Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Unum LTC update conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Matt Royal, Investor Relations. You may begin.
Thank you, Pam, and good morning. Earlier today, Unum announced it has agreed to enter into an agreement to cede a portion of our long-term care reserves and Multi-Life individual disability premium effective January 1st, 2025. The transaction is expected to close during 2025, subject to receipt of required regulatory approvals and satisfaction or waiver of other customary closing conditions. The press release announcing the transaction and supporting materials for today's call, which includes a description of an additional internal LTC reinsurance agreement, have been made available on the investors' section of our website at www.unum.com. Let me briefly take care of the Safe Harbor Statement before we jump in. Today's call may include forward-looking statements, and actual results may differ materially, and we are not obligated to update any of these statements.
Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results. Participating in this morning's conference call are Unum's President and CEO, Rick McKenney, and Chief Financial Officer, Steve Zabel. Now, let me turn the call over to Rick.
Great. Thanks, Matt, and good morning, everyone. We appreciate you joining us on such short notice to discuss the details of some exciting actions we have taken with our Closed Block. The primary transaction reduces the size of our legacy long-term care business as part of our franchise through a milestone transaction to sell nearly 20% of the long-term care block. It has been over a decade since we stopped actively marketing LTC, but since we have put it in Closed Block status in 2012, we have been actively managing it. First and foremost, we have continued to fulfill on our obligations to our policyholders to be there in time of need.
Over time, as we have dealt with a changing profile of the book, we have worked with customers and regulators to achieve more than $5 billion of value from innovative premium rate increase programs, which can take the form of a higher premium or alternatively reduce benefits, and more recently, we have taken actions with the investments backing this line by entering into over $3 billion of interest rate hedges to insulate the block from market movements and invested in alternative assets which benefit from the illiquid nature of the liabilities. In 2023, we also made the important decision to fund the reserves and capital behind this block so that we do not expect to need additions of capital in the future. The active management over the past decade has positioned us to be ready to transact on this block when market conditions were favorable.
Long-term care is distinctively different from all of our other offerings and does not align with our strategy, which focuses on helping the working world in their working years. As such, and as we've frequently discussed, we have been working for several years to find solutions and counterparties to remove long-term care from our balance sheet, creating value for all stakeholders. I'm pleased to announce that we have taken the first step towards our goal of removing this risk from our books as we have entered into an agreement with Fortitude Re. Effective January 1st, 2025, we're receiving $3.4 billion of long-term care reserves along with a portion of our Multi-Life individual disability in -force business, which equates to approximately $120 million of individual disability premiums in 2025. The transaction will generate approximately $100 million capital benefit for Unum while maintaining consistent levels of protections above our best estimate reserves.
The reinsured block represents more than 30% of our individual long-term care block. These are policies with richer benefits and carry a different risk profile compared to the group long-term care business. We are extremely pleased to see the ability to transact at an attractive price and a repeatable construct. For our policyholders, the transaction provides continued financial protection with full risk transfer through 100% coinsurance with additional asset protections with Fortitude Re, as well as Fortitude's separate retrocession of biometric risk to a highly rated global reinsurer. For our shareholders, the transaction serves three purposes: validation of our assumption set by a third party, risk reduction to the overall balance sheet, and finally, it reduces the source of distraction from our valuation as it allows investors to focus on our strong benefits businesses.
In addition to this reinsurance transaction, we are pleased to announce we have executed a separate and distinct internal reinsurance transaction whereby we have reinsured 100% of the LTC reserves out of our New York entity to another Unum affiliate. This move not only enhances protections for those policyholders across a broader entity, but also removed the key source of capital volatility in the business and subsequently led to a dividend to the holding company. As a result, we expect our year-end holding company cash strength to now be approximately $500 million higher. Looking to full year 2025, we're excited about our ability to execute on these actions while keeping our capital deployment plans intact and focusing on our growing rest of the franchise with revised EPS growth of 6%-10%.
Moreover, thanks to the hard work and relentless dedication of our team, we remain in a position to continue advancing the market for LTC transactions, and we recognize there is more to be done. With that, I'll turn it over to Steve to dive further into the details and some of the mechanics. Steve.
