Unum 2009 Annual Report Download - page 143

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Unum 2009 Annual Report
During 2007, we recaptured a closed block of individual disability business in our Individual Disability — Closed Block segment, with
approximately $204.3 million in reserves and $7.0 million of annual premium. The recapture had an immaterial effect on operating results.
During 2000, we reinsured substantially all of the individual life and corporate-owned life insurance blocks of business, which are now
reported in our Corporate and Other segment. The gain on these reinsurance transactions was deferred and is being amortized into income.
A portion of the ceded corporate-owned life insurance block of business surrendered during 2007. The termination of this fully ceded business
had no impact on our operating results and will not materially affect the amortization of the deferred gain. The termination resulted in a
balance sheet only decrease in reserves for future policy and contract benefits of $1,094.0 million and policy loans of $1,013.7 million, with
corresponding offsets to each in the reinsurance recoverable. The termination of this fully ceded business had no impact on our cash flows.
Note 13. Segment Information
Our reporting segments are comprised of the following: Unum US, Unum UK, Colonial Life, Individual Disability — Closed Block, and
Corporate and Other.
The Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment
products, and supplemental and voluntary lines of business, comprised of individual disability — recently issued, group and individual
long-term care, and brokerage voluntary benefits products. These products are marketed through our field sales personnel who work in
conjunction with independent brokers and consultants. We discontinued selling individual long-term care insurance effective in 2009.
The Unum UK segment includes group long-term disability insurance, group life products, and individual disability products sold primarily
in the United Kingdom through field sales personnel and independent brokers and consultants.
The Colonial Life segment includes insurance for accident, sickness, and disability products, life products, and cancer and critical illness
products marketed primarily to employees at the workplace through an agency sales force and brokers.
The Individual Disability — Closed Block segment generally consists of those individual disability policies that were designed to be
distributed to individuals in a non-workplace setting and which were primarily in-force prior to the substantial changes in product offerings,
pricing, distribution, and underwriting which generally occurred during the period 1994 through 1998. A minimal amount of new business
continued to be sold subsequent to these changes, but we stopped selling new policies in this segment at the beginning of 2004 other
than update features contractually allowable on existing policies.
The Corporate and Other segment includes investment income on corporate assets not specifically allocated to a line of business,
interest expense on corporate debt other than non-recourse debt, and certain other corporate income and expense not allocated to a line of
business. The Corporate and Other segment also includes results from certain Unum US insurance products not actively marketed, including
individual life and corporate-owned life insurance, reinsurance pools and management operations, group pension, health insurance, and
individual annuities.
In the following segment financial data, “operating revenue” excludes net realized investment gains and losses. “Operating income” or
“operating loss” excludes net realized investment gains and losses, income tax, and results of discontinued operations. These are considered
non-GAAP financial measures. These non-GAAP financial measures of “operating revenue” and “operating income” or “operating loss” differ
from revenue and income from continuing operations before income tax as presented in our consolidated statements of income prepared
in accordance with GAAP due to the exclusion of before-tax realized investment gains and losses. We measure segment performance
excluding realized investment gains and losses because we believe that this performance measure is a better indicator of the ongoing
businesses and the underlying trends in the businesses. Our investment focus is on investment income to support our insurance liabilities
as opposed to the generation of realized investment gains and losses, and a long-term focus is necessary to maintain profitability over the
life of the business.
Realized investment gains and losses depend on market conditions and do not necessarily relate to decisions regarding the underlying
business of our segments. However, income or loss excluding realized investment gains and losses does not replace net income or net
loss as a measure of overall profitability. We may experience realized investment losses, which will affect future earnings levels since our
underlying business is long-term in nature and we need to earn the assumed interest rates in our liabilities.