4.80 | ||||||
| Assuming Dilution | $ | 1.44 | $ | 2.53 | $ | 1.81 | $ | 1.18 | $ | 6.96 | $ | 4.79 | ||||||
| Assets | $ | 61,148.5 | $ | 72,292.3 | ||||||||||||||
| Liabilities | $ | 52,413.5 | $ | 66,258.4 | ||||||||||||||
| Stockholders' Equity | $ | 8,735.0 | $ | 6,033.9 | ||||||||||||||
| Adjusted Stockholders' Equity | $ | 11,459.1 | $ | 10,528.4 | ||||||||||||||
| Adjusted Operating Return on Equity | ||||||||||||||||||
| Unum US | 15.3 | % | 20.2 | % | 20.3 | % | 11.7 | % | 16.7 | % | 7.3 | % | ||||||
| Unum International | 26.4 | % | 25.5 | % | 23.3 | % | 15.6 | % | 21.4 | % | 10.8 | % | ||||||
| Colonial Life | 17.9 | % | 32.8 | % | 18.5 | % | 20.2 | % | 22.5 | % | 21.1 | % | ||||||
| Core Operating Segments | 17.0 | % | 23.7 | % | 20.2 | % | 14.1 | % | 18.6 | % | 11.0 | % | ||||||
| Consolidated | 10.7 | % | 14.6 | % | 14.5 | % | 10.3 | % | 12.4 | % | 9.2 | % |
1 Generally Accepted Accounting Principles
Unum Group Capital Metrics - Adjusted for ASU 2018-12
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Book Value (in millions) | |||||||||||||||
| Total Stockholders' Equity | $ | 8,735.0 | $ | 8,402.8 | $ | 7,787.8 | $ | 6,887.8 | $ | 6,033.9 | |||||
| Excluding: | |||||||||||||||
| Net Unrealized Gain (Loss) on Securities | (3,028.4) | (3,486.3) | (1,560.4) | 1,121.2 | 4,014.4 | ||||||||||
| Net Gain (Loss) on Hedges | (9.6) | 13.5 | 46.4 | 51.4 | 61.8 | ||||||||||
| Effect of Change in Discount Rate Assumptions on the Liability for Future Policy Benefits | 313.9 | 681.7 | (1,541.2) | (4,912.6) | (8,570.7) | ||||||||||
| Subtotal | 11,459.1 | 11,193.9 | 10,843.0 | 10,627.8 | 10,528.4 | ||||||||||
| Excluding: | |||||||||||||||
| Foreign Currency Translation Adjustment | (390.1) | (439.0) | (367.5) | (306.7) | (274.1) | ||||||||||
| Subtotal | 11,849.2 | 11,632.9 | 11,210.5 | 10,934.5 | 10,802.5 | ||||||||||
| Excluding: | |||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs | (334.1) | (380.9) | (386.8) | (391.8) | (396.0) | ||||||||||
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 12,183.3 | $ | 12,013.8 | $ | 11,597.3 | $ | 11,326.3 | $ | 11,198.5 | |||||
| Book Value (per share) | |||||||||||||||
| Total Stockholders' Equity | $ | 44.17 | $ | 42.20 | $ | 38.89 | $ | 34.12 | $ | 29.79 | |||||
| Excluding: | |||||||||||||||
| Net Unrealized Gain (Loss) on Securities | (15.31) | (17.51) | (7.79) | 5.55 | 19.82 | ||||||||||
| Net Gain (Loss) on Hedges | (0.05) | 0.07 | 0.23 | 0.25 | 0.30 | ||||||||||
| Effect of Change in Discount Rate Assumptions on the Liability for Future Policy Benefits | 1.59 | 3.42 | (7.70) | (24.33) | (42.32) | ||||||||||
| Subtotal | 57.94 | 56.22 | 54.15 | 52.65 | 51.99 | ||||||||||
| Excluding: | |||||||||||||||
| Foreign Currency Translation Adjustment | (1.98) | (2.20) | (1.84) | (1.52) | (1.35) | ||||||||||
| Subtotal | 59.92 | 58.42 | 55.99 | 54.17 | 53.34 | ||||||||||
| Excluding: | |||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs | (1.69) | (1.91) | (1.93) | (1.94) | (1.96) | ||||||||||
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 61.61 | $ | 60.33 | $ | 57.92 | $ | 56.11 | $ | 55.30 | |||||
| Leverage Ratio | 23.4 | % | 23.8 | % | 24.5 | % | 24.9 | % | 25.1 | % |
Unum Group Consolidated Statements of Income - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||
| Revenue | ||||||||||||
| Premium Income | $ | 2,410.2 | $ | 2,388.9 | $ | 2,416.0 | $ | 2,401.4 | $ | 9,616.5 | $ | 9,475.0 |
| Net Investment Income | 524.4 | 511.6 | 559.0 | 527.2 | 2,122.2 | 2,213.2 | ||||||
| Net Investment Gain (Loss) | 6.6 | (4.4) | (4.1) | (13.8) | (15.7) | 76.7 | ||||||
| Other Income | 63.6 | 63.0 | 68.7 | 65.8 | 261.1 | 242.9 | ||||||
| Total Revenue | 3,004.8 | 2,959.1 | 3,039.6 | 2,980.6 | 11,984.1 | 12,007.8 | ||||||
| Benefits and Expenses | ||||||||||||
| Benefits and Change in Reserves for Future Benefits | 1,850.2 | 1,784.0 | 1,865.7 | 1,983.0 | 7,482.9 | 7,897.3 | ||||||
| Change in Reserves - Remeasurement Gain | (71.4) | (282.5) | (65.6) | (68.8) | (488.3) | (344.0) | ||||||
| Commissions | 267.3 | 271.5 | 274.4 | 273.2 | 1,086.4 | 1,038.1 | ||||||
| Interest and Debt Expense | 47.2 | 47.0 | 47.4 | 46.9 | 188.5 | 185.0 | ||||||
| Cost Related to Early Retirement of Debt | — | 4.2 | — | — | 4.2 | 67.3 | ||||||
| Deferral of Acquisition Costs | (137.8) | (139.4) | (137.9) | (141.8) | (556.9) | (523.2) | ||||||
| Amortization of Deferred Acquisition Costs | 108.1 | 102.9 | 106.5 | 103.6 | 421.1 | 452.1 | ||||||
