Unum 2014 Annual Report Download - page 25

UNUM • 2014 ANNUAL REPORT 23
During the fourth quarter of 2013, we completed a review of our assumptions and modified our mortality and claim recovery
assumptions for our Unum US group life waiver reserves and, as a result, reduced the applicable claim reserves by $85.0 million and
increased 2013 net income $55.2 million.
Consolidated Company Outlook for 2015
We believe our disciplined approach to providing financial protection products at the workplace puts us in a position of strength as we
seek to capitalize on the growing and largely unfilled need for our products and services. We believe the need for our products and services
remains strong, and we intend to continue protecting our solid margins and returns through our pricing and risk actions. We continue to
invest in our infrastructure and our employees, with a focus on quality and simplification of processes and offerings. Our strategy is centered
on maintaining a strong customer focus while providing an innovative product portfolio of financial protection choices to deepen employee
coverages, broaden employer relationships, and open new markets. The low interest rate environment continues to be a challenge and
may put pressure on our profitability and reserve levels for some products, but we continue to analyze and employ strategies that we
believe will help us navigate this environment. We believe that consistent operating results, combined with the implementation of strategic
initiatives and the effective deployment of capital, will allow us to meet our long-term financial objectives.
Further discussion is included in “Consolidated Operating Results,” “Segment Results,” “Investments,” “Liquidity and Capital Resources,”
“Notes to Consolidated Financial Statements,” and “Reconciliation of Non-GAAP Financial Measures” contained herein.
Reconciliation of Non-GAAP Financial Measures
We analyze our performance using non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a
company’s performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in
the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures of “operating
revenue,” “before-tax operating income” or “before-tax operating loss,” and “after-tax operating income” differ from total revenue, income
before income tax, and net income as presented in our consolidated operating results and in income statements prepared in accordance
with GAAP due to the exclusion of net realized investment gains and losses, non-operating retirement-related gains or losses, and certain
other items as specified in the reconciliations below. We believe operating revenue and operating income or loss are better performance
measures and better indicators of the revenue and profitability and underlying trends in our business.
Realized investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying
business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation
of realized investment gains or losses. Although we may experience realized investment gains or losses which will affect future earnings
levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in
nature, and we need to earn the interest rates assumed in calculating our liabilities.
The amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pensions and other
postretirement benefit plans, is driven by market performance as well as plan amendments and is not indicative of the operational results
of our businesses. We believe that excluding the amortization of prior period gains or losses, as well as the settlement loss from our
pension plan amendment, from operating income or loss provides investors with additional information for comparison and analysis of our
operating results. Although we manage our non-operating retirement-related gains or losses separately from the operational performance
of our business, these gains or losses impact the overall profitability of our company and have historically increased or decreased over time,
depending on plan amendments and market conditions and the resulting impact on the actuarial gains or losses in our pensions and other
postretirement benefit plans.