Thanks, Rick. I couldn't agree more and be more thrilled for our team and for the company as we report on these actions. We have been diligently working on an external reinsurance solution for some time. The agreement we have entered into reflects outcomes that we knew were possible given the growing understanding the industry has regarding long-term care assumptions. Additionally, the entry of new market participants and increasing capital investment behind these types of products have helped contribute to this result. Rick mentioned our Closed Block strategy, which is focused on actively managing the block to reduce its footprint and the associated capital demands. Since last refreshing the strategy with you in February of 2023, we have persistently improved the block while working on risk transfer solutions.
This work included accelerated recognition of the premium deficiency reserve and wrapping up capital contributions to LTC, improving asset liability management through repositioning of assets and ramping up our interest rate hedging program, and finally, achieving premium rate approvals at a rate outpacing our best estimate assumption. Today, we are focusing on two significant actions, including a full risk transfer of nearly 20% of long-term care statutory reserves, which reduces our LTC footprint and increases the percentage of group LTC as a part of the remaining block. Additionally, the internal restructuring efforts Rick mentioned provide additional policyholder protection, eliminating a key source of capital volatility and supporting a dividend to our holding company. So now, turning to slide five, let's dive into the details of our external transaction, which contains two parts.
First, the transaction will reinsure $3.4 billion of LTC statutory reserves, which represents 19% of our total LTC statutory reserves. The reinsured block is comprised of individual LTC policies with attained ages of over 80. This represents 30% of all individual LTC reserves and includes both active and disabled lives. Active lives make up just over 60% of the reinsured reserves. On a standalone basis, the LTC portion of the transaction has a $200 million capital impact, which equates to approximately 6% of ceded reserves. We are included in this amount, approximately $480 million of capital benefits from the combination of tax benefits from the transaction, associated capital release, and expected future rate increases. We believe the capital impact is the most appropriate view of the economics of the transaction, given the certainty of these benefits to recur in potential future transactions on this block.
Overall, when considering price and the need for our counterparties to earn a return, the transaction is also a validation of our underlying long-term care assumptions. For Multi-Life individual disability, the transaction includes 20% of in- force IDI premium within the Unum US supplemental voluntary line. Similar to other recent LTC risk transfer transactions, the inclusion of additional business was necessary to execute a transaction. We view this as purely a facilitation mechanism as we continue to view this product line as a valuable and strategic part of our offering. As such, we agreed to a one-time quota share of in- force business as of the transaction effective date, or approximately $120 million of in- force premium. It is important to note this amount does not include any new business and will run off over time.
Unum will realize approximately $300 million in capital benefits as a result, an amount that includes approximately $50 million of released capital, partially offset by tax impacts. We believe the proceeds and the benefits of the IDI portion of this transaction represent a fair valuation on a standalone basis, so overall, the transaction will impact both lines, so let's review each, starting with LTC on the next slide. Following the transaction, we believe the level of protection above best estimate remains consistent at approximately $2.6 billion. Again, this consists of excess capital at Fairwind, plus the difference between statutory reserves and our best estimate. Relative to the size of the reserves, the amount of protection has increased. This is due partly to the capital released into excess capital of approximately $200 million and the relative margin over best estimate of the ceded block compared to the remainder.
We do not feel the additional level of protection provided by the released capital is really necessary to support our capital needs for LTC, so we may consider a dividend out of Fairwind at some point in the future. Regardless, the level of protection maintains our confidence that additional capital contributions for LTC will not be necessary. In addition to the protection update, we have provided updated sensitivities to key assumptions on the right side of the page. The transaction will reduce the risk on our remaining position across key liability assumptions, with reductions to sensitivities for premium rate increases, morbidity and mortality improvements, policy lapses, and claim incidents. The slight increase in interest rate sensitivity to a drop in the 30-year to 3.25% reflects the nature of the assets being transferred in the transaction.
Additional demographic information on the ceded and remaining blocks has been provided in the appendix. So now let's move on to the anticipated impacts from the IDI reinsurance. You can see on slide seven that despite the one-time impact of ceded premium on the growth rate in 2025, our underlying growth profile remains unchanged. For core operations, the premium growth rate is now expected to be 3%-6% in 2025, with an underlying and long-term growth profile remaining at 4%-7%. The ceded block will drive approximately $40 million less earnings for IDI in 2025, with an annual earnings impact in future years declining as the ceded block runs off. We forecast that the supplemental and voluntary line will now average $110 million in quarterly earnings in 2025.
