Unum Posts $419.7 Million Quarterly Loss As Long-Term Care Deal And Disability Claims Bite
Group disability profit fell 60.4% and Unum set 2026 adjusted earnings of $8.30 to $8.50 a share, under a revised definition.
Unum Group, which sells disability, life and other workplace benefits through employers, lost $419.7 million in the third quarter, or $2.65 per diluted share, against net income of $39.7 million a year earlier. The company said the hit came from a before-tax investment loss of $853.0 million tied mainly to a planned long-term care reinsurance transfer, while group disability claims ran hotter than expected, according to an 8-K filed Tuesday.
A $853 million investment hit
The investment loss was primarily impairments recognized because Unum intends to transfer assets backing its 2026 reinsurance transaction with Fortitude Re, which covers long-term care policies. Of the total, $833.5 million relates to that deal. The Closed Block segment, home to long-term care, also posted a before-tax adjusted operating loss of $135.6 million, versus $682.3 million a year earlier.
Excluding those items, after-tax adjusted operating income was $349.0 million, or $2.20 per diluted share, compared with $479.4 million, or $2.81, in the year-earlier quarter. A net tax-only benefit of $12.0 million also helped the quarter.
The Fortitude Re coinsurance agreement is expected to be executed in November. It reinsures about 28% of total Closed Block long-term care future policy benefits as of March 31, 2026.
Disability claims cut the margin
Group disability operating income fell 60.4% to $94.8 million from $239.3 million, even as premiums rose 4.0% to $816.6 million. The benefit ratio, the share of premiums paid out as claims, climbed to 67.1% from 47.8%. Unum cited less favorable reserve assumption updates, higher incidence, prior-period pricing actions and larger average long-term disability claims.
Across Unum US, segment operating income dropped 35.2% to $315.3 million. Unum International fell to $0.2 million from $44.2 million, while Colonial Life rose 35.0% to $169.4 million.
CEO Richard P. McKenney said underlying results "did fall short of our expectations," with strong voluntary benefits offset by "elevated claim submissions in group disability." Core premium growth was 4.7% on a constant-currency basis.
Outlook under a new yardstick
Unum revised how it defines adjusted operating income after talks with SEC staff during an ongoing comment letter process on its non-GAAP measures. Annual reserve assumption updates are now included. It expects 2026 adjusted operating income of $8.30 to $8.50 per share, including about $0.33 from a reserve-related item.
The company repurchased 2.1 million shares for $202.0 million in the quarter and paid $80.1 million in dividends, bringing year-to-date capital return to $1,038.5 million. Its risk-based capital ratio for traditional U.S. insurers was about 485%, which it called well above target, and holding company liquidity was $1.4 billion.
Management hosts its earnings call Wednesday at 8:00 a.m. ET.
