Unum Group (UNM) Earnings Call Transcript & Summary

Good afternoon. Pleased to have Unum up with me on stage. Directly to my right is Rick McKenney, CEO; and Steve Zabel to the far end, CFO and also want to acknowledge the Investor Relations team, Matt Royal and Nate Burns in the front.

But -- to start off, so Unum initially guided to 7% to 9% EPS growth for 2024, and you raised this to 10% to 15% after your first half results. So I wanted to start with just discussing the key factors that have driven the upside to your EPS guidance and also just your general thoughts on those favorable items continuing.

Great. Thank you, Ryan. First of all, thanks for having us here. It's always good to be at this conference. We appreciate the folks in the room and also get to talk to some people over the course of the day. So it's really great coming off of Labor Day, a lot is going on here as we get finishing out third quarter to the fourth quarter. But as you asked, in terms of raising our guidance, we came into this year feeling very good about the position we're in. 7% to 9% growth is what we expected. And we saw some very good results in the first quarter. And then the second quarter, record earnings levels, EPS levels for the second quarter. And so putting that together in our outlook for the year, which we'll talk, I'm sure, more about raised that outlook for 10% to 15% EPS growth. So very happy about that. So the bottom line, doing very well. I think we'll talk more about the factors with it, but also very happy with how our top line has been. When I think of our premiums growing over 5%, it's a really good combination with what we have. And so we'll dig more into that. If you were talking about just a couple of key factors that probably changed over that period of time, we've experienced some very good benefit ratios we've had starting on our LTD, which we've seen long-term disability for a period of time. And then clearly, our group life got better as we got into the second quarter. We see sustainability in those trends, and so that's why we upped our outlook for the year to 10% to 15%. But it's much broader than that. I think it is about our continued growth as we look to the year and what that means from a premium perspective and how that translates to earnings. But we can get more into that as we go through the course of the next period of time.

Great. Thanks. So I wanted to first talk about claim trends, but try to -- I guess, try to separate them from pricing since, as you can imagine, I'm going to ask you about that again despite all the questions on the second quarter call. But I guess just on claim trends, starting with group disability, can you talk about what are the actual key drivers of favorable claim trends? And if you can separate them maybe between incidents and recoveries.

Yes. So linking that into what we just talked about on the earnings side, those -- as we talked about increasing our guidance was actually good benefit trends. And I'll let Steve talk about the -- dissecting a little bit, what we saw in -- particularly in the group disability side.

Yes. Great. If I go back to what we've seen really over the last several years, during COVID, we saw kind of an elevation of our incidence trends within our group disability. During that period of time, though, we saw continued improvement in our closure of claims or returning employees to work. And what we've seen is post COVID, our incidence trends have really gone back to pre-COVID. And so those are pretty consistent with our long-term expectations. Recoveries have continued to get better. And we're very happy about that. We think that's sustainable. We spent a lot of time internally thinking about what are the best ways to set plans for employees to get back to work, set expectations for that, help them with accommodations. And as you can imagine, the spectrum of accommodations have changed a lot in kind of a post-COVID world where people are working from the offices, they're working from home, they're working from a lot of different places. That kind of opens the spectrum of the types of accommodations that we can make to get them back to work. So we're very happy with those trends. We think those are sustainable when you just look at the claims experience part of the benefit ratios that we've been experiencing. But as you mentioned, then the question becomes, how do you think about competition and pricing for those levels of margins.

Just, I guess, one more follow-up. How much of this is driven by, like, in your opinion, like to what extent is like remote work in playing a role? And then I know Unum has also invested a lot in your own claims management procedures. Like how is that impacting things...

Yes. It's hard to attribute -- mathematically attribute. I think what's important though is they're happening at the same time as really the flexibility of where people can work are coming together at a time when the things we can do, whether it's medical devices, whether it's different types of electronic equipment, that is all advancing very, very quickly. And so we have in-house nurses, clinical, vocational types of technicians that they look at every claim individually and think about that person, the diagnosis they have, their situation, the type of job they have, and they're able to really go through the menu of the things that we can do and apply that for the best plan for that person and get them back to be productive because one of the things that's great about our business is our interests are aligned. People want to get back to work. They want to recover as quickly as possible. They want to normalize their lives. And so our people are able to really help them do that.

