Good morning, and welcome to the Unum Group's First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this conference [ph] is being recorded. I would now like to turn the conference over to Tom White, Senior Vice President of Investor Relations. Please go ahead.

Great, thank you. Good morning, everyone and welcome to the first quarter 2021 earnings conference call for Unum. Our remarks today will include forward-looking statements, which are statements that are not of current or historical facts. As a result, actual results might differ materially from results suggested by these forward-looking statements. Information concerning factors that could cause results to differ appears in our filings with the Securities and Exchange Commission, and are also located in the sections titled Cautionary Statement regarding forward-looking statements, and risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2020. Our SEC filings can be found in the Investors section of our website. I’ll remind you that statements in today's call speak only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements. A presentation of the most directly comparable GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation can be found in our statistical supplement on our website also in the Investors Section. Yesterday afternoon, Unum reported first quarter 2021 net income of $153 million or $0.75 per diluted common share compared to $161 million or $0.79 per diluted common share in the first quarter of 2020. Net income for the first quarter of 2021 included first the net after-tax loss from the second phase of the Closed Block individual disability reinsurance transaction of $56.7 million which is $0.27 per diluted common share. Second, the after-tax amortization of the cost of reinsurance of $15.8 million which is $0.08 per diluted common share, and a net after-tax realized investment gain on the Company's investment portfolio, and this excludes the net realized investment gain associated with the reinsurance transaction of $13.5 million or $0.06 per diluted common share. Net income in the first quarter of 2020 included a net after-tax realized investment loss of $113.1 million which is $0.56 per diluted common share. So excluding these items, after-tax adjusted operating income in the first quarter of 2021 was $212 million or $1.04 per diluted common share compared to $274.1 million or $1.35 per diluted common share in the year ago quarter. Participating in this morning's conference call are Unum's President and CEO, Richard McKenney; Chief Financial Officer, Steven Zabel; Chief Operating Officer, Mike Simonds and Tim Arnold, who Heads our Colonial Life and Voluntary Benefits business. I'd also like to introduce our new Head of the Unum International business, Mark Till. Mark is an experienced leader in the insurance industry and we're very happy to have him here at Unum. And now, I'll turn the call over to Rick for his opening comments.

Thank you, Tom and good day everyone. Our first quarter results represent a solid start to 2021. With improving trends, we entered the second quarter with positive momentum and increasing optimism. We expect to see a strong second half recovery from the COVID-19 related pandemic. It certainly has been a tumultuous period, but we believe we are well positioned both strategically and financially to return to our pre-pandemic levels of profitability and margins in the coming quarters. Each quarter over the past year we've described had the COVID-19 pandemic and resulting economic impacts have influenced our operations and financial results across our business. Each quarter has had its own set of dynamics. This quarter was no different with the sharp increase in infections and deaths through the year end period. We have seen rapid changes since that period of time, but nonetheless it has had an impact on the quarter. First COVID had significantly impacted mortality experienced in our Life Insurance businesses and generated higher volumes of short term disability claims, and leave requests at the workplace. Additionally, the severe dislocations to the economy and national employment levels have dampened our premium growth by slower sales and regaining the natural growth we typically see in our in-force premium base. And finally, the downdraft in the financial markets last spring and the sharp decline in interest rates further pressured new money yields. We expect each of these trends to turn. Throughout these challenging times, I've been proud of our employees who stepped up and successfully met our corporate purpose to help people thrive throughout life's moments. As we stand today, I'm confident that the challenges posed by COVID-19 and the 2020 recession are largely behind us. I'm optimistic that while the pandemic certainly is not over, and we expect to see…

