Good day, and welcome to the Unum Group Third Quarter 2020 Earnings Conference Call. Today's call is recorded. At this time, I would like to turn the conference over to Mr. Tom White. Please go ahead sir.

Great. Thank you. Good morning, everyone, and welcome to the third quarter 2020 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 Securities and Exchange Commission, and are 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, 2019 and our subsequent Form 10-Q filings. Our SEC filings can be found in the Investors section of our website at unum.com. I remind you that, the statements in today's conference call speak only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements. And 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, which is also on our website in the Investors Section. Yesterday afternoon, Unum reported third quarter 2020 net income of $231.1 million, or $1.13 per diluted common share compared to $242 million or $1.16 per diluted common share in the third quarter 2019. Net income for the third quarter of 2020 included a net after-tax realized investment gain of $3.8 million and after-tax costs related to an organizational design update of $18.6 million. Net income in the third quarter of 2019 included a net after-tax realized investment loss of $20.8 million and after-tax debt extinguishment costs of $19.9 million. So excluding these items, after-tax adjusted operating income in the third quarter of 2020 was $245.9 million, or $1.21 per diluted common share compared to $282.7 million, or $1.36 per diluted common share in the year ago quarter. Participating in this morning's conference call are Unum's President and CEO, Rick McKenney; Chief Financial Officer, Steve Zabel; and Chief Operating Officer, Mike Simonds; as well as Peadar O'Donnell, who heads our Unum International Business; and Tim Arnold, who heads our voluntary – excuse me, our Colonial Life and Voluntary Benefits businesses. So, now I'll turn the call over to Rick for his opening comments.

Thank you, Tom, and good day, everyone. Our third quarter performance demonstrates a very good operating performance by our Unum team. This is in the face of difficult business and economic conditions that persist in our world and specifically in the employee benefits market. Overall, our financial results were solid this quarter and largely consistent with the expectations we set back in July. In the previous two quarters, we outlined what we believe are the factors that will influence our business and these have evolved largely as expected though impacts and recoveries are moving at different speeds. This morning, we will outline the most influential factors, while highlighting the key parts of our business that continued to deliver excellent results in this stressed environment. So as a backdrop, I'd like to outline the high-level business and economic conditions that persisted throughout the quarter and had meaningful impact on our results. As we look at it there are three major trends to follow. First and foremost, the health effects of COVID-19 remains significant with high mortality and high infection rates that impacted our benefits experience in multiple ways. Second, the sharp spike in unemployment rates in the spring has abated somewhat, but unemployment remains high relative to pre-COVID levels and continues to present a headwind to our growth rates. Third, we are beginning to see parts of the economy reopen and individuals return to more normal behavior and activities in their daily lives. This trend when done in a responsible way we think is a positive. But it did produce more negative impacts on our results in the third quarter relative to the second quarter. It may take time but the longer-term implications of a containment of the COVID-19 pandemic leading to a full reopening of the economy will be very…

Great. Thank you, Rick and good morning, everyone. In discussing Unum's third quarter financial results this morning, my remarks will focus more on analysis of our third quarter results relative to the second quarter rather than the traditional year-over-year comparison. Our intent is to show how the company is progressing through the pandemic and resulting recession and outline for you the impacts it has had on our results. As Tom outlined in his opening, after-tax adjusted operating income in the third quarter was $245.9 million or $1.21 per common share. By comparison in the second quarter of this year, excluding the lease impairment costs and net realized investment gain after-tax adjusted operating income was $250.1 million or $1.23 per common share. The tax rate was impacted this quarter by an increase in the UK corporate tax rate to 19% from 17% adding $9.3 million in additional tax expense. So we believe a good starting point for analyzing our results this quarter on a sequential basis is to look at before tax adjusted operating income which showed a slight increase to $318.5 million in the third quarter compared to $316.5 million in the second quarter. As I begin let me remind you of the economic and business conditions that existed in the quarter and outline the impacts that it had on our results. First, obviously, COVID-19 had a significant impact on the external environment, driving a high-level mortality once again plus a continued high level of infections. Excess death in the U.S. during COVID totaled an estimated 80,000 in the third quarter. The high mortality rate clearly impacted results in the Unum U.S. Group Life and voluntary benefits businesses and Closed Block long-term care. In addition, the higher rate of COVID infections that continued through the third quarter resulted in elevated…