Combined with our sustained expectation of $140-$170 million in earnings from the Closed Block, this leads to a revised adjusted EPS growth outlook of 6%-10%. So to conclude my remarks, I'd like to provide highlights from our internal restructuring action, which is distinct from our external transaction. During the first quarter, we executed a funds withheld reinsurance agreement, transferring 100% of the LTC reserves from our New York entity, First Unum, to Provident Life and Accident, a Tennessee domiciled entity. In short, this is a more efficient use of our enterprise capital and legal entity structure. PLA's strong capitalization, diverse product offerings, and steady statutory earnings provide more efficient support of the business compared to First Unum, where the business was much more concentrated.
As a result of the transaction, a major source of capital volatility from First Unum is removed as asset equity fluctuations at First Unum are buffered by PLA. Let's go to the transaction. First Unum paid a $630 million dividend, and projected holding company cash at year-end 2025 is now greater than $2.5 billion. Considering both actions discussed today, we are very pleased with the approximately $4 billion reduction in LTC reserves. So with that, I'll hand it back to Rick.
Great. Thank you, Steve. As we have discussed consistently, the continued management and reduction of our LTC footprint is an important part of our strategy, not only from a financial and risk perspective, but also allows more bandwidth to highlight the strength of our market-leading benefits business. We see immense opportunity in the group and voluntary benefits space and look forward to our journey of growth over the next several years. With the actions discussed today, we have taken another step to further reduce the footprint of the Closed Block, free up capital, and better position the company to continue helping the working world with leading employee benefits and services, and with that, let's move to your question.
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your headset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of John Barnidge with Piper Sandler. Please go ahead.
Good morning. Thanks for the opportunity and congrats on the transaction. My first question is on the characteristics of the remaining block. Can you maybe talk about how those differ from what was transacted, maybe how they're similar? I know there's some difference in inflation protection. Thank you.
Hey, John, this is Steve. I can take that one. So just to reiterate, this block was completely individual long-term care. And I would say, generally speaking, the characteristics are fairly similar to the rest of our individual LTC block. It is a more aged block, so the attained age, obviously, is going to be a little bit greater. I would, though, differentiate that from the characteristics of our group LTC block. And we've talked about in the past, but much more inflation types of benefits within the individual block, more lifetime benefits within that block. The average daily benefit tends to be higher. And so, generally speaking, I would say the block where we transacted, it was pretty consistent with what you'd see in the remaining ILTC block, just the attained age being a little bit higher.
John, I'd like to note too, and for anybody that's on the phone, in the appendix, we've got some demographics laid out. We didn't go through the specifics of it, but it's out there as part of the presentation.
Thank you for that. My follow-up question, you talked about interest in addressing the remaining block. Do these internal actions that we're also taking help ease that and facilitate that? Maybe talk about the amount of participants in the market with interest in LTC. Thank you.
Sure. There's a broader question. And first, you asked about the other transaction that we consummate. I think we've said it's kind of on separate and distinct tracks around our reinsurance to Provident Life of our business that was in New York. I think that that's really a different process that we went through in terms of optimization for internal. So we're very happy with that transaction, but distinct from removing the risk from the overall balance sheet. You asked about the market we have here today. Certainly very happy about how we've come out. As we've said, very consistently, these are about working with counterparties. And so we're very happy that we got to the point where the counterparty that made a lot of sense for us makes sense for them. And we'll continue to work on that.
The market is. You've seen a few transactions out there today. We're happy to be part of that group that has a transaction. We'll continue to work with the market around that. But I think it's actually good to see this today. I think as you go through the dynamics of the transaction, the dynamics of our block, we're optimistic that over time, and we've said that very clearly, these are complicated. They take time. We'll be able to continue to reduce the size of our LTC footprint.
Thank you.
Thanks, John.
Your next question comes from Elyse Greenspan with Wells Fargo. Please go ahead.
Hi, thanks. Good morning. My first question on the new EPS guidance, the $6-$10, what's the incremental buyback are you assuming? Is that $100 million? And then you guys said that with the internal deal, right, there's going to be about $500 million more capital at parent at the end of the year. So why wouldn't you guys, I guess, up the buyback more given the incremental capital flexibility here?
