Unum 2008 Annual Report Download - page 48

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
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The following chart lists charges in 2007 and 2006 which affect the comparability of our financial results. In describing our results, we
may at times note these items and exclude the impact on financial ratios and metrics to enhance the understanding and comparability of
our Company’s performance and the underlying fundamentals in our operations, but this exclusion is not an indication that similar items
may not recur.
Year Ended December 31
(in millions of dollars) 2007 2006

Regulatory Claim Reassessment Charges $ 65.8 $396.4

Regulatory Claim Reassessment Charges (12.8) 15.0
Broker Compensation Settlements — 18.5
 $ 53.0 $429.9
 $ 34.5 $280.1
Also affecting comparability of our financial results between years is the fluctuation in the British pound sterling to dollar exchange rate.
The functional currency of our U.K. operations is the British pound sterling. In periods when the pound weakens, translating pounds into
dollars decreases current period results relative to the prior period. In periods when the pound strengthens, translating pounds into dollars
increases current period results in relation to the prior period. However, it is important to distinguish between translating and converting
foreign currency. Except for a limited number of transactions, we do not actually convert pounds into dollars. As a result, we view foreign
currency translation as a financial reporting issue and not a reflection of operations or profitability in the U.K. Because of the volatility in the
weighted average pound/dollar exchange rate during the last three years, results translated into dollars are not comparable between years.
Our weighted average pound/dollar exchange rate was 1.871, 2.004, and 1.851 for the years ended 2008, 2007, and 2006, respectively. Our
operating revenue and operating income by segment would have been higher in 2008 by approximately $86.7 million and $24.2 million,
respectively, and higher in 2006 by approximately $86.7 million and $21.3 million, respectively, if the results for our U.K. operations had been
translated at a constant exchange rate of 2.004, the rate for 2007.
Consolidated premium income for both 2008 and 2007 includes premium growth, relative to the preceding year, for Unum US supplemental
and voluntary lines of business and Colonial Life. Unum US group disability and group life and accidental death and dismemberment lines
of business experienced year over year declines in premium income during 2008 and 2007, as expected, due primarily to our continued
pricing discipline for our Unum US group business and our strategy of developing a more balanced business mix. However, both premium
and case persistency for these lines of business improved during 2008 relative to 2007 and 2006, indicating that persistency for these
product lines has begun to stabilize as expected. Unum UK premium income, in local currency, increased in 2007 relative to the prior
year but declined in 2008 due to lower persistency in the group long-term disability line of business. Premium income in the Individual
Disability — Closed Block segment decreased in 2008 and 2007, as expected in this closed block of business.
Net investment income is marginally lower in 2008 relative to the prior year. Our portfolio yield has increased slightly year over year
due to the investment of new cash at higher rates than that of prior periods, particularly during the last two quarters of 2008. We also
received fewer bond call premiums in 2008 relative to prior year periods, and the level of prepayment income on mortgage-backed
securities declined in 2008 relative to the preceding year. The weaker pound in 2008 relative to 2007 also unfavorably affected translated
results for net investment income. Somewhat mitigating the impact of these items is continued growth in the level of invested assets.
Net investment income increased in 2007 relative to the prior year. The increase was due primarily to growth in invested assets,
partially offset by a lower yield due to the investment of new cash at lower rates than that of our existing portfolio yield and a decline in
the level of prepayment income on mortgage-backed securities. The pound strengthened during 2007 relative to 2006, which favorably
affected translated results for net investment income.