Great. Thank you Steve for that summary of our third quarter results. We continue to be pleased with the operational performance of the company through what continues to be an extraordinary environment. And we do believe we are well positioned to benefit from an improving economy and better business conditions as society continues to reopen. And in the meantime, we'll continue to focus on a crisp execution to manage through today's challenges. The team is here to respond to your questions. So, I'll ask the operator to begin the question-and-answer session.

Thank you. [Operator Instructions] Our first one today comes from Mr. Jimmy Bhullar from JPMorgan. Please go ahead. Your line is open.

Hi. Good morning. I had a question first just on the product persistency. It's declined very slightly, but the premiums declined more. So I think you report case persistency. But if you could talk about what trends you're seeing in terms of premium persistency. And it seems like that's weaker than case persistency. And if that is the case, I'm just wondering why you wouldn't have seen more of an impact in the last quarter, because unemployments sort of peak on here and it's a little bit of a delayed reaction that you're seeing on your premiums.

Yes, Jimmy, I think you're right. I think we're very happy with the persistency overall and what we've seen, but some of the dynamics you're talking about are right on. Mike can you give some details around that?

Sure, Rick. Thanks and good morning Jimmy. You are right. That's probably the first metric that we go to is what that persistency looks like and that is strong and incrementally improved a bit from the second quarter at a tick over 89% for the group insurance lines. And as we sort of sit here and deal with a pretty challenging environment, I can also say that if you look at our renewal programs forward to the January 1st renewals, we're feeling pretty good and in line with expectations there which I think is great and a really important underlying signal. To the question about how it flows through to premium. First question is our clients sticking with us the answer is, yes. Second question is what's happening within those clients. And what we've seen is while we've got a really, I think favorable mix by industry, the reality is that we are seeing the natural growth impact of fewer new hires and fewer salary increases, which flow through typically as natural growth on the group insurance lines. In the year-ago period, we would have seen in the high 2%, 3% range of natural growth that's approaching flat at this point. So favorable to what we're seeing in the broader economy due to the mix, but certainly a pressure item for us when it comes to premium. And then the last piece of the puzzle is new sales which as Rick and Steve went through. We're seeing good incremental improvement as distribution figures out how to adapt to the new environment, but lower new sales in the prior period is certainly a little bit of a drag on earned premium as well.

Okay. And then just another question on your U.K. business, I think you've had issues in terms of closing claims and just delay in getting the information to close a claim, because of the disruption related to COVID. Given that the case count has gone off recently is it fair to assume that that actually gets more severe in the near term and claims closings get more difficult so which would have a negative impact on your margins in the short-term?

Yeah. Peadar, can you take us through the U.K. dynamics

Yes. So thanks Jimmy for the question. So you're correct. In the second quarter, we saw severe disruption to our health service and to employers as we basically went into the pandemic lockdown and the whole health service was focused on dealing with COVID. Quarter three has been more benign and I think they've done a lot of planning now to think through how infection rates are going to grow through the fourth quarter. The main thing in quarter three why we're not seeing sort of income protection come back it would be more about people's behaviors, so they haven't been engaging in the health service. And obviously, the furlough scheme is still running hard here. So getting employers interested in getting people back to work has been a challenge. I'd expect the trend that we saw in quarter three to continue. I don't think it will get worse even though infection rates are increasing. I think the government is doing everything it can to balance the economy, balance the health service. Based on what we're seeing today, I think, they'll manage to work their way through that. So, the trend we've seen in Q3. I don't think it'll get better, but I think it will continue to sort of trend along the Q3 as opposed to the Q2 trends. So that's our expectation.

Thank you.

Thanks Jimmy.

Thank you. We will now take our next question from Ryan Krueger from Keefe, Bruyette & Woods. Please go ahead. Your line is open.

Hi. Thanks. Good morning. In the past, you've talked about the possibility of doing something with the closed IDI block as you get close to paying back the rest of the securitization debt. Can you just give us an update on how you're thinking about that?

