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2018 Annual Report
2018 Annual Report
2018 Annual Report
By most measures, 2018 was a very good year for Unum.
Beyond the numbers, we excelled at serving our customers who rely on us during some of life’s most challenging times, and we continued to invest in creating a world-class customer experience. In doing so, our core operations delivered outstanding results, driving profitable growth as we expanded both our geographic footprint and our product portfolio. We also continued our focus on social responsibility, principled governance, and environmental stewardship. And, despite industry headwinds, we stayed the course on our capital plans.
Hear from Rick McKenney, our President and CEO, on the social purpose of Unum that benefits all stakeholders.
These accomplishments, however, weren’t reflected in the performance of our company stock price, which — after years of strong performance — was set back by market and industry concerns about legacy long-term care.
We have managed through those challenges and delivered consistently solid results over the past decade, driven by the steady execution of our strategy combined with the power of our 10,000 dedicated employees pursuing a shared purpose: to provide essential financial protection to millions of workers and families.
We’ve built on our strengths and delivered excellent results, and we enter 2019 well-positioned for continued success over the long term.
Our strong financial foundation, long history of disciplined execution, and commitment to our purpose have prepared us well to thrive in shifting environments. That’s good news for the markets where we share our knowledge and expertise, and for the millions of people we serve.
Year-end numbers from 2018 affirm the success of that strategy. The highlights include:
In spite of these results, the strength of our core business was overshadowed by negative attention on long-term care insurance across our industry. The size of our long-term care block of business is significant enough to influence our overall results, including our stock price. We’ve been transparent and direct in sharing our strategy for carefully and effectively managing this business over the last decade. Our announcement in September that we would increase our long-term care reserves also brought with it increased transparency in underlying trends.
While the industry-wide disruption around long-term care has presented challenges, it hasn’t distracted us from a strong operational focus on our core businesses, or from delivering excellent results. We remain confident in our plans and our ongoing focus. Our disciplined underwriting and risk management strategy have led to stable returns, and we have benefitted from consistent execution of our capital strategy, including buying back $351 million in shares and paying dividends of $217 million in 2018.
Our work fills an essential need for financial protection that helps keep individuals and families secure and supports the success of thousands of businesses.
Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments and make a difference. Unum has a long tradition of engaging employees, shareholders, our communities, and society at large on advocacy, community outreach, environmental responsibility, and good governance.
Our work fills an essential need for financial protection that helps keep individuals and families secure and supports the success of thousands of businesses. Last year we paid $7.2 billion in benefits to our customers when they needed us most and helped hundreds of thousands of people return to work after injury or illness.
Our customers tell us how much it means to have Unum to lean on in tough times. Hearing from them and reading the messages they send us inspires us every day.
Cheri, a breast cancer survivor, said this: “Once the surgery was over, the bills started piling in. It was a whirlwind, but ‘How am I going to afford this?’ never crossed my mind.”
Jason, who suffered complications following brain surgery, told us benefits from Unum provided the money to pay his mortgage and living expenses when he couldn’t work. “It was such a relief, because it let me focus more on my health and recovery,” he said.
The social good we do begins with our mission of supporting our customers, but it also extends to the communities where we live and work. We dedicate significant resources to improving public education, to health and wellness, and to arts and culture in the places we call home. In 2018, we followed through on a commitment to increase our annual charitable contributions and, together, our company and our employees contributed $13.2 million to charitable causes, while our employees volunteered more than 67,000 hours to organizations they believe in.
To better serve our customers, we invest in the teams who deliver on our promises every day. We’re in the midst of a modernization of our main campuses that will drive productivity, not only through greater collaboration and flexibility, but also through employee health and wellbeing. Our new workspaces feature sit/stand desks, state-of-the-art fitness facilities, onsite health staff, and renovated cafeterias offering healthy dining options.
Employee wellness goes beyond physical health to include overall wellbeing. To support an engaged workforce, we enhanced our benefits program in 2018 by implementing paid parental leave for both mothers and fathers. Beginning in 2020, we’ll offer employees a first-of-its-kind student debt repayment option that allows them to trade unused paid time off for a payment toward student debt. Providing these kinds of benefits to our own employees parallels our commitment to making stronger financial protection and tools available to businesses and their workers, meeting a growing societal need.
Our purpose-driven culture also informs our approach to building an inclusive workplace. Building on our focus over several years, we established an Office of Inclusion & Diversity in 2018 and hired a vice president to lead that organization in ensuring Unum is a company where everyone has a voice. It’s the latest step down a path that already includes inclusion and diversity expectations for leaders across the company; strategies for building inclusion and diversity into recruitment and hiring practices; research and education to improve our understanding of different needs; and employee-led resource groups focused on supporting LGBTQIA+ employees, women, people of diverse racial and ethnic backgrounds, people with disabilities, veterans, and other self-identified populations.