| Other Expenses | 567.7 | 529.8 | 509.9 | 488.8 | 2,096.2 | 1,974.6 | ||||||
| Total Benefits and Expenses | 2,631.3 | 2,317.5 | 2,600.4 | 2,684.9 | 10,234.1 | 10,747.2 | ||||||
| Income Before Income Tax | 373.5 | 641.6 | 439.2 | 295.7 | 1,750.0 | 1,260.6 | ||||||
| Income Tax Expense | 84.3 | 131.3 | 71.9 | 55.3 | 342.8 | 279.6 | ||||||
| Net Income | $ | 289.2 | $ | 510.3 | $ | 367.3 | $ | 240.4 | $ | 1,407.2 | $ | 981.0 |
Unum Group Consolidated Balance Sheets - Adjusted for ASU 2018-12
| 2022 | 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| Assets | ||||||||||
| Investments | ||||||||||
| Fixed Maturity Securities - at fair value | $ | 34,840.8 | $ | 34,148.2 | $ | 36,576.4 | $ | 39,946.0 | $ | 43,336.0 |
| Mortgage Loans | 2,435.4 | 2,476.4 | 2,490.7 | 2,529.5 | 2,560.4 | |||||
| Policy Loans | 3,601.2 | 3,640.8 | 3,524.3 | 3,573.5 | 3,662.9 | |||||
| Other Long-term Investments | 1,440.1 | 1,430.4 | 1,391.6 | 1,280.4 | 1,203.0 | |||||
| Short-term Investments | 1,394.8 | 1,183.2 | 1,336.1 | 1,295.5 | 1,388.0 | |||||
| Total Investments | 43,712.3 | 42,879.0 | 45,319.1 | 48,624.9 | 52,150.3 | |||||
| Other Assets | ||||||||||
| Cash and Bank Deposits | 119.2 | 143.3 | 151.4 | 106.6 | 75.0 | |||||
| Accounts and Premiums Receivable | 1,482.1 | 1,475.4 | 1,563.9 | 1,571.6 | 1,519.9 | |||||
| Reinsurance Recoverable | 9,608.0 | 9,574.1 | 10,110.9 | 10,939.5 | 11,924.2 | |||||
| Accrued Investment Income | 615.0 | 717.2 | 705.6 | 658.5 | 602.7 | |||||
| Deferred Acquisition Costs | 2,560.0 | 2,526.5 | 2,493.3 | 2,464.3 | 2,427.4 | |||||
| Goodwill | 347.6 | 344.4 | 347.7 | 350.8 | 352.2 | |||||
| Property and Equipment | 451.7 | 442.4 | 447.5 | 454.9 | 462.7 | |||||
| Deferred Income Tax | 586.0 | 601.2 | 686.7 | 889.8 | 1,085.6 | |||||
| Other Assets | 1,666.6 | 1,674.4 | 1,684.0 | 1,704.9 | 1,692.3 | |||||
| Total Assets | $ | 61,148.5 | $ | 60,377.9 | $ | 63,510.1 | $ | 67,765.8 | $ | 72,292.3 |
Unum Group Consolidated Balance Sheets - Adjusted for ASU 2018-12 - Continued
| 2022 | 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Liabilities | ||||||||||
| Future Policy Benefits1 | $ | 39,082.5 | $ | 38,315.2 | $ | 41,918.7 | $ | 46,991.7 | $ | 52,510.7 |
| Policyholders' Account Balances1 | 5,234.8 | 5,305.6 | 5,247.7 | 5,255.3 | 5,295.7 | |||||
| Unearned Premiums | 365.5 | 406.8 | 449.9 | 444.8 | 360.3 | |||||
| Other Policyholders’ Funds | 1,750.4 | 1,756.0 | 1,778.8 | 1,816.9 | 1,790.9 | |||||
| Income Tax Payable | 190.9 | 212.2 | 232.6 | 227.2 | 159.1 | |||||
| Deferred Income Tax | 25.2 | 20.9 | 36.7 | 104.5 | 113.6 | |||||
| Short-term Debt | 2.0 | — | — | — | — | |||||
| Long-term Debt | 3,427.8 | 3,429.2 | 3,442.8 | 3,442.9 | 3,442.2 | |||||
| Other Liabilities | 2,334.4 | 2,529.2 | 2,615.1 | 2,594.7 | 2,585.9 | |||||
| Total Liabilities | 52,413.5 | 51,975.1 | 55,722.3 | 60,878.0 | 66,258.4 | |||||
| Stockholders’ Equity | ||||||||||
| Common Stock | 30.8 | 30.8 | 30.8 | 30.8 | 30.7 | |||||
| Additional Paid-in Capital | 2,441.0 | 2,432.3 | 2,417.4 | 2,395.8 | 2,408.1 | |||||
| Accumulated Other Comprehensive Income (Loss) | (3,448.3) | (3,611.0) | (3,809.5) | (4,438.5) | (5,164.6) | |||||
| Retained Earnings | 13,141.3 | 12,917.9 | 12,473.7 | 12,166.9 | 11,989.4 | |||||
| Treasury Stock - at cost | (3,429.8) | (3,367.2) | (3,324.6) | (3,267.2) | (3,229.7) | |||||
| Total Stockholders’ Equity | 8,735.0 | 8,402.8 | 7,787.8 | 6,887.8 | 6,033.9 | |||||
| Total Liabilities and Stockholders’ Equity | $ | 61,148.5 | $ | 60,377.9 | $ | 63,510.1 | $ | 67,765.8 | $ | 72,292.3 |
| 1 We previously reported Policy and Contract Benefits and Reserves for Future Policy Benefits in our consolidated balance sheets for each of the periods shown above. As part of the adoption of ASU 2018-12, these balances were reclassified into new line items, Future Policy Benefits and Policyholders' Account Balances. |
4.1
Unum Group Financial Results - Adjusted for ASU 2018-12
We measure and analyze our segment performance on the basis of "adjusted operating revenue" and "adjusted operating income" or "adjusted operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of investment gains or losses, amortization of the cost of reinsurance, and non-contemporaneous reinsurance, as well as certain other items as specified in the following pages. Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income.
