Good day and welcome to the Unum Group Third Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to our Senior Vice President of Investor Relations, Mr. Tom White. Please go ahead.

Great. Thank you, Karina. Good morning, everyone and welcome to the third quarter 2016 earnings conference call for Unum. Our remarks today will include forward-looking statements, which are statements that are not of current or historical fact. As a result, actual results might differ materially from results suggested by these forward-looking statements. Information concerning factors that could cause results to differ appears in our filings with the SEC and also located in the sections titled Cautionary Statement Regarding Forward-Looking Statements and Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as well as our subsequently filed quarterly reports on Form 10-Q. Our SEC filings can be found in the Investor section of our website at unum.com. I'll remind you that the statements in today's call speak only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements. A presentation of the most directly comparable GAAP measures and reconciliations of any non-GAAP financial measures included in today's presentation, can be found in our statistical supplement on our website, also in the Investor section. Participating in this morning's conference call are Unum's President and CEO, Rick McKenney and our CFO, Jack McGarry as well as the CEOs of our core business segments, Mike Simonds for Unum U.S.; Peter O'Donnell for Unum U.K.; and Tim Arnold for Colonial Life. Now, I'll turn the call over to Rick for his opening comments. Rick?

Thank you, Tom and good morning, everyone. The third quarter was another excellent for Unum with after tax operating income per share of $0.99, an increase of almost 9% over last year. For the first nine months of 2016 after tax operating income per shares also increased close to 9%. The performance exceeds the upper end of our outlook range for the year of 3% to 6% and is driven in large part by solid premium growth in Unum U.S., Unum U.K. and Colonial Life along with very consistent benefits experience. I’m very encouraged that we’re delivering the strong results despite today’s difficult business environment with historically low interest rates and more recently the sharp decline in the value of the British pound. The reason we’re delivering these results begins with the leadership position we’ve established in the employee and voluntary benefits marketplace over many years. These markets offer good opportunities for growth over the long term. And we believe that our longstanding and focus commitment to serving our customers and advisors sets us apart from the competition. Our industry leading expertise and our disciplined approach to the fundamental operations of our business have enabled us to grow our business with the high level of consistency and profitability. We’ll cover these strategic points with even greater detail at our upcoming investor meeting in December. This morning we will focus on the strong financial results we’ve achieved in the third quarter as a result of an execution of this strategy. So, now let me move to provide a few highlights on the quarter. First, the premium growth we’re generating on our core operation remains healthy at approximately 4%. This trend continues to be driven by strong persistency levels in all of our core business lines and the volume of sales we’ve…

Thank you, Rick and good morning, everyone. Rick provided a high level overview of our third quarter results and now we want to provide a more in-depth view of the operating trends we experienced in the quarter. First, I’m very encouraged by the composition of our after tax operating income per share growth of 8.8%, as after-tax operating income grew 3.7% over the year ago quarter and our share count declined by 4.9% due to our ongoing capital management initiatives. This continues the favorable trend of balanced growth to earnings growth and capital management activities we’ve seen throughout 2016. One of the primary drivers of our overall results this quarter was the performance of Unum U.S. Third quarter operating income was very strong at $231 million, an increase of 5.6% from the year ago quarter. Premium income growth continued its positive trend increasing 5.9% over the year ago quarter helped in par for the inclusion of our dental acquisition. The benefit ratio for Unum U.S. segment improved to 69.4% in the third quarter compared to 69.8% in the year ago quarter with excellent results in the group disability line. In addition our focus on disciplined expense management continued to contribute to the favorable operating results. The other expense ratio declined to 20.9% in the quarter compared to 21.8% in the year ago quarter, the profitability of the Unum U.S. remains very strong with an operating ROE of 15% for the third quarter of 2016. Within the Unum U.S. segment operating income in our group disability business was exceptionally strong this quarter at $85.4 million, an increase of 20.6% over the last year. Premium income increased 2.8% over the year ago quarter while pressure on net investment income continues as low new money yields pressure the portfolio yield. The benefit ratio…

Great. Thank you, Jack. And as we move to questions, I'd like to conclude the prepared remarks by really iterating how pleased we are with our third quarter results. I continue to be encouraged by the good premium growth we are generating which along with stable benefits experience drives our strong capital generation. I believe these trends will continue to service well as we manage through this challenging business environment. We'll now move to your questions and so I'll ask Kareena to begin the Q&A session. Kareena?

