Unum reinsures $3.8B of long-term care reserves to Fortitude Re, cutting LTC exposure 26%

Unum entered into an agreement to reinsure a portion of its closed individual long-term care business to Fortitude Re. This transaction involves transferring legacy long-term care liabilities, which are typically high-risk and capital-intensive, to a third-party reinsurer. The deal is structured as a 100% quota share coinsurance arrangement effective April 1, 2026.

Unum will transfer approximately $5.7 billion in assets and cash to Fortitude Re against $3.8 billion in statutory reserves, representing a $1.9 billion premium to reserves. This structure is typical for long-term care reinsurance where the reinsurer assumes future adverse development risk. The asset transfer amount is subject to interest rate adjustments before closing.

Unum retains administration of the policies and will receive payments from Fortitude Re if future premium rate increases exceed levels already priced into the deal. This allows Unum to participate in upside from regulatory approvals for higher premiums on this closed block of business, partially offsetting the transaction cost.

Unum expects capital relief and tax benefits from the transaction, with closing anticipated in 2026 pending regulatory approvals. The deal allows Unum to reduce capital allocated to legacy long-term care liabilities while maintaining some upside participation through the experience refund mechanism.

Unum disclosed entry into a reinsurance agreement. The 8-K furnishes a press release and investor presentation as exhibits but does not detail the transaction terms, counterparty, or financial impact in the body text. Management held a conference call on July 6, 2026 to discuss the transaction.

The safe harbor language references an anticipated capital benefit from the reinsurance transaction, suggesting the deal is expected to improve Unum's capital position. However, no specific figures or timing are disclosed in this 8-K filing.

This transaction, combined with a prior 2025 LTC reinsurance deal, reduces Unum's total LTC statutory reserves by approximately 40%. Together, the two external transactions will have decreased the company's closed block footprint through reinsurance of more than $7 billion of LTC statutory reserves. Following the transaction, Unum's remaining LTC statutory reserves are expected to be approximately $11.0 billion, with approximately 70% backing group LTC policies.

The transaction will be funded through Fairwind excess capital, holding company liquidity, and financing related to future tax benefits. Unum expects to maintain strong capital metrics post-closing: holding company liquidity of $1.5 billion to $2.0 billion, leverage of approximately 25%, and risk-based capital (RBC) of 400% to 425%. The impact on operating earnings is expected to be limited to foregone investment income and incremental interest expense from transaction financing.

The transaction involves Unum America recapturing the individual LTC block from its subsidiary Fairwind and then ceding it to Fortitude Re. Fortitude Re will further retrocede the biometric risk to a highly rated global reinsurer. The transaction is expected to close during 2026, subject to regulatory approvals and customary closing conditions.

CEO Richard McKenney stated this transaction advances Unum's Closed Block strategy to reduce exposure to legacy long-term care business and focus on the company's employee benefits franchise. The transaction significantly reduces the size and risk profile of the Closed Block, with management emphasizing commitment to disciplined execution, prudent capital management, and delivering long-term shareholder value.

Unum Group executed a second external long-term care reinsurance transaction, transferring $3.8 billion in statutory reserves (100% of Individual Long-Term Care reserves in Fairwind Insurance Company) to external reinsurers. This represents 26% of total LTC reserves and 52% of the ILTC block, covering approximately 50,000 policies with an average attained age of 76 years. The transaction is part of the company's ongoing closed block strategy to reduce LTC exposure and capital demands.

The transaction requires $5.66 billion in market value of assets to transfer $3.84 billion in statutory reserves. The net cost is $540 million (12%) relative to best estimate reserves of $4.5 billion, or $1.2 billion (31%) relative to statutory reserves. Economic benefits include $130 million in required capital release and $490 million in total tax benefits. Management characterizes the pricing as disciplined and consistent with the 2025 LTC transaction when evaluated relative to best estimate reserves.

After the transaction, the remaining LTC block shows materially lower sensitivities across all key assumptions. Sensitivity to future unapproved premium rate increases decreased 28% (from $1.0B to $720M), active policy lapses and mortality decreased 35%, claim incidence decreased 36%, claim resolutions decreased 42%, and interest rate sensitivity decreased 38%. Post-transaction, Group LTC represents approximately 70% of reserves and 95% of insured lives, with materially less rich benefits than Individual LTC (average daily benefit one-third of ILTC, 77% with no inflation protection, only 7% lifetime benefits versus 33% for ILTC).

Management affirms that capital position and deployment priorities remain unchanged post-transaction. For year-end 2026, the company expects to generate $1.4-$1.6 billion in capital and deploy approximately $1.5 billion including roughly $1.3 billion in buybacks and dividends. Expected year-end 2026 metrics include holding company liquidity of $1.5-$2.0 billion, leverage of approximately 25%, and risk-based capital ratio of 400-425%.

Including this transaction, Unum has now reinsured over $7 billion of LTC reserves through external transactions. The company's closed block management strategy since 2020 includes a $7.1 billion legacy Individual Disability Income transaction, a $3.4 billion LTC reinsurance transaction in 2025, and this $3.8 billion LTC transaction. Total LTC statutory reserves across all legal entities decreased from $14.8 billion at year-end 2025 to $11.0 billion post-transaction.