Unum Group Financial Results for Unum US Segment - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | $ | 1,580.6 | $ | 1,556.8 | $ | 1,571.0 | $ | 1,543.0 | $ | 6,251.4 | $ | 6,072.0 | ||||||
| Net Investment Income | 166.9 | 170.6 | 167.8 | 171.0 | 676.3 | 721.6 | ||||||||||||
| Other Income | 49.5 | 49.0 | 50.7 | 47.1 | 196.3 | 170.0 | ||||||||||||
| Total | 1,797.0 | 1,776.4 | 1,789.5 | 1,761.1 | 7,124.0 | 6,963.6 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 1,106.5 | 1,033.9 | 1,087.7 | 1,184.3 | 4,412.4 | 4,720.1 | ||||||||||||
| Change in Reserves - Remeasurement Gain | (76.7) | (211.8) | (87.6) | (65.4) | (441.5) | (289.8) | ||||||||||||
| Commissions | 155.8 | 151.3 | 154.1 | 153.2 | 614.4 | 583.4 | ||||||||||||
| Deferral of Acquisition Costs | (73.7) | (66.2) | (64.9) | (68.3) | (273.1) | (257.8) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 62.4 | 62.9 | 58.7 | 56.9 | 240.9 | 285.9 | ||||||||||||
| Other Expenses | 391.1 | 354.7 | 349.6 | 332.1 | 1,427.5 | 1,291.2 | ||||||||||||
| Total | 1,565.4 | 1,324.8 | 1,497.6 | 1,592.8 | 5,980.6 | 6,333.0 | ||||||||||||
| Income Before Income Tax and Net Investment Gains and Losses | 231.6 | 451.6 | 291.9 | 168.3 | 1,143.4 | 630.6 | ||||||||||||
| Reserve Assumption Updates | — | (155.0) | — | — | (155.0) | (215.0) | ||||||||||||
| Adjusted Operating Income | $ | 231.6 | $ | 296.6 | $ | 291.9 | $ | 168.3 | $ | 988.4 | $ | 415.6 | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratio1 | 65.2 | % | 62.8 | % | 63.7 | % | 72.5 | % | 66.0 | % | 76.5 | % | ||||||
| Other Expense Ratio2 | 24.0 | % | 22.1 | % | 21.6 | % | 20.9 | % | 22.2 | % | 20.7 | % | ||||||
| Income Ratio | 29.0 | % | 18.3 | % | 10.4 | % | ||||||||||||
| Adjusted Operating Income Ratio | 14.7 | % | 19.1 | % | 18.6 | % | 10.9 | % | 15.8 | % | 6.8 | % |
1Excludes the reserve decreases related to the reserve assumption updates that occurred during the third quarters of 2022 and 2021.
2Includes Unum US Group Disability's Other Income, which is primarily related to the fee-based services.
Unum Group Financial Results for Unum US Group Disability - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Group Long-term Disability | $ | 492.5 | $ | 480.9 | $ | 474.4 | $ | 463.9 | $ | 1,911.7 | $ | 1,827.8 | ||||||
| Group Short-term Disability | 240.4 | 232.2 | 232.1 | 221.6 | 926.3 | 864.0 | ||||||||||||
| Total Premium Income | 732.9 | 713.1 | 706.5 | 685.5 | 2,838.0 | 2,691.8 | ||||||||||||
| Net Investment Income | 86.5 | 84.8 | 87.5 | 90.3 | 349.1 | 379.6 | ||||||||||||
| Other Income | 48.3 | 48.4 | 49.8 | 45.3 | 191.8 | 165.7 | ||||||||||||
| Total | 867.7 | 846.3 | 843.8 | 821.1 | 3,378.9 | 3,237.1 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 545.0 | 498.6 | 535.3 | 563.9 | 2,142.8 | 2,140.8 | ||||||||||||
| Change in Reserves - Remeasurement Gain | (65.4) | (174.6) | (64.0) | (56.4) | (360.4) | (229.3) | ||||||||||||
| Commissions | 53.3 | 52.1 | 53.4 | 52.5 | 211.3 | 199.8 | ||||||||||||
| Deferral of Acquisition Costs | (15.0) | (12.9) | (12.5) | (12.7) | (53.1) | (49.8) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 15.0 | 14.2 | 12.7 | 11.1 | 53.0 | 84.2 | ||||||||||||
| Other Expenses | 231.8 | 217.2 | 213.4 | 199.9 | 862.3 | 773.9 | ||||||||||||
| Total | 764.7 | 594.6 | 738.3 | 758.3 | 2,855.9 | 2,919.6 | ||||||||||||
| Income Before Income Tax and Net Investment Gains and Losses | 103.0 | 251.7 | 105.5 | 62.8 | 523.0 | 317.5 | ||||||||||||
| Reserve Assumption Updates | — | (121.0) | — | — | (121.0) | (215.0) | ||||||||||||
| Adjusted Operating Income | $ | 103.0 | $ | 130.7 | $ | 105.5 | $ | 62.8 | $ | 402.0 | $ | 102.5 | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratio1 | 65.4 | % | 62.4 | % | 66.7 | % | 74.0 | % | 67.1 | % | 79.0 | % | ||||||
| Other Expense Ratio2 | 29.7 | % | 28.5 | % | 28.2 | % | 27.4 | % | 28.5 | % | 27.1 | % | ||||||
| Income Ratio | 35.3 | % | 18.4 | % | 11.8 | % | ||||||||||||
| Adjusted Operating Income Ratio | 14.1 | % | 18.3 | % | 14.9 | % | 9.2 | % | 14.2 | % | 3.8 | % |
1Excludes the reserve decreases related to the reserve assumption updates that occurred during the third quarters of 2022 and 2021.
2Includes Other Income, which is primarily related to the fee-based services.
5.1
Unum Group Financial Results for Unum US Group Life and Accidental Death & Dismemberment - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Group Life | $ | 419.2 | $ | 417.7 | $ | 419.6 | $ | 412.6 | $ | 1,669.1 | $ | 1,641.9 | ||||||
| Accidental Death & Dismemberment | 44.0 | 43.8 | 43.8 | 42.1 | 173.7 | 165.1 | ||||||||||||
| Total Premium Income | 463.2 | 461.5 | 463.4 | 454.7 | 1,842.8 | 1,807.0 | ||||||||||||
| Net Investment Income | 25.2 | 25.3 | 24.9 | 24.9 | 100.3 | 104.0 | ||||||||||||
| Other Income | 0.4 | 0.4 | 0.4 | 0.4 | 1.6 | 1.7 | ||||||||||||
| Total | 488.8 | 487.2 | 488.7 | 480.0 | 1,944.7 | 1,912.7 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 367.6 | 366.6 | 342.9 | 407.1 | 1,484.2 | 1,730.8 | ||||||||||||
| Change in Reserves - Remeasurement Loss (Gain) | (5.3) | (40.8) | (14.6) | (7.6) | (68.3) | 4.0 | ||||||||||||
| Commissions | 36.7 | 38.8 | 38.2 | 36.7 | 150.4 | 144.7 | ||||||||||||
| Deferral of Acquisition Costs | (10.4) | (9.0) | (8.8) | (9.1) | (37.3) | (36.1) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 11.4 | 11.0 | 10.1 | 9.4 | 41.9 | 58.6 | ||||||||||||
| Other Expenses | 62.4 | 58.4 | 56.2 | 54.1 | 231.1 | 213.8 | ||||||||||||
| Total | 462.4 | 425.0 | 424.0 | 490.6 | 1,802.0 | 2,115.8 | ||||||||||||
| Income (Loss) Before Income Tax and Net Investment Gains and Losses | 26.4 | 62.2 | 64.7 | (10.6) | 142.7 | (203.1) | ||||||||||||
| Reserve Assumption Update | — | (34.0) | — | — | (34.0) | — | ||||||||||||
| Adjusted Operating Income (Loss) | $ | 26.4 | $ | 28.2 | $ | 64.7 | $ | (10.6) | $ | 108.7 | $ | (203.1) | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratio1 | 78.2 | % | 78.0 | % | 70.8 | % | 87.9 | % | 78.7 | % | 96.0 | % | ||||||
| Other Expense Ratio | 13.5 | % | 12.7 | % | 12.1 | % | 11.9 | % | 12.5 | % | 11.8 | % | ||||||
| Income Ratio | 13.5 | % | 7.7 | % | ||||||||||||||
| Adjusted Operating Income (Loss) Ratio | 5.7 | % | 6.1 | % | 14.0 | % | (2.3) | % | 5.9 | % | (11.2) | % |
1Excludes the reserve decrease related to the reserve assumption update that occurred during the third quarter of 2022.
