Unum 2008 Annual Report Download - page 26

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22
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Potential Challenges
• Lower premium income from fewer employees in the work-force of our markets; employer- and employee-paid cost pressures may
also limit sales and reduce persistency.
• Lower net investment income from fewer long-term assets to match our liability portfolio; lower bond call prepayment income.
• Lower investment income and/or higher realized investment losses due to an increase in defaults.
• Higher unrealized investment losses.
• Higher disability claim costs.
• Higher operating expense ratios due to declining premiums.
Opportunities and Mitigating Factors
• Lower premium income may be mitigated by mix of business and by our growing position in the voluntary market.
• Lower premium income may be mitigated by theexibility of our product design and pricing.
• We may achieve higher investment income from wider corporate spreads which enhance investment income associated with new
purchases of fixed maturity securities.
• We have low levels of exposure to high risk investments.
• We believe our claim reserve discount rates are adequate relative to investment portfolio yield rates.
• We believe our risk management is strong; we have a diversied business mix, with a core market focus which generally has lower
and less volatile claim incidence.
• Our historical pattern of benets paid to revenues is consistent, even during cycles of economic downturns.
• We manage our expenses aggressively and have cost management initiatives in place.
• We believe our risk-based capital and holding company liquidity position us well for an economic downturn.
Our business outlook recognizes both the challenges of the current economic environment as well as the mitigating impact of risk-
reducing actions we have taken in recent years, including product diversification across sectors and locations, our mix of business, our disciplined
underwriting, pricing, claims, and expense management, a reduced credit risk profile in our investment portfolio, our capital management
strategy, and better risk management practices. Our outlook is responsive to our risk management framework and is consistent with our
risk appetite. Although occurrence of one or more of the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2008 may cause our results to differ from our outlook, we believe that our business outlook is built on sound
operating plans that have been tested against many of the challenges presented by the current economic environment.
Focus for 2009
During 2009, we intend to continue our focus on a number of key areas.
• Consistent execution of our operating plans. We will continue our emphasis on disciplined, profitable growth.
• Maintain a strong investment portfolio. We will maintain disciplined credit analysis in our selection of investment assets and
continue to be conservative within our investment risk tolerances.
• Build and effectively use capital. We intend to continue to build capital and manage it effectively within our stated capital
management strategy objectives.
• Professional development of our employees. We will continue our focus on employee training and development as well as
talent management.