Steven A. Zabel
Executive Vice President and Chief Financial Officer at Unum Group
Great. Thank you, Rick. And good morning, everyone. We are very encouraged by our strong fundamental performance in the fourth quarter and financial strength, which provides solid momentum headed into 2023. As expected, strong group disability loss trends continued in the fourth quarter with the group disability loss ratio remaining in the mid-60s, a trend we expect to continue into 2023.
We also achieved strong consolidated sales growth of 16.8% on a constant currency basis and maintain steady persistency across all product lines, while advancing our renewal pricing programs. Externally, the favorable operating environment continues to aid results. Natural growth, which comes from increase in employment levels and rising wages, continues to support top line growth for our group lines.
As Rick mentioned, we ended the year with an after-tax adjusted operating EPS growth rate of 42.8% over full year 2021. This includes after-tax adjusted operating income in the fourth quarter of $286.7 million or $1.43 per diluted common share. Given foreign tax dynamics, our corporate effective tax rate was 22.4% for the fourth quarter. The difference between our effective tax rate and the expected rate of 21% equates to approximately $0.03 of after-tax EPS. For the full year, our effective tax rate was 19.4%.
Included in our results was also the impact of a critical illness reinsurance treaty recapture, which added $8.2 million to operating expenses. Earnings in future periods will benefit from this action, providing an attractive rate of return. Regarding operating expenses, the full year 2022 adjusted operating expense ratio was 21.3% or 150 basis points above 2021. Excluding the reinsurance recapture, the 2022 result would have been closer to the low end of our estimated range.
As I review adjusted operating results, I will primarily focus on analyzing our fourth quarter results compared to the third quarter of 2022. This will allow me to describe how our business lines have been progressing. For items, such as premium and sales growth, I will continue to focus more on year-over-year comparisons. I expect to return to focusing on year-over-year results for business line performance with our first quarter 2023 results, given the continued endemic progression of the COVID-19 pandemic.
I'll begin my review of our operating performance with the Unum US segment. Adjusted operating income decreased to $228.7 million in the fourth quarter of 2022 compared to $275 million in the third quarter. This was driven primarily by lower earnings in the supplemental and voluntary lines, despite very strong levels of operating income from the group disability line. The group disability line reported another strong quarter with adjusted operating income of $114.6 million in the fourth quarter of 2022 compared to $129.8 million in the third quarter.
Favorable claim recoveries continue to drive earnings and a benefit ratio of 64.1% for the fourth quarter. For the full year of 2022, our adjusted benefit ratio was 66.7% compared to 76.7% in 2021. We are very pleased with how this block is performing. And given improved incidence trends, we expect the group disability benefit ratio will continue in the mid-60% range in 2023 given our stable staffing levels and supportive return to work environment. Results for Unum US Group Life and AD&D declined modestly from last quarter, with adjusted operating income of $29.3 million for the fourth quarter of 2022 compared to $30.9 million in the third quarter.
The adjusted benefit ratio increased slightly to 78.2% compared to 78% in the third quarter as overall mortality continued to pressure results with average claim size remaining on the higher end of our long-term expectation. We estimate that COVID-related impacts were close to our expectation of approximately $10 million per quarter. Adjusted operating earnings for the Unum US supplemental and voluntary line in the fourth quarter were $84.8 million, a significant decrease from the result of $114.3 million in the third quarter. As mentioned, this result was driven by the recapture of a critical illness reinsurance treaty of $8.2 million as well as the change in estimate within the individual disability unearned premium reserve of $9 million. Results for the dental and vision line were slightly above third quarter results as the benefit ratio decreased to 65.9% compared to 74.5% in the third quarter and 65.6% in the same period a year ago.
Turning now to premium trends and drivers, as we saw the strong momentum experience in the first nine months of the year for Unum US continuing. Growth in premium income in the fourth quarter was 4% on a year-over-year basis, adjusted for the change in estimate within the individual disability unearned premium reserve with particularly strong performance in the group disability business. Natural growth, a tailwind for our group products helps support year-over-year premium growth in group disability of 7.3% in the fourth quarter compared to 7.4% in the third quarter. Sales growth for Unum US was solid with an increase of 23.7% year-over-year in the fourth quarter and 18.4% for the full year. Persistency continued to remain generally stable with only minor variation by line of business with our total group block at 89.6% for the fourth quarter.