5.2
Unum Group Financial Results for Unum US Supplemental and Voluntary - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Voluntary Benefits | $ | 204.5 | $ | 196.2 | $ | 214.4 | $ | 218.6 | $ | 833.7 | $ | 840.7 | ||||||
| Individual Disability | 110.8 | 118.9 | 117.8 | 113.6 | 461.1 | 459.8 | ||||||||||||
| Dental and Vision | 69.2 | 67.1 | 68.9 | 70.6 | 275.8 | 272.7 | ||||||||||||
| Total Premium Income | 384.5 | 382.2 | 401.1 | 402.8 | 1,570.6 | 1,573.2 | ||||||||||||
| Net Investment Income | 55.2 | 60.5 | 55.4 | 55.8 | 226.9 | 238.0 | ||||||||||||
| Other Income | 0.8 | 0.2 | 0.5 | 1.4 | 2.9 | 2.6 | ||||||||||||
| Total | 440.5 | 442.9 | 457.0 | 460.0 | 1,800.4 | 1,813.8 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 193.9 | 168.7 | 209.5 | 213.3 | 785.4 | 848.5 | ||||||||||||
| Change in Reserves - Remeasurement Loss (Gain) | (6.0) | 3.6 | (9.0) | (1.4) | (12.8) | (64.5) | ||||||||||||
| Commissions | 65.8 | 60.4 | 62.5 | 64.0 | 252.7 | 238.9 | ||||||||||||
| Deferral of Acquisition Costs | (48.3) | (44.3) | (43.6) | (46.5) | (182.7) | (171.9) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 36.0 | 37.7 | 35.9 | 36.4 | 146.0 | 143.1 | ||||||||||||
| Other Expenses | 96.9 | 79.1 | 80.0 | 78.1 | 334.1 | 303.5 | ||||||||||||
| Total | 338.3 | 305.2 | 335.3 | 343.9 | 1,322.7 | 1,297.6 | ||||||||||||
| Adjusted Operating Income | $ | 102.2 | $ | 137.7 | $ | 121.7 | $ | 116.1 | $ | 477.7 | $ | 516.2 | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratios: | ||||||||||||||||||
| Voluntary Benefits | 43.4 | % | 35.1 | % | 42.4 | % | 44.9 | % | 41.6 | % | 45.1 | % | ||||||
| Individual Disability | 48.4 | % | 45.0 | % | 50.3 | % | 54.6 | % | 49.5 | % | 45.0 | % | ||||||
| Dental and Vision | 65.9 | % | 74.5 | % | 72.9 | % | 73.4 | % | 71.6 | % | 72.6 | % | ||||||
| Other Expense Ratio | 25.2 | % | 20.7 | % | 19.9 | % | 19.4 | % | 21.3 | % | 19.3 | % | ||||||
| Adjusted Operating Income Ratio | 26.6 | % | 36.0 | % | 30.3 | % | 28.8 | % | 30.4 | % | 32.8 | % |
5.3
Unum Group Financial Results for Unum International Segment - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||
| Adjusted Operating Revenue | ||||||||||||
| Premium Income | ||||||||||||
| Unum UK | ||||||||||||
| Group Long-term Disability | $ | 89.4 | $ | 89.8 | $ | 94.3 | $ | 103.4 | $ | 376.9 | $ | 401.9 |
| Group Life | 37.7 | 35.0 | 33.3 | 32.2 | 138.2 | 112.3 | ||||||
| Supplemental | 28.2 | 27.4 | 29.4 | 29.0 | 114.0 | 112.6 | ||||||
| Unum Poland | 23.0 | 21.1 | 22.4 | 23.2 | 89.7 | 90.2 | ||||||
| Total Premium Income | 178.3 | 173.3 | 179.4 | 187.8 | 718.8 | 717.0 | ||||||
| Net Investment Income | 47.8 | 37.0 | 50.8 | 34.5 | 170.1 | 132.7 | ||||||
| Other Income | 0.2 | 0.2 | 0.3 | 0.2 | 0.9 | 0.6 | ||||||
| Total | 226.3 | 210.5 | 230.5 | 222.5 | 889.8 | 850.3 | ||||||
| Benefits and Expenses | ||||||||||||
| Benefits and Change in Reserves for Future Benefits | 102.4 | 153.7 | 129.8 | 135.7 | 521.6 | 555.0 | ||||||
| Change in Reserves - Remeasurement Loss (Gain) | 19.2 | (25.3) | 21.3 | 12.8 | 28.0 | (2.0) | ||||||
| Commissions | 11.4 | 15.0 | 15.0 | 14.9 | 56.3 | 54.1 | ||||||
| Deferral of Acquisition Costs | (2.7) | (2.9) | (2.9) | (3.5) | (12.0) | (12.8) | ||||||
| Amortization of Deferred Acquisition Costs | 2.1 | 1.3 | 2.7 | 2.1 | 8.2 | 7.0 | ||||||
| Other Expenses | 38.8 | 36.2 | 36.5 | 34.6 | 146.1 | 139.1 | ||||||
| Total | 171.2 | 178.0 | 202.4 | 196.6 | 748.2 | 740.4 | ||||||
| Adjusted Operating Income | $ | 55.1 | $ | 32.5 | $ | 28.1 | $ | 25.9 | $ | 141.6 | $ | 109.9 |
Unum Group Financial Results for Unum UK - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions of pounds, except exchange rate) | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | ||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Group Long-term Disability | £ | 76.2 | £ | 76.2 | £ | 75.1 | £ | 77.1 | £ | 304.6 | £ | 292.0 | ||||||
| Group Life | 32.0 | 29.8 | 26.5 | 24.0 | 112.3 | 81.7 | ||||||||||||
| Supplemental | 23.9 | 23.4 | 23.4 | 21.6 | 92.3 | 81.8 | ||||||||||||
| Total Premium Income | 132.1 | 129.4 | 125.0 | 122.7 | 509.2 | 455.5 | ||||||||||||
| Net Investment Income | 38.6 | 29.9 | 39.2 | 24.2 | 131.9 | 91.0 | ||||||||||||
| Other Income | — | — | — | 0.1 | 0.1 | 0.1 | ||||||||||||
| Total | 170.7 | 159.3 | 164.2 | 147.0 | 641.2 | 546.6 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 76.4 | 117.6 | 92.6 | 89.9 | 376.5 | 362.8 | ||||||||||||
| Change in Reserves - Remeasurement Loss (Gain) | 16.0 | (21.1) | 17.3 | 9.7 | 21.9 | 1.7 | ||||||||||||
| Commissions | 5.8 | 9.1 | 8.7 | 8.2 | 31.8 | 28.7 | ||||||||||||
| Deferral of Acquisition Costs | (0.9) | (1.0) | (1.1) | (1.2) | (4.2) | (4.3) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 1.4 | 0.8 | 1.9 | 1.2 | 5.3 | 4.5 | ||||||||||||
| Other Expenses | 26.4 | 25.3 | 23.3 | 20.6 | 95.6 | 81.8 | ||||||||||||
