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64




Operating Results
Shown below are financial results and key performance indicators for the Individual Disability — Closed Block segment.
Year Ended December 31
(in millions of dollars, except ratios)   2007 % Change 2006

Premium Income    $1,009.9 (5.0)% $1,062.8
Net Investment Income   827.6 (0.1) 828.7
Other Income   103.7 (1.3) 105.1
   1,941.2 (2.8) 1,996.6

Benefits and Change in Reserves for Future Benefits   1,614.5 (5.6) 1,709.7
Commissions   69.1 (9.3) 76.2
Interest and Debt Expense   8.3 N.M. —
Other Expenses   139.8 0.3 139.4
   1,831.7 (4.9) 1,925.3

      $ 109.5 53.6 $ 71.3
Interest Adjusted Loss Ratio (1)  84.1% 90.5%
Operating Ratios (% of Premium Income):
Other Expense Ratio (2)  13.8% 13.1%
Before-tax Operating Income Ratio (3)  10.8% 6.7%
Premium Persistency  94.3% 94.4%
N.M. = not a meaningful percentage
(1) Included in these ratios are charges (credits) of $(10.7) million and $47.2 million in 2007 and 2006, respectively, related to the claim reassessment process. Excluding
these charges and credits, the interest adjusted loss ratio for 2007 and 2006 would have been 85.2% and 86.1%, respectively.
(2) Included in this ratio is a decrease of $2.5 million in 2007 related to the claim reassessment process. Excluding this item, the other expense ratio for 2007 would have
been 14.1%.
(3) Included in these ratios are charges (credits) of $(13.2) million and $47.2 million in 2007 and 2006, respectively, related to the claim reassessment process. Excluding
these charges and credits, the before-tax operating income ratio for 2007 and 2006 would have been 9.5% and 11.1%, respectively.
Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
The decrease in premium income for 2008 relative to the prior year is due to the expected run-off of this block of closed business due
to persistency and policy maturities. Net investment income decreased in 2008 compared to the prior year due to a decrease in bond call
premiums, a lower level of assets supporting this closed block of business, and a decline in the portfolio yield for this segment. During the
fourth quarter of 2007, we entered into an intercompany reinsurance transaction which allowed us to release excess statutory capital
previously supporting this reinsured closed block of business. As a result, the capital allocated to our Individual Disability — Closed Block
segment declined, with a resulting decrease in net investment income due to the lower asset levels needed to support allocated capital.
Because this is an intercompany reinsurance arrangement, reported results remain unchanged for this segment other than the lower net
investment income.
Other income includes the underlying results of certain blocks of reinsured business, including the net investment income of portfolios
held by those ceding companies to support the block we have reinsured. The net investment income for those blocks of reinsured business
also declined relative to prior years, primarily due to a lower level of assets.