Unum Group: Form 10-Q for the period ended Jun 30, 2025

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Executive Summary

Unum Group, a Delaware general business corporation, and its insurance and non-insurance subsidiaries, which collectively with Unum Group we refer to as the Company, operate in the United States, the United Kingdom, Poland, and, to a limited extent, in certain other countries. The principal operating subsidiaries in the United States are Unum Life Insurance Company of America (Unum America), Provident Life and Accident Insurance Company (Provident), The Paul Revere Life Insurance Company, Colonial Life & Accident Insurance Company (Colonial Life & Accident), Unum Insurance Company, Starmount Life Insurance Company, in the United Kingdom, Unum Limited, and in Poland, Unum Zycie TUiR S.A. (Unum Poland). We are a leading provider of financial protection benefits in the United States and the United Kingdom. Our products include disability, life, accident, critical illness, dental and vision, and other related services. We market our products primarily through the workplace.

We have three principal operating segments: Unum US, Unum International, and Colonial Life. Our other operating segments are the Closed Block and Corporate segments. These segments are discussed more fully under "Segment Results" included herein in this Item 2.

The benefits we provide help the working world thrive throughout life's moments and protect people from the financial hardship of illness, injury, or loss of life. As a leading provider of employee benefits, we offer a broad portfolio of products and services through the workplace that provide support when it is needed most.

Specifically, we offer disability, life and voluntary products, on both individual and group bases, as well as provide certain fee-based services. These products and services, which can be sold stand-alone or combined with other coverages, help employers of all sizes attract and retain the talented and capable workforce they need to succeed while protecting the incomes and livelihood of their employees. We believe employer-sponsored benefits are the most effective way to provide workers with access to information and options to protect their financial stability. Working people and their families, particularly those at lower and middle incomes, are perhaps the most vulnerable in today's economy yet are often overlooked by many providers of financial products and services. For many of these workers and families, employer-sponsored benefits are the primary defense against the potentially catastrophic financial impact of death, illness, or injury.

We have established a corporate culture consistent with the social value of our products and services. We see important links between the obligations we have to all of our stakeholders, and we place a strong emphasis on operating with integrity and contributing to positive change in our communities. Accordingly, we are committed not only to meeting the needs of our customers who depend on us, but also to being accountable for our actions through sound and consistent business practices, a strong internal compliance program, a comprehensive risk management strategy, and an engaged employee workforce.

This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 contained in this Form 10-Q and with the "Cautionary Statement Regarding Forward-Looking Statements" included below the Table of Contents, as well as the discussion, analysis, and consolidated financial statements and notes thereto in Part I, Items 1 and 1A, and Part II, Items 7, 7A, and 8 of our annual report on Form 10-K for the year ended December 31, 2024.

Operating Performance and Capital Management

For the second quarter of 2025, we reported net income of $335.6 million, or $1.92 per diluted common share, compared to net income of $389.5 million, or $2.05 per diluted common share, in the second quarter of 2024. For the first six months of 2025, we reported net income of $524.7 million, or $2.97 per diluted common share, compared to net income of $784.7 million, or $4.09 per diluted common share in the same period of 2024.

Included in our results for the second quarter of 2025 are:

• A net investment loss of $17.7 million before tax and $13.9 million after tax, or $0.08 per diluted common share;
• Amortization of the cost of reinsurance of $9.7 million before tax and $7.7 million after tax, or $0.05 per diluted common share; and
• Non-contemporaneous reinsurance of $5.0 million before tax and $3.9 million after tax, or $0.02 per diluted common share.

Included in our results for the first six months of 2025 are:

• A net investment loss of $224.5 million before tax and $177.3 million after tax, or $1.00 per diluted common share;
• Amortization of the cost of reinsurance of $19.3 million before tax and $15.3 million after tax, or $0.09 per diluted common share; and
• Non-contemporaneous reinsurance of $11.8 million before tax and $9.3 million after tax, or $0.05 per diluted common share.

Included in our results for the second quarter of 2024 are:

• A net investment loss of $10.4 million before tax and $8.2 million after tax, or $0.04 per diluted common share;
• Amortization of the cost of reinsurance of $10.3 million before tax and $8.2 million after tax, or $0.04 per diluted common share; and
• Non-contemporaneous reinsurance of $7.0 million before tax and $5.5 million after tax, or $0.03 per diluted common share.

Included in our results for the first six months of 2024 are:

• A net investment loss of $11.6 million before tax and $9.0 million after tax, or $0.05 per diluted common share;
• Amortization of the cost of reinsurance $20.7 million before tax and $16.4 million after tax, or $0.08 per diluted common share; and
• Non-contemporaneous reinsurance of $14.2 million before tax and $11.2 million after tax, or $0.06 per diluted common share.

Excluding these items, after-tax adjusted operating income for the second quarter of 2025 was $361.1 million, or $2.07 per diluted common share compared to $411.4 million, or $2.16 per diluted common share, for the same period of 2024. After-tax adjusted operating income was $726.6 million, or $4.11 per diluted common share, in the first six months of 2025, compared to $821.3 million, or $4.28 per diluted common share, in the first six months of 2024. See "Reconciliation of Non-GAAP and Other Financial Measures" contained herein in this Item 2 for further discussion and a reconciliation of these items.

Our Unum US segment reported adjusted operating income of $318.2 million and $647.3 million in the second quarter and first six months of 2025, respectively, compared to $357.5 million and $742.7 million in the same periods of 2024, due to unfavorable benefits experience and higher commissions, partially offset by higher premium income. The benefit ratio for our Unum US segment was 60.7 percent and 60.2 percent in the second quarter and first six months of 2025, respectively, compared to 58.2 percent and 57.5 percent in the same periods of 2024. Unum US sales decreased 16.2 percent and 8.1 percent in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024.

Our Unum International segment reported adjusted operating income of $41.6 million and $80.3 million in the second quarter and first six months of 2025, respectively, compared to $42.5 million and $79.9 million in the same periods of 2024. Our Unum UK line of business reported adjusted operating income of £29.4 million and £58.9 million in the second quarter and first six months of 2025, respectively, compared to £32.5 million and £60.7 million in the same periods of 2024, due to unfavorable benefits experience, partially offset by higher premium income and net investment income. The benefit ratio for our Unum UK line of business was 75.0 percent and 71.1 percent in the second quarter and first six months of 2025, respectively, compared to 69.5 percent and 68.8 percent in the same periods of 2024. Unum International sales, as measured in U.S. dollars, increased 1.1 percent and decreased 7.3 percent in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024. Unum UK sales, as measured in local currency, decreased 13.5 percent and 19.4 percent in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024.

Our Colonial Life segment reported adjusted operating income of $117.4 million and $233.1 million in the second quarter and first six months of 2025, compared to $116.9 million and $230.6 million in the same periods of 2024, primarily due to higher premium income and net investment income, partially offset by higher operating expenses. Also impacting the comparison of the second quarter of 2025, compared to the same period of 2024, was unfavorable benefit experience. The benefit ratio for Colonial Life was 48.3 percent and 48.0 percent in the second quarter and first six months of 2025, respectively, compared to 47.8 percent and 48.2 percent in the same periods of 2024. Colonial Life sales increased 2.9 percent and 2.6 percent in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024.

Our Closed Block segment reported a loss before income tax and net investment gains and losses of $10.8 million and $2.8 million in the second quarter and first six months of 2025, respectively, compared to income before income tax and net investment gains and losses of $34.3 million and $41.0 million in the same periods of 2024, which includes the amortization of the cost of reinsurance and the impact of non-contemporaneous reinsurance related to the Closed Block individual disability reinsurance transaction. Excluding these items, our Closed Block Segment reported adjusted operating income of $3.9 million and $28.3 million in the second quarter and first six months of 2025, respectively, compared to $51.6 million and $75.9 million in the same periods of 2024, due primarily to unfavorable benefits experience and a decrease in net investment income. The net premium ratio for long-term care increased to 94.9 percent at June 30, 2025 from 93.7 percent at June 30, 2024.

A rising interest rate environment could positively impact our yields on new investments, but could also increase unrealized losses in our current holdings. Alternatively, a declining interest rate environment could negatively impact our yields on new investments, but could also reduce unrealized losses in our current holdings. As of June 30, 2025, we do not hold any securities with a decline in fair value below amortized cost which we intend to sell nor any securities for which it is more likely than not that we will be required to sell before recovery in amortized cost for which an impairment loss was not recorded. During the first six months of 2025, we recognized impairment losses totaling $160.9 million as a result of our intent to transfer certain fixed maturity securities related to the reinsurance transaction with Fortitude Reinsurance Company Ltd. (Fortitude Re) which closed in July 2025. The net unrealized loss on our fixed maturity securities was $2.0 billion at June 30, 2025, compared to $2.6 billion at December 31, 2024,with the decrease due primarily to a decrease in U.S. Treasury rates. The earned book yield on our investment portfolio was 4.47 percent for the first six months of 2025 compared to a yield of 4.44 percent for full year 2024.

Additionally, a rising interest rate environment could result in reserve decreases while a declining interest rate environment could result in reserve increases, specific to our liability for future policy benefits, as the reserve discount rate assumptions used in the calculation of our liability are updated at each reporting date using a yield that is reflective of an upper-medium grade fixed income instrument, which is generally equivalent to a single-A interest rate matched to the duration of certain of our insurance liabilities. The change in discount rate assumptions on the liability for future policy benefits, net of reinsurance, due primarily to the decrease in U.S. Treasury rates during the first six months of 2025, resulted in an increase to the liability for future policy benefits, net of reinsurance, of approximately $0.2 billion.