| Total | 125.1 | 130.7 | 142.7 | 128.4 | 526.9 | 475.2 | ||||||||||||
| Adjusted Operating Income | £ | 45.6 | £ | 28.6 | £ | 21.5 | £ | 18.6 | £ | 114.3 | £ | 71.4 | ||||||
| Weighted Average Pound/Dollar Exchange Rate | 1.197 | 1.157 | 1.256 | 1.339 | 1.221 | 1.378 | ||||||||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratio | 69.9 | % | 74.6 | % | 87.9 | % | 81.2 | % | 78.2 | % | 80.0 | % | ||||||
| Other Expense Ratio | 20.0 | % | 19.6 | % | 18.6 | % | 16.8 | % | 18.8 | % | 18.0 | % | ||||||
| Adjusted Operating Income Ratio | 34.5 | % | 22.1 | % | 17.2 | % | 15.2 | % | 22.4 | % | 15.7 | % |
6.1
Unum Group Financial Results for Colonial Life Segment - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Accident, Sickness, and Disability | $ | 234.9 | $ | 236.1 | $ | 238.2 | $ | 239.7 | $ | 948.9 | $ | 953.3 | ||||||
| Life | 97.9 | 100.2 | 101.3 | 101.7 | 401.1 | 384.7 | ||||||||||||
| Cancer and Critical Illness | 87.6 | 87.0 | 88.1 | 89.3 | 352.0 | 352.2 | ||||||||||||
| Total Premium Income | 420.4 | 423.3 | 427.6 | 430.7 | 1,702.0 | 1,690.2 | ||||||||||||
| Net Investment Income | 37.3 | 38.6 | 38.7 | 38.1 | 152.7 | 172.0 | ||||||||||||
| Other Income | 0.3 | 0.3 | 0.2 | 0.3 | 1.1 | 1.0 | ||||||||||||
| Total | 458.0 | 462.2 | 466.5 | 469.1 | 1,855.8 | 1,863.2 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 233.8 | 221.0 | 231.3 | 240.5 | 926.6 | 969.8 | ||||||||||||
| Change in Reserves - Remeasurement Gain | (17.8) | (70.1) | (1.4) | (11.2) | (100.5) | (58.1) | ||||||||||||
| Commissions | 82.0 | 86.0 | 86.4 | 85.6 | 340.0 | 320.1 | ||||||||||||
| Deferral of Acquisition Costs | (61.4) | (70.3) | (70.1) | (70.0) | (271.8) | (252.6) | ||||||||||||
| Amortization of Deferred Acquisition Costs | 43.6 | 38.7 | 45.1 | 44.6 | 172.0 | 159.2 | ||||||||||||
| Other Expenses | 82.3 | 83.8 | 78.6 | 76.7 | 321.4 | 297.0 | ||||||||||||
| Total | 362.5 | 289.1 | 369.9 | 366.2 | 1,387.7 | 1,435.4 | ||||||||||||
| Adjusted Operating Income | $ | 95.5 | $ | 173.1 | $ | 96.6 | $ | 102.9 | $ | 468.1 | $ | 427.8 | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Benefit Ratio | 51.4 | % | 35.6 | % | 53.8 | % | 53.2 | % | 48.5 | % | 53.9 | % | ||||||
| Other Expense Ratio | 19.6 | % | 19.8 | % | 18.4 | % | 17.8 | % | 18.9 | % | 17.6 | % | ||||||
| Adjusted Operating Income Ratio | 22.7 | % | 40.9 | % | 22.6 | % | 23.9 | % | 27.5 | % | 25.3 | % |
Unum Group Financial Results for Closed Block Segment - Adjusted for ASU 2018-12
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Adjusted Operating Revenue | ||||||||||||||||||
| Premium Income | ||||||||||||||||||
| Long-term Care | $ | 174.4 | $ | 174.5 | $ | 173.7 | $ | 174.8 | $ | 697.4 | $ | 704.3 | ||||||
| All Other | 56.5 | 61.0 | 64.3 | 65.1 | 246.9 | 291.5 | ||||||||||||
| Total Premium Income | 230.9 | 235.5 | 238.0 | 239.9 | 944.3 | 995.8 | ||||||||||||
| Net Investment Income | 252.9 | 251.4 | 291.5 | 274.8 | 1,070.6 | 1,159.0 | ||||||||||||
| Other Income | 12.4 | 13.1 | 16.5 | 16.0 | 58.0 | 65.1 | ||||||||||||
| Total | 496.2 | 500.0 | 546.0 | 530.7 | 2,072.9 | 2,219.9 | ||||||||||||
| Benefits and Expenses | ||||||||||||||||||
| Benefits and Change in Reserves for Future Benefits | 407.5 | 375.4 | 416.9 | 422.5 | 1,622.3 | 1,652.5 | ||||||||||||
| Change in Reserves - Remeasurement Loss (Gain) | 3.9 | 24.7 | 2.1 | (5.0) | 25.7 | 5.9 | ||||||||||||
| Commissions | 18.1 | 19.2 | 18.9 | 19.5 | 75.7 | 80.5 | ||||||||||||
| Other Expenses | 44.5 | 42.4 | 44.5 | 40.9 | 172.3 | 194.2 | ||||||||||||
| Total | 474.0 | 461.7 | 482.4 | 477.9 | 1,896.0 | 1,933.1 | ||||||||||||
| Income Before Income Tax and Net Investment Gains and Losses | 22.2 | 38.3 | 63.6 | 52.8 | 176.9 | 286.8 | ||||||||||||
| Amortization of the Cost of Reinsurance | 11.8 | 11.8 | 13.3 | 13.4 | 50.3 | 69.8 | ||||||||||||
| Non-Contemporaneous Reinsurance | 10.3 | 1.7 | 10.0 | 12.4 | 34.4 | 32.9 | ||||||||||||
| Transaction Costs Related to Closed Block Individual Disability Reinsurance Transaction | — | — | — | — | — | 6.2 | ||||||||||||
| Adjusted Operating Income | $ | 44.3 | $ | 51.8 | $ | 86.9 | $ | 78.6 | $ | 261.6 | $ | 395.7 | ||||||
| Interest Adjusted Loss Ratios: | ||||||||||||||||||
| Long-term Care | 85.4 | % | 81.9 | % | 84.9 | % | 82.2 | % | 83.6 | % | 81.9 | % | ||||||
| Operating Ratios (% of Premium Income): | ||||||||||||||||||
| Other Expense Ratio1 | 14.2 | % | 13.0 | % | 13.1 | % | 11.5 | % | 12.9 | % | 11.9 | % | ||||||
| Income Ratio | 9.6 | % | 16.3 | % | 26.7 | % | 22.0 | % | 18.7 | % | 28.8 | % | ||||||
| Adjusted Operating Income Ratio | 19.2 | % | 22.0 | % | 36.5 | % | 32.8 | % | 27.7 | % | 39.7 | % |
1Excludes amortization of the cost of reinsurance. Also excluded are transaction costs related to the second phase of the Closed Block individual disability reinsurance transaction that occurred during the first quarter of 2021.