Yeah, Elyse, we actually did not, as part of our comments, increase the expectations of the buyback. We are still in the range of $500 million-$1 billion, which we laid out a few weeks ago as part of our overall investor day. As we've said, when this actually completes, and I think that's an important place, we still have to complete the transaction, we'll be in a spot. I think some of this transaction is actually going to happen right away. If we look at the second part of the transaction, that's going to be free and available to us. But we're going to talk about deployment in a very different way, which is we're in a very good position with the overall holding company cash. But when we think about the pace of deployment, last year was a strong year.
We retired or actually bought back 8% of our shares overall. But we are still focused on the growth elements of our strategy. So that comes organically and inorganically, increasing dividends, and then share repurchase is clearly part of that. So I think that when you look at our plans for this year, they will evolve. We'll continue to talk about them, but we have not deviated on our deployment plans for share repurchase, at least for the $500 million-$1 billion as we have it here today. So it'll be an ongoing discussion. I don't want to preclude that, but we're very happy about the capital generated by this transaction, as well as capital freed up by some of our other risk management actions.
Yeah, the only thing that I'd add to that, Elyse, just to make sure everybody understands kind of the components of the change in our EPS guidance. There's really only one thing that changed, and that's our expectation of earnings and supplemental and voluntary, given the ceding of some of the individual disability business. Our expectations are coming down about $40 million annually, and that just converts to the EPS change.
Thanks. And then my next question.
Sorry, Elyse. I just added that, and it's, I guess, implied. This isn't going to really change the gap earnings for the LTC block itself. There was very little earnings in the block that was ceded.
Thanks. And then my follow-up, can we get a bridge? You guys said there was a $480 million capital benefit to the $200 million overall negative capital impact of the LTC transaction. I know there's a negative ceding of $430 million in there, but what else would reconcile the two numbers?
Yeah, this is Steve. I think the biggest thing to think about is there is a normal statutory tax rate impact from both ceding commissions, both the negative and the positive ceding commission. Overall, that did reduce the amount of upfront capital needed. And then we did release required capital across multiple legal entities, but specifically within Fairwind, we were able to release required capital. And right now, I mentioned in my comments, we're planning on just leaving that in that legal entity for now, but that would be the other part of the offset.
Thank you. Your next question comes from Ryan Krueger with KBW. Please go ahead.
$2.6 billion of protection you still have. Can you give it? I guess, one thing I just wanted to understand was, so I assume there was a positive impact from doing the LTC deal on that, but then is the offset, the $600 million release of asset adequacy reserves in First Unum, was that also incorporated into this $2.6 billion update? Yeah, Ryan, Steve, the first part of that question was cut off, but I think I got the gist of it. I think the question was, talk a little bit more about the protection, the $2.6 billion, and just the components of that. I'll start off by saying the dividend that went up to the holding company from First Unum has no impact on that. That protection is specific to Fairwind.
And again, to repeat, that represents the excess capital above our targeted required capital levels, plus the difference between our reported statutory reserves and our best estimate. And the best way to think about it is within Fairwind, we ceded off part of that block. There was some margin related to the block that was ceded. So in essence, that margin goes away from that measurement. But there was capital benefit within Fairwind, where the capital that's there basically went from being required capital for the ceded block to just being excess capital. And so those basically washed. And so what we ended up with was the same amount of protection, but on a block that's smaller. So we kind of view that as net-net relatively stronger position within Fairwind.
And Ryan, you asked it, and I think it's important that these are two separate and distinct transactions. So just to reiterate that, they follow very different tracks, very different purposes, etc. So I want to make sure that as we are announcing them on the same day, they really are two very different things.
No, that makes sense. I actually didn't realize that the New York asset reserves were never part of the $2.6 billion. So that was what I was clarifying.
Got it.
I guess, I guess you got a transaction done, so naturally, we're going to ask you about the next one. I guess, I mean, have you been having dual track conversations already? Or I guess, have you been solely focused on this transaction? And then anything from here would be kind of starting over. Any, I guess, any color you can get on that?
Yeah, no, I think you'd expect, Ryan, that when we've been looking at transactions, we haven't gone kind of down a sole path. We've been talking to a number of parties over a number of different structures. That has continued. Probably over the last couple of weeks, we've been focused more here, naturally, given to get this to fruition. But there are ongoing discussions with other parties, with other attributes. I think as we talk about, we were consistently working and talking to other counterparties to think about what are the risks that they're looking for. This is a very good transaction where we have two different counterparties that are taking different pieces of this. We've talked about that. That's newer technology that kind of came to the fore 18 months ago or just with the first LTC transaction. So that's good. But there's ongoing discussions across the market.
