Unum Group

Fluctuations in exchange rates, particularly between the British pound sterling and the U.S. dollar for our U.K. operations, have an effect on our consolidated financial results. In periods when the pound weakens relative to the preceding period, translating pounds into dollars decreases current period results relative to the prior period. In periods when the pound strengthens, translating pounds into dollars increases current period results relative to the prior period.

The weighted average pound/dollar exchange rate for our Unum UK line of business was 1.265 and 1.257 for the three months ended June 30, 2024 and 2023, and 1.265 and 1.236 for the six months ended June 30, 2024 and 2023, respectively. If the 2023 results for our U.K. operations had been translated at the weighted average exchange rates of 2024, our adjusted operating revenue would have been higher by approximately $2 million and $10 million, respectively, in the second quarter and first six months of 2023 and our adjusted operating income would have been generally consistent and approximately $2 million higher, respectively, for the second quarter and first six months of 2023. However, it is important to distinguish between translating and converting foreign currency. Except for a limited number of transactions, we do not actually convert pounds into dollars. As a result, we view foreign currency translation as a financial reporting item and not a reflection of operations or profitability in the U.K.

Premium income increased in each of our principal operating segments in the second quarter and first six months of 2024 compared to the same periods of 2023, primarily due to favorable persistency and higher prior period sales. Premium income continues to decline, as expected, in our Closed Block segment.

Net investment income was higher in the second quarter and first six months of 2024 compared to the same periods of 2023 due primarily to higher miscellaneous investment income, primarily related to larger increases in the net asset value (NAV) on our private equity partnerships, and an increase in the level of invested assets, partially offset by lower investment income from inflation index-linked bonds held by Unum UK.

Our investment gains and losses on fixed maturity securities include net losses on sales of $5.4 million and $10.3 million in the second quarter of 2024 and 2023, respectively, and $21.2 million and $10.0 million in the first six months of 2024 and 2023, respectively. Credit and impairment losses on fixed maturity securities were $4.1 million during the second quarter and first six months of 2024. We did not recognize any credit or impairment losses on fixed maturity securities during the second quarter or first six months of 2023. Also included in net investment gains and losses were changes in the fair value of an embedded derivative in a modified coinsurance arrangement, which resulted in investment gains of $0.8 million and $5.2 million in the second quarters of 2024 and 2023, respectively, and $6.9 million and $5.5 million in the first six months of 2024 and 2023, respectively. The changes in the embedded derivative are primarily driven by movements in credit spreads in the overall investment market. See Note 4 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further information on investment gains and losses.

Other income is primarily comprised of fee-based service products in the Unum US segment, which include leave management services and administrative services only business, and the underlying results and associated net investment income of certain assumed blocks of reinsured business in the Closed Block segment.

Overall benefits experience was favorable in the second quarter and first six months of 2024 relative to the same periods of 2023. The consolidated benefit ratio, which includes the remeasurement gain or loss, was 68.9 percent and 68.6 percent in the second quarter and first six months of 2024, respectively, compared to 69.9 percent and 70.2 percent for the same prior year periods. Excluding the impact of non-contemporaneous reinsurance, the consolidated benefit ratio was 68.6 percent and 68.4 percent in the second quarter and first six months of 2024, respectively, compared to 69.5 percent and 69.9 percent for the same prior year periods. The underlying benefits experience for each of our operating business segments is discussed more fully in "Segment Results" as follows.

Commissions and the deferral of acquisition costs were higher during the second quarter and first six months of 2024 compared to the same periods of 2023 driven primarily by higher prior period sales in our principal operating segments. The increase in the amortization of deferred acquisition costs in the second quarter and first six months of 2024 compared to the same periods of 2023 is due primarily to growth in the level of the deferred asset in our Colonial Life segment and in our Unum US supplemental and voluntary product lines.

Other expenses and compensation expense, on a combined basis, increased in the second quarter and first six months of 2024 compared to the same periods of 2023 due primarily to an increase in employee-related costs, an increase in operational investments in our business, and growth in our fee-based service products.

Our effective income tax rates for the second quarter and first six months of 2024 were 21.4 percent and 20.8 percent of income before income tax, respectively, compared to 21.2 percent and 20.9 percent for the same prior year periods. Our effective income tax rates were generally consistent with the U.S. statutory rate of 21 percent in effect for the periods presented.

Consolidated Sales Results

Shown below are sales results for our three principal operating business segments.

Sales shown in the preceding chart generally represent the annualized premium income on new sales which we expect to receive and report as premium income during the next 12 months following or beginning in the initial quarter in which the sale is reported, depending on the effective date of the new sale. Sales do not correspond to premium income reported as revenue in accordance with GAAP. This is because new annualized sales premiums reflect current sales performance and what we expect to recognize as premium income over a 12 month period, while premium income reported in our financial statements is reported on an "as earned" basis rather than an annualized basis and also includes renewals and persistency of in-force policies written in prior years as well as current new sales.

Sales, persistency of the existing block of business, employment and salary growth, and the effectiveness of a renewal program are indicators of growth in premium income. Trends in new sales, as well as existing market share, also indicate the potential for growth in our respective markets and the level of market acceptance of price levels and new product offerings. Sales results may fluctuate significantly due to case size and timing of sales submissions.

See "Segment Results" as follows for a discussion of sales by segment.