Unum 2014 Annual Report Download - page 58

56 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Year Ended December 31, 2013 Compared with Year Ended December 31, 2012
Sales in group long-term disability in 2013 were consistent with 2012, with higher new account sales and an increase in core market
sales offset by a decrease in sales to existing customers and a decline in sales in the large case market.
Group life sales were lower in 2013 compared to 2012 as a result of declines in new account sales in both the core and large case
markets, which more than offset higher sales to existing customers. The decrease in group life sales was due in part to pricing discipline
and the initiation of rate increases on new business. Also impacting the comparability of group life sales relative to 2012 was the
discontinuance of new sales of certain of our group life product lines beginning in the third quarter of 2012.
Supplemental sales were lower in 2013 compared to 2012 due primarily to lower sales in our individual disability product line.
Segment Outlook
Our primary focus during 2015 will be a continuance of building on the key capabilities that we believe will enable us to deliver future
growth. We expect to continue to improve our profitability through our shift in business mix, premium rate increases, an increased focus on
new to market sales, and continued pursuit of efficiency opportunities.
We expect the low interest rate environment to continue to contribute to a dampening of overall earnings growth, and unfavorable
economic conditions may lead to a higher rate of claim incidence, lower levels of claim recoveries, or lower claim discount rates. We are
also preparing for Solvency II, a new European Union capital regime that will become effective January 1, 2016, the adoption of which will
likely result in an increase in supervisory and disclosure requirements and could also result in increased capital requirements. We continue
to work with regulatory authorities in the U.K. to agree on appropriate capital requirements for our U.K. business under Solvency II.
We continuously monitor key indicators to assess our risks and attempt to adjust our business plans accordingly.
In our group life business, the completion of our near-term actions regarding rate increases, reinsurance, and the discontinuance
of certain product lines have reduced volatility and contributed to improvement in our overall profit margin. We are now looking at
opportunities for disciplined growth in this market segment.
In our group long-term disability business, we remain committed to driving growth in the U.K. market. We will continue to follow a
disciplined approach to new sales activity in the competitive pricing environment. We do, however, see genuine opportunities to grow the
group long-term disability market in the U.K. through establishing new relationships with employers, deepening the level of coverage with
our existing corporate clients, and through new offerings such as a sick-pay product and an updated offering of our group critical illness
product. We anticipate returning to more normal levels of premium growth as our rate increases continue to be placed in the market and
as we continue to increase sales to new and existing customers. We have seen some positive results in terms of new to market sales
and increased coverage in existing cases. We believe the outlook for higher levels of employment, increases in corporate payrolls, and
expansion of benefit spending is beginning to improve and will positively impact our sales and operating results, but a sustained low
interest rate environment may dampen our profitability. In addition, we continue to focus on new market opportunities by raising
awareness of the need for income protection. Expanding group long-term disability market penetration remains a significant opportunity
and priority.