And as we've said, we want to. This is a good step, very important step, but we're going to look to do more.
Great. Thank you.
Your next question comes from Tom Gallagher with Evercore. Please go ahead.
Good morning. First question is the $2.6 billion of excess in Fairwind. And Steve, I know you mentioned you might consider releasing capital at some point from that block, but what would the trigger point be that we can legitimately think about a capital release? Would it be a second LTC deal? Would that be the main potential contributor to that? Or would it be more passage of time over two or three years? Can you help flesh that out?
Yeah, I would say, Tom, we're not setting a specific timetable, but it is a good lead-in for me just to remind, we have signed this transaction, but it is still subject to regulatory approval, getting through some of the other closing things that we need to get through. And so we would definitely want to see the transaction close and be truly executed before we would make any decisions around capital deployment out of Fairwind. But at that time, then we would evaluate what we want to do going forward and just how things have evolved during the year. So I wouldn't set a specific timetable on it other than we need to get the deal closed.
Gotcha. And in thinking about what might be next, should we think about all remaining parts of your block on the table, or would you really be targeting another slice of your individual disability block versus group? How are you thinking about it? Because I think the group has very different risk characteristics.
It does have different characteristics. I think when you think about where we are overall, we're going to look at the entire block as we have been. Because as you say, they have different risk characteristics. And what that means is it's going to actually be attractive to different buyers that are looking for different risk characteristics. And I'll give you just a couple of dimensions of that, which is one, age, which you think about the age of the block, which we talked about here. One is the individual nature of it. As we said, 30% of it is part of this transaction. So we still have more individual block, which have similar benefit characteristics, but maybe a tiny bit younger than what we transacted on here. And then the group business, it's going to be younger. There's going to be more cash ahead of it.
So somebody that wants to invest cash over time might be more attractive to them. And as I think you mentioned, Tom, the benefit structure of it is much, much different, much lower benefit levels ultimately over time. So a different risk profile from a longer-term biometric perspective. So all those are dynamics. We're going to talk to different counterparties that want to look at those different dynamics. It's all on the table to your point. We have 80% of the block left. The goal is to continue to remove that from the balance sheet.
Okay. Thanks.
Your next question comes from Wes Carmichael with Autonomous Research. Please go ahead.
Hey, thanks. Good morning. The $200 million impact from the LTC portion of the external deal, Steve, I think you mentioned tax benefits, capital release, and rate increases are all kind of embedded in there. Can you just break out what's embedded on the rate increase side?
Yeah. Roughly speaking, it's about $100 million, a little bit less than $100 million. And just to explain that one, so with a lot of these types of transactions, there's really no value transferred initially at day one for future rate increases. Those are built in through experience refunds, and our transaction is similar to that. We feel very confident, given our track record, that we're going to be able to achieve those future rate increases, and that value will basically come back to us over time just through the mechanisms of the reinsurance agreement.
That's helpful. And I guess my follow-up is related to that, but what does the structure of that look like? And I mean, I guess, are you assuming, I guess, additional programs beyond what you've already kind of put out there, or is this just kind of going out and executing on what's out there today? And I guess related to that, is there potentially upside to that $100 million?
Yeah. I would say right now, how we look at it is we have a current program in flight. A portion of that program would impact the block that we ceded. As we're able to achieve those approvals, then the economics would come back to us. So there's really nothing in the future not contemplated right now with our rate program plan. It's just delivering on that going forward.
No, thank you.
Your next question comes from Sunit Kamath with Jefferies. Please go ahead.
Great. Thanks. I think you'd mentioned that this deal sort of affirms or supports some of the assumptions that you guys have in your best estimate liability. Can you just talk a little bit about where there were some differences in terms of assumptions, like what the bigger sticking points were as you talked to the counterparty?
Yeah. So, Sunit, I'm not going to get kind of into the details of assumption by assumption where we ended up. I just kind of stepped back a little bit. And clearly, we believe that this is a fair transaction. And we know with these types of transactions, we're going to have to end up with a negative ceding really to compensate the counterparty for a certain return on this block of business. We feel like we've done that, and in the process, feel really good about the validation of our overall assumption set.
