Unum 2009 Annual Report Download - page 16

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14
The recent credit cycle has had minimal
impact on Unum’s portfolio relative to
other financial services providers. To
what do you attribute this performance?
Frank: Our performance can be directly attributed to our overarching philosophy of
investing in a way that helps the company keep its commitment to its customers.
As part of this commitment, we are rigorous about creating an asset portfolio that
matches the needs of our policyholder liabilities, and we’re also extremely disciplined
in our credit research.
Rick McKenney
Executive Vice President and Chief Financial Officer
Frank Williamson
Senior Vice President and Chief Investment Officer
How would you describe Unum’s
overall financial position today?
Rick: Our financial position is quite strong today and getting stronger. We continue
to generate very good operating earnings and cash flow in each of our businesses. The
capital backing our customers’ policies is at its highest level ever, and our holding
company capital is multiples of our annual needs. Underpinning this is the quality of our
investment portfolio, which withstood the financial crisis well and is even better
positioned today.
Clearly, Unum is in a strong position
today with respect to excess capital.
How do you determine what the
“right” level of capital is? What are
your plans, if any, for this capital?
Rick: Determining the right amount of capital is a dynamic process that starts with our own
view of our risks and the capital we should hold to withstand severe market downturns.
We then take into account the views of our multiple constituencies, including policyholders,
regulators, rating agencies, and the capital markets. As for our plans, we look to take the
excess capital we are generating and invest it in growth, both in our current businesses,
as well as new opportunities. We will then evaluate returning capital to our shareholders
through dividends and by repurchasing our shares.
How would you rate the overall quality
of Unum’s investment portfolio?
Frank: In a nutshell, we believe our portfolio is strong. Its quality has held up very
well despite the challenging environment, and our assets are generally well
matched with liabilities. Additionally, our exposure to commercial real estate —
an area of growing concern in the financial markets — is low.