Yeah, great. Thanks. Ryan, good morning. Yeah, I would say there's not much news on that front. We continue to look at counterparties in the market on that. And you mentioned we're getting close to paying off the non-recourse bet on that. And we really probably have three options. One, it's a block that generates distributable capital every year. We've been using that to pay off the debt. When that debt is paid off that will just be free and clear to the holdco. So that would be one option. Second option is we could look at re-levering it. I mean I think the markets are -- would be pretty receptive an offering around that sort of risk. And then, three would be a more for risk transfer transaction. So, we'll continue to evaluate all three of those, but really nothing to report at this time.

Got it. And then on the LTC rate increases, I guess how -- can you give a sense of how does the $1 billion of what you've achieved so far compared to your assumption in your reserves or where you'd be at this point?

Yeah. So I'll just kind of take us back to when we reset our reserve assumptions in 2018, we had $1.4 billion of premium value within those margins. About half of it was old program that we had on file with the states already about half of that was new. I'd say it was pretty well weighted to the group block, at least the new program definitely. Yeah, we're very happy with where we are today, kind of getting close to ringing the bell on that $1 billion of value. What I would say is we're pretty much consistent with our expectations. The one area that we feel like we maybe a little bit ahead is going all the way back to our California approval. We were very happy with the approval that we got there. But I would say, all thing is on balance. We're still on track. We still feel good about the $1.4 billion. We're still very happy about just the interaction with the regulators, the tone there and just the environment with the regulators through COVID. The activity has continued with them. So procedurally we still feel pretty good.

Got it. Thanks a lot.

Great. Thanks Ryan.

Our next question comes from Suneet Kamath from Citi. Please go ahead. Your line is open.

Thanks. Good morning. I wanted to start with sales, Rick, at the outset you talked about your delivery models being impacted in the quarter. I was wondering if you could just provide a little bit more color in terms of what's going on. And sort of relatedly, how are you guys approaching 2021 open enrollment in a kind of virtual world? I would imagine that would change the dynamic relative to what you've seen in a normal year. I'm just trying to figure out what you guys are doing differently in order to make sure that you're getting in front of the right employees as many as you can.

Yeah. I appreciate the question, Suneet. I think my comments are very much about the shock that happened to the system going back to the March time frame. When you think about the people that would have been in the middle of thinking about their enrollment or even thinking about bringing on a new plan everything just froze. So that throws that system. And then, when you think about even in our face-to-face model that Colonial Life does such a good job at obviously that was impacted as well. But things are moving along. And Mike maybe we can give some commentary about what we're seeing out there on the sales front and what gives us optimism for the future.

Sure, happy to. And if I just took a step back and looked across products and geographies brands, I would say, overall actually, I'm pretty encouraged about sort of the continued and gradual improvement of the underlying fundamentals around proposal activities, contact with producers. And we hit that trough as Rick was saying at the end of first quarter and the first part of the second quarter, and then it's been kind of working its way that tough's working its way through the pipeline, and we're refilling it albeit in a challenging time. I think we feel that most acutely in the small end of the market and in the voluntary, as you were raising when it comes to things like face-to-face enrollment. But I'd tell you across again brands and geographies the distribution teams remain intact. Turnover is very good. This is a very engaged team. I think that bodes very well for us as they continue to adapt -- as a broker and consultant partners continue to adapt to the new reality. I think that does bode well, particularly in the context of we're weathering quite a storm here with the pandemic. But it is clearly an indication that what we do, taking care of people when they get sick or when they get hurt, has never been more important. And I think that's a tailwind in terms of long-term demand. But if I look at Unum US, specifically, the core and voluntary lines is where we felt the challenge most acutely, and I am seeing a slow gradual incremental improvement month to month to month. I think it will continue to take some time before we're fully recruit and adapted to new ways of doing business. The large case market is -- has been less impacted. And we saw a nice lift here in third quarter that will be volatile as it has always been quarter-to-quarter as some quarters you're going to have a big transaction and other you're not. The only other level of detail I would provide is the dental insurance market, which Steve alluded to in his opening comments. But with the fall off in demand and a lot of practices closed in the second quarter, we did see a number of large carriers in the dental space extend rate guarantees in premium refunds at discounts. And that in effect has kind of slowed the new business market for group dental insurance. But the longer-term or even the mid-term trend, I think is positive. It will take some -- it'll take some time. And again I do feel like what we do is important and it's never been more so and that's how it's playing out from Unum U.S. point of view. And Tim, I don't know if you want to comment on Colonial Life?

