Net income for the fourth quarter of 2020 included the following items, a net after-tax gain from the Closed Block individual disability reinsurance transaction of $32 million, an increase to the reserves backing the Closed Block long-term care product line of $119.7 million after tax, an increase to reserves backing the group pension block, which is a part of the other product line within the Closed Block of $13.8 million after-tax, and a net after-tax realized investment gain on our investment portfolio, excluding the net realized investment gain associated with the Closed Block individual disability reinsurance transaction of $1.6 million.
So net income in the fourth quarter 2019 included a net after-tax realized investment gain of $7.2 million and after tax debt extinguishment cost of $1.7 million.
So excluding these items, after tax adjusted operating income in the fourth quarter of 2020 was $235.3 million or $1.15 per diluted common share compared to $290.7 million or $1.41 per diluted common share in a year ago quarter.
As we'll discuss in greater detail COVID-related deaths in the US for the full year totaled 345,000 with 138,000 occurring in the fourth quarter.
The CDC reports that approximately 80% of the COVID-related deaths have been over the age of 65 and this population will be vaccinated in the coming months.
This same group also represented about 50% of our group life deaths by count, many of whom are retirees who maintain some level of their coverage.
This in turn is expected to drive a strong rebound in our results, likely in the second half of 2021, and cause us to expect to get back to our historic levels of growth and profitability in 2022.
Our premiums in our core businesses for several years have seen growth in the 5% range.
But this year, it only grew by 0.6%.
And in the fourth quarter, it was down by 1.4%.
Full year sales for our core business segments, all declined in 2020, Unum US by 10%, Colonial Life by 27% and Unum International by 9.5%.
Looking forward, this has created an acceleration of the trends we were seeing with an increased adoption of digital sales and enrollment tools, that we have invested in over the past few years, especially for our Colonial Life agents, where we saw a 240% increase in the number of agents utilizing these digital tools.
The shock to employment levels in the spring, rising from 3.5% to a peak of 14.7% virtually wiped out all the benefit we usually see from growth in employee count and wages for existing customers.
Over the course of 2020, the yield on a 10-year treasury fell from its peak of 1.92% at the beginning of the year to a low of 50 basis points in March and ended the year at 92 basis points.
We would also note that through this period, our capital remained in excellent shape, as we ended the year in a strong financial position with healthy capital levels above our targets and holding company cash almost 4 times our target.
We have paid out over $150 million in COVID claims, mostly in small face amounts and provided by a company as a benefit.
Once fully executed, it will have the benefit of freeing up approximately $650 million of capital, primarily to holding company cash, part of which we see in our fourth quarter numbers.
In a year of unprecedented challenges from the economy, interest rates, credit markets and the health crisis, the strength of our capital metrics improved year end in 2020 compared to a year ago, with holding company cash increasing $650 million to $1.5 billion, risk-based capital holding steady at 365% and leverage declining almost 3 points to 26%, the measures of strength and stability of the company combined with the know-how of our team give us great confidence as we work through what we all hope are the last stages of the pandemic to a more stable environment ahead.
Before I do so, I want to level set our reported adjusted operating income of $1.15 per share for the fourth quarter against the outlook we provided at our December 17, outlook meeting, which did call for adjusted operating earnings per share within a range of $1.14 to $1.24.
The one area that did diverge significantly from our expectations with late quarter mortality, for setting [Phonetic] expectations for benefits experience, our outlook was based on an assumption of fourth quarter mortality from COVID-19 of 92,000 deaths nationwide.
Actual mortality turned out to be substantially higher at approximately 138,000 excess deaths with December accounting for over 50% of those deaths.
More specifically 25% of the quarter's excess deaths occurred in the last two weeks of the year with the average daily death count approaching 2600 pushing our reported income toward the lower end of our expected range.
