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54 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
Premium income was higher in 2014 compared to 2013 due to premium rate increases in our group long-term disability and group
life product lines, favorable persistency, and an increased retention level in our reinsurance program, as of January 1, 2014, for our group
life products that provide lump sum benefits. Partially offsetting these increases were large case policy terminations in our group life and
supplemental product lines.
Net investment income declined in 2014 compared to 2013 due primarily to lower yields on invested assets. We also reported lower
income from inflation index-linked bonds which we invest in to support the claim reserves associated with certain of our group policies that
provide for inflation-linked increases in benefits.
Group long-term disability and group life risk results were favorable in 2014 compared to 2013 due primarily to lower claim incidence
rates. Supplemental risk results were favorable in 2014 compared to 2013 due to lower claim incidence rates for the group critical illness
product line.
Commissions were higher in 2014 compared to 2013 due primarily to the increased retention level in our group life reinsurance
program. The amortization of deferred acquisition costs was lower in 2014 compared to the prior year due primarily to a decrease in the
level of the deferred asset. The other expense ratio was higher in 2014 compared to the prior year due primarily to an increase in
operational investments in our business and a lower comparative expense ratio in 2013 as a result of expense allowances related to the
reinsurance agreements in our group life product line.
Year Ended December 31, 2013 Compared with Year Ended December 31, 2012
Premium income was lower in 2013 compared to 2012 due primarily to reinsurance agreements we entered into effective January 1,
2013 to cede an additional portion of our group life business. The reinsurance agreements significantly decreased premium income and
benefit payments for group life during 2013 and also reduced volatility in this line of business. Premium income in 2013 was also unfavorably
impacted by continued pressure on persistency resulting from the initiation of premium rate increases, partially offset by an increase in
premium income as a result of rate increases in existing customer accounts.
Net investment income declined in 2013 compared to 2012 due primarily to a decrease in the yield on invested assets, lower levels
of invested assets, and lower income from inflation index-linked bonds.
Group long-term disability risk results were unfavorable in 2013 compared to 2012 due primarily to lower claim recoveries. Group life
risk results were favorable in 2013 compared to 2012 due primarily to lower mortality rates on the retained business. Supplemental risk
results were favorable in 2013 compared to the prior year due to lower claim incidence rates for the group critical illness product line.
Commissions and deferral of acquisition costs were lower in 2013 compared to 2012 due to expenses ceded under the group life
reinsurance agreements and a lower level of sales in 2013. The amortization of deferred acquisition costs and the other expense ratio were
generally consistent in 2013 compared to the prior year.