So moving on the Unum International segment experienced exceptional results with adjusted operating income for the fourth quarter increasing to $45 million from $29.9 million in the third quarter. Adjusted operating income for Unum UK improved in the fourth quarter to GBP37.7 million compared to GBP23.6 million in the third quarter. The reported benefit ratio for Unum UK lowered to 76% in the fourth quarter compared to 78.6% in the third quarter. As has happened in the past few quarters, the high levels of inflation experienced in the UK distorted the reported benefit ratio this quarter. As a reminder, a significant portion of our policies in the UK have an inflation rider, which are backed by inflation-linked gilts.
The inflation-linked benefits are capped, but the income we receive from the link gilts is not which benefits earnings levels in periods of very high inflation. When removing the direct inflationary impact, the Unum UK adjusted operating income was closer to our long-term target of GBP20 million per quarter. For the first quarter of 2023, we're expecting a muted inflationary impact in the Unum UK. Premium income for our Unum International business segment increased slightly on a year-over-year basis, dampened by exchange rate movements. Premiums continue to show strong growth on a local currency basis. Unum UK generated premium growth of 15.4% on a year-over-year basis in the fourth quarter while our Poland operation grew 13.6%. Both businesses continue to generate positive levels of annual year-over-year sales growth with Unum UK up 43.5% and Unum Poland up 26.3% in local currency.
Next, adjusted operating income for the Colonial Life segment increased to $93 million compared to $90.4 million in the third quarter. The increase was driven by a benefit ratio of 45% in the fourth quarter compared to 46.8% in the third quarter. For Colonial Life's top line, we have previously indicated it will take premium growth a couple of years to return to pre-pandemic levels. This quarter's result trended slightly downward with premium income 0.7% lower than prior year. However, full year premium income did grow by 0.7%. Sales in the fourth quarter were 2.3% higher compared to the prior year quarter and 5.9% higher for the full year 2022 compared to 2021. We continue to feel very good with the progress we've made to build back premium income to pre-pandemic levels for this business with full year 2022 premium levels, now 1% higher than in 2019.
In the Closed Block segment adjusted operating income excluding the amortization of cost of reinsurance related to the Closed Block individual disability reinsurance transaction was $40.4 million compared to $34.1 million in the third quarter, driven by favorable benefits experience in individual disability within our all other product line. This quarter, we also saw lower miscellaneous investment income, which includes earnings from alternative investments and bond call premiums of $12.2 million compared to $14.8 million in the third quarter. I will speak more to our investment portfolio in a few moments.
For benefits experience, long-term care remains stable with the interest-adjusted loss ratio at 86.3% compared to 85.7% in the third quarter and 82% on a 12-month rolling basis. The level of performance for LTC this quarter is consistent with our long-term expectations of an interest-adjusted loss ratio between 85% to 90%, while our rolling 12-month ratio remains below the range due to pandemic-related claim of mortality in early 2022. I would also like to take a moment and provide an update on our long-term care premium rate increase program. We continue to make good progress with our regulators in achieving actuarially justified rate increases for long-term care.
In 2022, our total rate increase approvals totaled just over $100 million of net present value. And since the start of 2023, we received approval for another significant increase in a single state worth roughly $200 million of net present value. This program is an important tool in managing the risk of this block, and we are very pleased with the progress we are making.
So wrapping up my commentary on the quarter's financial results, the adjusted operating loss in the corporate segment was $37.5 million compared to $49.5 million in the third quarter, primarily driven by higher investment income on shorter duration corporate-owned assets and lower interest and debt expense.
Moving now to investments; we continue to see a good environment for new money yields and risk management. Purchases made in the quarter continue to be at levels above our portfolio yield, and we experienced an overall increase in portfolio yield in the fourth quarter. In addition, we are pleased with the ongoing progress with our interest rate hedge program for long-term care. Since the start of 2023, we continued to expand the program and entered into an additional $200 million of treasury hedges, bringing the program to approximately 25% of near-term estimated investable cash flows in Unum America. We expect to continue expanding the hedging program over the coming quarters. We will provide additional details on our interest rate risk management strategy at our outlook meeting.
