Unum 2008 Annual Report Download - page 24

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20




The discussion and analysis presented in this section should be read in conjunction with our consolidated financial statements and
notes thereto.

Our primary objectives for 2008 included:
• Consistent execution of our operating plans. We continued our emphasis on disciplined, profitable growth.
• Continued innovation throughout our businesses. Within Unum US, we broadly launched Simply Unum in the small to mid sized
employer marketplace. We capitalized on the introduction of a number of health related products for Colonial Life and continued
to expand our enrollment capabilities and product offerings. In Unum UK, we worked on the development of new product
offerings and the improvement of corporate efficiencies.
• Leveraging of our leadership positions and marketplace reputation. We built on the momentum of 2007 with increased brand
and product awareness.
• Execution of our capital management strategy. We completed our share repurchase program and maintained our financial
measurements at favorable levels relative to our targets.
• Professional development of our employees. We continued our emphasis on training and leadership development and talent
management throughout our organization.
Through focusing on these objectives, we believe that we have instilled greater confidence in our company among our constituents.
In commenting on our results for 2008, we will discuss our operating performance, strategic and capital initiatives, the current economic
environment, and our major areas of focus for 2009.
Operating Performance
During 2008, Unum US reported an increase in segment operating income of 12.5 percent compared to the prior year and excluding
the 2007 revision to the claim reassessment reserve estimate. The group disability benefit ratio was 88.7 percent for the fourth quarter of
2008 and 89.9 percent for full year 2008, consistent with our goal of continual profit margin improvement for this line of business. Unum US
sales increased 11.0 percent in 2008 compared to 2007. Our group core market segment, which we define for Unum US as employee groups
with less than 2,000 lives, had a sales increase of 23.7 percent over the prior year, and the number of new accounts increased 16.4 percent.
Our supplemental and voluntary sales increased 6.8 percent in 2008 compared to last year, with a 14.6 percent increase in voluntary sales
offsetting the expected decrease in sales of individual long-term care. Sales in the group large case market segment declined 1.8 percent
compared to the prior year. During the third quarter of 2007, we introduced Simply Unum, an integrated platform of products and online
services that we believe will transform the benefits marketplace through innovative solutions for our group core market segment and our
voluntary market. The initial limited market rollout occurred in 2007, and we have now expanded the availability of Simply Unum to 45 states
nationwide. We will complete the rollout to the remaining states as state approvals are received. We are also in the process of developing
additional products and services.
Our Unum UK segment continues to produce excellent operating results, with an increase in segment operating income of 6.5 percent
for 2008, as measured in Unum UK’s local currency, relative to 2007. The functional currency of Unum UK is the British pound sterling, and
we translate Unum UK’s pound-denominated financial statements into dollars for our consolidated financial reporting. The recent fluctuations
in the pound to dollar exchange rate have decreased our current year results relative to 2007, particularly results reported for the second
half of 2008. We expect this volatility in translated financial results, which is a financial reporting issue and is not indicative of an operating
problem, to continue in 2009. Overall sales in Unum UK increased 3.6 percent in 2008 compared to the prior year. Sales in 2007 benefited
from the change in age equality legislation more so than in 2008. Excluding sales related to the change in age equality legislation from all
comparable periods, Unum UK achieved underlying sales growth of approximately 16 percent in 2008 relative to 2007. The U.K. market
remains highly competitive. We are developing new products and services to target new customer segments. During 2008 we launched
a dual benefit group disability product designed for the needs of the smaller employer.