We believe our capital and financial positions are strong. At June 30, 2025, the risk-based capital (RBC) ratio for our traditional U.S. insurance subsidiaries, calculated on a weighted average basis using the NAIC Company Action Level formula, was approximately 485 percent, which is above our long-term expectation. We repurchased 7.1 million shares and 6.0 million shares of Unum Group common stock under our share repurchase program, during the first six months of 2025 and 2024, respectively, at a cost of $505.9 million and $302.8 million, respectively, including commissions and excise tax. Our weighted average common shares outstanding, assuming dilution, equaled 174.4 million and 190.3 million for the second quarters of 2025 and 2024, respectively, and 176.6 million and 191.9 million for the first six months of 2025 and 2024, respectively. As of June 30, 2025, Unum Group and our intermediate holding companies had available holding company liquidity of $1,955.7 million that was held primarily in bank deposits, commercial paper, money market funds, corporate bonds, municipal bonds and asset backed securities. See Note 12 of the "Notes to Consolidated Financial Statements" contained herein in Item 1.

Closed Block Long-Term Care and Unum US Individual Disability Reinsurance Transaction

In February 2025, Unum America entered into a master transaction agreement with Fortitude Re which resulted in the execution of a coinsurance agreement (reinsurance agreement) during July 2025. This reinsurance agreement reinsures a portion of our Closed Block long-term care business and a portion of our Unum US individual disability business on a coinsurance basis to Fortitude Re. The reinsurance agreement represents approximately 21 percent of total Closed Block long-term care future policy benefits and approximately 15 percent of Unum US individual disability future policy benefits as of December 31, 2024.

Upon closing the transaction in July 2025, we transferred to Fortitude Re $953.5 million of cash, which included the ceding commission of $461.7 million, as well as fixed maturity securities which had an amortized cost of $3,096.3 million and a fair value of $3,224.5 million as of June 30, 2025. A final settlement, including the final ceding commission adjustment, is expected prior to the end of 2025. Fortitude Re established and will maintain a collateralized trust account for the benefit of Unum America to secure its obligations under the reinsurance agreement. During the first six months of 2025, we recognized impairment losses totaling $160.9 million based on our intent to transfer these fixed maturity securities. In preparation for the transaction, fixed maturity securities with a fair value of $151.6 million and amortized cost of $175.1 million were sold during the first six months of 2025, resulting in a $23.5 million net loss. Although we transferred a significant portion of our fixed maturity securities portfolio during the third quarter of 2025 as a part of this transaction, the overall credit profile of our remaining portfolio did not change.

In July 2025, immediately prior to entering into the reinsurance agreement with Fortitude Re, Unum America recaptured the aforementioned Closed Block long-term care business from Fairwind Insurance Company (Fairwind), an affiliated captive reinsurer, and assumed the aforementioned Unum US individual disability business from Provident, an affiliate.

See Notes 4 and 14 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 and "Investments" and "Liquidity and Capital Resources" contained herein in this Item 2 for further information.

Global Minimum Tax

The Organization for Economic Co-operation and Development (OECD) has established model rules to ensure a minimum level of tax of 15 percent (Pillar Two) for multinational companies. Several jurisdictions, including the United Kingdom, Ireland, and Poland have adopted Pillar Two beginning on or after December 31, 2023. We have not recorded Pillar Two taxes as of June 30, 2025, and we do not expect material impacts in 2025. We will continue to monitor legislative developments and refine our estimates as necessary.

One Big Beautiful Bill Act

In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into U.S. law. We do not expect the OBBBA to have a material impact on our financial position or results of operations in 2025.

Consolidated Company Outlook

We believe our strategy of providing financial protection products at the workplace puts us in a position of strength. We continue to fulfill our corporate purpose of helping the working world thrive throughout life’s moments by providing excellent service to people at their time of need. Our strategy remains centered on growing our core businesses, through investing and transforming our operations and technology to anticipate and respond to the changing needs of our customers, expanding into new adjacent markets through meaningful partnerships and effective deployment of our capital across our portfolio.

In 2024, we experienced increased earnings driven by the underlying strength of our business and expect positive operating trends in our core businesses to continue in 2025. The products and services we provide deliver significant value to employers, employees and their families, and we believe this will help drive sales and premium growth in 2025.

A rising interest rate environment could positively impact our yields on new investments, but could also increase unrealized losses in our current holdings. Alternatively, a declining interest rate environment could negatively impact our yields on new investments, but could also reduce unrealized losses in our current holdings. We also may continue to experience further volatility in miscellaneous investment income primarily related to changes in partnership net asset values as well as bond calls.

As part of our discipline in pricing and reserving, we continuously monitor emerging claim trends and interest rates. We will continue to take appropriate pricing actions on new business and renewals that are reflective of the current environment and may continue to utilize derivative financial instruments to manage interest rate risk.

Our business is well-diversified by geography within our markets, industry exposures and case size, and we continue to analyze and employ strategies that we believe will help us navigate the current environment. These strategies allow us to maintain financial flexibility to support the needs of our businesses, while also returning capital to our shareholders. We have strong core businesses that have a track record of generating significant free cash flow, and we will continue to invest in our operations and expand into adjacent markets where we can best leverage our expertise and capabilities to capture market growth opportunities as those opportunities emerge. We believe that consistent operating results, combined with the implementation of strategic initiatives and the effective deployment of capital, will allow us to meet our financial objectives.

Further discussion is included in the "Notes to Consolidated Financial Statements" contained herein in Item 1 and in "Reconciliation of Non-GAAP and Other Financial Measures," "Consolidated Operating Results," "Segment Results," "Investments," and "Liquidity and Capital Resources" contained herein in this Item 2.

Reconciliation of Non-GAAP and Other Financial Measures

We analyze our performance using non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP). The non-GAAP financial measure of "after-tax adjusted operating income" differs from net income as presented in our consolidated operating results and income statements prepared in accordance with GAAP due to the exclusion of investment gains or losses, the amortization of the cost of reinsurance, the impact of non-contemporaneous reinsurance, and reserve assumption updates as specified in the reconciliations below. Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, impairment losses, and gains or losses on derivatives. We believe after-tax adjusted operating income is a better performance measure and better indicator of the profitability and underlying trends in our business.

Investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation of investment gains or losses. Although we may experience investment gains or losses which will affect future earnings levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature, and we need to earn the interest rates assumed in calculating our liabilities.

We exited a substantial portion of our Closed Block individual disability product line through the two phases of the reinsurance transaction that were executed in December 2020 and March 2021. As a result, we exclude the amortization of the cost of reinsurance that we recognized upon the exit of the business related to the policies on claim status as well as the impact of non-contemporaneous reinsurance that resulted from the adoption of ASU 2018-12. We believe that the exclusion of these items provides a better view of our results from our ongoing businesses.

Cash flow assumptions used to calculate our liability for future policy benefits are reviewed at least annually and updated, as needed, with the resulting impact reflected in net income. While the effects of these assumption updates are recorded in the reporting period in which the review is completed, these updates reflect experience emergence and changes to expectations spanning multiple periods. We believe that by excluding the impact of reserve assumption updates we are providing a more comparable and consistent view of our quarterly results.

We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.

See "Investments" contained herein in Item 2 and Note 4 of the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further discussion regarding the net investment loss.

A reconciliation of GAAP financial measures to our non-GAAP financial measures is as follows:

(in millions)

(in millions)

(in millions)

(in millions)

We measure and analyze our segment performance on the basis of "adjusted operating revenue" and "adjusted operating income" or "adjusted operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of investment gains and losses, the amortization of the cost of reinsurance, the impact of non-contemporaneous reinsurance, and reserve assumption updates as specified in the reconciliations below. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income.

A reconciliation of total revenue to "adjusted operating revenue" and income before income tax to "adjusted operating income" is as follows:

(in millions of dollars)

Critical Accounting Estimates

We prepare our financial statements in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in our financial statements and accompanying notes. Estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in our financial statements.

The accounting estimates deemed to be most critical to our financial position and results of operations are those related to the liability for future policy benefits, fair value of investments, pension and postretirement benefit plans, income taxes, and contingent liabilities. There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2025.

For additional information, refer to our significant accounting policies in Note 1 of the "Notes to Consolidated Financial Statements" in Part II, Item 8, and "Critical Accounting Estimates" in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024.

Accounting Developments

For information on new accounting standards and the impact, if any, on our financial position or results of operations, see Note 2 of the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further information.

Consolidated Operating Results

(in millions of dollars)

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 1.333 and 1.265 for the three months ended June 30, 2025 and 2024, and 1.299 and 1.265 for the six months ended June 30, 2025 and 2024, respectively. If the 2024 results for our U.K. operations had been translated at the weighted average exchange rates of 2025, our adjusted operating revenue would have been higher by approximately $13 million and $12 million, respectively, in the second quarter and first six months of 2024 and our adjusted operating income would have been higher by approximately $2 million for both the second quarter and first six months of 2024. However, it is important to distinguish between translating and converting foreign currency. 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 2025 compared to the same periods of 2024, primarily due to prior period sales and the impacts from the recapture of a previously ceded block of business in our Unum US individual disability product line that occurred in the first quarter of 2025, partially offset by the expected decline in medical stop-loss in our Unum US segment. Premium income continues to decline, as expected, in our Closed Block segment.