Thank you. [Operator Instructions] And we will take our first question from Humphrey Lee from Dowling and Partners. Please go ahead.

Thank you for taking my question. Maybe you can talk about the kind of the market competition that you are seeing in Unum US, it seems to be getting more competitive as coverage in your sales activities in the quarter. Can you just talk about the overall competitions from the competitors and the pricing environment in general?

Great, Humphrey. Thanks for your question. Mike you want to answer?

Sure. Thanks Humphrey great question. And I would start by referencing a point that Jack made in his comment and that third quarter is our smallest quarter, fluctuate a bit year to year but typically about 15% of the year. So it's subject to a bit more volatility. I think I would certainly take the sales results and put them into two buckets and the first would be around volatility and when we look at the large case group insurance business voluntary benefits and IDI, I think we saw little bit of volatility against some good large sales in the year ago quarter. I feel really good about the traction we have got in the market at our value proposition and how we are competing. On the other side though I would say core group insurance it’s less about volatility and it's more about sustained trend we have seen over the last several quarters. And to your question well we have been moving rates up on new business slowly over the past I would say two and half years. We have not seen the corresponding increase from the market and so we have seen closed ratios fall off a bit particularly around new client sales and while certainly we would expect that given low interest rate the market will eventually move to where we are. We just have not seen that yet and us well enough to know that when the market allows us to write business at sustainable rates in the core we will be there with all the capacity that's available. Just in concluding what I would say is persistency remains really high. So not just to focus on new business, we are doing a good job keeping clients and that's helping to fuel some really nice earned premium growth almost 6% in the quarter.

Well, you mentioned the your competition is not moving the rate as you guys are doing right now so do you feel like it is more of a timing issue or do you feel like there maybe some under pricing in the market in general?

Yes, I would say our point of view is that new business rates don't reflect the full impact of the low interest rate environment in the market. What I would say is we have come in to each of the last couple of years as I mentioned with plans to sort of gradually move new business rates up. We feel like – actually we pretty much arrived given low interest rates that where we need to be on new business so as we look at the coming quarters and we will spend time on this at our Investor Day. I feel more optimistic that the market will come in line as the quarters come and like I said we will wait until that occurs.

Okay. And then just maybe sneak one more in. I think it's also question for Mike, you mentioned in the interview recently that you target to more than doubling the size of Starmount operations to kind of $500 million revenue over the next five years. Can you maybe share some of your thoughts in terms of how you can achieve that and then also kind of with some of the weaker sales in Unum US how would that play as a headwind since detail of pros tend to sell as a package?

Yes, we are really excited about the acquisition of Starmount Life Insurance out of Baton Rouge, Louisiana felt like from the very set of management meetings we had great alignment around the focus on customers and on the people down there. So we are really excited about adding this platform to the portfolio and it's right on strategy for us. We talk all the time about delivering a strong client experience keeping clients and seeking growth through those existing client relationships. And we feel like with the addition of Starmount we bring a really strong growth opportunity to bring dental and vision insurance into those brokerage and client relationships over the next several years. It's going to take some time to get it to national scale. And we don't expect it to be a meaningful contributor to earnings as we continue to invest in that platform in the short term but we are excited about it for the mid and long term.

Thank you Humphrey.

And we will take our next question from Ryan Krueger with KBW.

Hi, thanks. Good morning. My first question was on Unum UK, I guess from here maybe over the next intermediate term, do you think premiums will actually start to decline on it a year-over-year basis on a constant FX basis or given some of the pressures could you provide any more color on the outlook there?

Ryan, I would turn it to Peter O'Donnell on the U.K. Peter?

