Unum 2009 Annual Report Download - page 58

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum
2009
Sales in Unum UK increased in 2009 compared to 2008, aided by the exit of another large insurance provider from the U.K. group risk
market. Excluding the sales related to this exit of this provider, Unum UK sales increased 8.6 percent in 2009 compared to the prior year.
The sales growth in group life was attributable to sales growth in both the core market, which we define for Unum UK as employee groups
with fewer than 500 lives, and in the large case market. Group disability also had sales increases in both market segments. Sales of group
long-term disability and group life were both unfavorably impacted during 2009 by lower sales to existing accounts.
Sales in Unum UK increased in 2008 compared to 2007 primarily due to growth in group life sales offset partially by a decrease in
sales for group long-term disability. In the U.K., legislative changes that removed discrimination by employers on the basis of age, therefore
encouraging the extension of insurance coverage, became effective in October 2006. During 2007, Unum UK took advantage of the
opportunities offered by age equality legislation, with £7.4 million of additional sales during 2007 compared to only £2.0 million in 2008.
Excluding sales related to the change in age equality legislation, Unum UK achieved underlying sales growth of approximately 16 percent
in 2008 as compared to 2007.
Segment Outlook
During 2009, we experienced an unfavorable impact on sales to existing customers and premium growth, and we expect this may
continue in the near term if current economic conditions persist. Our sales and premium growth could also be further impacted by a
prolonged competitive pricing environment in the U.K. We have thus far not experienced any significant deterioration in disability claims
incidence or claim recoveries, but similar to Unum US, disability claim incidence and claim recovery rates may be influenced by the current
economic environment. Unum UK has an immaterial amount of goodwill recorded on its balance sheet at year end 2009, none of which is
currently believed to be at risk for future impairment. We continuously monitor key indicators to assess our risk to the economic slowdown
and attempt to adjust our business plans accordingly. Continued fluctuations in the U.S. dollar relative to the British pound sterling impact
our reported operating results.
Our current growth strategy focuses on generating organic growth and expanding our role as the leading provider of group disability
insurance in the U.K. Our strategy for future growth combines optimizing the performance of our existing business while developing new
market opportunities. We intend to optimize performance of the existing business by (i) improving customer service, (ii) expanding our
broker market capabilities and sales effectiveness, and (iii) building on and adapting our existing products to meet emerging customer
needs. We intend to develop new market opportunities for employee paid workplace solutions by offering a broader integrated product
with simpler, defined choices and flexible funding options through a streamlined and efficient platform with online capabilities matched to
broker and employer needs.
During 2010, we will continue our commitment to our risk management culture as we focus on the achievement of sustainable and
profitable growth through disciplined pricing, premium persistency, risk selection, and claims management. We expect to maintain our
strong leadership position in the U.K. during 2010. In the current competitive market and economic environment, we continue to have a
cautious outlook for premium growth, but we believe we will be able to achieve overall premium growth during 2010 through improved
persistency and increased sales to existing and new customers. Due to the disciplined cost management process we have implemented,
we intend to continue to align our operating expenses with premium growth through the implementation of expense efficiencies. During
2010, we expect our margins to continue at the favorable level maintained during 2009 and 2008.