Net investment income was higher in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily an increase in the level of invested assets and higher investment income from inflation index-linked bonds held by

Unum UK. Partially offsetting the higher net investment income for the first six months of 2025 compared to the same period of 2024 was a decrease in yield on invested assets.

Our investment gains and losses on fixed maturity securities include net losses on sales of $13.5 million and $5.4 million in the second quarter of 2025 and 2024, respectively, and $58.2 million and $21.2 million in the first six months of 2025 and 2024, 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 our reinsurance transaction with Fortitude Re 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 $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 in anticipation of our reinsurance agreement with Fortitude Re. Credit and impairment losses on fixed maturity securities were $4.1 million during the second quarter and first six months of 2024. 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 for the first six months of 2025 is a gain on the recapture of a previously ceded block of business in the Unum US individual disability product line.

Overall benefits experience was unfavorable in the second quarter and first six months of 2025 relative to the same periods of 2024. The consolidated benefit ratio, which includes the remeasurement gain or loss, was 71.9 percent and 70.6 percent in the second quarter and first six months of 2025, respectively, compared to 68.9 percent and 68.6 percent for the same prior year periods. Excluding the impact of non-contemporaneous reinsurance, the consolidated benefit ratio was 71.7 percent and 70.4 percent in the second quarter and first six months of 2025, respectively, compared to 68.6 percent and 68.4 percent for the same prior year periods. The benefit ratio, which includes the remeasurement gain or loss, for each of our operating business segments is discussed more fully in "Segment Results" as follows.

Commissions were higher during the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to the continued impacts from the recapture of a previously ceded block of business in our Unum US individual disability product line that occurred in the first quarter of 2025 as well as prior period sales in our principal operating business segments. The deferral of acquisition costs was higher during the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to increase in commissions and other sales-related costs in our Colonial Life segment. The increase in the amortization of deferred acquisition costs in the second quarter and first six months of 2025 compared to the same periods of 2024 is due primarily to growth in the level of the deferred asset in our Colonial Life segment.

Other expenses and compensation expense, on a combined basis, increased in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to an increase in operational investments in our business and impacts from the recapture of a previously ceded block of business in our Unum US individual disability product line that occurred in the first quarter of 2025.

Our effective income tax rates for the second quarter and first six months of 2025 were 19.5 percent and 20.6 percent of income before income tax, respectively, compared to 21.4 percent and 20.8 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 of 2025 primarily due to tax exempt income. Our effective income tax rates were generally consistent with the U.S. statutory rate of 21 percent in effect for the second quarter of 2024 and for the first six months of 2025 and 2024.

Consolidated Sales Results

Shown below are sales results for our three principal operating business segments.

(in millions)

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.

Segment Results

Our reportable segments are comprised of the following: Unum US, Unum International, Colonial Life, Closed Block, and Corporate.

In describing our results, we may at times note certain items and exclude the impact on financial ratios and metrics to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur. We also measure and analyze our segment performance on the basis of "adjusted operating revenue" and "adjusted operating income" or "adjusted operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of investment gains and losses and certain other items. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income. See "Reconciliation of Non-GAAP Financial Measures" contained herein in this Item 2.

Unum US Segment

The Unum US segment is comprised of the group disability, group life and accidental death and dismemberment, and supplemental and voluntary lines of business. The group disability line of business includes long-term and short-term disability, medical stop-loss, and fee-based service products. The supplemental and voluntary line of business includes voluntary benefits, individual disability, and dental and vision products. These products, excluding medical stop-loss which is no longer actively marketed as of the third quarter of 2024, are marketed through our field sales personnel who work in conjunction with independent brokers and consultants.

Unum US Operating Results

Shown below are financial results for the Unum US segment. In the sections following, financial results and key ratios are also presented for the major lines of business within the segment.

(in millions of dollars, except ratios)

98

Unum US Group Disability Operating Results

Shown below are financial results and key performance indicators for Unum US group disability.

(in millions of dollars, except ratios)

Premium income was consistent in the second quarter and first six months of 2025 compared to the same periods of 2024 due to the expected decline in medical stop-loss premium and lower persistency, mostly offset by an increase in premium income due to prior period sales. Net investment income was lower in the second quarter and first six months of 2025 compared to the same periods of 2024 due to a lower level of invested assets. Other income was generally consistent in the second quarter and first six months of 2025 compared to the same periods of 2024.

The benefit ratio was unfavorable in the second quarter and first six months of 2025 compared to the same periods of 2024 due to lower recoveries in our long-term disability product line and higher average claims size in our short-term disability product line. Also contributing to the unfavorable benefit ratio in the first six months of 2025 compared to the same period of 2024 was higher incidence in our long-term disability product line.

Commissions were higher in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to prior period sales. The deferral of acquisition costs were generally consistent in the second quarter and first six months of 2025 compared to the same periods of 2024. The amortization of deferred acquisition costs changed in the second quarter and first six months of 2025 compared to the same periods of 2024 due to the composition of lapses across cohorts. The other expense ratio, which includes other income that is primarily related to fee-based service products, was favorable in the second quarter of 2025 compared to the same period of 2024 due to our focus on expense management and operating efficiencies. The other expense ratio was generally consistent for the first six months of 2025 compared to the same period of 2024.

Unum US Group Life and Accidental Death and Dismemberment Operating Results

Shown below are financial results and key performance indicators for Unum US group life and accidental death and dismemberment.

(in millions of dollars, except ratios)

Premium income increased in the second quarter and first six months of 2025 compared to the same periods of 2024 due to prior period sales and in-force block growth, partially offset by lower persistency. Net investment income was lower in the second quarter and first six months of 2025 compared to the same periods of 2024 due to a lower level of invested assets. Also impacting the comparison for the second quarter of 2025 compared to the same period of 2024 is a decrease in the yield on invested assets.

The benefit ratio was unfavorable in the second quarter and first six months of 2025 compared to the same periods of 2024 due to higher average claim size in our group life product line and less favorable waiver of premium benefits experience, partially offset by lower incidence in our group life product line. The unfavorability for the second quarter of 2025 compared to the same period of 2024 is also partially offset by lower incidence and lower average claims size in our accidental death and dismemberment product line.

Commissions and the deferral of acquisition costs were higher in the second quarter and first six months of 2025 compared to the same period of 2024 due to prior period sales. The amortization of deferred acquisition costs decreased in the second quarter and the first six months of 2025 compared to the same periods of 2024 due to the composition of lapses across cohorts. The other expense ratio was favorable in the second quarter of 2025 compared to the same period of 2024 due to our focus on expense management and operating efficiencies. The other expense ratio was generally consistent during the first six months of 2025 compared to the same period of 2024.

Unum US Supplemental and Voluntary Operating Results

Shown below are financial results and key performance indicators for Unum US supplemental and voluntary product lines.

(in millions of dollars, except ratios)

Premium income was higher in the second quarter and first six months of 2025 compared to the same periods of 2024 due to the continued impacts from the recapture of a previously ceded block of business in the individual disability product line in the first quarter of 2025, favorable persistency in the voluntary benefits and dental and vision product lines, and higher prior period sales in the voluntary benefits and individual disability product lines. Net investment income increased in the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to an increase in the yield on invested assets and an increase in the level of invested assets. Other income was generally consistent in the second quarter of 2025 compared to the same period of 2024 and was higher in the first six months of 2025 compared to the same period of 2024 due primarily to a gain on the recapture of a previously ceded block of business in the individual disability product line.

The benefit ratio for voluntary benefits was favorable in the second quarter of 2025 compared to the same period of 2024 due to favorable benefit experience in the critical illness and hospital indemnity products, partially offset by unfavorable benefit experience in the life and accident products. The benefit ratio for voluntary benefits was unfavorable in the first six months of 2025 compared to the same period of 2024 due to unfavorable benefit experience in the critical illness, accident, and hospital indemnity products. The benefit ratio for the individual disability product line was unfavorable in the second quarter of 2025 compared to the same period of 2024 due primarily to lower recoveries. The benefit ratio for the individual disability product line was favorable in the first six months of 2025 compared to the same period of 2024 due primarily to higher recoveries. The benefit ratio for the dental and vision product line was unfavorable in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to higher claims incidence.

Commissions were higher in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to the continued impacts from the recapture of a previously ceded block of business in the individual disability product line in the first quarter of 2025. The deferral of acquisition costs and the amortization of deferred acquisition costs were generally consistent in the second quarter and first six months of 2025 compared to the same periods of 2024. The other expense ratio was favorable in the second quarter and first six months of 2025 compared to the same periods of 2024 due to our focus on expense management and operating efficiencies.

Sales

(in millions of dollars)

Group sales decreased during the second quarter and first six months of 2025 compared to the same periods of 2024 due to lower sales to existing customers in the large case market, which we define as employee groups with greater than 2,000 employees, lower sales to new customers in the core market, as well as the impact of no sales of our medical stop-loss product in the first six months of 2025 as it was no longer actively marketed as of the third quarter of 2024. Partially offsetting the comparison for the second quarter of 2025 compared to the same period of 2024 was higher sales to new customers in the large case market. The sales mix in the group market sector for the first six months of 2025 was approximately 59 percent core market and 41 percent large case market.

