Unum 2009 Annual Report Download - page 60

58
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum
2009
Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
The lower level of premium growth in 2009 compared to the 2008 growth rate was attributable primarily to lower sales during the first
half of 2009 and lower persistency in the accident, sickness, and disability product line. The lower persistency primarily relates to the loss of a
few large policyholder accounts. We believe our lower premium growth was partially due to the current economic conditions which affected
the buying patterns of employees and caused employers to defer introduction of new plans. Net investment income increased in 2009 in
comparison to the prior year due to growth in the level of assets, an increased level of prepayment income on mortgage-backed securities,
and a higher yield on the portfolio due to the investment of new cash at a higher yield than that of the existing portfolio.
The overall benefit ratio for this segment remained stable in 2009 relative to the prior year, with a lower benefit ratio in the life and
cancer and critical illness lines of business partially offset by a slightly higher benefit ratio in the accident, sickness, and disability line of
business. The life product line reported a lower benefit ratio in 2009 relative to the prior year due to a change in the mix of life business
and the resulting lower change in the active life reserve. The cancer and critical illness product line reported a lower benefit ratio in 2009
relative to the prior year due primarily to a release of active life reserves, partially offset by an increase in disabled life reserves associated
with the older cancer products. The increase in the benefit ratio in the accident, sickness and disability line of business resulted primarily
from a slight increase in the claim incidence rates relative to the favorable experience of last year.
The amortization of deferred acquisition costs was higher in 2009 due to the continued increase in the level of deferred acquisition
costs as well as the fluctuation in amortization related to certain of our interest-sensitive policies.
Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
Growth in premium income for 2008 compared to 2007 was attributable primarily to stable persistency and an increase in sales
during 2008 and 2007. Net investment income increased in 2008 in comparison to 2007 due to growth in the level of assets and a higher
yield on the portfolio.
The benefit ratio decreased in 2008 in comparison to 2007 due primarily to favorable risk experience in the accident, sickness,
and disability line of business, offset somewhat by higher benefit ratios in the life and cancer and critical illness lines of business. The
improvement in the accident, sickness, and disability line of business resulted from favorable experience related to several new products
introduced between 2002 and 2004. The life line of business benefit ratio was higher in 2008 relative to 2007 due to a higher level of death
claims and a higher average claim cost. The cancer and critical illness product line reported a higher benefit ratio in 2008 relative to 2007
due primarily to unfavorable claim experience associated with the older cancer products.
The other expense ratio for 2008 increased in comparison to 2007 due primarily to field expansion and development.
Sales
Year Ended December 31
(in millions of dollars) 2009 % Change 2008 % Change 2007
Accident, Sickness, and Disability $221.1 (0.5)% $222.1 5.1% $211.3
Life 68.3 6.7 64.0 (4.0) 66.7
Cancer and Critical Illness 54.4 0.6 54.1 (4.9) 56.9
Total Sales $343.8 1.1 $340.2 1.6 $334.9