This has been discussed less and it's not as big of a product for you as group disability, but you've had pretty favorable individual disability experience lately as well. Is that -- do you think that's the same drivers? Or is there something different happening in that...

Yes. I would say they're pretty consistent drivers. The benefits team that we have supporting those 2 line of businesses are the same. It's the same team. It's the same type of data that we can rely on to think about the best path back to work. It just so happens, we sell them both in the work site. It just so happens that the individual is more of an executive carve-out and the group disability is more of a true group business where we cover the vast majority of the employee base.

And then in group life, that was one of the areas you mentioned, you've seen a major improvement in claims there. I guess, can you help frame like where -- how does mortality compare now to prepandemic levels. And it's probably a little bit different for the group life business since it's working age population only.

It is. And that's where I would start. It's very important to understand. Our group life business is for those people in the working age population. So I think roughly 65 or below age. And so those dynamics can be a little bit different than a lot of the individual businesses out there that might be on older age policyholders. So what we saw prepandemic were benefit ratios that were in the low to mid-70% range. And those can be volatile period to period. But by and large, those are the types of experience levels that we've seen. Obviously, in COVID, those benefit ratios ballooned. And we supported our customer base. We kept our promises, paid a lot of mortality claims through that period. We then saw more of a reversion to what I would call prepandemic with a little bit of endemic mortality in there. So our expectations were more in the mid-70% benefit ratio. And that's what we saw for a period of time. The last 3 quarters, we've seen very favorable incidents though. And so you just think about the number of people that have -- that die within our policyholder population, that is below prepandemic and really what our expectations are. So we've been running in the mid- to high 60% benefit ratio. And as Rick mentioned, we've kind of made a call for our outlook and our expectation for at least the back half of the year that, that will be more around 70% benefit ratio. And that's part of what basically computes to the 10% to 15% EPS growth that now we're expecting for the full year.

And just the last more claims specific question in the U.S. was on voluntary. You have had some volatility there. Can you give a little more color on what has happened? I guess that's probably like the one area that's been a little bit unfavorable.

Right. Yes. And I wouldn't say it's been unfavorable. We have 2 different brands. We have a Unum US brand and a Colonial brand where we have blocks of business within voluntary benefit. Colonial has been pretty consistent around benefit ratios in the high 40% range, and that would be our expectation. We do have a block of business within there that is cancer -- basically cancer care type of policy. That's a small block, and that one can be a little volatile because one claim can be pretty significant within that block. I would say if you go to the Unum US side, the one thing that's really important is voluntary benefits isn't a product. It's a series of a lot of products that we sell as a suite and people come in and select the products that they want. I would say there's puts and takes there, but it's been running pretty much within our expectations. We would think that it'd be between 45% and 50% benefit ratio. And by and large, that's what we've seen. We've seen a couple of quarters. It was actually a little light from that, but I feel pretty good with the margins we have there. And you're going to see some volatility period-to-period. We do have a block of life insurance in there, which can cause some of that volatility.

So shifting gears to growth, starting with Unum US, can you talk about the growth environment and -- there's a few drivers, natural growth in the block persistency and sales. Can you talk about kind of what you're seeing in all those areas.

Certainly. So I think that natural growth has been one that we've talked about a little bit over the last several years. That's constructed 2 things. One is wage inflation that we've seen. And so that has been actually a lift as we look at the last several years and actually persisted. And the second is just the employee growth, the payrolls that we have out there. And so although that was not as big a driver as we looked in more recent history, I think as you look back to the last several years, that's actually been quite good as the employment picture has been strong. So that's kind of an underpinning and underlying thing, but it's not what we're actioning and what we're driving overall. I think the one thing that we saw in the last couple of quarters, which was very good was our persistency levels. So people are staying with us. There's a couple of drivers that we see from an overall persistency. One is just what the motion in the market in terms of things that are going out to bid, people, employers or actually their brokers advising them to bring things to market, and that has just been really strong. We think that we're creating actually some glue with those customers, and it comes on multiple fronts. One is just consistency. So consistency of service levels, consistency of employee experience, consistency of price, I think, is a good underlying driver and which is why we see pretty strong persistency. This last leg up is a little bit harder to articulate exactly why that is, but we're very happy with that. So that's underlying the block as we have it today, very, very strong. And then the sales front is one that we've been successful on over the last several years. Certainly, the competitive environment, as we've said, it's always a competitive environment, but the team is doing a good job on the sales front. And so we'll look to the back half of this year. Certainly, a lot happens in the fourth quarter in terms of what sales look like for the company and for the industry. But we think we bring a very good value proposition to the market. And so we're excited about what the teams are out there doing. When you bring all that together, we really think about growth in our top line is the premium growth levels that we've seen. We've seen some very strong premium growth of 5.5% on our core business. And we think that's what's important. And so longer term, we want to be in that 5% to 7% premium growth range. And I think that's a great aspiration because we can do that with good pricing, with good margins and see the kind of growth that we're looking for as a company.