Yes, sure, Mike. Thanks. So it is definitely a challenging environment and as Mike pointed out, especially in the small case market and in situations where sales are performed on a face-to-face basis. So it is challenging. We are encouraged by the incremental improvement we saw in the third quarter over the second quarter. And there are a number of bright spots and Steve pointed to some of those in his opening comments. I'll just maybe walk you through a few others. So as Steve pointed out, new agent recruitment is up 8.6% year-over-year. The number of sales managers in our organization has grown by 8.4% year-over-year. When we do enrolments, we see participation levels that are in line to slightly above last year. And when we look at our enrollments by type, on an account basis, the number of enrollments that we performed with agent assistance this year is down 26.5%. But in many ways you would expect that to be worse given that the economy especially in the second quarter was largely closed. We're very encouraged by the alternative forms of enrollment where we look capabilities over the last few years. We're seeing great adoption. Telephonic enrollments were up 30% year-over-year. Self-serve enrollments are up 25% year-over-year. A number of our agents who can conduct enrollments virtually has grown by 243% year-over-year. So it's a challenging environment. We expect it's going to take some time to dig out, but we believe we're extremely well positioned for the future as it relates to sales on the BB business.

Got it. And then my second question just on long-term care. And I know it's a little early, but do you see any -- I would like to get your initial thoughts if you see any lasting impacts from COVID. What I'm thinking about there is maybe less of the willingness for people to go into long-term care facilities or at the facilities themselves maybe fewer feds, which might make it more costly to run. I know it's very fluid, but just would love to get your initial thoughts in terms of any kind of longer-term impacts from COVID?

Yes. Great. Good question. So I'd probably put it in the three buckets as far as the dynamics that we're seeing just in behavior and also experience around our LTC block. Probably the simplest to describe is just the higher claim of mortality. We definitely have seen that continued. I noted in my comments, it continued to be higher than what our seasonal expectations would be for the third quarter. I would say it was not on a relative basis as high as we saw in the second quarter. But that's something that we'll just track and we'll probably follow more just the health statistics that you see broadly. The second would be incidents. As we noted in the second quarter, we had very low incidents quite a bit below our expectations. We've actually seen that come back to more normal trends in the third quarter. And so we think we're probably back to somewhat of a norm there. And then I would go to just kind of location of care and just movement between location of care. That normally you'd see kind of a progression of care that might go from the home to a facility over time. What we saw in the second quarter was really the movement from home care to facility really slowed down dramatically. And you saw a little bit of the movement from facility back to home care which you do see some. What we saw in the third quarter was more of just the location of care locked up across the board a little bit more where people weren't necessarily transitioning from home to facility or facility to home care. It still occur, but not at the pace that we maybe we've seen in the past. I would say with all that said and if you go back through the three buckets and you think about longer-term implications of that, clearly mortality is mortality. We would not reset our thinking around longer-term mortality trends based on kind of the acute experience that we've seen recently. But when it comes to people's desire to go on claim and to go into a facility or have people in their home that is something that we'll definitely need to track to see if there's longer-term implications. And then definitely, the movement, the normal progression of where people receive care that is something that we'll clearly track over time and see if those behaviors change over time. With all that said, we're going into our reserve adequacy season here. We'll be completing that in the fourth quarter. We would not look to change any of our longer-term trends for what we've seen over the last two quarters. We'd want to see that over time really understand the drivers of that before we make any long-term -- longer-term adjustments.

Okay. Thank you.

Thank you, Suneet.

We will now take our next question from Tom Gallagher from Evercore. Please go ahead. Your line is open.