Appendix to Supplemental Exhibit
2022 Significant Items
•Third quarter of 2022 reserve assumption updates resulting in reserve reductions of $121.0 million and $34.0 million before tax, or $95.6 million and $26.9 million after tax, in our Unum US group long-term disability and group life product lines, respectively.
2021 Significant Items
•Third quarter of 2021 reserve assumption updates resulting in a reserve reduction of $215.0 million before tax, or $169.9 million after tax, in our Unum US group long-term disability product line.
•Third quarter of 2021 impairment loss of $12.1 million before tax, or $9.6 million after tax, on previously capitalized internal-use software that we no longer plan to utilize.
•Second quarter of 2021 cost related to the early retirement of debt of $67.3 million before tax, or $53.2 million after tax.
•Second quarter of 2021 impairment loss of $13.9 million, or $11.0 million after tax, on a right-of-use (ROU) asset related to an operating lease for office space that we do not plan to continue using to support our general operations.
•Second quarter of 2021 U.K. tax rate increase from 19 percent to 25 percent, effective April 1, 2023, which resulted in $23.6 million of additional tax expense through continuing operations for the revaluation of our deferred tax assets and liabilities.
•In December 2020, we completed the first phase of a reinsurance transaction, pursuant to which Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company, and Unum Life Insurance Company of America, wholly-owned domestic insurance subsidiaries of Unum Group, and collectively referred to as "the ceding companies", each entered into separate reinsurance agreements with Commonwealth Annuity and Life Insurance Company (Commonwealth), to reinsure on a coinsurance basis effective as of July 1, 2020, approximately 75 percent of the Closed Block individual disability business, primarily direct business written by the ceding companies. On March 31, 2021, we completed the second phase of the reinsurance transaction, pursuant to which the ceding companies and Commonwealth amended and restated their respective reinsurance agreements to reinsure on a coinsurance and modified coinsurance basis effective as of January 1, 2021, a substantial portion of the remaining Closed Block individual disability business that was not ceded in December 2020, primarily business previously assumed by the ceding companies.
In December 2020, Provident Life and Casualty Insurance Company (PLC), also a wholly-owned domestic insurance subsidiary of Unum Group, entered into an agreement with Commonwealth whereby PLC will provide a 12-year volatility cover to Commonwealth for the active life cohort (ALR cohort). On March 31, 2021, PLC and Commonwealth amended and restated this agreement to incorporate the ALR cohort related to the additional business that was reinsured between the ceding companies and Commonwealth as part of the second phase of the transaction. As part of the amended and restated volatility cover, PLC received a payment from Commonwealth of approximately $18 million.
In connection with the second phase of the reinsurance transaction, Commonwealth paid a total ceding commission to the ceding companies of $18.2 million. The ceding companies transferred assets of $767.0 million, which consisted primarily of cash and fixed maturity securities. In addition, we originally recognized the following in the first quarter of 2021 related to the second phase:
•Net realized investment gains totaling $67.6 million, or $53.4 million after tax, related to the transfer of investments.
•Prior to the implementation of ASU 2018-12, an increase in benefits and change in reserves for future benefits of $133.1 million, or $105.1 million after tax, resulting from the realization of previously unrealized investment gains and losses recorded in accumulated other comprehensive income.
•Transaction costs totaling $6.2 million, or $5.0 million after tax.
•Prior to the implementation of ASU 2018-12, reinsurance recoverable of $990.0 million related to the policies on claim status (DLR cohort).
•Payable of $307.2 million related to the portfolio of invested assets associated with the business ceded on a modified coinsurance basis.
•Prior to the implementation of ASU 2018-12, cost of reinsurance, or prepaid reinsurance premium, of $43.1 million related to the DLR cohort.
Appendix to Supplemental Exhibit - Continued
Deposit asset of $5.0 million related to the ALR cohort.
In applying ASU 2018-12 to the second phase of our Closed Block individual disability reinsurance transaction, we recognized the following changes:
•The ceded reserves were valued using a discount rate reflective of an upper-medium grade fixed-income instrument as of the transaction date and the increase in benefits and change in reserves for future benefits of $133.1 million described above was reversed, resulting in a net $142.5 million decrease to the cost of reinsurance, or prepaid reinsurance premium related to the DLR cohort, and a net $142.5 million increase to the reinsurance recoverable related to the DLR cohort.
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. We believe the following non-GAAP financial measures are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
•Consolidated adjusted operating revenue, which excludes investment gains or losses;
•After-tax adjusted operating income or loss, which excludes investment gains or losses, amortization of the cost of reinsurance, and non-contemporaneous reinsurance as well as certain other items, as applicable;
•Adjusted operating return on equity, which is calculated using after-tax adjusted operating income or loss and excludes from equity the unrealized gain or loss on securities, the effect of change in discount rate assumptions on the liability for future policy benefits, and net gain or loss on hedges;
•Leverage ratio, which excludes the unrealized gain or loss on securities, the effect of change in discount rate assumptions on the liability for future policy benefits, and net gain or loss on hedges; and
•Book value per common share, which is calculated excluding accumulated other comprehensive income (loss) (AOCI).
Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. Investment gains or losses and unrealized gains or losses on securities depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our Company. Leverage ratio and book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, are important measures.
As previously discussed, we have exited a substantial portion of our Closed Block individual disability product line through the two phases of the reinsurance transaction that were executed in December 2020 and March 2021, respectively. As a result, we exclude the amortization of the cost of reinsurance that was recognized upon the exit of the business related to the DLR cohort of policies as well as the impacts related to the non-contemporaneous reinsurance that occurred as a result of the adoption of ASU 2018-12. The impacts of non-contemporaneous reinsurance are related to the second phase of the reinsurance transaction. The direct reserves for this block are locked-in using the discount rate utilized as of the transition date, January 1, 2021, while the ceded reserves are locked-in using an upper-medium grade fixed-income instrument as of the reinsurance transaction date in March 2021, resulting in higher ceded reserves. While the total equity impact is neutral, the different discount rates utilized for direct and ceded reserves result in disproportionate earnings impacts. We believe that the exclusion of these items provides a better view of our results from our ongoing businesses.
