Unum Doubles Down on LTC Reinsurance, Reserve Mix Shifts to Group
Unum Group struck a second Fortitude Re deal ceding $3.8 billion of long-term-care statutory reserves, pushing its cumulative reduction in that book toward 40%.
Unum Group (UNM) announced a second external reinsurance transaction with Fortitude Re, ceding $3.8 billion of statutory reserves tied to its long-term-care book, equal to 26% of total LTC reserves and 52% of individual LTC reserves as of March 31, 2026. The disability and supplemental-benefits insurer's latest deal builds on a 2025 transaction with the same reinsurer, bringing the cumulative reduction in Unum's total LTC statutory reserves to roughly 40% and total reinsured exposure across both deals above $7 billion.
The transaction reshapes what remains on Unum's books rather than simply shrinking it. Statutory LTC reserves are expected to fall from $14.8 billion at year-end 2025 to about $11.0 billion once the deal closes, and the remaining pool tilts toward group LTC policies, which will make up roughly 70% of the total versus a mix that was close to even between group and individual LTC ($7.5 billion and $7.3 billion, respectively) at year-end 2025. Unum said the shift cuts sensitivity to future rate increases by 28% and to claim-incidence assumptions by 36%, trimming the tail risk that has weighed on the Closed Block segment.
That protection came at a steeper price than the first transaction. The blended net cost of the 2026 deal runs to 19% of reserves ceded, driven by a 31% cost on the new transaction against just 6% on the 2025 deal, reflecting a less favorable reserve profile even after accounting for a larger tax benefit of $490 million compared with $200 million previously. Alongside the announcement, Unum issued year-end 2026 capital guidance of $1.5 billion to $2.0 billion in holding-company liquidity and a risk-based capital ratio of 400% to 425%, both below the $1.73 billion in liquidity and roughly 460% RBC reported for Q1 2026, signaling expected compression as the deal is funded and closes.
The transaction lands against a Closed Block segment still under pressure. The segment swung to a $145.3 million adjusted operating loss in the first quarter of 2026 from $8.0 million of income a year earlier, hurt by group policy terminations, LTC claim incidence and lower net investment income, marking at least a second consecutive quarter of deterioration on a comparable adjusted basis. The LTC net premium ratio ticked up to 97.6% from 97.5% at year-end 2025, holding near the level it reached after a Q3 2025 reserve assumption update that stripped out morbidity and mortality improvement assumptions and added a GLTC new-employee provision, producing a one-time after-tax charge of $377.8 million, or $2.21 a share, that quarter.
Elsewhere in the business, first-quarter 2026 net income rose to $232.0 million, or $1.41 a diluted share, from $189.1 million, or $1.06, a year earlier, while after-tax adjusted operating income was roughly flat at $352.5 million, or $2.14 a share, versus $348.8 million, or $1.95, in the prior-year period. Core sales growth accelerated to 14.4% in constant currency with premium growth of 3.9%, though that pace decelerated from the 20.8% sales growth the Unum US segment alone reported in the same quarter. Segment results diverged sharply: group life and AD&D adjusted operating income jumped 66.3% to $115.1 million as its benefit ratio improved to 61.8% from 69.3%, while group disability income fell 10.6% to $106.6 million as its benefit ratio rose to 63.7% from 61.8%, extending a decline now in its second consecutive reported quarter. Supplemental and voluntary income dropped 17.4% to $116.2 million, and Unum International income fell 20.2% to $30.9 million despite 16.2% premium growth, led by a 30.8% decline at Unum UK to £20.4 million as its benefit ratio worsened to 72.9% from 67.1%. Colonial Life was the exception, with adjusted operating income up 10.5% to $127.8 million as its benefit ratio improved to 46.0% from 47.7%, reversing a margin-compression trend from the prior quarter.
Unum reiterated its full-year 2026 outlook of $8.60 to $8.90 in adjusted operating earnings per share, representing 8% to 12% growth over a redefined 2025 base of $7.93, unchanged from the guidance first issued alongside fourth-quarter 2025 results on February 5, 2026, despite the new reinsurance transaction. The company also changed its non-GAAP presentation beginning this quarter, now excluding the entire Closed Block segment from after-tax adjusted operating income rather than only amortization and non-contemporaneous reinsurance items, with prior periods restated to conform.
Unum kept up its buyback pace, repurchasing $402.4 million of stock, or 5.4 million shares, in the first quarter of 2026, following more than $1.0 billion repurchased across all of 2025 and $252.5 million in the fourth quarter alone. Book value per share excluding accumulated other comprehensive income grew 3.6% year over year to $78.93, a deceleration from the 9.3% total and 3.3% ex-AOCI growth rates reported at year-end 2025, while holding-company liquidity fell to $1,726 million from $2,344 million over the same span.