Thanks. Just a follow-up on that long-term care question. So if you continue to see this level of favorable experience for long-term care even if it is more short-term driven not maybe willing to extrapolate it from a longer-term reserving standpoint, but you still have a short-term earnings benefit here. I'm just curious is this -- let's say, if this continues for the next several quarters to some degree will this potentially lower the annual contributions that Unum needs to make as part of the deal you made with Maine for the ultimate $2.1 billion?

Yes. Yes. Thanks, Tom. So probably the way I think about it. First of all, the experience will kind of change the inventory of our block going into our year-end reserve adequacy work in the TDR. That might have very small impacts and that's just kind of the math. You'd run the math through the prescribed assumptions to determine the TDR. So I'd say that's probably pretty immaterial. We have seen better statutory results in the LTC block and some of that is in Fairwind. So obviously, that will adjust our thinking on capital levels that we'll need in Fairwind at year end. And so that would be a dynamic. But when it comes to how we think about capital contributions, at least for now we're still planning for the same kind of year end full year capital contributions into the LTC book that we've given guidance on before which was about $600 million in total for the year. We put about $270 million of that down into the subs already. So well within our capital plan going into the end of the year. I mean I think it's probably a little premature to really materially change what that expectation would be. But clearly it does help to have lower statutory losses on that book.

That's helpful. Can you give a sense for what kind of delta you've seen in Fairwind earnings? Is it similar to the improvement that we've seen on a GAAP basis, which the last couple of quarters has probably been cumulatively I don't know $80 million better? Is it -- would it be directionally similar to that in Fairwind or different?

Yes. I mean again in general, I think, we'll have fewer losses that we'll have to fund, but we'll have to just see how the entire equation turns out for Fairwind before I want to talk about that. But the other thing is we do still need to go through and finalize our New York company asset adequacy testing. And with rates where they are now that might be a little challenging. So I really wouldn't want to adjust down what we think our capital requirements are going to be right now. We need to get through those processes first.

Fair point. And just my follow-up is, I guess, heading into 2021, I heard the commentary you made on unemployment impacts on top-line. The -- I guess, looking at your case persistency it looks pretty solid, but you're still seeing some pressure on top-line. Is there a way to sensitize if those trends continue what you think this would mean for top-line kind of broadly for Unum into 2021? I don't know if you're able to sensitize that from a range?

Yes, Tom, I think, we probably would refrain from doing that at the moment. As we get to the end of the year, we'll have a much better sense on that. But those -- like we said the underlying dynamics, we've seen we will continue to see as we head into the fourth quarter. But we want to give you a good refresh summary as we get towards the middle of December in terms of what 2021 will look like.

Okay. Thanks.

Thanks, Tom.

Our next question comes from Mark Hughes from Truist. Your line is open.

Yeah. Thank you. Good morning. Can you talk about the elevated leave management expenses the last couple of quarters? Can you share specifically or roughly what those were this quarter? And how do you think those will trend in 4Q?

Great. Thanks, Mark. Mike you want to take us through the leave management business?

Sure. Good morning, Mark. Thanks for the question. It's a good one. And I'd start to your specific question, I mean, sizing it one way to think about it is the operating expense ratio that you see for the group disability segment if you peel out services largely flat year-over-year. So that growth in the expense ratio is really driven by -- and we've called it leave, but it's actually leave plus the administrative services we provide to clients when they self-insure their short-term disability plan. And the combination of the two is where we've seen volumes jump-up significantly in the second and third quarter. And as we've, sort of, outlined at the outset of the call the short-term disability is continued COVID-related pressure on short-term disability particularly acute in the larger end of the market and the recovery of the non-COVD. So as things like discretionary surgical procedures came back online as health care providers figured out how to operate safely the combination of the two drills. Volume increase is north of 50% here in the third quarter. Those don't play through as benefits in terms of claims paid. They play through as the expenses that we need to handle. As I look forward so one is it is important that we are there for our clients and that's what we're doing through this period as we sort of look towards the reality of 2021, I can tell you we are looking at implementing increased fees to help us cover some of those expenses. Importantly, we're also beginning to restructure the nature of the contracts on our services business where we shift the balance towards volume-based contracts and away from flat price per covered employees, so that we can better account and align with fluctuations in volumes in the future. And the last piece of the puzzle as we work through it over the coming quarters will be continuing to drive efficiency. We like the business very much and we're investing in technology that is already beginning to bear fruit and we expect a very sort of steady improvement in our unit costs and in the client experience over the coming 4 to 6 quarters. And just to refresh, we only offered these services in conjunction with insured lines, we feel good about the profitability of the entire customer relationship, when we look at the insurance and the services together and feel like it's a real differentiator. It's the majority now of our mid- and large-case RFPs that come in are requesting bids on services. So we feel it's a really important part of our value proposition and one that we can profitably meet. It's going to take us some time to work through it, particularly given the current environment.