The year-end surge that occurred negatively impacted our deferred tax operating income by approximately $22 million relative to the midpoint of our expectation, primarily in Unum US Group Life with minor impacts to short-term disability, Voluntary Benefits and Colonials Life Insurance business.
This was offset in part by approximately $10 million favorable before tax operating income in long-term care from higher claim claimant mortality.
This $12 million net impact late in the quarter impacted our operating income by $0.05 per share.
As Tom outlined in his opening after tax adjusted operating income in the fourth quarter was $235.3 million or $1.15 per common share.
By comparison in the third quarter of this year, after-tax operating income was $245.9 million or $1.21 per common share.
So we saw about an $11 million decline in sequential quarterly earnings.
These count showed a significant resurgence in the fourth quarter as excess deaths in the US from COVID totaled an estimated 138,000 compared to 80,000 in the third quarter.
The impacts to our business are higher mortality across our Life Insurance business lines and increased short-term disability claims, which increased by 3% relative to the third quarter.
Fortunately, the unemployment rate is gradually improved to 6.7% for December compared to 7.8% for September and the peak level in April of 14.8%.
However, today's rate is higher than the 3.5% level, the US economy was experiencing heading into the pandemic a year ago, high unemployment rates negatively impacted premium growth in our core business lines it a negated the benefit we usually experienced from natural growth in the in-force blocks.
Adjusted operating income for the fourth quarter was $64.7 million compared to $73 million in the third quarter.
First, we experienced pressure on STD claims from the resurgence in COVID infection rates with the volume of COVID-related stand-alone STD claims, increasing 45% by count from the third quarter to the fourth quarter.
Second, pressure on expenses from leave request volumes remains high and continued to impact results, with those volumes running approximately 6% higher relative to the third quarter.
And third, pressure on net investment income impacted operating income as miscellaneous investment income was $10 million lower due to lower levels of bond call premiums.
Miscellaneous investment income from bond calls was unusually high in the third quarter at $12 million and slightly below average in the fourth quarter at $2 million.
We continue to be very pleased with the consistency of the results and LTD throughout this volatile environment as demonstrated by the group disability benefit ratio of 72.5% this quarter, the lowest in recent history, compared to 74.1% in the prior quarter.
Adjusted operating income for Unum US Group Life and AD&D remained depressed with a loss of $21.9 million in the fourth quarter compared to income of $13.9 million for the third quarter, with the change driven primarily by unfavorable claims experience.
That is we continue to see approximately 1% of the excess mortality by count in our Group Life results.
Specifically, in the fourth quarter, we had approximately 1,300 excess claims by count or slightly under 1% of the 138,000 reported deaths nationwide.
In the third quarter, we reported slightly more than 900 excess life claims benchmark against the base of approximately 80,000 COVID related deaths nationwide, a higher claim count of approximately 350 at an average claim size of $50,000 in the fourth quarter, accounts for part of the decline in operating earnings.
We believe this 1% mortality relationship to national trend will continue in the early part of 2021 and suggest that you use that as a basis for your projections and estimates in future quarters.
Over time this relationship could change and potentially exceed 1% on what we expect to be a declining overall mortality count as vaccinations rollout to different sectors of the population, initially to the elderly, teachers, medical personnel and first responders, but we will update you as these trends evolve.
The Unum US supplemental and voluntary lines experienced consistent -- generally consistent results in the fourth quarter with adjusted operating income of $100.7 million compared to a $101.3 million in the third quarter.
The IDI line had favorable results with the benefit ratio declining to 42% in the fourth quarter from 48.6% in the third quarter, driven primarily by favorable incidence and mortality trends in the block.
Finally, results in the Dental and Vision business improved in the fourth quarter with the benefit ratio declining to 65.4% from 76.8% primarily driven by lower utilization.
Sales for Unum US declined 7% in the fourth quarter compared to the year ago quarter, sequentially though we see sales momentum building with improvement in the year-over-year decline from 18.5% in the third quarter to 7% in the fourth quarter.
