Unum 2012 Annual Report Download - page 49

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UNUM 2012 ANNUAL REPORT 47
Year Ended December 31, 2012 Compared with Year Ended December 31, 2011
Premium income increased slightly in 2012 compared to 2011, with sales growth of 11.9 percent and generally stable persistency
levels. As previously discussed, high unemployment levels and the competitive environment continue to pressure our premium income
growth, including growth from existing customers. Net investment income declined in 2012 relative to 2011 due to a decrease in income
from bond call premiums, a decrease in the level of invested assets, and a decline in yield on invested assets, partially offset by an increase
in the level of prepayment income on mortgage-backed securities. Other income for 2012 included fees from administrative services
products of $81.7 million compared to $77.9 million in 2011.
The benefit ratio was slightly unfavorable in 2012 compared to 2011, due primarily to a 50 basis point decrease in the discount rate
during the third quarter of 2012 for group long-term disability new claim incurrals compared to a 25 basis point decrease during the third
quarter of 2011. Also unfavorably impacting the benefit ratio for group disability were higher claim prevalence rates and a higher average
weekly indemnity for short-term disability, mostly offset by favorable long-term disability claim recoveries.
The deferral of acquisition costs in 2012 was higher than 2011 due primarily to higher sales. The amortization of deferred acquisition
costs was lower in 2012 compared to 2011 due primarily to a decrease in amortization related to internal replacement transactions. The
other expense ratio was lower in 2012 relative to 2011 due primarily to higher premium income and our continued focus on operating
effectiveness and expense management.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Premium income decreased in 2011 compared to 2010 due primarily to the ongoing high levels of unemployment and the competitive
environment, partially offset by higher premium and case persistency. Net investment income was lower in 2011 compared to 2010 due
primarily to a decrease in the level of invested assets and a decline in the level of prepayment income on mortgage-backed securities,
partially offset by an increase in bond call premiums. Other income included fees from administrative services products of $77.9 million and
$74.9 million in 2011 and 2010, respectively.
The benefit ratio was slightly higher in 2011 compared to 2010 due to an increase in group long-term and short-term disability
incidence rates and a decrease in the claim reserve discount rate for group long-term disability new claim incurrals as previously discussed.
These unfavorable impacts on the benefit ratio were mostly offset by a higher rate of group long-term disability claim recoveries.
The deferral of acquisition costs in 2011 was higher than 2010 due to a higher level of sales in 2011 and an increase in the associated
acquisition costs. The amortization of acquisition costs in 2011 was lower than 2010 due to a decrease in amortization related to internal
replacement transactions. Although we continued our focus on operating effectiveness and expense management throughout 2011, the
other expense ratio was slightly higher in 2011 relative to 2010 due primarily to an increase in expenses associated with the growth in the
fee-based family medical leave products.