Unum 2014 Annual Report Download - page 53

UNUM • 2014 ANNUAL REPORT 51
Segment Outlook
During 2015, we expect continued strong growth momentum, with continued strong persistency and sales growth within our
existing client relationships. We believe we will achieve year-over-year growth in premium income, with additional improvement in our
premium and sales growth rates if the overall economic recovery further accelerates and market pricing adequately reflects the impact
of a low interest rate environment.
Our net investment income may be impacted, either favorably or unfavorably, by fluctuations in miscellaneous investment income.
The low interest rate environment and tighter credit spreads continue to place pressure on our profit margins by impacting net investment
income yields and claim reserve discount rates. As part of our continued pricing discipline and our reserving strategy, we continuously
monitor emerging interest rate experience and adjust our pricing and reserve discount rates, as appropriate. We expect a stable risk
environment for our group disability product line in 2015, with the impact of the lower claim reserve discount rate offset by premium rate
increases we place in the market, resulting in a benefit ratio for full year 2015 that is generally consistent with the level of 2014.
Our amortization of deferred acquisition costs may be unfavorably impacted, particularly in our supplemental and voluntary
product line, by higher than expected policy terminations. We believe future profit margin improvement is achievable, driven primarily
by our continued product mix shift, expense efficiencies, and consistent operating effectiveness.
Certain risks and uncertainties are inherent in the disability insurance business. Components of claims experience, such as incidence
and recovery rates, may be worse than we expect. Disability claim incidence and claim recovery rates may be influenced by, among other
factors, the rate of unemployment and consumer confidence. Within the group disability market, pricing and renewal actions can be taken
to react to higher claim rates or lower discount rates, but these actions take time to implement, and there is a risk that the market will not
sustain increased prices. In addition, changes in economic and external conditions may not manifest themselves in claims experience for
an extended period of time. Unfavorable economic conditions may lead to a higher rate of claim incidence, lower levels of claim recoveries,
or lower claim discount rates. Claim incidence levels may fluctuate due to the normal volatility that occurs in group disability business
or may be related to economic conditions. We continuously monitor key indicators to assess our risks and attempt to adjust our business
plans accordingly.
We remain confident in our strategy of providing consumers with valuable financial protection benefits, broadening our employer
client relationships, and building collaborative partnerships with complementary product manufacturers, technology firms, and distributors.
Our continued investment in our franchise includes active client management and a differentiated integrated experience across our product
lines. There are significant growth opportunities in each of our markets and within our existing client base, and we continue to invest in the
people, processes, and technologies that will allow us to enhance our ability to grow the market over the long term. Underpinning our
strategy is our continued commitment to risk management discipline, talent development, and our core values.