Ryan thanks very much for your question. So to give a little bit of background to what’s happening in the UK as you know we have voted to exit Europe in June and since then there has really been what I would call an interim period where people have been trying to work out what that means. How that's impacting our business if you look at our results, sales going well, persistence going well. But natural growth which is really live and wage inflation as basic is anemic, which is actually a bit lower than the last year whereas when we were planning we saw the economy would be getting to sort of start to motor. And really that's what I see happening in 2017 as well. As people are uncertain about the future and I think the negotiations will go on in 2017. I think there will be discerning about bring new staff on and putting wage inflation into the economy and we will see that remain low. So we might get 2% to 3% on lives and wage inflation in a good economy. I think it will be 1% to 1.5% which is pretty much what we are seeing this year. So I think premiums will be lower than we expected. But it will still get a better growth as we look forward on the scenario that we are planning. Although I would also say that it is uncertain. And it depends on how the market reacts to those price negotiations. So we are monitoring that. We are also taking action around the interest rates because they have dropped off a bit and again because the ten year fail quite significantly. And the most obvious example of where our competitors will be impacted is the exchange rates. So while on constant currency I think it will a lot lower than expected on an exchange rate we are going to see that to the one dollar 20 if it sticks there come through each quarter for the next two or three quarters when we do relative comparisons. So you need to factor that into your analyst models.

Great. Thanks and then could you give us an update on the delta between statutory and GAAP long term care reserves and then would you expect similar impacts in first Unum from year end testing as we had in kind of last few years?

Thanks Ryan, Jack you want to add to it.

Yes. So in terms of GAAP stat I think last quarter I said was around 800 million. It's grown a little bit. It tends to grow on a quarterly basis so it's a very comfortable margin particularly when you think about pretty much in the context of level of interest rate, discount changes we have taken over the past couple of periods. So a very comfortable stat GAAP difference we would expect. Any movements we take in long term care in the future could be logically GAAP adjustments as opposed to cash adjustment and will allow us to maintain our capital plans and share repurchase at its current level. With respect to first Unum we will expect kind of similar types of adjustment in first Unum that we have seen throughout the period. We don't expect anything outsized relative to that and it's something that is built into our capital plans and our cash models and we are confident that it will be a pretty smooth transition that in the fourth quarter.

Okay. Thanks a lot.

Thanks Ryan.

And we will take our next question from John Nadel with Credit Suisse, please go ahead.

Good morning everybody. Mike I wanted to follow-up a little bit on the commentary around competition in Unum US and maybe pricing still needing to catch up a bit. We know that several carriers had to go through a process of sort of fixing their books of business and I guess that's the process that's been ongoing I thought anyway for the last couple of years. Would you characterize sort of the overall markets as still needing to take a lot of rate because it seems to me some of those companies were really taking significant rate playing some catch-up? I just wonder what your commentary is around that?

Yes. Thanks John good morning and I think your read is largely accurate. I think at any point in time you have got some carriers that are steady as it goes. Some that are moving to fix issues that have worked their way into their books and more aggressively moving up rates and some that are looking to take share by underwriting more aggressively and it's really when you have a condition like I would characterize the current market it isn't that everyone is out of whack. I think what we have is just enough carriers that are more interested in share than improving margins such that we are not seeing enough opportunity to show sales growth. We are still writing business certainly and as I said, I am probably more optimistic heading into the next year than I have been in the little while, but it will take time. And again we will wait to see how it plays out.

Without naming names I mean would you be willing to at least say those who are in your view more focused on taking share than they tend right now be publicly traded or private?

That's a clever way to get out John, yes so I probably would stick to avoid giving too much color on this specific names but generally I would say, when you are seeking growth and you show growth for sustained period of time purely on new clients coming in it can be very tricky to maintain margins. So we see a pretty strong correlation over the long run between new client sales growth and profit margins.

Okay. And then just a follow-up for Jack on group long term care case reported over to an individual case, should we expect that to have an ongoing impact on interest adjusted loss ratio or is it more of a discrete impact in the third quarter only?

Yes thanks John. Now that's done. We wouldn’t expect that they have an ongoing impact.

Terrific. Thanks.

[Operator Instructions] We will take our next question from Tom Gallagher with Evercore ISI.

Good morning. Jack just first question on holding company cash just so I understand this so $600 million of whole co cash is that the total number or do you have an extra amount for planned contributions to the New York subs and Fairwind for the year. Is that all an extra amount sitting at the holding company or so anyway that's my first question?

Yes, Tom I think I noted in our Q that is net of anticipated contributions to our subsidiaries.