Voluntary benefits sales decreased during the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to lower sales to new and existing customers in the large case market. Partially offsetting the comparison for the first six months of 2025 compared to the same period of 2024 is higher sales to new and existing customers in the core market. Individual disability sales, which are primarily concentrated in the multi-life market, decreased in the second quarter of 2025 compared to the same period of 2024 due to lower sales to new and existing customers. Individual disability sales increased during the first six months of 2025 compared to the same period of 2024 primarily due to higher sales to new customers. Dental and vision sales decreased during the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to lower sales to new customers.

Segment Outlook

We remain committed to offering consumers a broad set of financial protection benefit products at the worksite. During 2025, we will continue to invest in a unique customer experience defined by simplicity, empathy, and deep industry expertise through the increased utilization of digital capabilities and technology to enhance enrollment, underwriting, the client administration experience, and claims processing. In addition, we will focus on strategically driven sales by enhancing the connectivity, alignment, and support for brokers and technology partners, including integration with human capital management systems. With respect to smaller employers, we will continue to provide a comprehensive set of consumer-focused products, enhance our distribution model, and utilize our digital tools to bring industry leading enrollment capabilities and a fully integrated customer experience. Our differentiated offerings and market leading leave management services provide substantial growth opportunities, particularly with larger employers, and stronger persistency in our core products. We believe our active client management, integrated customer experience across our product lines, and strong risk management, will enable us to continue to grow our market over the long-term.

We expect strong adjusted operating income in 2025 with premium growth driven by new sales and persistency. We expect the group disability market to remain competitive which may impact our pricing and renewal premium levels. We expect strong group disability claim experience to continue in 2025, driven by operational performance. We also expect group life claim experience to be mostly stable, but may experience some quarterly claims volatility. We expect a decline in our supplemental and voluntary line of business adjusted operating income following the closing of the reinsurance transaction with Fortitude Re. We expect a slight increase in our operating expense ratio as we continue to invest in our people and capabilities.

A rising interest rate environment could positively impact our yields on new investments, but could also increase unrealized losses in our current holdings. Alternatively, a declining interest rate environment could negatively impact yields on new investments, but could also reduce unrealized losses in our current holdings. Our net investment income may continue to be impacted by volatility in miscellaneous investment income.

As part of our discipline in pricing and reserving, we continuously monitor emerging claim trends and interest rates. We will continue to take appropriate pricing actions on new business and renewals that are reflective of the current environment.

We continuously monitor key indicators to assess our risks and adjust our business plans accordingly.

As previously discussed, we entered into a reinsurance agreement with Fortitude Re to cede a portion of our individual disability business. For further discussion, see “Executive Summary" contained herein in Item 2 and Note 14 of the "Notes to Consolidated Financial Statements" contained herein in Item 1.

Unum International Segment

The Unum International segment is comprised of our operations in both the United Kingdom and Poland. Our Unum UK products include insurance for group long-term disability, group life, and supplemental lines of business, which includes dental, critical illness, and individual disability products. Our Unum Poland products include insurance for individual and group life with accident and health riders. Unum International's products are sold primarily through field sales personnel and independent brokers and consultants.

Operating Results

Shown below are financial results and key performance indicators for the Unum International segment.

(in millions of dollars)

Foreign Currency Translation

The functional currencies of Unum UK and Unum Poland are the British pound sterling and Polish zloty, respectively. Premium income, net investment income, claims, and expenses are received or paid in the functional currency, and we hold functional currency-denominated assets to support functional currency-denominated policy liabilities. We translate functional currency-denominated financial statement items into dollars for our consolidated financial reporting. We translate income statement items using an average exchange rate for the reporting period, and we translate balance sheet items using the exchange rate at the end of the period. We report unrealized foreign currency translation gains and losses in accumulated other comprehensive income in our consolidated balance sheets.

Fluctuations in exchange rates impact Unum International's reported financial results and our consolidated financial results. In periods when the functional currency strengthens relative to the preceding period, translation increases current period results relative to the prior period. In periods when the functional currency weakens, translation decreases current period results relative to the prior period.

Unum UK Operating Results

Shown below are financial results and key performance indicators for the Unum UK product lines in functional currency.

(in millions of pounds, except ratios)

Premium income was higher in the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to in-force block growth in the group life and supplemental product lines.

Net investment income was higher in the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to higher income from inflation index-linked bonds. Our investments in inflation index-linked bonds support the claim liabilities associated with certain group policies that provide for inflation-linked increases in policy benefits. The change in net investment income attributable to these index-linked bonds is generally correlated to a change in policy benefits related to the inflation index-linked group long-term disability and group life policies.

The benefit ratio was unfavorable in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to higher inflation-linked experience in benefits, partially offset by favorable incidence in the group life product line. Also impacting the comparison for the second quarter of 2025 compared to the same period of 2024 is higher incidence in the group long-term disability product line.

Commissions were higher in the second quarter and first six months of 2025 compared to the same periods of 2024 primarily due to in-force block growth.

The deferral of acquisition costs and the amortization of deferred acquisition costs were generally consistent in the second quarter and first six months of 2025 compared to the same periods of 2024. The other expense ratio was lower in the second quarter of 2025 compared to the same period of 2024 due primarily to our focus on operating efficiencies, and was generally consistent in the first six months of 2025 compared to the same period of 2024.

Sales

(in millions of dollars and pounds)

The following discussion of sales results relates to our Unum UK product lines based on functional currency.

Unum UK group long-term disability sales decreased in the second quarter of 2025 and in the first six months of 2025 compared to the same periods of 2024, driven primarily by lower sales to new and existing customers in the large case market, which we define as employee groups with more than 500 employees, and lower sales to existing customers in the core market.

Unum UK group life sales decreased in the second quarter and first six months of 2025 compared to the same periods of 2024 due to lower sales to new customers in the large case market, partially offset by higher sales to new customers in the core market.

Unum UK supplemental sales decreased in the second quarter and first six months of 2025 compared to the same periods of 2024 due to lower sales in our dental product line, partially offset by higher sales in our group critical illness product line.

Segment Outlook

We are committed to driving growth in the Unum International segment and will build on the capabilities that we believe will generate growth and profitability in our businesses over the long term. In 2025, we will focus on scaling our business and broadening our product portfolio. For our Unum UK line of business, we will continue to focus on delivering a best in class health and wellbeing service to improve retention of our key customers and drive growth across our product offerings. We will also accelerate premium growth by focusing on both the broker experience and customer engagement, while maintaining our disciplined approach to pricing. Within our Unum Poland line of business, we will drive growth by continuing to expand our existing distribution channels. We will also continue to invest in digital capabilities, technology, and product enhancements which we believe will drive sustainable growth over the long term.

In 2025, we expect growth in adjusted operating income with continued sales and premium growth. We continuously monitor key indicators to assess our risks and adjust our business plans accordingly.

Colonial Life Segment

The Colonial Life segment includes insurance for accident, sickness, and disability products, which includes dental and vision products, life products, and cancer and critical illness products. These products are marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agent sales force and brokers.

Operating Results

Shown below are financial results and key performance indicators for the Colonial Life segment.

(in millions of dollars, except ratios)

Premium income in the second quarter and first six months of 2025 was higher compared to the same periods of 2024 due to prior period sales and favorable overall persistency. Net investment income increased during the second quarter and first six months of 2025 relative to the same periods of 2024 due to an increase in the level of invested assets and an increase in the yield on invested assets.

The benefit ratio was unfavorable in the second quarter of 2025 relative to the same period of 2024 primarily due to unfavorable benefit experience in the accident, sickness, and disability product line. The benefit ratio was favorable in the first six months of 2025 relative to the same period of 2024 primarily due to favorable benefit experience in the life product line, partially offset by unfavorable benefit experience in the accident, sickness and disability product line.

Commissions were higher in the second quarter and first six months of 2025 relative to the same periods of 2024 due to prior period sales. The deferral of acquisition costs was higher in the second quarter and the first six months of 2025 relative to the same periods of 2024 due to the increase in commissions and other sales-related costs. The amortization of deferred acquisition costs was higher during the second quarter and the first six months of 2025 relative to the same periods of 2024 primarily due to growth in the level of the deferred asset. The other expense ratio increased in the second quarter and first six months of 2025 relative to the same periods of 2024 due primarily to an increase in employee-related costs and an increase in operational investments in our business.

Sales

(in millions of dollars)

Commercial sector sales increased in the second quarter of 2025 compared to the same period of 2024 due primarily to higher sales to new customers in the core market, which we define as accounts with less than 1,000 employees, and higher sales to new and existing customers in the large case market, partially offset by lower sales to existing customers in the core market. Commercial sector sales increased in the first six months of 2025 compared to the same period of 2024 due primarily to higher sales to new customers in the large case market, partially offset by lower sales to existing customers in the core market. Public sector sales increased in the second quarter and first six months of 2025 compared to the same periods of 2024 due to higher sales to existing customers. Public sector sales for the first six months of 2025 compared to the same period of 2024 also increased due to higher sales to new customers.

