Unum 2011 Annual Report Download - page 56

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum 2011 Annual Report
54
Sales in Unum UK decreased slightly in 2010 compared to 2009, with the decrease in sales in the group long-term disability line of
business being attributable to a decline in sales in the large case market, partially offset by higher sales to existing customers and higher
core market sales. The sales growth in group life was attributable to higher sales in the large case markets as well as higher sales to
existing customers, partially offset by slightly lower core market sales. The decrease in sales in supplemental and voluntary was due to a
decline in sales in the large case market. Negatively affecting year over year comparisons is an increase in 2009 sales which resulted from
the exit of another large insurance provider from the U.K. group risk market.
Segment Outlook
The challenging economic and competitive pricing environment in the U.K. continue to negatively impact Unum UK’s premium growth,
and we expect this may continue in the near term if current economic and competitive conditions in the U.K. persist. Our sales growth may
also continue to be impacted by a prolonged competitive pricing environment in the U.K. The level of disability claim incidence in 2011 was
favorable relative to the same period of 2010, but our claim resolutions were unfavorable relative to the 2010 due in part to a lower level of
early duration claims and the impact of the economic environment on our ability to resolve claims. The current economic conditions may
lead to a higher rate of claim incidence, lower levels of claim recoveries, or lower claim discount rates. We are initiating price increases for
our group disability and group life products during 2012 to mitigate the impact of the current economic conditions. We continuously
monitor key indicators to assess our risks 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) increasing underwriting and pricing discipline,
(ii) improving our claims management processes, and (iii) expanding our broker market capabilities and sales effectiveness. We intend
to develop new market opportunities by raising awareness of the need for income protection, including seeking to increase coverage
of currently insured groups to include a greater percentage of the workforce, and by offering a suite of employer and employee paid
workplace solutions using integrated products with simpler, defined choices and flexible funding options through a streamlined and
efficient platform with online capabilities matched to broker and employer needs.
In the current competitive pricing market and economic environment, we continue to have a cautious outlook for premium growth.
We anticipate returning to more normalized levels of premium growth through stable persistency and price increases, as well as increased
sales to existing and new customers which we expect to occur commensurate with the timing of the U.K. economic recovery. We expect
our overall benefit ratio in 2012 to be favorable compared to 2011. We expect our profit margins to continue at a favorable level, consistent
with 2011.