Okay. And then Jack if I look over to the last three years you have averaged about 300 million of contributions between the New York sub and the LTC capital Fairwind. So is it fair to assume that the number would be in excessive 600? Would be closer to $900 million of whole co cash right now?

Yes Tom can I talk about that for a second because you looked over the last three years. That's 13, 14, and 15. In the fourth quarter of 2013, we re-domesticated our Bermuda captive into Vermont and when we did that we made a contribution because we stepped the reserves up on a statutory basis to the NAIC level. So we – so that was an unusual event in the fourth quarter of 2013 that recorded cash. In 2014, we took the reserve charge. And as a result of the reserve charge, there was a change in statutory reserves related to claim reserves and so there was an unusual contribution in 2014 resulting from that. So I think if you look at the three year average those aren't average periods. There were significant advanced that we identified in each of them and we don't have 300 million of cash needs in the fourth quarter or we are anticipating if you go back and you look at our cash holdings by quarter, if you back out those significant event sheet don't see a drop in cash in the third quarter. And also I mean in the fourth quarter and also note that the fourth quarter is a wider cash need from an interest expense perspective because most of our coupons are doing in the first and third quarter and so you can't just look at that funding. There is a reason those funding take place in the fourth quarter it's because we have other cash needs in the fourth quarter that offset.

Just to be clear you wouldn't expect to have any cash needed Fairwind this year?

I wouldn't expect to have any extraordinary fourth quarter event that significantly changes our holding company cash.

Okay. So between New York and Fairwind if I think about the amounts that would be needed there on a run rate basis you would not expect if I look at the last three years including last year there to be any meaningful amount that’s need for Fairwind. Is that fair?

It will be similar to our normal amount, clearly under a $100. The other thing note about of these things, we fund them over the year, it’s not a fourth quarter event, you will see it for Fairwind in the fourth quarter because when the [indiscernible] gets filed, but it’s something that happens on an unknowing basis.

Okay. Thanks and then just my follow-up on the group case that got converted on the long term care side how big of portion of your total group business was that, was that – that was your largest case you said. What percent of the total was that?

Yes. It's like 5% of the total I mean it was a large case. It was four to five times bigger than our second largest case. In our average case size on the group business is like a 100, so it was a very, very big and relative to the block.

Okay. Alright. Thank you.

Thank you.

And we will take our next question from Mark Hughes from SunTrust.

Thank you. Good morning.

Hey Mark.

Your benefit ratio on the US group disability business was quite low this quarter. Was that just some natural variability or is that has been trending in that direction and you finally just sort of getting more credibility?

Thanks for noticing Mark. Mike you want to take that on?

Yes. Thanks. Good morning Mark. I think it's a little bit of both so certainly we had favorable new claims incidents and has had favorable new claimants over the last several quarters but maybe a little bit more so here in the most recent period, I do think probably proportionally those the bigger driver is just the continued impact of the strong risk management. So when we talked about new price discipline leading to a difficult new sales quarter for us I would link that directly to being conservative in our pricing and so as we have worked that through in terms of new business and through our renewal programs that has had the effect of lowering the benefit ratio and what I think is a sustainable way and if you put good risk management at the front of the business and we are really strong consistent high quality benefits organization at the backend of the process, I think we are really pleased with the outcome. And so sitting where we are at this point is really good and as we look forward to the fourth quarter and think about as Jack alluded to any necessary changes to the discount rate on new claimants occurs in LTD should that be necessary we feel really comfortable that the business is healthy enough to be able to absorb that and maintain that targeted range for us which is in the 80% to 82% loss ratio range.

And then, your natural growth kind of the wage headcount growth any body language on whether that was little bit better, little bit slower this quarter?

Pretty consistent with what was have seen over the course of the year. So muted from what we would see as a healthy and strong margin but it is a net contributor for us.

Thank you.

Thanks Mark. Thank you.

And we will take our next question from [indiscernible] please go ahead.

Good morning Unum. I am just curious if you had any reactions to January series of announcements specifically the charge for monitoring care related to more longer duration claims which I think you have commented you have been seeing to some extent but are they ahead of behind the curve in your view and do you have ruling interest on the success of their actions and any general commentary and their strategic move would be appreciated?