So I'm going to ask it slightly different than the multitude of questions you got on this already on the second quarter call. But I think the -- when we think about -- I guess this is, in my opinion, I think the reason you're getting obviously so many questions on the competitive environment is -- you and the industry broadly are having favorable experience in a lot of group lines. It's a competitive industry that can get repriced over a period of time. So I think naturally, it seems like if a lot of companies are having favorable results, that's eventually going to lead to more competition in some reversion to the mean on the underwriting experience. But I was just kind of hoping to get your broad perspective on that and how you think this could play out for Unum over the next few years?

Yes. I think the competitive picture is real. People like this line of business. And so you have to look at many of our peers that are out there, a multiline carriers. This is one they really like because it's a good business, how it prices, the customers it serves, the breadth of the reach that it has, it's a very good business. So we don't wish for a lack of competition. We think competition is good. It's about rational competition and someone will come in and compete on features and price within a range. We think that that's a good thing overall. And so nothing tells us today that there's any outliers, any pricing that's happening out and so forth. Hopefully, we continue to hear that from an overall perspective. The hypothesis that says like, okay, it's -- the margins are good. They certainly are good for us, and they're good for some of our peers, not all of our peers, but for some of our peers as well, that, that will come into the market in a more aggressive pricing. And I think there's a couple of ways to dissect that. So I don't think that, that's necessarily the case, certainly not in the near term. One, as you think about our breadth of books of business. So we actually will ensure from down to 2 people, up to 200,000 people. And so making sure that you have that breadth of book is important. Because in the smaller cases, it's going to come to market less frequently. Because there, they want to make sure it's more about the quality, the delivery, consistency of pricing. And so I think that, that will come a little bit less frequently to market because they like having us as a carrier of theirs. As you start to move up in larger cases because of the size and the impact, those might come to market a little bit more frequently, and that's where you'll see some of the drive. But overall, we feel very good about what our margins look like. And I'd also say you can't isolate any one product. So when you think about group disability having good margins for us and for some others, it really gets sold as a package. And so now you add into that group life has been reasonably good. That -- but then there's also what you see on the front end of the business, lead management capabilities, short-term disability capabilities, all those things have to work in concert. So competition is real, competition is out there, but I think we've said pretty clearly that we're going to see how this plays out, but we feel very good about the margins where they are today and the confidence that we increased our EPS guidance for the year, and we'll have to see how the year wraps up and as we look into 2025.

A couple of follow-ups. One was just on the small mid versus the large. So you did have -- your sales have been stronger in your kind of smaller case core market this year, and I think they're up, I believe, 3% in the first half of the year. And then your large case market sales are down 12%. Is that the dynamic that you were just talking about in terms of -- are there competitive differences between those 2 different markets right now? Is that what's driving that?

Yes. I would say, generally, you have more swings at the plate with small case and you're able to have more consistency year-to-year with volumes within a certain period. Large case can be a little bit more episodic and a little bit more chunky. And so sometimes those compares get a little bit skewed. Honestly, we had pretty good success last year in the second quarter in our large case sales. And so that made a pretty tough compare. That was factored in as we thought about the entire year, though, what our expectations were. I would say we're pretty optimistic to close out the year strong.

Got it. And then -- this is -- it's hard, I think, for us on the outside to appreciate this, but like how meaningful are -- does things like capabilities come into play when you get into a pricing discussion? And I guess also just how different do you feel like capabilities are between companies in the market at this point?

