Unum 2011 Annual Report Download - page 58

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum 2011 Annual Report
56
The overall benefit ratio was higher in 2011 compared to 2010 due to less favorable risk results in the accident, sickness, and disability
product line due to a higher level of incurred claims in our accident and disability products. Risk results in the life product line were slightly
lower in 2011 compared to 2010. Risk results in the cancer and critical illness product line were generally consistent in 2011 compared to 2010.
Commissions and the deferral of acquisition costs were both higher in 2011 compared to 2010 due primarily to an increase in
costs related to growth in new business premium. The amortization of deferred acquisition costs continues to increase as the level of the
deferred asset grows. The other expense ratio was lower in 2011 compared to 2010 due primarily to higher premium income and a
continued focus on expense management.
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 premium
growth was negatively impacted in both years due to economic conditions. 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.
Sales
Year Ended December 31
(in millions of dollars) 2011 % Change 2010 % Change 2009
Accident, Sickness, and Disability $242.9 2.3% $237.4 7.4% $221.1
Life 65.5 (0.3) 65.7 (3.8) 68.3
Cancer and Critical Illness 57.5 3.2 55.7 2.4 54.4
Total Sales $365.9 2.0 $358.8 4.4 $343.8
Colonial Life’s sales were higher in 2011 relative to 2010, with new account sales 1.6 percent above the level of 2010, and existing
account sales 2.2 percent higher than in 2010. Commercial market sales were 2.5 percent higher in 2011 compared to 2010, driven
primarily by a sales increase of 4.4 percent in the core commercial market segment, which we define as accounts with fewer than 1,000
lives. Sales in the large case commercial market segment decreased 7.4 percent in 2011 compared to 2010. In the public sector market,
sales were generally consistent in 2011 as compared to 2010. Sales results for 2011 were unfavorably impacted by our decision to
discontinue selling our limited benefit medical product during 2011. The number of new accounts declined 1.8 percent in 2011 compared
to 2010, while the average new case size was 3.4 percent higher for 2011 relative to 2010.
Colonial Life’s sales were higher in 2010 compared to 2009, with 4.2 percent growth in new account sales, and 4.4 percent growth
in existing account sales relative to the prior year. Commercial market sales were 8.1 percent higher in 2010 compared to 2009, driven
primarily by a sales increase of 9.3 percent in the core commercial market segment. Sales in the large case commercial market segment
increased 2.6 percent in 2010 compared to 2009. In the public sector market, sales were 8.1 percent lower in 2010 compared to 2009.
The number of new accounts added in 2010 was 13.6 percent higher than 2009, while the average new case size was 8.2 percent lower
relative to 2009.