Great. Thanks Bob. This is Rick, just we don't like to comment on other people's transaction obviously. I would highlight we have a very different business model but there are some things environmentally probably that's worth noting around the long term care market. We have been discussing for some time the transactions in the space particular it's a long term care will come in due course. We have seen some reinsurance transactions now, we see a situation where there is a buyer and a seller in the space and so this doesn't mean anything. Eminent for us, but I certainly think it does mean progress in terms of the capital markets, long term care and looking at different solutions. The second piece I note is well in this environment we have been discussing the need Jack mentioned it again in terms of what we have been doing around rate actions in the market, the need for those rate increases in our book of business. We have been doing those actions taking that on and I think the environment given some of the things that we highlighted is becoming a least more knowledgeable about the need for rate increases and what's going on and I think that's the environment that we are looking for. So those are couple of things going on in that environment. And the last thing I highlight is we also as a company have significant strength across the board. That gives us a whole lot of flexibility to do what we want to do any options to pursue either structurally, buying back our shares as we are doing consistently and making sure that we are taking actions ultimately benefit our shareholders. I think you had a question specific to some of the things they did, some of the things they are seeing in their long term care block and maybe Jack you can make couple of comments on who it would translate or it doesn't translate to our book of business.

Yes. And so I don't really going to talk about what Genworth is seeing. I will tell you what we are seeing and I think probably the most fundamentally important point is we are not scrambling to keep pace with long term care. We are working through the long term care issue and we are making significant progress as a company to doing that. We feel like we are still much in better shape today than we were even three years ago and a lot of that is because of that active management of the block. So let me talk to you about what some of things have been. In 2014 we reset reserves assumptions. We placed those reserves assumption on a best estimate basis using our current phone experience and our experience since then has been consistent with those expectations. We also established those, when we established those reserves we built in currently filed rate increases using historical approval rates. Less than the third of those rate increase assumptions remain outstanding. We are making significant progress against them. And feel very good about where the assumptions lie with only a small portion remaining. That not only helps to support our reserve assumptions but it also gives us room in the future to react future adverse claim experience should emerge. The third point I would make is that our block is unique and long in the long term care business is approximately half of the block is group longer term care with employer funding an extremely conservative planned designs. And because of that group coverage and employer funding, most employees terminate their employer funded coverage when they leave the employer. As a result our group long term care has a lapse rate of closer to 10% versus less than 1% lapse rate from those individual long term care policies. And our group long term care has substantially lower risk profile, but I think that the thing that really sets us apart as a company is the vibrancy of our company in its market leading position and strong profitability. We have great free cash flow generation from our core business. We have consistently over the last six years funded our long term care capital needs. We are still allowing us to increase our dividend and maintain consistent level of share repurchases. As a result our long term care charges have largely been GAAP events and not cash events and we would expect that to continue into the future.

Can we summarize Jack by – the earning guidance to the above the range and your answer to Tom and Ryan's questions on funding and accounting for long term care that probability of a charge in a way you are pretty high confident so you can get through the fourth quarter without an event?

Yes. We mentioned in the script that we don't answer. From what we are seeing right now we don't anticipate anything unusual in the fourth quarter with long term care.

Thank you.

Thanks Bob.

And we will take our next question from Randy Binner with FBR Capital Markets.

Hey good morning. Thanks. I just have a couple of follow-ups on the termination. First can you tell us what the circumstances were of that group case terminating?

Yes. It was terminated because of rate increases so we had filed group long term care rate increases in that state. They had been approved and they were being implemented over a three year phase approach it was significant rate increases. And so the customer once faced with their first line decided they don't want to fund the employee benefits any longer and so they terminated the case. But it was driven by the rate increases.

Rate increases specifically on the LTCP spread than the other aspects of the case. Is that right?

Yes. It was rate increases on the group long term care.

Then the other one there is just so I understand it is that you had a large auto port component and so you shifted a lot of folks to individuals versus group policies and so the persistency assumption there goes lower meaning you have a higher lapse assumption. So if I am getting all that right –

Lapse assumption goes lower. So lapse is on the group side are on the 10% range. On the individual side they are well less than 1%.

Got it. So as they – as each person individually goes to a lower lapse and then – that's the headwind. Okay got it. I had that backwards. Perfect. Thanks a lot.

