Unum Group

2024 Operating Performance and Capital Management

For 2024, we reported net income of $1,779.1 million, or $9.46 per diluted common share, compared to net income of $1,283.8 million, or $6.50 per diluted common share, in 2023.

Included in our results for 2024 are:

•A net investment loss of $34.6 million before tax and $27.0 million after tax, or $0.14 per diluted common share;

•Amortization of the cost of reinsurance of $41.4 million before tax and $32.7 million after tax, or $0.17 per diluted common share;

•Non-contemporaneous reinsurance of $25.1 million before tax and $19.9 million after tax or $0.11 per diluted common share;

•A net reserve decrease related to assumption updates of $357.4 million before tax and $282.6 million after tax, or $1.50 per diluted common share; and

•A loss resulting from a legal settlement of $15.3 million before tax and $12.1 million after tax, or $0.06 per diluted common share.

Included in our results for 2023 are:

•A net investment loss of $36.0 million before tax and $28.2 million after tax, or $0.14 per diluted common share;

•Amortization of the cost of reinsurance of $44.1 million before tax and $34.8 million after tax, or $0.18 per diluted common share;

•Non-contemporaneous reinsurance of $34.8 million before tax and $27.5 million after tax or $0.14 per diluted common share; and

•A net reserve increase related to assumption updates of $177.2 million before tax and $139.3 million after tax, or $0.70 per diluted common share.

Excluding these items, after-tax adjusted operating income for 2024 was $1,588.2 million, or $8.44 per diluted common share compared to $1,513.6 million, or $7.66 per diluted common share for 2023. See "Reconciliation of Non-GAAP and Other Financial Measures" contained herein in this Item 7 for a reconciliation of these items.

Our Unum US segment reported income before income tax and net investment gains and losses of $1,582.8 millionin 2024 compared to $1,484.3 million in 2023, which include the reserve assumption updates that occurred during the third quarters of 2024 and 2023. Excluding these items, our Unum US segment reported adjusted operating income of$1,439.2 million in 2024 compared to $1,355.5 million in 2023, primarilydue to higher premium income as well as favorable benefits experience, primarily in our group life product line, partially offset by higher commissions. The benefit ratio, excluding the reserve assumption updates, for our Unum US segment for 2024 was 58.2 percent, compared to 59.8 percent in 2023. Unum US sales increased 6.5 percent in 2024 compared to 2023.

Our Unum International segment reported income before income tax and net investment gains and losses of $150.3 million in 2024 compared to $140.2 million in 2023, which include the reserve assumption updates during the third quarters of 2024 and 2023. Excluding these items, our Unum International segment reported adjusted operating income of $157.8 million in 2024 compared to $158.1 million in 2023. As measured in local currency, our Unum UK line of business reported adjusted operating income, which excludes the reserve assumption updates, of £117.8 million in 2024 compared to £124.6 million in 2023, primarily due to lower net investment income as well as unfavorable benefits experience in the group life and group long-term disability product lines, partially offset by higher premium income. The benefit ratio for our Unum UK line of business, excluding the reserve assumption updates, was 69.8 percent in 2024 compared to 69.0 percent in 2023. Unum International sales, as measured in U.S. dollars, increased 9.4 percent in 2024 compared to 2023. Unum UK sales, as measured in local currency, increased 6.6 percent in 2024 compared to 2023.

Our Colonial Life segment reported income before income tax and net investment gains and losses of $512.7 million in 2024 compared to $480.8 million in 2023, which include the reserve assumption updates during the third quarters of 2024 and 2023. Excluding these items, our Colonial Life segment reported adjusted operating income of $466.7 million in 2024 compared to $400.1 million in 2023, primarily due to favorable benefits experience and higher premium income, partially offset by higher commissions and amortization of deferred acquisition costs. The benefit ratio, excluding the reserve assumption updates, for Colonial Life was 47.7 percent in 2024 compared to 50.9 percent in 2023. Colonial Life sales decreased 1.4 percent in 2024 compared to 2023.

