Unum 2009 Annual Report Download - page 17

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15
Unum has performed well in this
recession, particularly when compared to
the 2001-2002 economic slowdown. What
are the reasons for this improvement?
Rick: I think the company learned a lot from previous recessions. That is evident in our
focus on risk management which, over the last several years, has been an important
element of our strategy. As a result, we entered this recession a much stronger
company with reduced credit risk in our investment portfolio, diversified business units,
and a product portfolio disciplined in pricing and underwriting. It is also difficult to
compare the impacts of two different cycles, as there are many variables, which is
why a strong underpinning of risk management will continue to be our focus.
How has Unum been impacted most
by the economic downturn?
Rick: We have seen impacts from the downturn, and it has been primarily to our top-line
revenue growth. As you would see in the world at large, our customers haven’t been
growing their workforces, salaries, or benefits. Therefore we have seen very little of what
we would call “natural” growth in ongoing premiums. To counter that, we’ve had good
success in attracting new accounts, which should bode well for us when the general
employment picture improves.
Do you expect to make significant
changes to Unum’s investment
portfolio going forward? Do you
see opportunities given the
dislocations that have occurred
in the financial markets?
Frank: Our philosophy has served us well, and, particularly since it’s tied to a commitment to
our customers, it isn’t going to change. Likewise, we don’t expect our portfolio to change
in a significant way, though we will continue to see gradual adjustments over time.
We are in a position to take responsible investment risks, and, where our credit
research indicates that there are good opportunities to create returns without undue
risk, we will choose those places to put new funds to work. The markets will continue
to be volatile, so we expect there to be opportunities to invest if we remain well-
prepared and have the financial flexibility to respond as they arise.
A Solid Financial
Foundation
The company has said it has significant
financial flexibility. How important
is this?
Rick: Having financial flexibility means having strategic flexibility, and it is a very valuable
asset for us. It gives us many options when it comes to exploring ways to invest in
what we have today and to grow the company for the future. As witnessed in the
economic downturn, our financial flexibility afforded us the ability to capitalize on
some of the dislocation in the market.
Given Unum’s performance over the
last few years, are there opportunities
for the company’s ratings to be
revised upward?
Rick: We see our position today as deserving of higher ratings. We were pleased that Fitch
recognized this with an upgrade to our financial strength ratings, and that AM Best moved us
to a positive outlook – particularly given the ongoing downgrades and negative outlooks for
many insurance companies in this environment. We will continue to focus on executing our
business plans, and ultimately we are not hindered by our current ratings in the marketplace.
We sold $1 billion of new business in 2009 and issued $350 million of debt, so our many
stakeholders already recognize our financial strength.