Great, thank you, Rick and good morning everyone. In discussing Unum's first quarter financial results this morning, my remarks will primarily focus on analysis of our first quarter results relative to the fourth quarter of 2020, which will allow us to show how the company's business lines are progressing through the pandemic. I'll start with the Unum U.S segment, which reported adjusted operating income for the first quarter of $15.7 million compared to $143.5 million in the fourth quarter. As I'll describe in greater detail, these results were significantly impacted by COVID related mortality in our Group Life business line and Life Insurance line within the Voluntary Benefits business. Beyond a significant mortality impact, we were pleased with the underlying performance of the rest of the businesses, particularly the 2.7% increase in premium income related to the fourth quarter. Starting with the Unum U.S. Group Disability line, adjusted operating income for the first quarter was $64.1 million compared to $64.7 million in the fourth quarter of 2020. We were very pleased to see premium income increase by 3.5% compared to the fourth quarter with solid growth this quarter, very good persistence and natural growth stabilizing. The benefit ratio was 74.8% compared to the very favorable 72.5% in the fourth quarter. As we expected, the first quarter benefit ratio was elevated due to the short-term disability line where we continue to see high COVID related claims driven by infection rates. We continue to expect the annual group disability benefit ratio to run in the 73% or 74% range with some quarterly volatility. There are few other points to mention on group disability. First, net investment income was slightly higher in the first quarter largely driven by higher miscellaneous investment income. Second, the expense ratio improved nicely declining to 28.4% in the…

Great. Thank you, Steve. As you can hear from our comments, we continue to be very pleased with the operational performance of the company through what has been an extraordinary environment. We believe we are well positioned to benefit from improving business conditions as vaccines take hold and mortality and infection rates from COVID-19 continue to subside. The team is here to take your questions. I will ask the operator to begin the Q&A session.

Thank you. We will now begin the Q&A session. [Operator Instructions] Our first question comes from Tracy Benguigui of Barclays. Please go ahead.

Thank you. Good morning. I just wanted to touch on your holding company cash of 1.7 billion, do you anticipate the need to downstream part of that amount back to operating companies or is that amount truly fungible? I did hear your comments about a positive credit trajectory.

Yes, so when you think about the $1.7 billion of cash, that sits there and actually is for our use. When you think about the overall course of our capital plans for the year as we talked about at year-end, everything is contemplated in there. What we would have said at year-end is that we would expect the year to end in a similar spot to where we ended 2020.So, we are up above that right now and I think that number is roughly $1.5 billion. We've had some good positive things that have happened as a result of the transaction, leverage et cetera. So, we believe that's available for our use to go back as Steve said into core growth, to go into our acquisitions if we see the opportunity there, and then dividends and share repurchase. So, we feel good about that. There is no expectation on and any portion of that per se will be downstreamed into the companies.

Okay. So, I guess my follow-up is also at that outlook, meaning you mentioned potentially having to hold some of that capital for upcoming C1 [ph] charges, that were going to come in this year or I think it maybe next year, so any update on that thinking?

We did talk about at the Analyst [ph] meeting that that was, as we roll forward the year contemplated in that $1.5 billion roughly at year-end was C1 [ph] factor change which was in the range of $200 million. We are not sure if that will happen now, so you can still consider that to be part of those plans, but that number is factored in and we'll have to see how that transpires with the NAIC here in the coming months. I think it's probably as we are sitting here in May and nothing has come out, it is maybe less likely that it will occur, but we'll still have to wait and see on that front.

Okay. Thank you.

Thank you. [Operator Instructions] Our next question comes from Erik Bass of Autonomous Research. Please go ahead.

Hi, thank you. Can you talk about your assumed path to margin normalization across different product lines? It sounds like Group Life could have a little bit of a longer tail as the pandemic impacts shift to a younger population. But what are you assuming for disability, critical illness, LTC, et cetera, and are there any areas where you're concerned about a potential spike in claims for a period?

So that’s a pretty broad question, so we'll try and dissect across the number of our lines .And what we are seeing, I mean, many of our lines are actually continuing to perform pretty well, so we see no change there. Certainly some that we talked about, we're going to see reversion back here over the course of the year, maybe we will dissect some of those. Mike do you want to start on the Group Life side, you know what we are seeing and what we may expect?

