Unum 2007 Annual Report Download - page 47

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Unum 2007 Annual Report 45
We intend to continue with our disciplined approach to pricing and also with our strategy of developing a more balanced business mix.
This strategy is expected to result in a lower premium persistency or market share, particularly in the large case Unum US group market,
but historically the profitability of business that terminates has generally been lower than the profitability of retained business. We do
not anticipate a decline in the number of cases, or case persistency, for our Unum US group market on an aggregate basis.
See “Segment Results” as follows for additional discussion of sales by segment.
Segment Results
Our reporting segments are comprised of the following: Unum US, Unum UK, Colonial Life, Individual Disability — Closed Block (previously
referred to as Individual Income Protection — Closed Block), Other, and Corporate. In the following segment financial data and discussions
of segment results, “operating revenue” excludes net realized investment gains and losses. “Operating income” or “operating loss” excludes
net realized investment gains and losses and income tax. These are considered 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.
These non-GAAP financial measures of “operating revenue” and “operating income” or “operating loss” differ from revenue and income
(loss) from continuing operations before income tax as presented in our consolidated operating results and in income statements prepared
in accordance with GAAP due to the exclusion of before tax realized investment gains and losses. We measure segment performance for
purposes of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information,
excluding realized investment gains and losses because we believe that this performance measure is a better indicator of the ongoing
businesses and the underlying trends in the businesses. Our investment focus is on investment income to support our insurance liabilities
as opposed to the generation of realized investment gains and losses, and a long-term focus is necessary to maintain profitability over the
life of the business. Realized investment gains and losses depend on market conditions and do not necessarily relate to decisions regarding
the underlying business of our segments. However, income or loss excluding realized investment gains and losses does not replace net
income or net loss as a measure of overall profitability. We may experience realized investment losses, which will affect future earnings
levels since our underlying business is long-term in nature and we need to earn the assumed interest rates in our liabilities.
A reconciliation of total operating revenue by segment to total consolidated revenue and total operating income by segment to
consolidated net income is as follows:
Year Ended December 31
(in millions of dollars) 2007 2006 2005
Operating Revenue by Segment $ 10,585.1 $ 10,533.1 $ 10,266.0
Net Realized Investment Gain (Loss) (65.2) 2.2 (6.7)
Revenue $ 10,519.9 $ 10,535.3 $ 10,259.3
Operating Income by Segment
$ 1,062.4 $ 463.2 $ 700.6
Net Realized Investment Gain (Loss) (65.2) 2.2 (6.7)
Income Tax 324.8 61.8 189.9
Income from Discontinued Operations 6.9 7.4 9.6
Net Income $ 679.3 $ 411.0 $ 513.6
As previously noted, included in the before-tax operating income by segment shown above are before-tax charges of $53.0 million,
$411.4 million, and $75.0 million in 2007, 2006, and 2005, respectively, related to the claim reassessment process and $18.5 million in
2006 for the broker compensation settlement.