Yes. It's a really good question. I would say if you went back a number of years, it was probably less of a differentiator in terms of the capabilities. When somebody brought a group life business to bear, I know there were certain capabilities. But that has changed pretty dramatically over the last period of time and even since the pandemic. And those capabilities are in different forms. One is that connectivity into the HRIS systems that we have. So think about that direct connectivity. And it's all about making that human resource managers life a lot easier in terms of how they administer claims and take care of their employees. And I think that's been a differentiator, which we've highlighted for ourselves. I think the other piece that you have out there from a capability perspective is just believe management side and these other things. So it really is about service to the HR department. And you say you're on the outside, you're not, your customers. And so you can actually see this in your daily lives. When you're starting to administer leave management across the 50 states and actually do so in a meaningful way, it makes a difference to your employees. It makes a difference to your HR department. So I think those are differentiators we can have out there. Still got to be within a range on pricing. It matters. But that's why we talk often about pricing is fine if it's in a range, even pre-pandemic, that was always true. But just those [ rogue ] pricing, movers out there, we aren't seeing them today, and that's what can disrupt the market.

And then just one more quick one just on -- is -- in Unum US is a 3-year rate guarantee still the standard or is there much of a range?

It's common. It's common 3 years what you have out there. And so it depend,s, [ very ] smaller cases might be a little bit less. So you might see a 2-year in larger cases, you might see slightly more, but I think that's probably a pretty good common ground is a 3-year type rate guarantee.

Great. And then in the Colonial Life business, your sales have been growing a bit less than I think you had thought they would this year so far, but then your premiums have been pretty in line. Can you talk about the dynamics that you're seeing in that business?

Yes. Yes, I'd just go back to kind of the movie that we've seen for our Colonial business since the pandemic. It kind of started out with impacts to the businesses that we insure. And just as a reminder, this is a small extent of the market. These are kind of mom-and-pop, small business owners that we insure. And we have a 1099 agency force that goes out and sells directly to the employer. They may not have an HR department. So it's kind of the owner making the decisions. So there's one step to sell. And then the second step is to actually get enrollment meetings with the employees and talk about the available products for them to buy. When [ you go ] through COVID, so the first thing we thought about is can we get to business owners, what's going to be the stability of kind of that part of the market. We really worked our way through that. I think that part of the market was very resilient. A lot of business owners really where we're able to navigate that period of time quite well. But then what we saw was being able to get feet on the street because it's all about a lot of agents out there calling on a lot of people. And we did see that lag a little bit when you get into 2021, 2022, being able to attract, retain, train and get productive, the 1099 agents. And so I'd say that business is just slower to recover. We love the trends. Premium growth trends are starting to build. Sales trends are starting to build, but it probably hasn't come back quite as fast as we would want it to. But we're optimistic because we've got a playbook. This line of business has proven historically that it can grow 10% year-over-year from a sales perspective. And so we're pretty confident we can get it back. It's just taking a while to get it back to those levels.

And I think you highlighted 2 things are important. One is premiums are growing. So we'll actually be able to retain the business and grow the overall book. And the second is the margins and that business are quite good, which they've been for a long period of time. We haven't given up on that front. So we just have to get the engine going. As Steve talked about the engine going and we got a lot of agents out there and some may be listening in today. We just have to get more activity, more feet on the street to grow at the rate that I think we're capable.

Then in the U.K., you've had a really good earnings recovery there. What have been the factors that have driven that, whether your own pricing actions or things more broadly in the market? And kind of where do you see the run rate earnings power of that business now?

Yes. So I'll just start out and I'll turn it over to Steve. We feel very good about our U.K. business. And included in that our international business, which would be our Polish business as well. We actually -- we just held our group -- our Board meeting over there. So we took our Board of Directors to the U.K. We see great opportunity. I think it's good to educate them on the growth we've seen. We've seen some very strong growth from a top line perspective. We also see it in bottom line. Steve, maybe you can touch on the dynamic...