Total sales for group lines meaning LTD, STD and Group Life combined decreased 4.3% as the fourth quarter experience the impact of a higher than normal level of large case sales recorded in the third quarter.
Sales on this platform increased 6% in the fourth quarter over the year ago quarter and increased 17% for the full year.
As discussed throughout 2020 and on our outlook call, the supplemental lines show more pressure than the group lines, voluntary, benefits sales declined 24.2% compared to the year ago quarter, but did improve their sequential year-over-year decline, which is 35.8% in the third quarter.
Dental and Vision sales declined 9.4% as we continue to see disruption in group sales stemming from discounts and other incentives carriers are providing in response to the unusually favorable claim trends, the industry experienced in the second quarter.
This dynamic is evident in our persistence results as well, which improved to 85% versus 82.6% in the year ago quarter.
Similar to VB, we also see momentum building in the sequential year-over-year sales decline improved in dental and vision from down 33.1% in 3Q to down 9.4% in 4Q.
Finally, stop-loss sales continue to grow from a small base, up over 140% for the fourth quarter and full year providing a good long-term growth opportunity for us in a very capital efficient product line.
Adjusted operating income for the fourth quarter remained generally consistent at $20.7 million compared to $21.4 million in the third quarter.
Income for Unum UK was GBP15.4 million this quarter compared to GBP15.2 million in the prior quarter.
Colonial Life had a more challenging fourth quarter with adjusted operating income of $71.2 million compared to $92.2 million in the third quarter.
These results were primarily impacted by a higher benefit ratio of 56.6% compared to 52.2% in the third quarter, which was primarily driven by higher COVID-related life insurance and disability claims as well as weaker results in the cancer and critical illness products.
I'd also point out the fourth quarter net investment income was lower than third quarter, reflecting the unusually large $8.1 million of miscellaneous investment income we did record in the third quarter.
Sales for Colonial Life declined 26.5% in the fourth quarter relative to year ago.
This represents some improvement related to year-over-year trends we saw in the second and third quarters, which were down 43% and 27.6% respectively.
While our traditional agent assisted sales remained pressured, we saw a 30% increase in telephonic enrollment and a 25% increase in our digital self service platforms.
In addition, agent recruiting remains strong with a 10% increase year-over-year.
In the Closed Block segment, adjusted operating earnings increased to $104.2 million in the fourth quarter, which did exclude the significant items that I'll cover in just a moment.
This compares with $70.8 million in the third quarter, largely driven by the impact of higher climate mortality on the LTC block and positive marks on the alternative investment portfolio following the significant decline that we saw in value as of the end of the second quarter.
The positive mark on the alts was $29.4 million in the fourth quarter compared to $11.3 million in the third quarter and a loss of $31.3 million in the second quarter, which did reflect the negative market conditions at the end of the first quarter.
For the long-term care block the interest adjusted loss ratio was 60.2% in the fourth quarter, excluding the impact of the reserve assumption update, which I'll cover separately in a moment.
[Technical Issues] the results of both quarters remain well below our expected long-term range of 85% to 90%.
Claimant mortality by count was approximately 15% higher than expected in the fourth quarter.
As a reminder, claimant mortality was approximately 15% higher than expected in the third quarter and 30% higher in the second quarter.
For the Closed Disability Block, the interest adjusted loss ratio was 79.5% in the fourth quarter, excluding the impacts from the reinsurance transaction, compared to 86.6% in the third quarter.
Then wrapping up my commentary on the quarter's financial results, the adjusted operating loss in the corporate segment was $42.7 million in the fourth quarter.
This is favorable to the run rate of losses of $45 million to $50 million per quarter that we did outline for you back in our December meeting, primarily due to lower expenses in this quarter.
While the accounting treatment for the transaction is complex, the primary economic impact is the ultimate release of approximately $650 million of capital backing this block, primarily as holding company cash.
