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 1.344 and 1.348 for the three months ended September 30, 2026 and 2025, and 1.345 and 1.314 for the nine months ended September 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 lower by approximately $1 million in the third quarter of 2025 and higher by approximately $16 million in the first nine months of 2025. Our adjusted operating income for the third quarter of 2025 would have been generally consistent and our adjusted operating income would have been higher by approximately $3 million for the first nine 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 core operating segments in the third quarter and first nine months of 2026 compared to the same periods of 2025, primarily due to sales in the Unum US segment as well as higher persistency in the Unum US group product lines, partially offset by the expected run off in medical stop-loss premium and lower persistency in the Unum US supplemental and voluntary product lines. Also partially offsetting the increase in the first nine months of 2026 compared to 2025 is the impact of ceding a portion of Unum US individual disability product line as part of the 2025 Fortitude Re reinsurance transaction. Premium income continues to decline in our Closed Block segment, as expected, and, for the comparison of the first nine months of 2026 to the same period of 2025, 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 higher in the third quarter compared to the same period of 2025 due primarily to an increase in the yield on invested assets and higher miscellaneous investment income. Net investment income was lower in the first nine months of 2026 compared to the same period 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 and depreciation expense associated with real estate previously held for sale reclassified to real estate held for the production of income, partially offset by higher yield on invested assets.

Our investment gains and losses for the third quarter and first nine months of 2026 were driven primarily by the 2026 Fortitude Re reinsurance transaction which resulted in a net loss of $833.5 million in the third quarter and first nine months of 2026. This loss was primarily due to impairment losses based on the intent to transfer fixed maturity securities supporting the 2026 Fortitude Re reinsurance transaction. Our investment gains and losses for the third quarter and first nine months of 2025 were driven primarily by the 2025 Fortitude Re reinsurance transaction which resulted in a net gain of $137.6 million in the third quarter of 2025 and a net loss of $46.8 million in the first nine months of 2025. In addition, we realized a $19.1 million loss on sales of fixed maturity securities relating to funding of a dividend from one of our subsidiaries in the first nine months of 2025. 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. Other income also includes the amortization of the deferred gain related to the 2025 Fortitude Re reinsurance transaction that began in the third quarter of 2025. Other income for the first nine months of 2025 primarily includes a gain on the recapture of a previously ceded block of business in the individual disability product line that occurred in the first quarter of 2025.

Overall benefits experience was favorable in the third quarter and first nine months of 2026 relative to the same periods of 2025. The consolidated benefit ratio, which includes the remeasurement gain or loss, was 74.1 percent and 72.3 percent in the third quarter and first nine months of 2026, respectively, compared to 86.5 percent and 75.8 percent for the same prior year periods. 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 third quarter and first nine months of 2026 compared to the same periods of 2025 due to sales. The amortization of deferred acquisition costs was higher in the third quarter and first nine months of 2026 compared to the same periods of 2025 due to growth in the level of the deferred asset.

Other expenses and compensation expense, on a combined basis, in the third quarter of 2026 is generally consistent compared to the same period of 2025. Other expenses and compensation expense, on a combined basis, increased in the first nine 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.

Our effective income tax rates for the third quarter and first nine months of 2026 were 23.6 percent and 16.4 percent of income before income tax, respectively, compared to 27.2 percent and 21.1 percent for the same prior year periods. Our effective income tax rate differed from the U.S. statutory rate of 21 percent for the third quarter and first nine months of 2026 primarily due to the release of unrecognized tax benefits due to completion of an IRS exam partially offset by a valuation allowance related to our deferred tax assets on capital losses. Our effective tax rate differed from the U.S. statutory rate of 21 percent for the third quarter of 2025 primarily due to global intangible low taxed income tax and interest on uncertain tax positions, partially offset by tax exempt income and prior year tax return true-up. Our effective income tax rate was generally consistent with the U.S. statutory rate of 21 percent in effect for the first nine months of 2025, with interest on uncertain tax positions mostly offset by tax exempt income.

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.