Ensuring an inclusive and diverse culture is a long-term commitment, but our efforts have already earned recognition outside our walls. Unum is one of 230 companies selected for the 2019 Bloomberg Gender-Equality Index, which distinguishes organizations committed to transparency in gender reporting and advancing women’s equality. The index includes organizations from 10 industry sectors across 36 countries and regions. Our company scored particularly high for gender equality among senior leadership; inclusion and diversity leadership and strategy; and flexible work, family-friendly, and health care policies.
Unum has also been recognized by the Women’s Forum of New York and the 2020 Women on Boards organization for female representation on the corporate board. And we are proud to be one of the Human Rights Campaign Foundation’s Best Places to Work for LGBTQ Equality.
Our companies continue to hold leadership positions in our markets, with deep expertise that spans more than 170 years. In 2018, we strategically expanded both our portfolio of products and services and the geographic area we cover, while maintaining our single-minded focus on meeting the growing need for financial protection.
We have seen the benefits of this disciplined growth in new dental products and dental insurance networks that are providing lift across the portfolio. We continue to find dental insurance offers a cost-effective entry point into our full suite of products and services for new customers, while deepening current relationships.
In early 2018, we acquired LeaveLogic, which provides easy-to-use digital tools that help customers easily access and manage their leave benefits. We also launched HR Connect to seamlessly integrate with existing HR platforms, creating a simple experience for benefits administration. These capabilities expand our leadership in the growing leave and absence management market, demonstrated by the more than 310,000 leaves we administered in 2018. We also grew our stop loss offering, which helps companies limit their exposure to high medical claims.
We expanded our geographic reach with the acquisition of Pramerica Życie, a financial protection provider in Poland. Unum Poland joins Unum UK to form our Unum International business, bringing tremendous potential for growth. Unum UK also launched a new voluntary benefits offering called Benni to make personalized, employee-selected coverage more widely available to workers in the U.K. Meanwhile, our Colonial Life business continued to expand its distribution network to reach more underserved areas with more than two dozen new territory or district offices and nearly 750 new sales representatives.
Today’s economic trends indicate the need for our products and services will continue to grow. Low unemployment means employers must take advantage of more attractive, robust benefits packages to compete for top talent. At the same time, too many employees lack a basic financial safety net to protect their families, their finances, and their futures. For example, although the vast majority of disability insurance is acquired through the workplace, only a third of workers have this essential coverage. And about two in five working-age people in the U.S. are considered financially fragile, unable to come up with $400 in an emergency or cover the cost of a midsize budget shock such as a car repair or medical bill within a month.
For so many people, financial protection benefits are a lifeline during some of life’s worst times. This is our purpose; this is what drives us.
Our unwavering focus on serving customers who rely on us to be there when they need us most drives our ongoing investment in the customer experience.
The workforce of the future includes five generations from diverse cultures and backgrounds, each with unique interests and needs. One thing they have in common, though, is their need for financial protection — and, increasingly, their expectation of seamless, online experiences that provide near-instant responses.
To meet and keep ahead of those expectations, we’re investing in our operations, streamlining our processes and redesigning the customer experience with a digital mindset and an outside-in approach that puts the customer journey at the center. This requires us to constantly question and better understand what customers want to do and how we can make it easier for them.
Helping guide us on this journey is our recently hired chief information and digital officer, who is leading our efforts to transform our thinking so the digital customer experience is central and we tap into technology to deliver agile, accurate, and empathetic solutions.
Our belief in our shared purpose of providing essential financial protection to millions of workers and families, combined with our disciplined approach to executing our plans and active management of our closed block, position us well for continued growth in 2019 and beyond.
We’ll continue to focus on expanding our business to meet increasing customer needs while preparing for market changes and challenges. Our exceptional home office and field teams put us in an enviable position in our industry, ready to take advantage of opportunities for greater success.
Enhancing the customer experience has been a cornerstone of our investments in 2018, and that will continue in 2019. As part of this focus, we are investing in digital capabilities that will benefit our clients — both employers and their employees — while also bringing more digital processes into our own operations to create efficiencies we can reinvest in our external growth.
Over the past few years, we have added products and made acquisitions that are now allowing us to expand into new areas. Our dental platform is expected to add 3% to our U.S. sales growth in 2019. Our medical stop loss business is in its early stages but offers a strong growth opportunity in the coming years. And we’ve added a vital employee benefits business in Poland that is well-run, profitable, and fast-growing.
With these opportunities in front of us, I am excited about where we are headed in 2019. Thank you for your trust and confidence in our commitment to exceeding the expectations of you and our customers every day.
