As I write this letter, we find ourselves in the early stages of unprecedented events stemming from the COVID-19 pandemic. Many individuals and families have been affected by this disease and the corresponding economic impacts. Unum is committed to doing everything we can for people – our employees and their families, our customers, our communities, and our shareholders – as the situation continues to unfold.
I’m proud of the dedication and resiliency of our employees around the world as they continue working to provide the same level of unparalleled service to our customers, whose needs are greater than ever. From the start, we worked diligently to communicate to our customers, share important legislative and regulatory updates, and provide resources to help them navigate the many impacts of COVID-19. Our purpose of helping the working world thrive throughout life’s moments doesn’t stop during a pandemic. It becomes even more critical, and we remain committed to taking care of all our stakeholders in this fast-evolving situation.
Robust business continuity planning and regular program testing have allowed us to respond quickly to events. To protect the health and safety of our employees, we enhanced our remote-work capacity and successfully transitioned our 10,000 employees to working remotely within days, as the outbreak began. This transition and other adjustments we made provided stable service experiences for our customers and prompt support for their employees. At the same time, we led the way in our local communities to support critical health services, combat food insecurity and ensure equitable access to learning.
The strength for us to react quickly has been built up over many years, driven by a clear mission and strong underlying culture. There are many unknowns ahead, but our clarity of purpose will show the way.
Review of 2019 Performance
2019 was a good year that further positions the company for success. We delivered consistent solid performance and growth across our core businesses, while remaining laser-focused on providing customers with a world-class experience and helping safeguard millions of people. To meet our customers’ evolving needs, we continued to invest in new digital capabilities and in key growth areas, like leave management. At the same time, we remained committed to our responsibilities as an employer, community member and leader in advancing efforts to benefit our society and environment.
Despite our strong performance and significant achievements, market and industry concerns about legacy long term care business continued to overshadow the performance of our core operations and weigh on our stock price. Our core business has historically generated strong cash flow to reinvest in the company and manage the capital needs of LTC, and we will continue to actively manage this block.
In 2019, we saw an increased demand for our products and services, driven by favorable economic conditions, low unemployment and a number of positive workplace trends. While employers in today’s market face challenging decisions in the short term, we believe the need for more inclusive, robust benefits packages will be critical to all businesses over the long term. It’s certainly a conversation we are having with our customers as they work to support their talent at this time, and it has reinforced the societal need for what we do.
We’ve built on our strengths and delivered solid core results, and we are positioning the business for continued growth and long-term success.
As we recover from the impacts of the COVID-19 pandemic, the need for inclusive employee benefits has never been clearer.
2019 Performance by the Numbers
Through the execution of our strategy, our business maintains a solid financial base, which allows us to support more than 39 million individuals and their families, across more than 180,000 companies.
In 2019, our strategy yielded profitable and steady growth. The highlights include:
- Net income of $1.10 billion and strong after-tax adjusted operating income of $1.14 billion, based on total revenues of $12 billion
- Earnings per share of $5.24 and adjusted operating EPS at an all-time high of $5.44, resulting in another year of record growth
- Return on equity of 17.2% in our core operating segments
- Book value per share up 11.2% from 2018, continuing our long-term commitment to shareholder equity growth
- Nearly $630 million in capital returned to shareholders
We remain focused on growing our geographic footprint, expanding our portfolio of products and services, and investing in key growth areas to deliver superior financial performance and capital deployment. In 2019, we paid $229 million in dividends and increased the annual dividend rate by 11.2% over the prior year. We also repurchased $400 million worth of our outstanding shares.
Our Purpose-Led Business
Above all else, we are relentlessly focused on living our purpose to help the working world thrive throughout life’s moments. We believe in our mission to help safeguard millions of people. Last year alone, we paid $7.5 billion in benefits to individuals during difficult moments in their lives, providing support that allowed them to recover and prosper. As one customer told us, “I will be eternally grateful as you have been a pillar of encouragement and strength in my life.” Reactions like this truly reaffirm all that our team does and remind us we are providing more than just financial support.
Our employees can also attest to our focus on doing the right thing for those we support – especially in times where that help is critical. This year alone, our employees helped 318,000 people return to work.