Segment Outlook

We remain committed to providing employees and their families with simple, modern, and personal benefit solutions. During 2025, we will continue to utilize our strong distribution system of independent agents, benefit counselors and broker partnerships. We will also continue to invest in solutions and digital capabilities to expand our reach and effectiveness, driving growth and improving productivity while enhancing the customer experience. In 2025, we will continue to bring an enhanced engagement and enrollment platform to market, enabling deeper connections with employees through the enrollment process as well as maintaining stronger relationships throughout the customer lifecycle. We believe our distribution system, customer service capabilities, digital and virtual tools, and ability to serve all market sizes position us well for future growth.

In 2025, we expect growth in adjusted operating income for the full year with strong sales growth, continued premium growth and stable claim experience. We continuously monitor key indicators to assess our risks and adjust our business plans accordingly.

Closed Block Segment

The Closed Block segment consists of group and individual long-term care and other insurance products no longer actively marketed. We discontinued offering individual long-term care in 2009 and group long-term care in 2012. Other insurance products include individual disability, group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations, and other miscellaneous product lines.

Operating Results

Shown below are financial results and key performance indicators for the Closed Block segment.

(in millions of dollars, except ratios)

Premium income for the long-term care product line in the second quarter and first six months of 2025 was generally consistent with the same periods of 2024. Premium income for our all other product line continues to decline as expected due to policyholder lapses.

Net investment income was lower during the second quarter and first six months of 2025 relative to the same periods of 2024 primarily due to lower miscellaneous investment income, primarily related to smaller increases in the NAV on our private equity partnerships, and a decrease in the level of invested assets, partially offset by an increase in yield on invested assets.

Other income primarily includes the underlying results and associated net investment income of certain assumed blocks of business.

Policy benefits including remeasurement loss, excluding the impacts of non-contemporaneous reinsurance, were higher in the second quarter and first six months of 2025 compared to the same periods of 2024 driven primarily by lower claimant mortality and an increase in the current period benefit expense resulting from the higher net premium ratio and the impact of capped cohorts in the long-term care product line. Also impacting the second quarter of 2025 compared to the same period of 2024 was higher average new claim size in the long-term care product line. The net premium ratio for long-term care increased to 94.9 percent at June 30, 2025 from 93.7 percent at June 30, 2024 due primarily to unfavorable incidence and the impact of the reserve assumption updates in the third quarter of 2024.

The other expense ratio, excluding the amortization of the cost of reinsurance, was higher in the second quarter and first six months of 2025 compared to the same periods of 2024 due primarily to an increase in operational investments in our business.

Individual Disability Reinsurance Transaction

As shown in the chart above, we exclude from income before income tax and net investment gains and losses, the amortization of the cost of reinsurance and the impact of non-contemporaneous reinsurance related to the Closed Block individual disability reinsurance transaction, where we ceded a significant portion of this business. The cost of reinsurance continues to be amortized over a remaining period of approximately 21 years, on a declining trajectory generally consistent with the expected run-off pattern of the ceded reserves. As a result of the execution of the second phase of the reinsurance transaction occurring after January 1, 2021, the transition date of ASU 2018-12, in accordance with the provisions of the ASU related to non-contemporaneous reinsurance, we were required to establish the ceded reserves using an upper-medium grade fixed-income instrument as of the reinsurance transaction date in March 2021 which resulted in higher ceded reserves compared to that which was reported historically. However, the direct reserves for the block reinsured in the second phase were calculated using the original discount rate utilized as of the transition date. Both the direct and ceded reserves are then remeasured at each reporting period using a current discount rate reflective of an upper-medium grade fixed-income instrument, with the changes recognized in OCI. While the total equity impact is neutral, the different original discount rates utilized for direct and ceded reserves result in disproportionate earnings impacts. The impact of non-contemporaneous reinsurance will fluctuate depending on the magnitude of reserve changes during the period. The decrease in the effects of non-contemporaneous reinsurance treatment in the second quarter and first six months of 2025 compared to the same periods of 2024 is due to expected run out of the ceded block which resulted in a smaller net change in reserves in the second quarter and first six months of 2025 compared to the same periods of 2024.

Segment Outlook

We will continue to execute on our well-defined strategy of implementing long-term care premium rate increases, efficient capital management, improved financial analysis, and operational effectiveness. In regard to capital management, we will continue to explore, and execute where appropriate, structural and reinsurance options to enhance financial flexibility. We continue to file requests with various state insurance departments for premium rate increases on certain of our individual and group long-term care policies which reflect assumptions as of the date of filings. In states for which a rate increase is submitted and approved, we routinely provide customers options for coverage changes or other approaches that might fit their current financial and insurance needs. Despite continued anticipated premium rate increases in our long-term care business, we expect overall premium income and adjusted operating revenue to decline over the long term as these closed blocks of business wind down. We will likely experience volatility in net investment income due to fluctuations of miscellaneous investment income, driven by the allocation towards alternative assets, primarily private equity partnership investments, in the long-term care product line portfolio. We record changes in our share of the NAV of the partnerships in net investment income. We receive financial information related to our investments in partnerships and generally record investment income on a one-quarter lag in accordance with our accounting policy. As these NAVs are volatile and can fluctuate materially with changes in market economic conditions, there may possibly be significant movements up or down in future periods as conditions change. We continuously monitor key indicators to assess our risks and adjust our business plans, including utilization of derivative financial instruments to manage interest rate risk.

Profitability of our long-tailed products is affected by claims experience related to mortality, morbidity, resolutions, investment returns, premium rate increases, and persistency. The net premium ratio represents the ratio of future expected benefits and related expenses to future expected gross premiums using the original discount rate. Long-term care benefits experience may continue to have quarterly volatility, particularly in the near term as our claim block matures and as we continue the implementation of premium rate increases. Claim resolution rates which reflect the probability that a disability or long-term care claim will close due to recovery or death of the insureds, are very sensitive to operational and external factors and can be volatile. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the life of the block of business and will vary from actual experience in any one period. It is possible that variability in any of our reserve assumptions, including, but not limited to, mortality, morbidity, resolutions, premium rate increases, benefit change elections, and persistency, could result in a material impact to our reserves.

As a result of the execution of the reinsurance transaction related to our Closed Block individual disability line of business, we have fully ceded a significant portion of this business.

As previously discussed, we entered into a reinsurance agreement with Fortitude Re to cede a portion of our long-term care business. For further discussion, see “Executive Summary" contained herein in Item 2 and Note 14 of the “Notes to Consolidated Financial Statements” contained herein in Item 1.

Corporate Segment

The Corporate segment includes investment income on corporate assets not specifically allocated to a line of business, interest expense on corporate debt, and certain other corporate income and expenses not allocated to a line of business.

Operating Results

(in millions of dollars)

Adjusted operating loss decreased in the second quarter and first six months of 2025 relative to the same periods of 2024 due primarily to increased net investment income, which was driven by an increase in miscellaneous investment income and an increase in the level of invested assets.

Segment Outlook

We expect to continue to generate excess capital on an annual basis through the statutory earnings in our insurance subsidiaries and believe we are well positioned with flexibility to preserve our capital strength while also returning capital to our shareholders. We may experience volatility in net investment income due to changes in the prevailing interest rates, miscellaneous investment income, and the composition and level of invested assets.

Investments

Overview

Investment activities are an integral part of our business, and profitability is significantly affected by investment results. We segment our invested assets into portfolios that support our various product lines. Generally, our investment strategy for our portfolios is to match the effective asset cash flows and durations with related expected liability cash flows and durations to consistently meet the liability funding requirements of our businesses and to manage interest rate risk. We seek to earn investment income while assuming credit risk in a prudent and selective manner, subject to constraints of quality, liquidity, diversification, and regulatory considerations. Our overall investment philosophy is to invest in a portfolio of high quality assets that provide investment returns consistent with that assumed in the pricing of our insurance products. Assets are invested predominantly in fixed maturity securities.

We may redistribute investments among our different lines of business or sell selected securities and reinvest the proceeds, when necessary, to adjust the cash flow and/or duration of the asset portfolios to better match the cash flow and duration of the liability portfolios. Asset and liability portfolio modeling is updated on a quarterly basis and is used as part of the overall interest rate risk management strategy. Cash flows from the in-force asset and liability portfolios are projected at current interest rate levels and at levels reflecting an increase and a decrease in interest rates to obtain a range of projected cash flows under the different interest rate scenarios. These results enable us to assess the impact of projected changes in cash flows and duration resulting from potential changes in interest rates. Testing the asset and liability portfolios under various interest rate scenarios enables us to choose what we believe to be the most appropriate investment strategy, as well as to limit the risk of disadvantageous outcomes. Although we test the asset and liability portfolios under various interest rate scenarios as part of our modeling, the majority of our liabilities related to insurance contracts are not interest rate sensitive, and we therefore have minimal exposure to policy withdrawal risk. Our determination of investment strategy relies on long-term measures such as asset adequacy analysis and the relationship between the portfolio yields supporting our various product lines and the aggregate discount rate assumptions embedded in the reserves. We also use this analysis in determining hedging strategies and utilizing derivative financial instruments for managing interest rate risk and the risk related to matching duration for our assets and liabilities. We do not use derivative financial instruments for speculative purposes.

Our investment portfolio is well diversified by type of investment and industry sector. We have established an investment strategy that we believe will provide for adequate cash flows from operations and allow us to hold our securities through periods where significant decreases in fair value occur. We believe our emphasis on risk management in our investment portfolio has positioned us well and generally reduced the volatility in our results.