They made about GBP 20 million a quarter. And it was pretty consistent. They modestly grew over time, but that was a pretty stable business. They went into Brexit, economy slowed down a little bit and then obviously, they had their challenges with COVID. We've pretty much -- that's all played through the business. And what's come out really is a business that's more resilient. They're bringing a lot more capabilities to the market there. We have things like an application for our group customers that they're able to access general practitioners and kind of get around the National Health Service over there, which is really a challenge right now and just other types of technology that makes the brokers more connected and more productive, but also help helps employees and employers, and those are starting to really win in the market. The other dynamic that's been going on over there is a big part of the product set over there. They have benefits that are indexed to inflation in essence within the economy there. We back those with assets that also float and the liability, the benefits are capped at 5%, but obviously, the assets are not. And so we've actually earned some pretty good margins over the last couple of years with very high inflation over there. That's really abated where you kind of get to the same apples-to-apples type of earnings profile and their earnings were over GBP 30 million in the second quarter, which if you take out the impact of inflation, that would be the best quarter that, that business has ever had. They continue to grow at double digits, and I think they have a lot of opportunity over there. There's a lot of market to still be gained over in the U.K. We like them to be bigger and we love them to do that organically or inorganically if the opportunity arose. But we're very high on that business right now. And they've had a bit of a slog over the last 5 to 6 years, and they've kind of come out of it a much better business that's growing at a pretty good pace.

Moving to long-term care. Maybe I was hoping you could maybe take us through kind of how claims trended earlier in the pandemic, how -- then how they've kind of trended as we've come out of the pandemic? And then when you just think about the overall trend line longer-term utilization, where we're at, at this point?

Sure. Yes. And I'll break it down because really the 2, I'd say, acute variances that we saw during the pandemic were around the level of incidents, just the number of claims submitted and then also claimant mortality, so the mortality within the claimant block. And early on in the pandemic, we saw 2 things very acutely, one, very, very high claimant mortality. And we saw that continue for, I would say, probably 18 months off and on. And what we've seen now is that's back to pretty historical levels as far as the level of claimant mortality. I talked about kind of the age group of the business in our group life being working age people. A lot of the claimants that we have in our LTC block, those are kind of retirement age people. So it's an older population. The incidence is something that early on in the pandemic, we had very low levels. And logically, it kind of makes sense. People -- we're not really wanting to get care anywhere, whether it was in a facility or bringing people in their home, there's just a lot of uncertainty. So early on, incidence levels were pretty low. Those then moderated more towards our long-term expectations, say, in the '21-'22 period of time. But one dynamic that was created is if you go all the way back and you think about this block of business and how our collective claim inventory grows over time, it was kind of on a regression line as this block ages. We've cut off the block. It's a closed block, and so the block is just going to age over time. We had a nice regression line, and then we get out into the pandemic. And really, our cumulative claim inventory kind of diverged from what the regression line would say, meaning that in the period, our incidence was lower than would have been indicative of longer-term trends. What we've seen more recently in probably the last 18 months is in-period incidence is actually elevated from what our expectations are. And if you can picture that claim inventory line, it started to diverge back towards what our longer-term expectation is. So our belief is that, that will probably come back into a more cumulative claim inventory and our in-period incidents will be more consistent with our longer-term expectations. The last 18 months has pretty much been a story of continued improvement to the second quarter, which is really the best incidence quarter that we've seen in 18 months. And we're optimistic that in the back half of the year, that will continue to abate. We're seeing some signs that, that will be the case. With that all said, this can be a very volatile block. It's hard to make predictions about performance over the next couple of quarters, we think more longer-term expectations and what that looks like. So we'll continue to monitor it, but we are very happy with how we started out the year, and it was pretty consistent with what we had expected coming into the year.

That was really helpful. I guess when you think about your long-term assumptions, it seems like it would be almost difficult to change them at this point when you're kind of -- you have this longer-term trend, and you've had volatility within a few years. But how do you think through that as you go through your assumption review?

Yes. Well, I'll start by saying I'm making no statement about conclusions for our assumption review. We go through an annual review every third quarter. We look at all of our assumptions for all of our product sets in compliance with the LDTI GAAP guidance for GAAP assumptions. Then in the fourth quarter, we'll do our work on statutory reserve adequacy and conclude that. So we'll be talking more on our third quarter call about the results of our GAAP assumption review. With that said, I think it's a logical conclusion to say we look at a data set over a long period of time when we think about longer-term assumptions, we usually use a decade of data. The last decade, it's been, as I described, it's been very interesting to try to cull through that data to really understand kind of longer-term expectations. We're just adding another year to that data set, but we'll continue to look at more of a long-term expectation.

