Unum 2011 Annual Report Download - page 50

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum 2011 Annual Report
48
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Premium income was higher in 2011 compared to 2010 due primarily to growth in our voluntary benefits product line. Premium
persistency for the individual disability — recently issued product line decreased, while the premium persistency for the voluntary benefits
product line increased slightly. Net investment income was higher in 2011 compared to 2010 due primarily to an increase in the level of
assets supporting these lines of business, partially offset by a decline in the level of prepayment income on mortgage-backed securities
and a decline in bond call premiums.
The interest adjusted loss ratio for the individual disability — recently issued line of business in 2011 was lower than 2010 due to lower
incidence rates. The benefit ratio for voluntary benefits was lower in 2011 compared to 2010 due primarily to a lower average paid claim
size for voluntary life and lower paid incidence and prevalence rates for voluntary disability.
Commissions and the deferral of acquisition costs were higher in 2011 than 2010 due to higher sales. The amortization of deferred
acquisition costs was lower in 2011 compared to 2010 due to favorable premium persistency relative to assumptions for certain issue years
within certain of our product lines as well as prospective unlocking for favorable mortality experience relative to assumptions for our
interest-sensitive voluntary life products. The other expense ratio in 2011 was lower than 2010 as we continue to focus on expense
management.
The individual disability — recently issued product line had goodwill of approximately $187.5 million at December 31, 2011, none of
which is currently believed to be at risk for future impairment. The fair value of this product line is significantly in excess of its carrying value.
Year Ended December 31, 2010 Compared with Year Ended December 31, 2009
Premium income increased in 2010 relative to 2009 due primarily to sales growth in the voluntary benefits product line and higher
persistency. Premium income declined in 2010 relative to 2009 for individual disability — recently issued due to lower sales, partially offset
by favorable persistency. Net investment income increased in 2010 relative to 2009 due to an increase in the level of assets supporting
these lines of business and an increase in bond call premiums, partially offset by a decline in the level of prepayment income on mortgage-
backed securities.
The interest adjusted loss ratio for the individual disability — recently issued line of business in 2010 was consistent with 2009, with a
higher rate of claim recoveries generally offsetting the higher paid claim incidence rates. The benefit ratio for voluntary benefits decreased
in 2010 when compared to 2009 due primarily to a lower average paid claim size in the voluntary life product line, particularly in the
second half of 2010.
Commissions in 2010 were higher than 2009 due to the increase in voluntary benefits sales. The deferral of acquisition costs in 2010
was slightly higher than the level of 2009. The amortization of deferred acquisition costs was higher in 2010 relative to 2009 due to an
acceleration of amortization resulting from lower persistency for certain issue years in certain of the product lines. The other expense ratio
in 2010 was slightly higher than the level of 2009.