Is the duration of the typical short-term disability claims some of the COVID -- some of the effect of COVID? Have you seen any of those transition to long-term visibility?

Yes. Great question. And the reality is the nature of the COVID claim, it is not typically going to make it through elimination period to the long-term disability plan. So typically, those are going to be 90 to 180 days and very, very, very few insignificant flow-through to LTV. And maybe in contrast Peadar was talking a little bit about what we're seeing with recoveries with long-term disability in the U.K. We here in the U.S. have actually been able to do pretty well and actually favorable to expectations. And again, as health care providers are figuring out the new normal, that's a little bit of tailwind for us too when it comes to recoveries on the LTV side.

Thank you.

Sure. Thanks, Mark.

Thank you, Mark.

Our next question comes from Andrew Kligerman from Credit Suisse. Please go ahead. Your line is open.

Thank you. Good morning. Maybe just to tag on to that last question about leave management. And I know that the year-over-year increase in leave request was about what 50% to 60%. Maybe just even moving beyond that you talked about some of the restructuring that you're doing to that product, when might it transition from a cost-centered to an earnings contributor? Do you kind of have a timeline or a window when you think that might occur?

I can take one. It's Mike. Appreciate the question, Andrew. And first and foremost, we do look at it in the context of the overall client relationship and look at it insured and services together. But as volumes have increased related to COVID, it is -- definitely put pressure on the operations as we talked about in the restructuring of the contracts that we talked about. But as I look out over the next, I would say 4 to 8 quarters, it's a pretty steady improvement I think in revenue per covered member, as we put the price increases through and then the benefit of unit costs coming down, which actually we're already starting to see here in 2020. So it will take some time to work all the way through. Their contracts look similar to what we see on the insured side with 2-year contracts being pretty standard. So it will take us probably the 6 to 8 quarters to work it through. But I'm actually pretty excited about the potential for that business, not only for what it can provide for us for fee income, but probably more importantly because of the importance that our clients put to it and the real need that it needs. And as I kind of look out, wouldn't try to predict what's going to happen from a legislative point of view. But in general, the trend has been towards more complexity when it comes to things like complying with leaves laws at the federal state and municipal level. And as more change comes down, I think that increases the need for professional outsourcing services and something that we can do there to meet our clients.

Got it. Thank you. And then with regard to credit and I think what I heard just specifically with regard to Fallen Angels, you said your outlook for the Fallen Angels had reduced in half. If I remember correctly, at 2Q you cited expectations for all of 2020 to have defaults of $70 million and just overall downgrades of $1.3 billion including, let's see yes. And so far as of the first half, you had $52 million of defaults and $529 million of downgrades. So could you update that outlook for the full year? And if possibly even provide the third quarter figures.

Great. Yeah. Andrew hi, this is Steve. I would say from an impairments perspective, I think your numbers are relatively right. What we would say is for the remainder of the year, we anticipate impairments to be de minimis. It would be our view right now. We have a little bit built into our capital plan, but really aren't expecting anything for the remainder of the year there. From a downgrade perspective, our full year estimate now is around $800 million. We've already reflected $670 million of that as of 9/30. And you're right that $800 million came down from about $1.3 million would have been what we would have quoted, in our last call. So, very, very little anticipated for the remainder of the year, the other thing I'd tell you in the third quarter, the capital impact was pretty close to zero. A big part of that downgrade, that bond had already been adjusted as far as the NAIC rating, so it really didn't have a capital impact, even though it was considered a Fallen Angel. So, we feel pretty good about that. And then, we do have a downgrade estimate in our capital plan going into next year. But again, we think that's pretty manageable.

