Unum 2014 Annual Report Download - page 63

UNUM • 2014 ANNUAL REPORT 61
Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
Total premium income decreased in 2014 compared to 2013 due to expected policy terminations and maturities. The premium
decrease resulting from persistency trends in the long-term care line of business was partially offset by the favorable impact of premium
rate increases on certain of these policies. We continue to file requests with various state insurance departments for premium rate
increases on certain of our individual and group long-term care policies. The rate increases reflect current interest rates and claim
experience, higher expected future claims, longevity, persistency, and other factors related to pricing long-term care coverage. In states
for which a rate increase is submitted and approved, customers are also given options for coverage changes or other approaches that
might fit their current financial and insurance needs.
Net investment income was higher in 2014 relative to 2013 due to increased invested asset levels and higher miscellaneous income,
partially offset by a decrease in yield on invested assets. Other income, which includes the underlying results of certain blocks of individual
disability reinsured business and the net investment income of portfolios held by those ceding companies to support the block we have
reinsured, was lower in 2014 compared to 2013 primarily due to lower investment income from the investment portfolios held by the
ceding companies.
Individual disability risk results for 2014 were unfavorable relative to 2013 due primarily to higher claim incidence rates. Long-term
care risk results were unfavorable in 2014 relative to the prior year due to the reserve charge, as previously discussed. Excluding this charge,
long-term care risk results were favorable compared to 2013 due to lower claim incidence rates.
Commissions decreased in 2014 compared to 2013 due to a lower level of accrued commissions in 2014 as well as the expected
run-off of these blocks of business. Interest and debt expense in 2014 was lower than 2013 due to principal repayments on the outstanding
debt issued by Northwind Holdings, LLC (Northwind Holdings) and a decrease in the floating rate of interest. The other expense ratio was
higher compared to 2013 due to lower premium income and an increase in expenses attributable to our long-term care product line.
Year Ended December 31, 2013 Compared with Year Ended December 31, 2012
Total premium income decreased in 2013 compared to 2012 due to expected policy terminations and maturities, partially offset by
the favorable impact of premium rate increases on certain of our long-term care policies as well as the issuance of group long-term care
certificates on in-force cases.
Net investment income was higher in 2013 compared to 2012 due primarily to higher invested asset levels, partially offset by a
decrease in the yield on invested assets. Other income was lower in 2013 compared to 2012 due in part to lower investment income in
the portfolios held by the ceding companies to which we have ceded certain blocks of individual disability business.
Individual disability risk results for 2013 were slightly favorable compared to 2012 due primarily to lower claim incidence rates.
Long-term care risk results were slightly favorable in 2013 compared to 2012 due to more favorable development in active life reserves.
Interest and debt expense in 2013 was lower than 2012 due to principal repayments on the outstanding debt issued by Northwind
Holdings and a decrease in the floating rate of interest. The other expense ratio was consistent in 2013 compared to 2012.
Segment Outlook
We intend to continue our focus on operational effectiveness, rate increases, enhancement of our experience analysis tools, and
capital management. We expect operating revenue to decline over time as these closed blocks of business wind down, although we
anticipate additional premium income associated with long-term care rate increases. We also expect a small amount of group long-term
care certificates may continue to be issued where we are required to do so under the terms of existing group policies. We will likely
experience volatility in net investment income due to fluctuations of miscellaneous investment income. We continuously monitor key
indicators to assess our risks and attempt to adjust our business plans accordingly. We expect the low interest rate environment and
the tightening of credit spreads to continue to place pressure on our earnings and reserve levels.