As a global organization working with unique businesses and individuals, we strongly believe in the importance of diversity and creating an inclusive work environment. Continuing with our efforts over the past several years, in 2019 we were named a Best Place to Work for LGBTQ Equality on the Corporate Equality Index and a Best Place to Work for Disability Inclusion on the Disability Equality Index. Additionally, we have committed to achieving gender parity in our leadership by 2030 as part of the Paradigm for Parity Coalition.
In 2019, we also focused on enhancing our workplace culture and the professional training and development of employees. We are proud to have been recognized as a great place to work by several independent organizations and will continue to make investments in our people and culture to create a world-class workplace. Last year, we were selected as a Best Employer for Women by Forbes, recognized for the second year in a row by the Great Place to Work Institute, and named a Best Employer for Excellence in Health & Wellbeing by the National Business Group on Health, among other accolades.
We also know the importance of reaching beyond our office walls and into our communities. In 2019, we contributed $15 million to charitable causes through corporate and employee contributions. This giving includes in-kind contributions, matching gifts and more than 120,000 volunteer hours to organizations of their choice – time our community partners tell us is invaluable.
Growing and Improving the Customer Experience
In 2019, we continued to invest in digital transformation across our organization to enhance our own product offering and capabilities, while improving the customer experience through more efficient and higher-quality solutions.
We already see the return on this investment. More customers are using cloud-based systems like our newly expanded HR Connect and recently launched MyUnum platforms for billing and benefit management, and they’re giving positive marks on the experience. As the only certified solution provider on Workday in the benefits and leave space, we have placed over $100 million in new premium on that platform, resulting in exceptional client experiences.
Our Colonial Life business has similarly made meaningful investments in digital transformation and improved customer experience through several new quote-to-claim capabilities, including digital benefits booklets, an employee online scheduler, tailored customer websites, claims automation and the Colonial Life benefits app.
We have also seen an increase in positive experiences across Unum International. In the U.K., more employer customers are taking advantage of our award-winning Benni platform, which allows employees to choose additional benefits alongside those offered by their employer. Additionally, our recently released Help@Hand health support app allows for quicker access to medical appointments digitally, at no additional cost for covered employees. We successfully integrated Poland into our international business, with operations in the region exceeding our expectations for both premium growth and profits in 2019, leveraging our marketing and distribution expertise from the U.S. and U.K.
Along with digital improvements, our investment in leave management services has contributed to the growth of our group benefits business. Large employer sales were up 29% in 2019 based on leave services alone. The demand for absence management is evident: 46% of firms with 1,000 or more employees now offer parental paid leave and 90% of paid short term disability claims have an associated leave. Additionally, nine states in the U.S. have already implemented or passed comprehensive paid leave legislation, with 31 states having considered new or expanded programs in 2019. As the policy landscape continues to change, we have been an active voice in these national conversations.
Of course, as we enhance the customer experience, we are always considering the many unique difficulties that people often face. With 2 in 5 workers considered financially fragile, millions on leave at any given moment, and 40% living paycheck to paycheck, it is essential that we have a robust and inclusive set of benefits for people to choose from, no matter what their situation. We continue to update our offerings across our portfolio to meet this increased need for flexibility in benefit packages.
Looking Ahead
Despite the current environment, Unum continues to make strategic investments in our future while remaining focused on the disciplined management of our closed block.
As we move forward, our priority will be on focused investments for our customers. We expect to remain a market leader by anticipating and responding to the evolving needs of our customers. Additionally, we will enhance synergies across our companies and build upon our strong Unum culture, as well as improve processes to make our business more efficient and agile.
Throughout Unum’s more than 170-year history, we have successfully managed many economic cycles and global events. Today our company has a strong balance sheet, capital position, and liquidity, with a high-quality franchise network that people know and trust. We are confident in our ability to navigate through the recent market impacts of the coronavirus pandemic, while providing workers with the essential benefits they need.
As we recover from the impacts of the COVID-19 pandemic and prepare to help people return to work in the coming months, the need for inclusive employee benefits has never been clearer. Our belief remains that this success also comes from continuing to practice our company values, both through our business practices and our contributions to the world around us. As we focus on our business goals, we will not lose sight of that bigger picture. Times like these renew our sense of purpose, and although there will be challenges, I look forward to what we will accomplish in 2020.
Thank you for your continued support.