Reinsurance Transactions

As a part of the reinsurance agreement with Fortitude Re, which closed during July 2025, we transferred fixed maturity securities and cash to Fortitude Re. The fixed maturity securities had an amortized cost of $3,096.3 million and a fair value of $3,224.5 million as of June 30, 2025. We recognized impairment losses totaling $152.4 million and $8.5 million during the first and second quarter of 2025, respectively, based on our intent to transfer these assets. In preparation for the anticipated transaction, fixed maturity securities with a fair value of $151.6 million and amortized cost of $175.1 million were sold during the first quarter of 2025, resulting in a $23.5 million net loss. Although we transferred a significant portion of our fixed maturity securities portfolio as part of this transaction, the overall credit profile of our remaining portfolio did not change. See "Executive Summary" for further information on the anticipated reinsurance transaction contained herein in this Item 2.

In February 2025, First Unum Life Insurance Company (First Unum), a wholly owned insurance subsidiary, entered into a reinsurance agreement with Provident, a wholly owned insurance subsidiary, to cede, on a coinsurance with funds withheld basis, 100 percent of the long-term care business of First Unum effective January 1, 2025. Also, in February 2025, First Unum received regulatory approval for, and paid, an extraordinary dividend of $630 million to Unum Group. As a part of the funding of the dividend, fixed maturity securities with a fair value of $81.8 million and an amortized cost of $100.9 million were sold, resulting in a $19.1 million net loss.

Fixed Maturity Securities

The fair values and associated unrealized gains and losses of our fixed maturity securities portfolio, by industry classification, are as follows:

Fixed Maturity Securities - By Industry Classification

As of June 30, 2025

(in millions of dollars)

1Includes credit-tranched securities collateralized by loan obligations, auto loans, and other asset types

The following two tables show the length of time our investment-grade and below-investment-grade fixed maturity securities portfolios had been in a gross unrealized loss position as of June 30, 2025 and at the end of the prior four quarters. The relationships of the current fair value to amortized cost are not necessarily indicative of the fair value to amortized cost relationships for the securities throughout the entire time that the securities have been in an unrealized loss position nor are they necessarily indicative of the relationships after June 30, 2025. The decrease in the net unrealized loss on fixed maturity securities during the second quarter of 2025 was due primarily to the tightening of credit spreads.

Unrealized Loss on Investment-Grade Fixed Maturity Securities

Length of Time in Unrealized Loss Position

(in millions of dollars)

118

Unrealized Loss on Below-Investment-Grade Fixed Maturity Securities

Length of Time in Unrealized Loss Position

(in millions of dollars)

119

As of June 30, 2025, we held 45 investment-grade fixed maturity securities with a gross unrealized loss of $10.0 million or greater as shown in the chart below.

Gross Unrealized Losses $10 Million or Greater on Investment-Grade Fixed Maturity Securities

As of June 30, 2025

(in millions of dollars)

At June 30, 2025, we held one below investment-grade fixed maturity security with a gross unrealized loss greater than $10.0 million. The security is a utilities company and had a fair value of $34.4 million and a gross unrealized loss of $10.9 million.

Unrealized losses on investment-grade fixed maturity securities principally relate to changes in interest rates or changes in market or sector credit spreads which occurred subsequent to the acquisition of the securities. Below-investment-grade fixed maturity securities are generally more likely to develop credit concerns than investment-grade securities. At June 30, 2025, the unrealized losses in our below-investment-grade fixed maturity securities were generally due to higher interest rates, credit spreads in certain industries or sectors and, to a lesser extent, credit concerns related to specific securities. For each specific security in an unrealized loss position, we believe that there are positive factors which mitigate credit concerns and that the securities for which we have not recorded a credit loss will recover in value. We have the ability and intent to continue to hold these securities to recovery of amortized cost less allowance for credit losses.

During the second quarter of 2025, we recognized a realized loss of $13.4 million on the sale of fixed maturity securities from a single issuer in the communications sector. We had no other individual net investment losses of $10.0 million or greater from credit losses or sales of fixed maturity securities during the first six months of 2025 or 2024.

As of June 30, 2025, the amortized cost, net of allowance for credit losses, and fair value of our below-investment-grade fixed maturity securities was $1,485.5 million and $1,452.2 million, respectively, and our below-investment-grade fixed maturity securities as a percentage of our total investment portfolio decreased to 3.2 percent at June 30, 2025 from 3.3 percent at December 31, 2024 on a fair value basis. Below-investment-grade securities are inherently riskier than investment-grade securities since the risk of default by the issuer, by definition and as exhibited by bond rating, is higher. Also, the secondary market for certain below-investment-grade issues can be highly illiquid. Additional downgrades may occur, but we do not anticipate any liquidity problems resulting from our investments in below-investment-grade securities, nor do we expect these investments to adversely affect our ability to hold our other investments to maturity.

Fixed Maturity Securities - Foreign Exposure

Our investments in issuers in foreign countries are chosen for specific portfolio management purposes, including asset and liability management and portfolio diversification across geographic lines and sectors to minimize non-market risks. In our approach to investing in fixed maturity securities, specific investments within approved countries and industry sectors are evaluated for their market position and specific strengths and potential weaknesses. For each security, we consider the political, legal, and financial environment of the sovereign entity in which an issuer is domiciled and operates. The country of domicile is based on consideration of the issuer's headquarters, in addition to location of the assets and the country in which the majority of sales and earnings are derived. We do not have exposure to foreign currency risk, as the cash flows from these investments are either denominated in currencies or hedged into currencies to match the related liabilities. We continually evaluate our foreign investment risk exposure.

Mortgage Loans

The carrying value of our mortgage loan portfolio was $2,172.5 million and $2,224.5 million at June 30, 2025 and December 31, 2024, respectively. Our investments in mortgage loans are carried at amortized cost less an allowance for expected credit losses which was $15.6 million and $16.1 million at June 30, 2025 and December 31, 2024, respectively. Our mortgage loan portfolio is comprised entirely of commercial mortgage loans. Our mortgage loan portfolio is well diversified geographically and among property types.

Due to conservative underwriting, the incidence of non-performing mortgage loans and foreclosure activity continues to be low. Other than our allowance for expected credit losses, we held one specifically identified impaired mortgage loan at June 30, 2025 and December 31, 2024. The carrying value was $9.2 million at both June 30, 2025 and December 31, 2024. See Note 4 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further discussion of our mortgage loan portfolio and the allowance for expected credit losses.

Private Equity Partnerships

The carrying value of our investments in private equity partnerships was $1,450.9 million and $1,450.6 million at June 30, 2025 and December 31, 2024, respectively. These partnerships are passive in nature and represent funds that are primarily invested in private credit, private equity, and real assets. The carrying value of the partnerships is based on our share of the partnership's NAV and changes in the carrying value are recorded as a component of net investment income. We receive financial information related to our investments in partnerships and generally record investment income on a one-quarter lag in accordance with our accounting policy. We recorded net investment income totaling $25.3 million and $43.6 million for the partnerships in the second quarter and the first six months of 2025, respectively. The majority of our investments in partnerships are not redeemable. Distributions received from the funds arise from income generated by the underlying investments as well as the liquidation of the underlying investments. There is generally not a public market for these investments. We had $764.3 million of commitments for additional investments in the partnerships at June 30, 2025 which may or may not be funded. See Note 3 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further discussion of our private equity partnerships.

Derivative Financial Instruments

We use derivative financial instruments primarily to manage interest rate risk, risk related to matching duration for our assets and liabilities, foreign currency risk, and equity risk. Historically, we have utilized current and forward interest rate swaps, current and forward currency swaps, forward benchmark interest rate locks, currency forward contracts, forward contracts on specific fixed income securities, and total return swaps. As of June 30, 2025, we had $3,809.0 million in notional amount of derivatives outstanding, of which $2,597.0 million is related to management of reinvestment risk in our long-term care product line, $1,072.8 million is related to management of foreign currency risk related to foreign denominated investments, and $139.2 million is economically hedging a portion of the liability related to our non-qualified defined contribution plan. Credit exposure on derivatives is limited to the value of those contracts in a net gain position, including accrued interest receivable less collateral held. Our credit exposure on derivatives was $0.2 million at June 30, 2025. At June 30, 2025, there were no fixed maturity securities received from our counterparties and no cash posted as collateral from our counterparties. The carrying value of fixed maturity securities posted as collateral to our counterparties was $285.0 million at June 30, 2025. There was no cash posted as collateral to our counterparties at June 30, 2025. We believe that our credit risk is mitigated by our use of multiple counterparties, all of which have an investment-grade credit rating, and by our use of cross-collateralization agreements. See Note 5 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further discussion of our derivatives.

For further information see "Investments" in Part I, Item 1 and "Critical Accounting Estimates" and "Investments" in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024, and Notes 3, 4, and 5 of the "Notes to Consolidated Financial Statements" contained herein in Item 1.

Liquidity and Capital Resources

Overview

Our liquidity requirements are met primarily by cash flows provided from operations, principally in our insurance subsidiaries. Premium and investment income, as well as maturities and sales of invested assets, provide the primary sources of cash. Debt and/or securities offerings provide additional sources of liquidity. Cash is applied to the payment of policy benefits, costs of acquiring new business (principally commissions), operating expenses, and taxes, as well as purchases of new investments.