Okay. Thank you Randy.

And we will take our next question from Jimmy Bhullar with JP Morgan.

Hi, good morning. So my first question was just on the likelihood of discount rate reduction on the disability side. Assuming rates are where they are, how would you approach that over the next few quarters?

Jack you want to take that?

Yes. So I think we talked about in both the press releases as well as our comments that rates are significantly below where they were in 2015. If they stay where they are we will anticipate taking a discount rate change in long term disability. We feel very comfortable on that given the performance of long term disability of not only this quarter but over the past three or four quarters that we can take that discount rate change without well maintaining the loss ratio on that EBITDA 82% range. So we will talk more about that at our Investor Meeting in December 15th but given current conditions it's certainly something we are looking very hard at.

And I think the last time you adjusted it was maybe on 50 basis points. So would you assume a similar reduction or would it be larger than that?

It's in the ballpark. It maybe a little larger, rates have fallen on the yields of practice they have recovered a little bit recently but spread just coming as well. And so that's one of the things that we will wait until we have a better idea of where rates are in the fourth quarter. What are our investment strategy is and we will act accordingly. But certainly we didn't believe that any action we will take no matter who big it is, we will take outside of that 80% to 82% range.

On the loss ratio?

Yes.

And then lastly just on long term care you did mention that you don't expect the charge this year. Assuming that rates don't move materially from current levels, how long can you go without taking charge based on your current assumptions? Would 2017 necessitate a charge given if rates are where they are given what your assumptions are on reserves?

It's so volatile because rates don't stay where they are. Rates move, spread moves, supply and demand in the marketplace move, assets classes don't all move in sync and so without it is really hard to predict exactly where your new money rates are going to fall in any year. Clearly, there is pressure but we do have a good margin currently and our discount rates for long term care versus our portfolio yield. We had the expectation that it would be 5% for 4-5 years. And 2017 will be three years into that. So it's going to be judgment call whether it's 2017, 2018 and a lot of it will depend on what the outlook is a year from now given that we can't even predict what the outlook is going to be at the end of this year.

Okay. Thank you.

Thanks Jimmy.

And we will take our next question from Michael Kovak with Goldman Sachs.

Great, thanks for taking the question. I wanted to first on sales to maybe follow-up a little bit. As you looked at and as you begin to think about 2017 outlook that you are preparing for in the coming weeks and month, Unum US has obviously been weaker than you expected. Anything that changes sort of long term growth in terms of where you are expecting both sales and premium in that line given challenges in 2016?

Mike.

Yes sure. Good morning Michael thanks for the question. I think we are sticking with the strategy so I don't think your question is there are material change outside of the acquisition of Starmount I think we will begin to contribute first to sales growth over the course in particularly towards the back end of next year. And I will translate into top line growth and then ultimately into earnings once we get passed the first kind of series of investments into the platform. So that's going to play out over a really kind of a series of years and we are really excited about it and then in general we continue to feel very good about growth in the voluntary benefits market and our unique proposition there. So I would expect growth in voluntary to be there next year in individual disability that continues to be really strong contributor as well. And I think it just comes down to again given that we feel pretty good about our current position on new business pricing. We don't see need to move on that next year wherever the market be.

Okay. That's helpful and then if I could on long term care, with this group auto portability feature can you give us a sense of what percent of your overall group policies have this type of portability feature?

That was the only one. So there isn't another group policy holder in our portfolio that has that feature.

And then sort of a follow-up on that if I could so this sounds like you are kind of one time gap type adjustment that you made. Anything on the statutory basis given the lower lapse rates?

No.

Thanks for the answers.

I am sorry and we will take our next question from Yaron Kinar with Deutsche Bank.

Thank you. Good morning everybody. I have a couple of questions on the long term disability business. So assume the pricing action that you have taken recently already anticipation of the low rate environment and the potential decrease of the discount rate?

Yes, thanks Yaron it's Mike. I appreciate the question and you are correct. So we are trying to price forward for where we believe we need to be from an interest rate perspective. So when Jack talks about being very comfortable about maintaining that target loss ratio of 80% to 82% it's because we put the price renewal actions in place and feel good about that for the health of the business.