Okay. I'll try. And then second, post this deal, can you just give us a split of your stat reserves for LTC between individual and group?
Yeah. I probably don't have that right in front of me, Sunit. It's not something that necessarily we have published before. It's probably in the annual statements somewhere that we could get to that, but not something that we publish at this time.
Okay. And if I could just sneak one more in. I'm trying to reconcile the $600 million dividend with the $300 million capital benefit from the second transaction. Just trying to think, I must be missing something.
Yeah. I'm not sure where the $300 million is coming from, but the dividend out of First Unum is really just the result of the release capital, required capital within our New York entity. If you think about that internal reinsurance transaction as a whole, we ceded that entire block to our Tennessee domiciled company, and the net economics of that created excess capital in First Unum that we no longer need. We paid a dividend up to the holding company of just over $600 million for that.
Yeah. Sunit, there's a few moving pieces in there. And so I think overall, because there are just some moving parts, as we said in my comments, that we've increased our holding company free capital by $500 million. So as you think about kind of when we went into the year saying we got $2 billion plus, now we're saying we have $2.5 billion plus. But there are some moving pieces. And as this thing finishes, we'll start to see what those come out. But that'll take as we get closer to close.
Got it. Okay. That's fine. Thanks.
Your next question comes from Jimmy Bhullar with J.P. Morgan. Please go ahead.
Hey, good morning. So just had a question on the way you're presenting the financial implications of the deal. So the $200 million capital impact that you're mentioning for LTC, it seems like that's including some of the positives that you would have already gotten regardless of whether you'd reinsured the block or not, like price increases. So just trying to reconcile why one should not look at the ceding commission, the $430 million, as the sort of consideration for this deal and as one's trying to assess what future transactions could occur at.
Sure. Yeah. I can take that one. So the gross ceding on the LTC portion of the transaction was $680 million. And underlying that, it excludes the value of those future rate increases. So I think that's fundamental to how this reconciles. Then if you look at the other things like there's tax deductibility of that negative ceding, there is release of the required capital within Fairwind to support that. And then it's really an add-back in because we do believe that we're going to be able to achieve those rate increases, and we were not, in essence, paid for those in the original ceding commission. And so we feel that that is an important part of the full capital impact picture of the transaction. And I think what's also important is we do think in future transactions, we'll be able to replicate those components of the transaction.
And I think at the end of the day, what investors are looking for is what is the capital need to fund this type of transaction, and what does that mean kind of going forward for future transactions. So we just feel like this depiction of the upfront capital impact is consistent with what it would look like in the future and the right way to think about it.
Okay. And then are there any aspects of the ceded block versus what you're retaining that are better or worse in this regard, whether it's price increases or potential tax benefits or other things? If you were to transact under similar type terms, is there anything that's better or worse on the retained block versus what you just reinsured?
Yeah. I try not to look at it in terms of better or worse, but how I would think about it is the characteristics are relatively similar to the rest of our ILTC block. And we did lay that out in the appendix. Really, the big thing that is different is it is more aged. It's a more mature block itself. But when you think about the underlying assumptions and all those types of things, it'll be very consistent with what we have in our remaining ILTC block.
Okay. And then just lastly, how do you think about the retained individual block versus the group block? Because the group block is fairly younger. I think persistency is somewhat similar, but the age is obviously younger on the group side.
Yeah. Yeah. Like Rick mentioned, it's obviously a younger block. These are mostly people that are still in the workforce. And the benefit structures are very different as far as the type of benefit coverages that were purchased on this and things like inflation, things like lifetime benefits. But it's really all laid out in the appendix, and you can really see the difference between the characteristics of ILTC and GLTC.
Okay. Thank you.
Thanks, Jimmy.
Your next question comes from Joel Hurwitz with Dowling. Please go ahead.
Hey, good morning. Just on the block characteristics, so this was obviously an older block. Are you seeing interest from counterparties in younger blocks of business?
Yeah, Joel, I wouldn't want to talk too much about the market dynamics. We're talking to people about all types of different dynamics. You would have seen other transactions out there that may have dealt with different age levels and things like that. But I wouldn't really want to give you too much insight in terms of discussions that we're having external.