We have established an investment strategy that we believe will provide for adequate cash flows from operations. We attempt to match our asset cash flows and durations with expected liability cash flows and durations to meet the funding requirements of our business. However, deterioration in the credit market may delay our ability to sell our positions in certain of our fixed maturity securities in a timely manner and adversely impact the price we receive for such securities, which may negatively impact our cash flows. Furthermore, if we experience defaults on securities held in the investment portfolios of our insurance subsidiaries, this will negatively impact statutory capital, which could reduce our insurance subsidiaries' capacity to pay dividends to our holding companies. A reduction in dividends to our holding companies could force us to seek external financing to avoid impairing our ability to pay dividends to our stockholders or meet our debt and other payment obligations.

Our policy benefits are primarily in the form of claim payments, and we have minimal exposure to the policy withdrawal risk associated with deposit products such as individual life policies or annuities. A decrease in demand for our insurance products or an increase in the incidence of new claims or the duration of existing claims could negatively impact our cash flows from operations. However, our historical pattern of benefits paid to revenues is generally consistent, even during cycles of economic downturns, which serves to minimize liquidity risk.

The liquidity requirements of the holding company Unum Group include common stock dividends, interest and debt service, and ongoing investments in our businesses. Unum Group's liquidity requirements are met by assets held by Unum Group and our intermediate holding companies, dividends from primarily our insurance subsidiaries, and issuance of common stock, debt, or other capital securities and borrowings from our existing credit facility, as needed. As of June 30, 2025, Unum Group and our intermediate holding companies had available holding company liquidity of $1,955.7 million that was held primarily in bank deposits, commercial paper, money market funds, corporate bonds, municipal bonds and asset backed securities. No significant restrictions exist on our ability to use or access funds in any of our U.S. or foreign intermediate holding companies. Dividends repatriated from our foreign subsidiaries are eligible for 100 percent exemption from U.S. income tax but may be subject to withholding tax and/or tax on foreign currency gain or loss.

As a part of the reinsurance agreement with Fortitude Re, which closed during July 2025, we transferred $953.5 million of cash, which included the ceding commission of $461.7 million, as well as fixed maturity securities which had an amortized cost of $3,096.3 million and a fair value of $3,224.5 million as of June 30, 2025. A final settlement, including the final ceding commission adjustment, is expected prior to the end of 2025.

See "Executive Summary" and "Investments" contained herein in Item 2, and Note 14 in the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further discussion of this transaction.

As part of our capital deployment strategy, we may repurchase shares of Unum Group's common stock, as authorized by our board of directors. The timing and amount of repurchase activity is based on market conditions and other considerations, including the level of available cash, alternative uses for cash, and our stock price. During the six months ended June 30, 2025, we repurchased 7.1 million shares at a cost of $500.0 million excluding commissions and excise tax.

Our board of directors has authorized the following repurchase programs:

(in millions)

1Concurrent with the announcement of the February 2025 repurchase program, we also announced the termination of the July 2024 program as of March 31, 2025, and all unused amounts under that program expired as of that date.

See Note 12 of the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further information.

Cash Available from Subsidiaries

Unum Group and certain of its intermediate holding company subsidiaries depend on payments from subsidiaries to pay dividends to stockholders, to pay debt obligations, and/or to pay expenses. These payments by our insurance and non-insurance subsidiaries may take the form of dividends, operating and investment management fees, and/or interest payments on loans from the parent to a subsidiary.

Restrictions under applicable state insurance laws limit the amount of dividends that can be paid to a parent company from its insurance subsidiaries in any 12-month period without prior approval by regulatory authorities. For life insurance companies domiciled in the U.S., that limitation generally equals, depending on the state of domicile, either ten percent of an insurer's statutory surplus with respect to policyholders as of the preceding year end or the statutory net gain from operations, excluding realized capital gains and losses, of the preceding year. The payment of dividends to a parent company from a life insurance subsidiary is generally further limited to the amount of unassigned funds.

Unum America cedes blocks of long-term care business to Fairwind, which is an affiliated captive reinsurance subsidiary domiciled in the United States. The ability of Fairwind to pay dividends to Unum Group will depend on its satisfaction of applicable regulatory requirements and on the performance of the business reinsured by Fairwind. Unum Group did not make any capital contributions to Fairwind during the first six months of 2025, nor do we expect to make capital contributions for the remainder of the year.

The ability of Unum Group and certain of its intermediate holding company subsidiaries to continue to receive dividends from their insurance subsidiaries also depends on additional factors such as RBC ratios and capital adequacy and/or solvency requirements, funding growth objectives at an affiliate level, and maintaining appropriate capital adequacy ratios to support desired ratings. The RBC ratios for our U.S. insurance subsidiaries at June 30, 2025 are in line with our expectations and are significantly above the level that would require state regulatory action.

Unum Group and/or certain of its intermediate holding company subsidiaries may also receive dividends from our U.K. subsidiaries, the payment of which may be subject to applicable insurance company regulations and capital guidance in the U.K. Unum Limited is subject to the requirements of U.K. Solvency II, the system of prudential regulation applying in the U.K., which prescribes capital requirements and risk management standards for the U.K. insurance industry. Our U.K. holding company is also subject to the U.K. Solvency II requirements relevant to insurance holding companies while, together with certain of its subsidiaries including Unum Limited, the group (the Unum UK Solvency II Group) is subject to group supervision under U.K. Solvency II. The Unum UK Solvency II Group received approval from the U.K. Prudential Regulation Authority (PRA) to use its own internal model for calculating regulatory capital and also received approval for certain associated regulatory permissions including transitional relief as the U.K. Solvency II capital regime is implemented.

The payment of dividends to the parent company from our subsidiaries also requires the approval of the individual subsidiary's board of directors.

During 2025, we intend to maintain a level of capital in our insurance subsidiaries above the applicable capital adequacy requirements and minimum solvency margins. As a result of our consideration of overall capitalization needs, we may not utilize the entire amount of dividends available in 2025, which are based on applicable restrictions under current law. Approximately $1,383 million is available, without prior approval by regulatory authorities, during 2025 for the payment of dividends from Unum Group's traditional U.S. insurance subsidiaries, which excludes our captive reinsurer. Unum Group has received $110 million of ordinary dividends from its traditional U.S. insurance subsidiaries during the six months ended June 30, 2025. First Unum entered into a reinsurance agreement with Provident to cede, on a coinsurance with funds withheld basis, 100 percent of the long-term care business of First Unum, effective January 1, 2025. Also in February 2025, First Unum received regulatory approval for, and paid, an extraordinary dividend of $630 million to Unum Group. No other extraordinary dividends have been paid during the first six months of 2025.

Insurance regulatory restrictions do not limit the amount of dividends available for distribution from non-insurance subsidiaries except where the non-insurance subsidiaries are held directly or indirectly by an insurance subsidiary and only indirectly by Unum Group, which does not apply to our current entity structure.

Funding for Employee Benefit Plans

During the six months ended June 30, 2025, we made contributions of $44.3 million and £2.7 million to our U.S. and U.K. defined contribution plans, respectively, and expect to make additional contributions of approximately $44 million and £3 million during the remainder of 2025. We had no regulatory contribution requirements for our U.S. qualified defined benefit pension plan and we made no voluntary contributions during the six months ended June 30, 2025. We do not expect to have regulatory contribution requirements for our U.S. qualified defined benefit plan during the remainder of 2025, but we reserve the right to make voluntary contributions during the remainder of 2025. We made a regulatory contribution of £13.7 million to our U.K defined benefit pension plan during the six months ended June 30, 2025 and expect to make approximately £1 million in additional regulatory contributions for the remainder of 2025. We have met all minimum pension funding requirements set forth by the Employee Retirement Income Security Act (ERISA). We have estimated our future funding requirements under the Pension Protection Act of 2006 and under applicable U.K. law and do not believe that any future funding requirements will cause a material adverse effect on our liquidity. See Note 11 of the "Notes to Consolidated Financial Statements" of our annual report on Form 10-K for the year ended December 31, 2024 for further discussion.

Debt, Term Loan Facility, Credit Facilities and Other Sources of Liquidity

Our long-term debt balance at June 30, 2025 was $3,469.1 million, net of a net discount of $129.2 million and deferred debt issuance costs of $35.1 million, and is comprised of unsecured senior notes, unsecured medium-term notes, and junior subordinated debt securities. Our short-term debt balance at June 30, 2025 was $274.8 million, net of a discount and deferred debt issuance costs of $0.1 million each. Our short-term debt balance is comprised of unsecured senior notes.

In April 2025, we and certain of our traditional U.S. life insurance subsidiaries, Unum America, Provident and Colonial Life & Accident, amended and restated the terms of our existing credit agreement providing for a five-year $500.0 million senior unsecured revolving credit facility with a syndicate of lenders. The revolving credit facility, which was previously set to expire in 2027, was extended through April 2030. We may request that the lenders’ aggregate commitments of $500.0 million under the facility be increased by up to an additional $200.0 million. Other of our domestic wholly-owned subsidiaries are permitted to join the credit facility as borrowers, subject to certain conditions. Any obligation of a subsidiary under the credit facility is subject to an unconditional guarantee by Unum Group. At June 30, 2025, there were no borrowed amounts outstanding under the revolving credit facility and letters of credit totaling $0.4 million had been issued.

