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 1.340 and 1.333 for the three months ended June 30, 2026 and 2025, and 1.342 and 1.299 for the six months ended June 30, 2026 and 2025, respectively. If the 2025 results for our U.K. operations had been translated at the weighted average exchange rates of 2026, our adjusted operating revenue would have been higher by approximately $1 million and $16 million, respectively, in the second quarter and first six months of 2025. Our adjusted operating income for the second quarter of 2025 would have been generally consistent and our adjusted operating income would have been higher by approximately $3 million for the first six months of 2025. 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 2026 compared to the same periods of 2025, primarily due to sales, partially offset by the impact of ceding a portion of the Unum US individual disability product line as a part of the 2025 Fortitude Re reinsurance transaction as well as the expected run off in medical stop-loss premium. Premium income continues to decline in our Closed Block segment, as expected, and this was accelerated by the impact of ceding a portion of the Closed Block long-term care product line as a part of the 2025 Fortitude Re reinsurance transaction.

Net investment income was lower in the second quarter and first six months of 2026 compared to the same periods of 2025 due primarily to a decrease in the level of invested assets supporting the Closed Block long-term care product line as a result of the 2025 Fortitude Re reinsurance transaction, depreciation expense associated with real estate previously held for sale reclassified to real estate held for the production of income, and lower 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 $7.5 million and $13.5 million in the second quarter of 2026 and 2025, respectively, and $8.0 million and $58.2 million in the first six months of 2026 and 2025, respectively. The net losses for the first six months of 2025 were primarily related to a realized loss of $23.5 million on sales of fixed maturity securities relating to the 2025 Fortitude Re reinsurance transaction as well as a $19.1 million realized loss on sales of fixed maturity securities relating to funding of a dividend from one of our subsidiaries. Credit and impairment losses on fixed maturity securities were $3.0 million and $5.2 million during the second quarter and first six months of 2026. Credit and impairment losses on fixed maturity securities were $19.1 million and $172.5 million during the second quarter and first six months of 2025, respectively. Credit and impairment losses on fixed maturity securities for the first six months of 2025 is primarily comprised of the $160.9 million impairment loss based on the intent to transfer fixed-maturity securities relating to the 2025 Fortitude Re reinsurance transaction. See Note 4 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 and "Investments" contained herein in this Item 2 for further information.

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. Also included within other income in the Unum US individual disability product line, in the second quarter and first six months of 2026, is the amortization of the deferred gain on reinsurance as a part of the 2025 Fortitude Re reinsurance transaction and, in the first six months of 2025, is a gain on the recapture of a previously ceded block of business.

Overall benefits experience was favorable in the second quarter of 2026 relative to the same period of 2025. The consolidated benefit ratio, which includes the remeasurement gain or loss, was 71.0 percent and 71.9 percent in the second quarter of 2026 and 2025, respectively. Overall benefits experience was unfavorable in the first six months of 2026 relative to the same period of 2025. The consolidated benefit ratio, which includes the remeasurement gain or loss, was 71.4 percent and 70.6 percent in the first six months of 2026 and 2025, respectively. The underlying benefits experience for each of our operating 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 2026 compared to the same periods of 2025 due to sales in our principal operating segments. The amortization of deferred acquisition costs was higher in the second quarter and first six months of 2026 compared to the same periods of 2025 due to growth in the level of the deferred asset in our Colonial Life segment, partially offset by a decrease in the level of the deferred asset in our Unum US individual disability product line as a result of the 2025 Fortitude Re reinsurance transaction.

Other expenses and compensation expense, on a combined basis, increased in the second quarter and first six months of 2026 compared to the same periods of 2025 due to an increase in the amortization of the cost of reinsurance as a result of the 2025 Fortitude Re reinsurance transaction, as well as employee-related costs.

Our effective income tax rates for the second quarter and first six months of 2026 were 22.0 percent and 22.7 percent of income before income tax, respectively, compared to 19.5 percent and 20.6 percent for the same prior year periods. Our effective income tax rate differed from the U.S. statutory rate of 21 percent for the second quarter and first six months of 2026 primarily due to interest on uncertain tax positions and Net Controlled Foreign Corporation Tested Income. Our effective tax rate differed from the U.S. statutory rate of 21 percent for the second quarter of 2025 primarily due to tax exempt income. Our effective income tax rate was generally consistent with the U.S. statutory rate of 21 percent in effect for the first six months of 2025.

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.