On that note, that's pretty encouraging. When you say management book could you give a little color around it? And tying into that, share repurchases is there a possibility that you could resume in the first quarter?

Yeah. I would say we'd leave any discussion to capital plans for next year, probably that to our Investor Day, in December. Really we're going through kind of our annual planning process. And finalizing what we think next year is going to look like. I can tell you though our early read would be that, the credit markets would continue to be pretty stable, going into next year. And so we wouldn't anticipate large capital implications from downgrades next year.

That's great. Thank you.

Thanks, Andrew.

Thanks, Andrew.

Our next question comes from Humphrey Lee with Dowling & Partners. Please go ahead. Your line is open.

Good morning. And thank you for taking my questions. Looking at the Closed Block IDI, the claims continue to be elevated. I think last quarter you talked about you're seeing some normalization. But I was just wondering can you color -- provide some color in terms of what you've seen since the second quarter core and then into the fourth quarter?

Yeah. Good morning, Humphrey. This is Steve. Yeah, you're right. Last quarter our loss ratio in our CBD block, was 89.5%. That came down to 86.6%, this quarter. So we've seen some improvement. We have seen some higher incidents, kind of through the COVID environment. We haven't seen an awful lot of actual COVID claims. But the environment has really generated, I'd say, more just general incidents within the block. It's something we continue to monitor from an earnings perspective, it was pretty manageable. We continue to feel really good about that block. It's -- that block capitalized in our north wind structure. And that structure has continued to perform very well continues to pay off the debt on time. And we would anticipate that to continue.

Okay. And then, in terms of the long-term care you talked about the mortality being 15% higher. Can you give us a sense in terms of, whether those are concentrated in the possible life or in the active life?

Yeah. No, that's a great distinction. Those -- what I'm quoting there would be in the claimant block only. And that's really where we've seen the elevation over this entire period. I would say we have not seen any sort of significant movement, in mortality in the active life block, during this period of time.

Got it. Thank you.

It's a great thing that figured.

[Operator Instructions] We will now take our next question from Josh Shanker with Bank of America. Please go ahead. Your line is open.

Yeah. Thank you very much. I was hoping you could give us some color on, whether changes in short-term disability versus long-term disability purchasing will be with us for a while. Or do you think it's just a short-term situation related to COVID? And likewise given that COVID will persist for a little while, how do you see the sales recovery in Colonial Life playing out over the next 18 months?

Mike, can you [Indiscernible].

Okay. Yes. Yes. Yes happy to take it. So I would not read into the quarter-to-quarter shifts, between product sales. I think the reality is we had a couple of larger transactions in the up market on the group insurance side. And they happen to be in a couple of product lines and not in a couple of others. So I don't know that, there's a sustained trend to read into what consumers or employers are changing with their benefit plans. And then, the second question, I'll put that over to Tim.

Yeah. Thanks Mike. So again, we're encouraged by the quarter-over-quarter improvement we saw in the second quarter to third quarter. We expect to continue to see incremental improvement. Some of that's going to be dependent upon how the virus behaves and whether there are any additional impacts to the economy based on, potential reemergence of the virus. But again our agents are adapting to the environment we're in. They're adopting the digital tool set that we shared with them. And we're actually seeing face-to-face enrollments beginning to reemerge in places where the virus is a lesson. So we're encouraged and optimistic. But it will be a choppy road ahead for a couple of quarters.

Without guidance, do you have some sort of planning about thinking about 2021 versus 2019, Colonial Life sales?

Yeah. I think we're not going to [Indiscernible]...

We'll talk about that in December, what our early outlook looks like around that. That's a good time to discuss some of those dynamics.

All right. Thank you very much.

Thanks, Josh.

I think we're up on time here. So I want to thank everybody for joining us this morning. Please do stay safe and healthy. And operator this now completes our third quarter 2020 call.

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