Okay. And then just on the $600 million release of the AAR from First Unum, just what drove that? When you put up the AAR, what was the driver of that? And just why is it going away now?
Yeah. I can take that one. It's really just related to the regulatory requirements in New York versus how we think about the requirements in Tennessee. So given the transaction ceded all of the reserves that we had in First Unum, we, in essence, got that benefit within the First Unum entity. But you have to think of that transaction more as a whole. There were a lot of things within the economics, the release of the reserves versus what was set up in our Tennessee domiciled entity. Think about tax benefits and think about release of the required capital within First Unum. But we ended up with excess capital in First Unum, and we thought just from an efficient capital management perspective, we went ahead and paid a dividend up to the holding company.
Okay. Thank you.
Your next question comes from Alex Scott with Barclays. Please go ahead.
Hey, good morning. First one I have for you is just on the implications for Unum Life Insurance Company's, RBC ratio and capital. It sounds like there's some moving pieces between Fairwind versus the main operating company. So I'm just trying to understand how the capital changes specifically for Unum Life I nsurance Company's .We're looking at year-end statutory filings and so forth. I just want to make sure I have that clear.
Yeah. Steve, I can take that one. The plan is to fund the cost of the transaction really out of the excess capital of Unum US. And so we still expect risk-based capital to remain at healthy levels kind of on a consolidated basis. We haven't updated our year-end expected range of RBC. It's 425%-450%, but we may be at the lower end of that range at this point because we did fund the transaction really out of Unum US with the excess capital there. But again, we did generate more excess capital within Fairwind.
Yep. So that was actually my next question. We're going to get the 10-K soon. It'll tell us what the equity level is. And Fairwind, that's part of that sort of 2.6 of protection that you point to. I think it's over a billion and a half. This sounds like it adds maybe a couple hundred, few hundred million to it. Any help in us thinking through the equity in Fairwind?
Yeah. What we disclose would be the total equity of Fairwind, and really, all we're doing is releasing required capital into what we consider excess capital, and so it does net help kind of the protection, but it doesn't really change the overall capital levels in Fairwind. It's just how we think about the capital that's down there. There are also going to be a little bit of change in the Premium Deficiency Reserve within Fairwind, and so that will have a small impact as well, but kind of the overall capital isn't really impacted by releasing the excess capital.
Got it. Okay. Thanks.
Thanks, Alex.
Your next question comes from Josh Shanker with Bank of America. Please go ahead. Josh Shanker?
Hello?
There you go.
Can you hear me? Hello? Can you hear me?
We can hear you now.
Yep. We can hear you now.
Congratulations on the deal. On the IDI block, it's $40 million of reduced earnings in 2025. Getting smaller as it matures and shrinks over time. But you're only going to have this transaction for six to nine months in 2025, and in 2026, you'll have a full year of the impact. Still, does that mean that 2026 impact will be smaller than 2025, even though the deal will be part of a full year's earnings rather than a partial year's earnings?
Yeah, Josh, good question. I would think about the $40 million as kind of roughly an annual run rate. The reality is that we have to see when the deal actually closes to see how that kind of articulates itself in 2025. So think of that as an annual run rate. And then that will decrease over time. We're going to kind of replenish those earnings probably over a five-year period when you think about just capital generation for the organization. And it's a good point just around this is an in-force block of our IDI business, and there was no new business included. So we feel great about this platform. We feel great about the growth potentials. We're just going to have a little blip in the earnings power as we go through 2025, and then that will rebuild over time.
I'm not going to rush the regulators, but let's just say with the June 30 close, that'd be a $20 million impact for 2025, and then somewhat smaller than $40 million for 2026.
Yeah. That's probably a decent way to think about it.
Okay. That's it for me. Thank you.
Great. Thanks.
Thanks, Josh.
Pam, do we have any more questions?
We lost our operator.
Hold on one second. We'll wait and see if we have more questions in the queue.
Yep.
Okay. I think we have more questions in the queue. We can't get a hold of the operator here. So we're going to wrap up the call here. We appreciate all the questions today. I think we're going to see many, many of you here over the next few days as part of the AGA conference. We look forward to that. For our teams that worked on this, that are listening, much appreciation for the hard work over a longer period of time. And thanks for your attention today. We'll look forward to talking more about it and as we get through the rest of the year talking about our core businesses and the growth trajectory we're looking at. Thanks for joining us today.