And then when we think about your statutory reserves for LTC, I guess, first, just how much higher are they than your GAAP? Or -- I think you've gotten away a little bit from GAAP more economic. But maybe just start there just kind of how much higher are your statutory reserves than whatever the key other metric you [ use. ]

Yes. We used to talk a lot about the relationship between our GAAP LTC reserve and our statutory LTC reserve and the thinking there being that our GAAP reserve reflected our best estimate. It was kind of the same as our economic view of the block. And so any statutory reserves above that would be considered margin, and we consider that margin. So that was something that the market and we monitored quite a bit to kind of demonstrate there was margin. With LDTI, that's no longer the construct because we have a prescribed interest rate. So we're not able to reflect our view of interest rates and frankly, the portfolio that we have in force today when we think about discounting our liability. So we have moved away from that. And at our last Investor Day, we gave a disclosure, which was meant to try to give the essence of that comparison. And so what we did is we looked at our LTC liability on more of an economic basis and think about that as best estimate liability assumptions with our view of an interest rate path and our current investment portfolio. So it has kind of replicated the historical GAAP, best estimate reserve that we had. Then we also look at the excess capital that we have in our Fairwind subsidiary, which is where the majority of our LTC business is. We have excess capital down there. The combination of those 2 things gives us about $2.8 billion of what we think is buffer for our statutory reserve. And why we think that's important is GAAP reserving is interesting, but I think what people care about is what's the capital consumption needs and the regulatory reserving requirements for this LTC business. And so we gave that metric to say we have about $2.8 billion a buffer and then some sensitivities to say, hey, if some of these liability assumptions differ or diverge from our current assumption set, this would be the impact on our view of that best estimate, which would in essence, say, do you have enough buffer to absorb those scenarios, which we do. If you go back and look at the materials, we feel like we have very, very good buffer. And so that's kind of the new measurement that we're using to try to demonstrate the amount of margin that we think we have in our statutory reserves before we'd actually have to make capital contributions to support that business.

Is your interest rate sensitivity similar still to what you laid out at the outlook call? Or -- I know you've taken probably some additional hedging actions since then. Has there been much of a change?

Yes. I would say it's pretty consistent. We have put on some more hedges. We put them on it, prevailing interest rates, which have been pretty favorable over 4% for the 30 years. So I feel pretty good about that. And so I would say, neutral to positive from the sensitivities that we would have given at Investor Day, and we'll refresh that as we get into next year's Investor Day.

So that you upped your share repurchase authorization and kind of your pace last quarter, can you talk about the reasons you're doing that now? And what are your capital management priorities on a go-forward basis?

Sure. I'll take you back, Ryan, to thinking about what our capital generation has been, which has been tremendous over the last couple of years. So when you think about that first, there's a lot of generation that we have that we're putting back into the business. So you think about, first of all, previously, and I'm looking back to 2023 and previous years, long-term care, as Steve was just talking about was a place that we put capital. We haven't done that because we believe, given the buffers that Steve talked about, that there's no more need to put capital there. So let me just start there and say the generation that we have today is going for our use towards our priorities. Number one, as we talked about is grow the business. And so when we think about that, it's on the core basis, which doesn't take a tremendous amount of capital to grow organically, but we think about inorganic or is there M&A that can allow us to grow faster. So that's #1 priority. When you think about number two is actually what we want to do from an overall generation perspective, deployment perspective is what we do in dividends. And so actually, earlier this year, we increased dividends 15%. So that's good to put that in the baseline. And then what you asked about is share repurchase. So we've actually been increasing the share repurchase, the pace over the last several years. And we think that's been at a very reasonable pace that we feel very comfortable with. And so that would have gone from back a couple of years ago to $200 million range up to $250 million. This year, we came into the year saying it would be $500 million of share repurchase. Through the first half, we did $300 million. And what we've said is we're going to continue to increase the pace in the back half of the year. And we think that's a reasonable place to be, but the underpinnings of all that are: one, we don't think that we have to put any more money towards LTC and that's looking out many years into the future; and two, the fact that we have the ability today to maintain very strong capital levels at our company. And that's both from an RBC perspective and from cash at the holding company. So all of those come together to say we're in a good spot. We're happy with the shares that we're buying back today and the rate we're buying them back below book. But at the same time, we'll look at where those priorities are to grow the business first and continue to think about that. So I think the equation is working well. I think it all goes back to having really good businesses that are generating significant capital, and you've seen that over the last couple of years.

