Unum 2009 Annual Report Download - page 52

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50
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum
2009
Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
Premium income for group life and accidental death and dismemberment decreased in 2009 relative to 2008, a portion of which was
expected and is due to our pricing, renewal, and risk selection strategy. Consistent with the decline in premium income for group disability,
premium growth for group life and accidental death and dismemberment has also been negatively impacted by lower premium growth
from existing customers. Premium income for accidental death and dismemberment declined in part due to a reinsurance agreement
entered into, effective January 1, 2009, to cede an $8.0 million annualized premium in-force block of business. In both product lines,
premium persistency improved, but case persistency declined in comparison to the prior year due to a higher number of terminated cases
in the fewer than 100 lives market segment. Net investment income was consistent in 2009 relative to 2008, with an increase in the
level of assets offset by lower interest rates on floating rate assets.
The benefit ratio in 2009 was higher than the prior year as a result of a higher average paid claim size in group life which was only
partially offset by a lower rate of paid claim incidence.
The deferral of acquisition costs increased in 2009 compared to 2008 due primarily to an increase in the level of deferrable expenses
resulting from the increase in sales. Amortization of deferred acquisition costs was lower in 2009 relative to the prior year due to a decrease
in amortization related to internal replacement transactions.
The other expense ratio increased in 2009 in comparison to the prior year due to the decline in premium income as well as an increase
in policy acquisition-related costs associated with increased sales and an increase in policy maintenance expenses associated with the
change in the mix of in-force policies from the large case market to the core market segment.
Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
Premium income for group life decreased in 2008 relative to 2007 due primarily to our pricing, renewal, and risk selection strategy.
Premium persistency and case persistency both improved in 2008 in comparison to 2007. The decrease in net investment income in 2008
relative to 2007 resulted from a decline in the level of assets supporting these lines of business and from a lower yield on the portfolio due
to the investment of new cash at a lower yield than that of the existing portfolio.
The benefit ratio decreased in 2008 due primarily to lower paid claim incidence rates for both group life and the accidental death and
dismemberment lines of business.
The deferral of acquisition costs increased in 2008 due primarily to increased sales in the group core market segment. Amortization of
deferred acquisition costs was higher in 2008 relative to 2007 due to an increase in amortization related to internal replacement transactions.
The other expense ratio increased in 2008 in comparison to 2007 due primarily to the decline in premium income as well as an increase
in policy maintenance expenses and product and service development costs.