Okay. And then conceptually I am still trying to understand why you would need to lower the discount rate. I understand that interest rates are coming down but at the same time if I remember correctly you have quite a nice margin, reserve margin there. So why can't you just see some of that margin erode while keeping discount rate unchanged?

Yes I think the reason is you don't the margin to erode because that's earnings. And so I don't think you don't want to see your earnings erode. You want to be able to maintain that margin and the way to do that is to price business based on a current environment you are selling it in.

Yes I wanted to add real quick. It's Mike is this pricing strategy links to the value of proposition in the market and so for us it is about keeping clients for the long term and growing those relationships so sustainability of pricing is really, really important to so we always want to be on balance conservative so that we don't end up on situation where we are trying to play catch up and disrupting relationships.

Okay. That's helpful. Thank you.

And we will take our next question from Seth Weiss with Bank of America Merrill Lynch.

Hi, good morning. I just want to ask question on expenses Rick in your comments you mentioned that the expense ratio in the US was down about a percentage point. And you referenced the headwinds to the businesses that we are all aware of. Is there a more room on the expense side to help offset some of the business pressure that you are seeing?

Yes I think it's a fair question. And what we have seen over the last couple of years really actually is good management across the board by our teams on the expense side and we think about it as relative to our overall base. So the team has done a really nice job and that expense ratio has come down. I don't see that as a major driver in terms of how we take profits forward or how we run the company. I think it's something we have been doing very consistently and it's nice to see some of that come through over different period but make no mistake we are investing in our business as well and so when you think about the acquisition that we did what we are putting into our systems to connect better with our customers we are making a lot of investments in our business today. So don't take it as an expense story. It's much more a balanced efficiency and investment back in the business.

So what you think this expense margin that we have now is [indiscernible] run rate or should I read into your comments on investing in the business that maybe see that tick up a little bit after it's ticked down the last year?

No I think actually stay pretty consistent. It might come down a little bit lower. You know what I think that we benefit by as well as scale. So as our premium lines growing and the business continues to grow, we could do so little bit more efficiently. So it's flat probably down, you won’t see it tick back up and I am talking about longer term trends not actually going to happen in fourth quarter or any particular quarter.

Great. Thanks a lot.

And we will take our next question from [indiscernible] research.

Hi, thank you. How much more room do you have to grow with existing clients in either cross selling or increasing penetration and how does dental on vision play into this overtime?

Mike you want to start?

Sure. Thanks. I appreciate it. So we got a lot of runway is the quick answer. So we average around three benefits per client and we feel like certainly we have got 5, 6, 7 relevant products depending on the client. So it's good opportunity there and the actually highlighted one of the other big opportunities. So the long term trend in the market is from employer funded to more employee choice and so deepening penetration into the employee basis is really important and I would say a big chunk of our product and marketing efforts has been around increasing participation in employee elected plans and we see today on a 100% voluntary plan you may have one in five employees fully participating and so we see a lot of run way there to find good sustainable and profitable growth as well.

So that's on the US side. I think I would add as well you have heard from Peter on the UK side. Now they are in dental business, they will be expanding their portfolio. But I’ll also give Tim Arnold the chance on the Colonial Life side which has seen tremendous sales growth to talk little bit about his efforts too to expand the portfolio. Tim?

Yes. Thank you, Rick. And I think questions around growth from existing customers at Colonial Life about two-thirds of our sales each year come from existing customers we have a national footprint of benefit counselors you can go out and re-enroll existing customers each year which is a major competitive advantage for us. We are also seeing very strong growth in new customers which bodes well for the future as we go back out and re-enroll those customers as well. We feel great about this. The sales success we are having overall that's very broad balanced as Jack said in his comments. We have leading indicators that suggest that the strength we have seen recently in sales will continue lot of new people on the ground having good success. Lot of new officers will get success and also making investment in our existing offices. So a lot going well currently and encouraged about the future.

Great, thank you.

Thanks for the question Eric. Operator any other questions.

And we have no further questions at this time.

Great, thank you, Karina. Thank you all for taking the time to join us this morning, we look forward to seeing you at our outlook meeting, on the morning of December 15 in New York. So until then now we will talk you through, thanks. Bye, bye.

Once again that does conclude today's conference. Thank you for your participation, you may now disconnect.