Unum 2007 Annual Report Download - page 66

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
64 Unum 2007 Annual Report
Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over
the life of the block of business and will vary from actual experience in any one period. It is possible, however, that variability in our
reserve assumptions could result in a material impact on our reserve levels.
Other Segment
The other operating segment includes results from Unum US insured products not actively marketed (with the exception of certain
individual disability products), including individual life and corporate-owned life insurance, reinsurance pools and management operations,
group pension, health insurance, and individual annuities. We expect operating revenue and income resulting from the products that are
not actively marketed to decline over time as these business lines wind down, and we expect to reinvest the capital supporting these
lines of business in the future growth of our Unum US, Unum UK, and Colonial Life segments.
Operating Results
Year Ended December 31
(in millions of dollars) 2007 % Change 2006 % Change 2005
Operating Revenue
Premium Income $ 1.7 (62.2)% $ 4.5 73.1)% $ 2.6
Net Investment Income 108.4 (4.2) 113.2 (6.1) 120.5
Other Income 28.5 (15.7) 33.8 (6.1) 36.0
Total 138.6 (8.5) 151.5 (4.8) 159.1
Benefits and Expenses
Benefits and Change in Reserves for Future Benefits 115.2 (4.4) 120.5 (1.4) 122.2
Commissions 1.9 (36.7) 3.0 172.7 1.1
Amortization of Deferred Acquisition Costs — N.M. — N.M. 0.5
Other Expenses 4.0 11.1 3.6 (32.1) 5.3
Total 121.1 (4.7) 127.1 (1.5) 129.1
Operating Income Before Income Tax
and Net Realized Investment Gains and Losses $ 17.5 (28.3) $ 24.4 (18.7) $ 30.0
N.M. = not a meaningful percentage
Reinsurance Pools and Management
Our reinsurance operations include the reinsurance management operations of Duncanson & Holt, Inc. (D&H) and the risk assumption,
which includes reinsurance pool participation; direct reinsurance, which includes accident and health (A&H), long-term care (LTC),
and long-term disability coverages; and Lloyd’s of London (Lloyd’s) syndicate participations. During the years 1999 through 2001, we
discontinued new underwriting in our reinsurance pools and began an exit process from the pools and management operations through
a combination of a sale, reinsurance, and/or placement of certain components in run-off. During 2007, this line of business reported an
operating loss of $6.0 million compared to operating losses of $6.7 million and $11.0 million in 2006 and 2005, respectively.