Miscellaneous investment income decreased in the fourth quarter to $13.9 million compared to $18 million in the third quarter. Last quarter, we set expectations for alternative income to moderate below our longer-term expectation of $20 million to $25 million due to market volatility. Despite this volatility, income from our portfolio remained positive, posting $11.5 million of earnings as our diversified portfolio of real assets, credit and equity demonstrated its resiliency.
So looking ahead, alternative asset income will remain directionally correlated with market performance. For the first quarter of 2023, we estimate alternative asset income of $10 million to $15 million. Likewise, traditional bond call activity and the resulting miscellaneous investment income reduced with the rapid rise in interest rates in 2022, while lower bond calls pressure net investment income in the short term maintaining higher-yielding securities is beneficial to our portfolio yields in the long run.
As discussion continues around the likelihood of a recession, I wanted to take a few moments to again highlight the strength of our investment portfolio and management. Our investment portfolio is well positioned if we move into a weaker economic period, and we have a long history of outperforming the benchmarks through cycles. Stress testing is performed at the individual issuer level and the modeled impact of a mild-to-moderate recession is not material.
Further, we experienced net upgrades of over $500 million in the fourth quarter and estimate net neutral rating actions in 2023 within our portfolio. Also, as mentioned last quarter, since the end of 2020 we greatly decreased our exposure to below-investment-grade securities from just under 9% of fixed maturity investments at amortized cost to under 6% at the end of 2022. As expected, our capital levels are well in excess of our targets and operational needs, offering tremendous flexibility.
The weighted average risk-based capital ratio for our traditional US insurance companies remain robust at approximately 420% and holding company liquidity was $1.6 billion at the end of the fourth quarter compared to 415% and $1.1 billion, respectively, at the end of the third quarter. The increases were primarily attributable to the C2 mortality factor changes, which added approximately 25 points of RBC and strong dividends from our subsidiaries. Specifically, we made dividends from First Unum for the second straight year in the amount of $39 million.
Dividends paid from our Unum UK business were $37 million in the fourth quarter and totaled $66 million for the full year. Our capital metrics have benefited from the rebound we saw in our statutory earnings this year. Statutory after-tax operating income was $240.4 million for the fourth quarter and nearly $1 billion for the full year.
Looking at capital deployment in the fourth quarter, we paid $65.8 million in common stock dividends and repurchased $62.6 million of our shares this quarter. For the full year, we paid $255.3 million in dividends and purchased $200 million of our stock. Capital contributions into the Fairwind subsidiary were $50 million in the fourth quarter, which brings the total for the year to $515 million, which is below our original expectations of $550 million to $600 million coming into the year.
Looking ahead, we plan to provide our views across the business on 2023 during our outlook meeting on February 23rd. Next year's results and outlook will be the first under the new long-duration targeted improvement accounting pronouncement. As we've described in the past, this applies only to GAAP basis financial statements and has no economic statutory accounting or cash flow impacts to the business. While we will discuss in more detail, the meeting I'll provide two reminders about LDTI's impact to Unum.
First, there will be an adjustment to accumulated other comprehensive income and adoption, which we have estimated in previous filings, based on the difference in our investment portfolio and a single A rated bond yield as of reporting -- as of the reporting period date. Second, based on recasting prior year financials, 2021 and 2022 will see higher earnings under LDTI, and we expect a favorable earnings relationship to continue based on our current forecasts.
In closing, I wanted to reflect on the incredible year Unum has had in 2022. Our 42.8% growth in after-tax adjusted EPS vastly exceeded the initial expectations we laid out at last year's Investor Day of 4% to 7%. Our capital metrics ended the year at historically strong levels, and we took the opportunity to reduce risk in LTC through our hedging program, which narrows the range of outcomes for that block. Execution of these items help drive a sector-leading total shareholder return of 74%.
So now, I'll turn the call back to Rick for his closing comments and I look forward to your questions.