Our Closed Block segment reported income before income tax and net investment gains and losses of $246.6 million in 2024 compared to a loss before income tax and net investment gains and losses of $282.8 million in 2023, which include the amortization of the cost of reinsurance and the impact of non-contemporaneous reinsurance related to the Closed Block individual disability reinsurance transaction, as well as the reserve assumption updates. Excluding these items, our Closed Block segment reported adjusted operating income of $137.8 million in 2024 compared to $164.9 million in 2023, primarily due to unfavorable benefits experience in our long-term care and all other product lines, partially offset by favorable net investment income. The net premium ratio for long-term care increased to 94.6 percent at December 31, 2024 from 93.5 percent at December 31, 2023.

A rising interest rate environment could positively impact our yields on new investments, but could also increase unrealized losses in our current holdings. Alternatively, a declining interest rate environment could negatively impact our yields on new investments, but could also reduce unrealized losses in our current holdings. As of December 31, 2024, we do not hold any securities with a decline in fair value below amortized cost which we intend to sell nor any securities for which it is more likely than not that we will be required to sell before recovery in amortized cost. The net unrealized loss on our fixed maturity securities was $2.6 billion and $1.6 billion at December 31, 2024 and 2023, respectively, with the increase due primarily to an increase in U.S. Treasury Rates. The earned book yield on our investment portfolio for 2024 was 4.44 percent, which was generally consistent with a yield of 4.45 percent for 2023.

Additionally, a rising interest rate environment could result in reserve decreases while a declining interest rate environment could result in reserve increases, specific to our liability for future policy benefits, as the reserve discount rate assumptions used in the calculation of our liability are updated at each reporting date using a yield that is reflective of an upper-medium grade fixed income instrument, which is generally equivalent to a single-A interest rate matched to the duration of certain of our insurance liabilities. The change in discount rate assumptions on the liability for future policy benefits, net of reinsurance, due primarily to the increase in U.S Treasury rates during 2024, resulted in a decrease to the liability for future policy benefits, net of reinsurance, of approximately $2.3 billion.

We believe our capital and financial positions are strong. At December 31, 2024, the RBC ratio for our traditional U.S. insurance subsidiaries, calculated on a weighted average basis using the NAIC Company Action Level formula, was approximately 430 percent, which is above our long-term expectations. We repurchased 15.7 million shares of Unum Group common stock under our share repurchase program, at a cost of $979.3 million, which includes commissions, excise tax, and $80.3 million related to shares which settled in February 2025 in connection with the November 2024 accelerated share repurchase agreement during 2024. Our weighted average common shares outstanding, assuming dilution, equaled 188.1 million and 197.6 million for 2024 and 2023, respectively. As of December 31, 2024, Unum Group and our intermediate holding companies had available holding company liquidity of $1,987.0 million that was held primarily in bank deposits, commercial paper, money market funds, corporate bonds, municipal bonds, and asset backed securities.

Closed Block Long-Term Care and Unum US Individual Disability Reinsurance Transaction

On February 26, 2025, Unum America entered into a master transaction agreement with Fortitude Reinsurance Company Ltd. (Fortitude Re) which, subject to receipt of regulatory approvals and the satisfaction or waiver of other customary closing conditions, is expected to result in the execution of a coinsurance agreement (anticipated reinsurance agreement) during 2025.

This anticipated reinsurance agreement is to reinsure a portion of our Closed Block long-term care insurance business and a portion of our Unum US individual disability business on a coinsurance basis to Fortitude Re. The anticipated reinsurance agreement represents approximately 21 percent of total Closed Block long-term care future policy benefits and approximately 15 percent of Unum US individual disability future policy benefits as of December 31, 2024. The transaction is expected to result in approximately $430 million pre-tax ceding commission paid to Fortitude Re. Fortitude Re will establish and maintain a collateralized trust account for the benefit of Unum America to secure its obligations under the anticipated reinsurance agreement.

Immediately prior to entering into the anticipated reinsurance agreement with Fortitude Re, Unum America will recapture the aforementioned Closed Block long-term care business from Fairwind Reinsurance Company (Fairwind), an affiliated captive reinsurer, and assume the aforementioned Unum US individual disability business from Provident Life and Accident Insurance Company, an affiliate.

