Unum 2010 Annual Report Download - page 57

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Unum 2010 Annual Report
55
Year Ended December 31, 2010 Compared with Year Ended December 31, 2009
Premium income increased in 2010 relative to 2009 due primarily to increased sales and favorable persistency. Although the premium
growth rate improved over the rate of 2009, it is still less than our long-term expectations. Premium growth was negatively impacted
during both 2010 and 2009 due to economic conditions which we believe affected the buying patterns of employees and caused
employers to defer introduction of new plans. Net investment income increased in 2010 in comparison to 2009 due to growth in the level
of assets, an increase in income from partnership investments, and an increase in bond call premiums.
The overall benefit ratio increased in 2010 relative to 2009 due to unfavorable experience in the accident, sickness, and disability
product line resulting from an increase in the level of paid claims and reserves driven by a higher level of claim incidence and slightly
higher average claim sizes. The cancer and critical illness benefit ratio increased relative to 2009 due primarily to the continued higher
levels of large claims on the older block of cancer products, partially offset by a refinement of the loss adjustment expense reserve
calculation. Somewhat negatively affecting year over year comparisons is the release of active life reserves in the second quarter of 2009
in our cancer and critical illness product line. The life benefit ratio decreased in 2010 relative to 2009 due primarily to favorable mortality.
Commissions and the deferral of acquisition costs both increased in 2010 compared to 2009 due primarily to increased sales. The
amortization of deferred acquisition costs in 2010 was higher relative to 2009 due to the continued increase in the level of deferred
acquisition costs, offset partially by the decrease in amortization related to certain of our interest-sensitive policies.
The other expense ratio decreased in 2010 compared to 2009 due primarily to a continued focus on expense management.
Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
The lower level of premium growth in 2009 compared to the 2008 growth rate was attributable primarily to lower sales during the
first half of 2009 and lower persistency in the accident, sickness, and disability product line. The lower persistency primarily relates to the
loss of a few large policyholder accounts. As mentioned in the preceding discussion, we believe our lower premium growth was partially
due to economic conditions. Net investment income increased in 2009 in comparison to 2008 due to growth in the level of assets, an
increased level of prepayment income on mortgage-backed securities, and a higher yield on the portfolio due to the investment of new
cash at a higher yield than that of the existing portfolio.
The overall benefit ratio for this segment remained stable in 2009 relative to 2008, with a lower benefit ratio in the life and cancer
and critical illness lines of business partially offset by a slightly higher benefit ratio in the accident, sickness, and disability line of business.
The life product line reported a lower benefit ratio in 2009 relative to 2008 due to a change in the mix of life business and the resulting
lower change in the active life reserve. The cancer and critical illness product line reported a lower benefit ratio in 2009 relative to 2008
due primarily to a release of active life reserves, partially offset by an increase in disabled life reserves associated with the older cancer
products. The increase in the benefit ratio in the accident, sickness and disability line of business resulted primarily from a slight increase in
the claim incidence rates relative to the favorable experience of 2008.
The amortization of deferred acquisition costs was higher in 2009 relative to 2008 due to the continued increase in the level of
deferred acquisition costs as well as the uctuation in amortization related to certain of our interest-sensitive policies.
The other expense ratio was consistent year over year.
Sales
Year Ended December 31
(in millions of dollars) 2010 % Change 2009 % Change 2008
Accident, Sickness, and Disability $237.4 7.4% $221.1 (0.5)% $222.1
Life 65.7 (3.8) 68.3 6.7 64.0
Cancer and Critical Illness 55.7 2.4 54.4 0.6 54.1
Total Sales $358.8 4.4 $343.8 1.1 $340.2