We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.
For a reconciliation of the most directly comparable GAAP measures to these non-GAAP financial measures, refer to the "Reconciliation of Non-GAAP Financial Measures" beginning on page 9.2, other than book value per common share, which is presented on page 2.
9.1
Reconciliation of Non-GAAP Financial Measures
| Three Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | December 31 | December 31 | |||||||
| 2022 | 2022 | 2021 | ||||||||||
| Total Revenue | $ | 3,004.8 | $ | 2,959.1 | $ | 3,039.6 | $ | 2,980.6 | $ | 11,984.1 | $ | 12,007.8 |
| Excluding: | ||||||||||||
| Net Investment Gain (Loss) | 6.6 | (4.4) | (4.1) | (13.8) | (15.7) | 76.7 | ||||||
| Adjusted Operating Revenue | $ | 2,998.2 | $ | 2,963.5 | $ | 3,043.7 | $ | 2,994.4 | $ | 11,999.8 | $ | 11,931.1 |
9.2
Reconciliation of Non-GAAP Financial Measures - Continued
| After-Tax Adjusted Operating Income (Loss) | Average Allocated Equity1 | Adjusted Operating Return on Equity | ||||
|---|---|---|---|---|---|---|
| Year Ended December 31, 2022 | ||||||
| Unum US | $ | 781.1 | $ | 4,675.8 | 16.7 | % |
| Unum International | 167.6 | 781.6 | 21.4 | % | ||
| Colonial Life | 369.5 | 1,642.5 | 22.5 | % | ||
| Core Operating Segments | 1,318.2 | 7,099.9 | 18.6 | % | ||
| Closed Block | 201.8 | 4,873.7 | ||||
| Corporate | (156.2) | (979.8) | ||||
| Total | $ | 1,363.8 | $ | 10,993.8 | 12.4 | % |
| Year Ended December 31, 2021 | ||||||
| Unum US | $ | 328.9 | $ | 4,481.3 | 7.3 | % |
| Unum International | 87.6 | 808.0 | 10.8 | % | ||
| Colonial Life | 337.8 | 1,597.9 | 21.1 | % | ||
| Core Operating Segments | 754.3 | 6,887.2 | 11.0 | % | ||
| Closed Block | 249.3 | 4,265.6 | ||||
| Corporate | (69.7) | (1,046.1) | ||||
| Total | $ | 933.9 | $ | 10,106.7 | 9.2 | % |
1Excludes unrealized gain (loss) on securities, the effect of change in discount rate assumptions on the liability for future policy benefits, and net gain (loss) on hedges and is calculated using the stockholders' equity balances presented on page 9.5. Due to the implementation of ASU 2018-12 for which the beginning balance of 2021 for certain stockholders' equity line items were adjusted, we are computing the average allocated equity for 2021 using internally allocated equity that reflects the adjusted beginning balances at January 1, 2021. As a result, average equity for the years ended December 31, 2021 for certain of our segments will not compute using the historical allocated equity at December 31, 2020.
9.3
Reconciliation of Non-GAAP Financial Measures - Continued
| After-Tax Adjusted Operating Income (Loss) | Average Allocated Equity2 | Annualized Adjusted Operating Return on Equity | ||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, 2022 | ||||||
| Unum US | $ | 182.8 | $ | 4,783.4 | 15.3 | % |
| Unum International | 48.1 | 730.1 | 26.4 | % | ||
| Colonial Life | 75.3 | 1,678.5 | 17.9 | % | ||
| Core Operating Segments | 306.2 | 7,192.0 | 17.0 | % | ||
| Closed Block | 32.9 | 4,942.0 | ||||
| Corporate | (37.4) | (807.5) | ||||
| Total | $ | 301.7 | $ | 11,326.5 | 10.7 | % |
| Three Months Ended September 30, 2022 | ||||||
| Unum US | $ | 234.4 | $ | 4,643.5 | 20.2 | % |
| Unum International | 45.3 | 709.7 | 25.5 | % | ||
| Colonial Life | 136.6 | 1,668.1 | 32.8 | % | ||
| Core Operating Segments | 416.3 | 7,021.3 | 23.7 | % | ||
| Closed Block | 39.3 | 4,688.4 | ||||
| Corporate | (53.7) | (691.2) | ||||
| Total | $ | 401.9 | $ | 11,018.5 | 14.6 | % |
| Three Months Ended June 30, 2022 | ||||||
| Unum US | $ | 230.8 | $ | 4,537.4 | 20.3 | % |
| Unum International | 43.7 | 751.2 | 23.3 | % | ||
| Colonial Life | 76.3 | 1,649.4 | 18.5 | % | ||
| Core Operating Segments | 350.8 | 6,938.0 | 20.2 | % | ||
| Closed Block | 68.0 | 4,572.1 | ||||
| Corporate | (30.0) | (774.7) | ||||
| Total | $ | 388.8 | $ | 10,735.4 | 14.5 | % |
| Three Months Ended March 31, 2022 | ||||||
| Unum US | $ | 133.1 | $ | 4,550.9 | 11.7 | % |
| Unum International | 30.5 | 782.5 | 15.6 | % | ||
| Colonial Life | 81.3 | 1,612.9 | 20.2 | % | ||
| Core Operating Segments | 244.9 | 6,946.3 | 14.1 | % | ||
| Closed Block | 61.6 | 4,592.6 | ||||
| Corporate | (35.1) | (960.8) | ||||
| Total | $ | 271.4 | $ | 10,578.1 | 10.3 | % |
2Excludes unrealized gain (loss) on securities, the effect of change in discount rate assumptions on the liability for future policy benefits, and net gain (loss) on hedges and is calculated using the stockholders' equity balances presented on page 9.5.