We have a five-year £75.0 million senior unsecured standby letter of credit facility with a different syndicate of lenders, pursuant to which a syndicated letter of credit was issued in favor of Unum Limited (as beneficiary), our U.K. insurance subsidiary, and is available for drawings up to £75.0 million until its scheduled expiration in July 2026. We have an additional five-year, £75.0 million senior standby letter of credit facility pursuant to which a standby letter of credit was issued in favor of Unum Limited (as beneficiary), our U.K. insurance subsidiary, and is available for drawings up to £75.0 million until its scheduled expiration in December 2028. At June 30, 2025, no amounts have been borrowed under the standby credit facilities or letters of credit issued.

There are no significant financial covenants associated with any of our debt obligations other than our borrowings under the credit facilities, which are subject to financial covenants, negative covenants, and events of default that are customary. Each credit facility includes financial covenants based on our leverage ratio and consolidated net worth as well as covenants that limit subsidiary indebtedness. We continually monitor our debt covenants to ensure we remain in compliance. We have not observed any current trends that would cause a breach of any debt covenants.

See "Debt, Term Loan Facility, Credit Facilities and Other Sources of Liquidity" and Note 10 of the "Notes to Consolidated Financial Statements" contained in Part II, Items 7 and 8, respectively, of our annual report on Form 10-K for the year ended December 31, 2024 for further discussion.

Shelf Registration

We maintain a shelf registration with the Securities and Exchange Commission to issue various types of securities, including common stock, preferred stock, debt securities, depository shares, stock purchase contracts, units and warrants. The shelf registration enables us to raise funds from the offering of any securities covered by the shelf registration as well as any combination thereof, subject to market conditions and our capital needs.

Commitments

As of June 30, 2025, we had commitments of $98.1 million to fund certain investments in private placement fixed maturity securities and $764.3 million to fund certain private equity partnerships.

With respect to our commitments and off-balance sheet arrangements, see the discussion under "Cash Requirements" in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024. During the first six months of 2025, there were no substantive changes in our commitments, contractual obligations, or other off-balance sheet arrangements other than the changes noted herein.

Transfers of Financial Assets

Our investment policy permits us to lend fixed maturity securities to unaffiliated financial institutions in short-term securities lending agreements, which increases our investment income with minimal risk. We account for all of our securities lending agreements and repurchase agreements as secured borrowings. As of June 30, 2025, we held $27.1 million of cash collateral from securities lending agreements. The average cash collateral balance during the first six months of 2025 was $39.1 million, and the maximum amount outstanding at any month end was $46.2 million. As of June 30, 2025, we held $41.2 million of off-balance sheet securities lending agreements which were collateralized by securities that we were neither permitted to sell nor control. The average balance of these off-balance sheet transactions during the first six months of 2025 was $29.0 million, and the maximum amount outstanding at any month end was $41.2 million.

To manage our cash position more efficiently, we may enter into securities repurchase agreements with unaffiliated financial institutions. We generally use securities repurchase agreements as a means to finance the purchase of invested assets or for short-term general business purposes until projected cash flows become available from our operations or existing investments. We had no securities repurchase agreements outstanding at June 30, 2025, nor did we utilize any securities repurchase agreements during the first six months of 2025. Our use of securities repurchase agreements and securities lending agreements can fluctuate during any given period and will depend on our liquidity position, the availability of long-term investments that meet our purchasing criteria, and our general business needs.

Certain of our U.S. insurance subsidiaries are members of regional FHLBs. As of June 30, 2025, we owned $35.2 million of FHLB common stock and had outstanding advances of $525.5 million from the regional FHLBs which were used for the purpose of investing in either short-term investments, matched fixed maturity securities, or matched commercial mortgage loans. As of June 30, 2025, we have additional borrowing capacity of approximately $735.4 million from the FHLBs.

See Note 4 of the "Notes to Consolidated Financial Statements" contained herein in Item 1 for further information.

Consolidated Cash Flows

(in millions of dollars)

Operating Cash Flows

Operating cash flows are primarily attributable to the receipt of premium and investment income, offset by payments of claims, commissions, expenses, and income taxes. Premium income growth is dependent not only on new sales, but on policy renewals and growth of existing business, renewal price increases, and persistency. Investment income growth is dependent on the growth in the underlying assets supporting our insurance liabilities and capital and on the earned yield. The level of commissions and operating expenses is attributable to the level of sales and the first year acquisition expenses associated with new business as well as the maintenance of existing business. The level of paid claims is affected partially by the growth and aging of the block of business and also by the general economy, as previously discussed in the operating results by segment.

Investing Cash Flows

Investing cash inflows consist primarily of the proceeds from the sales and maturities of investments. Investing cash outflows consist primarily of payments for purchases of investments. Our investment strategy is to match the cash flows and durations of our assets with the cash flows and durations of our liabilities to meet the funding requirements of our business. When market opportunities arise, we may sell selected securities and reinvest the proceeds to improve the yield and credit quality of our portfolio. We may at times also sell selected securities and reinvest the proceeds to improve the duration matching of our assets and liabilities and/or re-balance our portfolio. As a result, sales before maturity may vary from period to period. The sale and purchase of short-term investments is influenced by proceeds received from FHLB funding advances, issuance of debt, our securities lending program, and by the amount of cash which is at times held in short-term investments to facilitate the availability of cash to fund the purchase of appropriate long-term investments, repay maturing debt, and/or to fund our capital deployment program.

In preparation for the reinsurance transaction with Fortitude Re, fixed maturity securities with a fair value of $151.6 million were sold during the first quarter of 2025. Also during the first quarter of 2025, fixed maturity securities with a fair value of $81.8 million were sold related to the funding of an extraordinary dividend from a wholly owned insurance subsidiary to Unum Group.

See Note 4 of the "Notes to Consolidated Financial Statements" contained herein in Item 1 and "Investments" contained herein in this Item 2 for further information.

Financing Cash Flows

Financing cash flows consist primarily of borrowings and repayments of debt, dividends paid to stockholders, repurchases of common stock, and policyholders' account deposits and withdrawals.

Cash used to repurchase shares of Unum Group's common stock during the first six months of 2025 and 2024 was $500.9 million and $300.0 million, respectively. During the first six months of 2025 and 2024, we paid dividends of $150.5 million and $141.5 million, respectively, to holders of Unum Group's common stock.

In June 2024, we issued $400.0 million of 6.000% senior notes due 2054 and received proceeds of $391.6 million. A portion of the net proceeds of the offering were used to repay the outstanding indebtedness under our senior unsecured delayed draw term loan facility, resulting in a cash outflow of $350.0 million.

Ratings

A.M. Best Company (AM Best), Fitch Ratings (Fitch), Moody's Ratings (Moody's), and S&P Global Ratings (S&P) are among the third parties that assign issuer credit ratings to Unum Group and financial strength ratings to our insurance subsidiaries. Issuer credit ratings reflect an agency's opinion of the overall financial capacity of a company to meet its senior debt obligations. Financial strength ratings are specific to each individual insurance subsidiary and reflect each rating agency's view of the overall financial strength (capital levels, earnings, growth, investments, business mix, operating performance, and market position) of the insuring entity and its ability to meet its obligations to policyholders. Both the issuer credit ratings and financial strength ratings incorporate quantitative and qualitative analyses by rating agencies and are routinely reviewed and updated on an ongoing basis.

We maintain an ongoing dialogue with the four rating agencies that evaluate us in order to inform them of progress we are making regarding our strategic objectives and financial plans as well as other pertinent issues. A significant component of our communications involves our annual review meeting with each of the four agencies. We hold other meetings throughout the year regarding our business, including, but not limited to, quarterly updates.

Agency ratings are not directed toward the holders of our securities and are not recommendations to buy, sell, or hold our securities. Each rating is subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be regarded as an independent assessment, not conditional on any other rating. Given the dynamic nature of the ratings process, changes by these or other rating agencies may or may not occur in the near-term. We have ongoing dialogue with the rating agencies concerning our insurance risk profile, our financial flexibility, our operating performance, and the quality of our investment portfolios. The rating agencies provide specific criteria and, depending on our performance relative to the criteria, will determine future negative or positive rating agency actions.

We compete based in part on the financial strength ratings provided by rating agencies. A downgrade of our financial strength ratings can be expected to adversely affect us and could potentially, among other things, adversely affect our relationships with distributors of our products and services and retention of our sales force, negatively impact persistency and new sales, particularly large case group sales and individual sales, and generally adversely affect our ability to compete. A downgrade in the issuer credit rating assigned to Unum Group can be expected to adversely affect our cost of capital or our ability to raise additional capital.

The table below reflects the outlook as well as the senior unsecured debt ratings for Unum Group and the financial strength ratings for each of our traditional insurance subsidiaries as of the date of this filing.

NR = not rated

There have been no changes in the rating agencies' outlooks or ratings during 2025 prior to the date of this filing.

See our annual report on Form 10-K for the year ended December 31, 2024 for further information regarding our debt, issuer credit ratings and financial strength ratings and the risks associated with rating changes.

We are subject to various market risk exposures including interest rate risk and foreign exchange rate risk. With respect to our exposure to market risk, see the discussion under "Investments" in Item 2 of this Form 10-Q and in Part II, Item 7A of our annual report on Form 10-K for the year ended December 31, 2024. During the first six months of 2025, there was no substantive change to our market risk or the management of this risk.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. We evaluated those controls based on the 2013 Internal Control - Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, these officers concluded that our disclosure controls and procedures were effective as of June 30, 2025.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2024.