Sure. Yes, Group Disability. Steve, I am wondering if you could improve life, on the disability front, you had an elevated loss ratio in the quarter as we talked about. A short time disability entirely and underneath that is COVID related claims entirely. So, that we will follow pretty closely actually the track of improvement that Steve laid out in his opening comments. So, as national COVID cases and then come down or we saw not only through the course of course of the first quarter but sitting here in the second quarter, nothing that sort of suggests anything different than that continued steady pace of improvement. There will be lingering impacts on the disability side in that short term disability [indiscernible] segment here in the second quarter. But you know let me talk about December, I think the outlook in the second half is quite good with LTD right there within expectations, a kind of 73% to 74% disability loss ratio that we kind of see on an annual basis, I mean that’s a reasonable place to think about it Steve in the second half of the year.

Yes, great. And then I will take, Erik I will take Group Life. This is Steve. So, as I mentioned in my comments, in the first quarter nationally we had about 200,000 deaths, that was reflected in our book about one week at about 1% of that or just over 200,000 deaths. We do estimate from what we've seen kind of out there that we are going to be around 50,000 to 60,000 deaths probably in the second quarter nationally and how we equate that to our book would imply that our Group Life and AD&D business would be about breakeven in the second quarter. I would say then for the remainder of the year, we would have that gradually revert back to kind of historical loss ratios in that business. So, we think second quarter might be kind of tough, but the latter half of the year we'll get back to where we historically were at for margins. I would say on LTC, we've clearly had very low loss ratios over the last year or 77.7%. We did see trends through the first quarter where mortality did begin to revert back closer to maybe more normalized, but definitely were still higher, 15% higher than what we would anticipate, in the second quarter we would see that revert, maybe back to more normal expectations. And then incidence really is back in March to kind of our historical levels and we will have to see how that continues into the second quarter and we'll have to track that. But I would say we anticipate being back in that 85% to 90% kind of range in LTC as we get to the back half of the year.

I'll take this around on the Colonial Life, we did say there was a small increase in the benefit ratio from Life, we expect that improve, but it is not a big factor.

Got it. And anything on the sort of voluntary products, where I think there may be some benefits from lower utilization on things like the accident policies, and maybe a little bit on Critical Illness anything notable you're seeing there?

Yes, where I -- Erik, this is Tim. Thank you for the question. We are not really seeing anything different than what Mike and Steve described in our experience in the Voluntary Benefits lines. It's less pronounced in the Voluntary Benefits business, but we see the same trends developing over time.

Thank you. And then may be returning to sort of Tracy's question as well on kind of the excess capital. It sounds like something where you're thinking over the next quarter or two, if I mean we continue to see improvement in the environment that you maybe have position to start thinking about deploying that? And I guess if you could just talk about how you're evaluating different options? And I think at different points you've been asked, you've mentioned prefunding in LTC transaction as another option and is that something that would be in the toolkit as well?

Yes Erik. I think it's a fair question. I think as we still are coming out of this pandemic period, we're going to evaluate all of our options that are in front of us. And I think as we've always said, we have good capital flexibility at our disposal. We are going to make sure we put that right back into our core operations. We have seen some really good investments to make just on the core operational side. M&A, when you think about that it's going to be probably smaller capability type transactions. We think we like our portfolio today. We think we have good breadth, but we'll look at some capabilities as we've done over the last several years and then other forms, dividends and share repurchase are always on the table. You added a question about prefunding the LTC piece as well. We don’t see the need to do that. We are actually on a path there on putting funds into our LTC that makes sense and we will continue to do that at the pace we've been doing, no change in plans that we have there. But we are always looking at the LTC Block and making sure just like we did at year-end with our Individual Disability, what are the ways that we can free capital from behind that, it is a Closed Block. And so making sure we can think about the pieces that will be good for potentially for risk transfer are out there, but as we've said before those are more difficult transactions, will take some time. But certainly that's a place where we are looking to potentially deploy some capital, if we see the right risk transfer opportunity.

Thank you. I appreciate the comments.

Thank you. [Operator Instructions] There seems to be no further questions at this time. I would now like to hand the call back to Mr. McKenney. Please go ahead.

Great, thank you. We appreciate everybody joining us today and taking the time out. Operator that now completes our first quarter 2021 earnings call and we look forward to connecting with many of you at upcoming investor conferences. Thank you.

Thank you. That conference is concluded. You may now disconnect your lines.