2024, 2023, and 2022 Reserve Assumption Updates

During the third quarters of 2024, 2023, and 2022, we completed our annual cash flow assumption review and updated certain of our assumptions used to develop the liability for future policy benefits. For more information see "Critical Accounting Estimates" included herein in this Item 7 as well as Note 6 of the "Notes to Consolidated Financial Statements" contained herein in Item 8.

Loss on Legal Settlement

During the third quarter of 2024, we incurred a loss of $15.3 million before tax, or $12.1 million after tax, within our Corporate segment for the settlement of an employment-related matter. $4.9 million of the loss is recorded within compensation expense and $10.4 million of the loss is recorded within other expenses in the consolidated statements of income.

Inflation Reduction Act

In August 2022, the Inflation Reduction Act (IRA) was signed into law in the U.S. and includes certain corporate tax provisions effective January 1, 2023. The IRA imposed a new 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income (AFSI) on corporations that have average AFSI over $1.0 billion in any prior three-year period, starting with years 2020 to 2022. Our company is an applicable corporation. We have not recorded any CAMT as of December 31, 2024. We do not expect that any CAMT incurred would impact earnings since it would be offset with a credit toward regular income tax in subsequent years. The IRA also imposed a one percent excise tax on fair market value of corporate stock repurchases after December 31, 2022. This excise tax is recorded as part of the cost basis of treasury stock and is assessed on the fair market value of stock purchases, reduced by the fair value of any shares issued during the period. We have recorded $8.3 million of excise tax in stockholders' equity, as part of the cost basis of treasury stock in 2024.

U.K. Tax Law Change

In June 2021, the Finance Act 2021 was enacted, resulting in a U.K. tax rate increase from 19 percent to 25 percent, effective April 1, 2023.

Global Minimum Tax

The Organization for Economic Co-operation and Development (OECD) has established model rules to ensure a minimum level of tax of 15 percent (Pillar Two) for multinational companies. Several jurisdictions, including the United Kingdom, Ireland, and Poland have adopted Pillar Two beginning on or after December 31, 2023. We have not recorded material Pillar Two taxes as of December 31, 2024, and we do not expect material impacts in 2025. We will continue to monitor legislative developments.

Consolidated Company Outlook for 2025

We believe our strategy of providing financial protection products at the workplace puts us in a position of strength. We continue to fulfill our corporate purpose of helping the working world thrive throughout life’s moments by providing excellent service to people at their time of need. Our strategy remains centered on growing our core businesses through investing and transforming our operations and technology to anticipate and respond to the changing needs of our customers, expanding into new adjacent markets through meaningful partnerships, and effective deployment of our capital across our portfolio.

In 2024, we experienced increased earnings driven by the underlying strength of our business and expect positive operating trends in our core businesses to continue in 2025. The products and services we provide deliver significant value to employers, employees and their families, and we believe this will help drive sales and premium growth in 2025.

A rising interest rate environment could positively impact our yields on new investments but could also increase unrealized losses in our current holdings. Alternatively, a declining interest rate environment could negatively impact our yields on new investments but could also reduce unrealized losses in our current holdings. We also may continue to experience further volatility in miscellaneous investment income primarily related to changes in partnership net asset values as well as bond calls.

As part of our discipline in pricing and reserving, we continuously monitor emerging claim trends and interest rates. We will continue to take appropriate pricing actions on new business and renewals that are reflective of the current environment and may continue to utilize derivative financial instruments to manage interest rate risk.

Our business is well-diversified by geography within our markets, industry exposures and case size, and we continue to analyze and employ strategies that we believe will help us navigate the current environment. These strategies allow us to maintain financial flexibility to support the needs of our businesses, while also returning capital to our shareholders. We have strong core businesses that have a track record of generating significant free cash flow, and we will continue to invest in our operations and expand into adjacent markets where we can best leverage our expertise and capabilities to capture market growth opportunities as those opportunities emerge. We believe that consistent operating results, combined with the implementation of strategic initiatives and the effective deployment of capital, will allow us to meet our financial objectives.

Further discussion is included in "Reconciliation of Non-GAAP and Other Financial Measures," "Consolidated Operating Results," "Segment Results," "Investments," and "Liquidity and Capital Resources" contained herein in this Item 7 and in the "Notes to Consolidated Financial Statements" contained herein in Item 8.