9.4
Reconciliation of Non-GAAP Financial Measures - Continued
Average allocated equity is computed as follows:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 1/1/2021 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Stockholders' Equity | $ | 8,735.0 | $ | 8,402.8 | $ | 7,787.8 | $ | 6,887.8 | $ | 6,033.9 | $ | 4,166.0 |
| Excluding: | ||||||||||||
| Net Unrealized Gain (Loss) on Securities | (3,028.4) | (3,486.3) | (1,560.4) | 1,121.2 | 4,014.4 | 5,315.8 | ||||||
| Net Gain (Loss) on Hedges | (9.6) | 13.5 | 46.4 | 51.4 | 61.8 | 97.8 | ||||||
| Effect of Change in Discount Rate Assumptions on the Liability for Future Policy Benefits | 313.9 | 681.7 | (1,541.2) | (4,912.6) | (8,570.7) | (10,932.5) | ||||||
| Total Adjusted Stockholders' Equity | $ | 11,459.1 | $ | 11,193.9 | $ | 10,843.0 | $ | 10,627.8 | $ | 10,528.4 | $ | 9,684.9 |
| Twelve Months Ended | ||||||||||||
| 12/31/2022 | 12/31/2021 | |||||||||||
| Average Adjusted Stockholders' Equity | $ | 10,993.8 | $ | 10,106.7 | ||||||||
| Three Months Ended | ||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||
| Average Adjusted Stockholders' Equity | $ | 11,326.5 | $ | 11,018.5 | $ | 10,735.4 | $ | 10,578.1 |
9.5
Reconciliation of Non-GAAP Financial Measures - Continued
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | |||||
| 2022 | ||||||||
| Net Income (in millions) | $ | 289.2 | $ | 510.3 | $ | 367.3 | $ | 240.4 |
| Excluding: | ||||||||
| Net Investment Gain (Loss) (net of tax expense (benefit) of $1.7; $(1.0); $(1.0); $(3.2)) | 4.9 | (3.4) | (3.1) | (10.6) | ||||
| Amortization of the Cost of Reinsurance (net of tax benefit of $2.5; $2.5; $2.8; $2.8) | (9.3) | (9.3) | (10.5) | (10.6) | ||||
| Non-Contemporaneous Reinsurance (net of tax benefit of $2.2; $0.3; $2.1; $2.6) | (8.1) | (1.4) | (7.9) | (9.8) | ||||
| Reserve Assumption Updates (net of tax expense of $-; $32.5; $-; $-) | — | 122.5 | — | — | ||||
| After-tax Adjusted Operating Income (in millions) | $ | 301.7 | $ | 401.9 | $ | 388.8 | $ | 271.4 |
| Three Months Ended | ||||||||
| December 31 | September 30 | June 30 | March 31 | |||||
| 2022 | ||||||||
| Net Income (per share*) | $ | 1.44 | $ | 2.53 | $ | 1.81 | $ | 1.18 |
| Excluding: | ||||||||
| Net Investment Gain (Loss) | 0.02 | (0.02) | (0.02) | (0.05) | ||||
| Amortization of the Cost of Reinsurance | (0.04) | (0.04) | (0.05) | (0.05) | ||||
| Non-Contemporaneous Reinsurance | (0.04) | (0.01) | (0.04) | (0.05) | ||||
| Reserve Assumption Updates | — | 0.61 | — | — | ||||
| After-tax Adjusted Operating Income (per share*) | $ | 1.50 | $ | 1.99 | $ | 1.92 | $ | 1.33 |
| *Assuming Dilution. |
9.6
Reconciliation of Non-GAAP Financial Measures - Continued
| Year Ended December 31 | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||
| (in millions) | per share * | (in millions) | per share * | |||||
| Net Income | $ | 1,407.2 | $ | 6.96 | $ | 981.0 | $ | 4.79 |
| Excluding: | ||||||||
| Net Investment Gains and Losses | ||||||||
| Net Realized Investment Gain Related to Reinsurance Transaction (net of tax expense of $—; $14.2) | — | — | 53.4 | 0.26 | ||||
| Net Investment Gain (Loss), Other (net of tax expense (benefit) of $(3.5); $1.9) | (12.2) | (0.07) | 7.2 | 0.03 | ||||
| Total Net Investment Gain (Loss) | (12.2) | (0.07) | 60.6 | 0.29 | ||||
| Items Related to Closed Block Individual Disability Reinsurance Transaction | ||||||||
| Amortization of the Cost of Reinsurance (net of tax benefit of $10.6; $14.7) | (39.7) | (0.20) | (55.1) | (0.27) | ||||
| Non-Contemporaneous Reinsurance (net of tax benefit of of $7.2; $7.0) | (27.2) | (0.13) | (25.9) | (0.12) | ||||
| Transaction Costs (net of tax benefit of $—; $1.2) | — | — | (5.0) | (0.02) | ||||
| Total Items Related to Closed Block Individual Disability Reinsurance Transaction | (66.9) | (0.33) | (86.0) | (0.41) | ||||
| Reserve Assumption Updates (net of tax expense of $32.5; $45.1) | 122.5 | 0.61 | 169.9 | 0.83 | ||||
| Impairment Loss on Internal-Use Software (net of tax benefit of $—; $2.5) | — | — | (9.6) | (0.05) | ||||
| Cost Related to Early Retirement of Debt (net of tax benefit of $—; $14.1) | — | — | (53.2) | (0.26) | ||||
| Impairment Loss on ROU Asset (net of tax benefit of $—; $2.9) | — | — | (11.0) | (0.05) | ||||
| Impact of U.K. Tax Rate Increase | — | — | (23.6) | (0.12) | ||||
| After-tax Adjusted Operating Income | $ | 1,363.8 | $ | 6.75 | $ | 933.9 | $ | 4.56 |
| *Assuming Dilution. |
9.7
Reconciliation of Non-GAAP Financial Measures - Continued
| December 31 | September 30 | June 30 | March 31 | December 31 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | ||||||||||||||
| Debt | $ | 3,429.8 | $ | 3,429.2 | $ | 3,442.8 | $ | 3,442.9 | $ | 3,442.2 | |||||
| Including: | |||||||||||||||
| Lease Liability | 67.9 | 69.8 | 75.2 | 78.1 | 82.6 | ||||||||||
| Adjusted Debt and Lease Liability | $ | 3,497.7 | $ | 3,499.0 | $ | 3,518.0 | $ | 3,521.0 | $ | 3,524.8 | |||||
| Total Stockholders' Equity | $ | 8,735.0 | $ | 8,402.8 | $ | 7,787.8 | $ | 6,887.8 | $ | 6,033.9 | |||||
| Excluding: | |||||||||||||||
| Net Unrealized Gain (Loss) on Securities | (3,028.4) | (3,486.3) | (1,560.4) | 1,121.2 | 4,014.4 | ||||||||||
| Net Gain (Loss) on Hedges | (9.6) | 13.5 | 46.4 | 51.4 | 61.8 | ||||||||||
| Effect of Change in Discount Rate Assumptions on the Liability for Future Policy Benefits | 313.9 | 681.7 | (1,541.2) | (4,912.6) | (8,570.7) | ||||||||||
| Equity, As Adjusted | 11,459.1 | 11,193.9 | 10,843.0 | 10,627.8 | 10,528.4 | ||||||||||
| Debt, As Adjusted and Lease Liability | 3,497.7 | 3,499.0 | 3,518.0 | 3,521.0 | 3,524.8 | ||||||||||
| Total Adjusted Capital | $ | 14,956.8 | $ | 14,692.9 | $ | 14,361.0 | $ | 14,148.8 | $ | 14,053.2 | |||||
| Leverage Ratio | 23.4 | % | 23.8 | % | 24.5 | % | 24.9 | % | 25.1 | % |
9.8