The prepaid cost of reinsurance of $815.7 million, which largely reflects the negative ceding commission and difference between GAAP and statutory reserves held on the block, will be amortized over the life of the block with the amortization reported as a non-GAAP measure and excluded from our adjusted operating earnings.
The deposit asset related to the ALR cover is initially $88.2 million and will be adjusted going forward to reflect the net cash flows related to the performance and accretion of interest.
As we also just discussed back in our December meeting, we completed an update of our GAAP reserve adequacy for the LTC block and did record a reserve increase of $119.7 million on an after-tax basis which was really at a midpoint of our expected range.
As we mentioned, we lower the interest rate assumption for the 10-year treasury yield to an ultimate rate of 3.25% and extended the mean reversion period to seven years.
This change added approximately $500 million to reserves, but we also had favorable offsets with the success of our rate increase approval program lower expense expectations and movements in our group LTC inventories.
The amounts contributed for full year 2020 were $411 million for Fairwind and $55 million for First Unum.
The Fairwind contribution includes funding $181 million after-tax for the LTC premium deficiency reserve in conjunction with the Maine Bureau of Insurance Examination.
Also in the fourth quarter, as part of our GAAP reserve adequacy review, we did record a reserve increase of $13.8 million after tax in the group pension block, which is included in the other product line within Closed Block segments.
This Closed Block has reserves of approximately $700 million and runs off at a rate of approximately $40 million annually.
First, we recorded a large after-tax realized investment gain of over $1 billion in the quarter.
This quarter we allocated $360 million of these securities with a 7.4% yield and BBB rating to the LTC investment portfolio.
During the fourth quarter, we saw only $85 million of investment grade bonds downgraded to below investment grade, and $52 million of which will be upgraded back to investment grade status when the acquisition of that company is completed this year.
A final point I'll make is that we saw a strong recovery in the valuation mark on our alternative investment assets of $29.4 million this quarter.
Given the current portfolio size, we would expect quarterly positive marks on the portfolio between $8 million and $10 million.
Now looking to our capital position, we finished the year in very good shape with a risk-based capital ratio for our traditional US insurance companies at approximately 365% and holding company cash at $1.5 billion, which are both comfortably above our targeted levels.
The cash balance, includes the capital released from the Phase one of the reinsurance transaction of approximately $400 million and we'll have an additional benefit at Phase two of the transaction is completed in the first quarter.
So in total, once the reinsurance transaction was fully executed in the first quarter, we anticipate releasing over $650 million of capital, primarily to the holding company.
In addition, our leverage ratio has declined to 26.2%.
So now based on the higher than estimated COVID-related mortality we experienced in the fourth quarter of 2020 and our revised assumption of a 30% increase in mortality accounts in the first quarter of 2021.
We now expect a modest decline of 5% to 6% for full year 2021 adjusted operating income per share.
As for our outlook for capital metrics, we anticipate year end 2021 level of holding company cash and risk-based capital to be very in line with our year-end 2020 metrics of 365% RBC and $1.5 billion of holding company liquidity, which will provide a strong stable capital base as we work through the remaining impacts from the pandemic.

Summary:
So excluding these items, after tax adjusted operating income in the fourth quarter of 2020 was $235.3 million or $1.15 per diluted common share compared to $290.7 million or $1.41 per diluted common share in a year ago quarter.
This in turn is expected to drive a strong rebound in our results, likely in the second half of 2021, and cause us to expect to get back to our historic levels of growth and profitability in 2022.
Our premiums in our core businesses for several years have seen growth in the 5% range.
Before I do so, I want to level set our reported adjusted operating income of $1.15 per share for the fourth quarter against the outlook we provided at our December 17, outlook meeting, which did call for adjusted operating earnings per share within a range of $1.14 to $1.24.
As Tom outlined in his opening after tax adjusted operating income in the fourth quarter was $235.3 million or $1.15 per common share.