Important Points
-
Interested in Unum Group? Here are five stocks we like best.
-
The Unum group agreed to reintroduce an additional $3.8 billion in long-term care statutory facilities through Fortitude Re, bringing its total guaranteed LTC reserves to $7 billion and reducing its exposure by 40% from the start of last year.
-
The deal wipes out all the rest of Unum individual long-term care business from Fairwind, leaving mainly the LTC group there, and LTC’s total statutory reserves are expected to drop from $14.8 billion to about $11 billion after the closing.
-
Unum said the transaction would use $650 million of the company’s excess cash, but capital return programs remain unchangedincluding approximately $1.3 billion in expected dividends and share buybacks through 2026.
Unum Group (NYSE:UNM) said it has agreed to refinance an additional portion of its long-term care insurance liabilities, marking the company’s third-largest overseas refinance deal and its second involving long-term care.
In a conference call with analysts, President and CEO Rick McKenney said the deal would free up $3.8 billion of long-term care facilities, bringing long-term care facilities back to $7 billion. He said the transaction reduced Unum’s exposure by 40% compared to the beginning of last year.
→ PepsiCo’s budget can turn patience into real profit
The transaction will begin operations on April 1, 2026, and is expected to close in 2026, subject to regulatory approvals and other customary closing conditions, according to Matt Royal, senior vice president of investor relations and treasury.
Deal Clears One’s Remaining LTC at Fairwind
McKenney said the transaction removes all of Unum’s long-term care business that was originally underwritten by Unum America and subsequently re-certified to Fairwind. The remaining liabilities at Fairwind will be long-term group maintenance, which management says has a different risk profile.
→ MarketBeat Week in Review – 07/06 – 07/10
Chief Financial Officer Steve Zabel said the company is returning $3.8 billion in long-term savings to Fortitude Re. Similar to Unum’s previous long-term care reinsurer deal, the biometric risk assigned to Fortitude Re will be reintroduced to the highly rated world insurer, he said.
Zabel said the reinsured block represents 26% of Unum’s long-term care total and 52% of its long-term care business. It includes about 50,000 policies with an average life expectancy of 76 years, compared to 86 years for the reinvigorated block in last year’s work.
→ Buyer Beware: These 2 Stock Charts Recently Showed a Death Cross
The block focuses on active life preserves, which account for 75% of reclaimed land. Zabel said it also has a “materially richer benefit profile” than the Unum business, with 83% of policies protecting against inflation and 43% offering whole life benefits.
Financial Costs and Prices
McKenney said the transaction will cost Unum $650 million in excess cash from the holding company, which he described as equal to the risk reduction achieved. He also said Unum’s plan to return $1.3 billion to shareholders through dividends and share buybacks remains on hold.
Zabel said management believes the most appropriate way to evaluate transactions is related to best reserve ratios, because that measure reflects the exposure being transferred. On that basis, he said transaction costs are about 12% of the best-estimated amount, compared to 10% in 2025. The combined cost for both transactions is about 11%.
Zabel said the total cost compared to official reserves is higher because the 2026 block has a worse reserve profile. He said the block holds the best estimates of depositing nearly $700 million more than legal reserves, including a negative net worth of about $660 million.
The administration said the economic benefits from the deal include the release of necessary capital and tax benefits, which reduce a large part of the total cost. Zabel also said that Unum is using short-term financing that is tied to future tax benefits that are expected to be realized in the next few years.
Remaining Long Term Care Block
After the transaction, Unum’s total long-term care savings will drop from $14.8 billion to about $11 billion, according to Zabel. Group long-term care will represent approximately 70% of the remaining long-term care facilities and 95% of insured lives.
Zabel said the shift to group long-term care is “structurally important” because the group business carries less affluent benefit plans, younger people of age and lower end-risk than individual long-term care. He said the average per diem benefit in group long-term care is about one-third that of individual long-term care. He also said that 77% of group long-term care policies have no inflation protection and only 7% have lifetime benefits.
Management said the transaction reduces sensitivity to all of Fairwind’s key assumptions, including premium rate increases, lapses and deaths, claims events, claim decisions and interest rates. Zabel said that sentiment dropped from 28% to 42%.
After the transaction, Fairwind will retain approximately $7.1 billion of group long-term care facilities, backed by approximately $2.1 billion in reserves and total protection of approximately $1.9 billion, Zabel said. Provident Life will continue to hold the remaining long-term care exposure, supported by diversification from a broad and growing product portfolio.
Capital Investment Plans Are Unchanged
Zabel said Unum expects its year-end 2026 capital metrics to remain strong, including risk-adjusted capital in the 400% to 425% range, carrying the company’s capital of $1.5 billion to $2 billion and a margin of around 25%.
He said Unum’s 2026 cash flows and spending are unchanged, including expected cash generation from $1.4 billion to $1.6 billion and expected spending of about $1.5 billion, including about $1.3 billion in share repurchases.
“There is no change in our priorities, there is no change in the plans we have planned, and there is no change in our return of capital to shareholders this year as a result of the transaction,” said Zabel.
Analysts Ask About Future LTC Actions
During a question-and-answer session, analysts asked whether Unum could pursue more long-term care insurance transactions, including group long-term care. McKenney said the company continues to talk to partners about different parts of the block but emphasized that future deals will depend on market conditions and the number of shareholders.
“We like to take that risk off our entire balance sheet,” McKenney said of long-term care. “At the same time, we have also been clear that we will only do that if it makes sense from the shareholders’ point of view.”
McKenney said Unum remains focused on employee benefits franchises in the US, UK and Poland while continuing to operate a long-term closed care block. He described the new deal as “another logical step” in the company’s blockchain strategy.
About Unum Group (NYSE:UNM)
The Unum Group (NYSE: UNM) is a leading provider of employee benefits in the United States and select international markets, specializing in disability, health, accident and critical illness insurance. With both fully insured and self-funded plans, the company offers group coverage designed to protect income and reduce financial stress for employees and their families. Its portfolio includes short-term and long-term disability plans, group health and accidental death and dismemberment (AD&D) policies, as well as critical illness and hospital products.
In addition to its core products, Unum Group markets voluntary benefits under its Colonial Life brand, which allows employees to purchase additional insurance such as accident, cancer, and dental coverage directly through payroll deduction.
This quick news alert is generated by the scientific narrative expertise and financial data from MarketBeat to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
The article “Unum Group Cuts Long-Term Care Risk in $3.8B Reinsurance Deal” was first published by MarketBeat.
View MarketBeat’s top stocks for July 2026.