So your RBC ratio and your holding company liquidity are both pretty far above your targets. And even with the higher share repurchase, it seems like you're generating enough ongoing free cash flow that you're probably not really going to dip into your existing excess capital much. How should we think about what that excess capital buffer could ultimately be used for over time?

Yes. So I think you're right. If you are to our last quarter, our RBC level is 470% at our traditional companies. That's kind of a high watermark, also had cash of about $1.3 billion. So yes, significant excesses to our targets today. And at the generation levels, we're not going to consume it based on what we've talked about from a deployment perspective that we've seen over the last year. And so it's going to go back to those priorities. First, we're going to try and grow the business as we can. But if there's not the right opportunity for M&A, we're not going to chase it. And then we'll have to think about what the balance is from a share repurchase perspective. That's the dynamic we're thinking about constantly. But once again, it gets back to those same deployment priorities that we've had for a long period of time.

To what extent could M&A be -- bolt-on M&A be of interest? Is that something in consideration?

Yes, I probably wouldn't describe as bolt-on M&A and more capability-driven M&A. And so if we were to bolt something on, it will come with capabilities that we don't have today to allow us to grow faster. So what we're not looking at is just a consolidating transaction where we take out a bunch of costs and actually see some earnings there, that would take a very steep price to think that, that's a good use of our time and capital. But what we would like to do is bring on acquisitions that can actually allow us to grow a little bit faster. Think about that as digital capabilities that we can bring in, distribution opportunities we have. We've talked about the U.K. and Poland as places we'd also like to use M&A to grow those to a scale that we think works better.

And then I guess probably my last. I hate to end it on the long-term care, but I did want to at least -- I'll ask you -- I can only imagine how many times you've been asked this, but just latest thoughts on the possibility of long-term care risk transfer and where the market is and kind of where you guys are in this process.

Yes. We're happy to talk about it as we have for a long period of time. I think we are ready to transact. Our teams have done a really good job of positioning where we are, the ability to analyze different slices, tranches that we have. I think last year having a transaction in the market is helpful. It says that the ability for buyers and sellers to meet, which we've been talking about for a long time actually came to fruition. So we're going to be active in the market to see what kind of tranche would be interesting to a buyer that we think would be done at a reasonable price. So still active, still interested. There's still a market that's in development there. Time helps just in terms of people getting comfort levels with different liability assumptions. But as we've said all along, until a deal actually happens, it's hard to talk about when exactly it will happen. But I think it's a market we continue to stay focused on.

Are there any questions in the audience?

You talked about group life in 2Q at 65% and the second half outlook and the 10% to 15% earnings growth is 70%. Was there anything one-off in nature in 2Q or the comps tough in the second half of the year? I mean to go from 65% back to 70% is a huge leap.

Yes. I think it's probably just more prudence on our part just thinking about being able to maintain that level of favorability. It's -- it can be a volatile block. It's mortality, and it's really just driven by the level of claimants. And so I would say it's a good planning. It's kind of a good planning metric to use. It's what underpins our view on the outlook. But clearly, with this type of line of business, it could vary from that. I would say there's not one specific thing that happened in the second quarter that we could point to and say that's not going to recur. It's literally just the number of deaths in the block.

Yes. I think it's like into a rolling trend is probably more what guides that as opposed to anything we -- particularly we see reverting back.

Right.

All right. Great.

In the back.

Sorry, this is an old question, but any research on the GLP-1 drugs in terms of any benefit.

Yes, I think it's -- yes, I appreciate that. And so I think it's early to talk about what the impacts of that would be. I think overall, GLP is a very interesting dynamic to health, which has an impact on some of our product lines in terms of your ability or going out on disability and then longer-term benefits. But we wouldn't get into exactly what that would look like. I think it's still early days, but possibilities certainly exist.

All right. Well, I think pretty much out of time. So we're going to wrap it up. Thank you very much...

Well. Thanks, everyone.

Thank you, Ryan. Thank you all for showing up.