Unum 2012 Annual Report Download - page 58

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
56 UNUM 2012 ANNUAL REPORT
Sales in Unum UK’s group long-term disability product line were higher in 2012 compared to 2011 due to higher sales in both the
core market, which we define for Unum UK as employee groups with fewer than 500 lives, and in the large case market, partially offset by
lower sales to existing customers. Group life sales were lower in 2012 compared to 2011 due to our discontinuance of new sales of certain
of our group life product lines during the third quarter of 2012, lower large case sales, and lower sales to existing customers, partially offset
by higher core market sales. Supplemental and voluntary sales were lower in 2012 compared to the 2011 due primarily to lower sales in
our group critical illness and individual disability product lines.
Sales in Unum UK’s group long-term disability and group life product lines were lower in 2011 compared to 2010 due to a decline
in sales in both the core and large case markets. These declines were partially offset by higher sales to existing customers. Sales in the
supplemental and voluntary line of business decreased in 2011 compared to 2010 due primarily to lower individual disability product sales.
Segment Outlook
Our primary focus during 2013 is to stabilize profitability and improve growth over the medium term. Our shift in business mix and
focus on premium rate increases for both group long-term disability and group life is expected to improve profitability. However, pressure
on new sales and persistency is likely, and the low interest rate environment is expected to dampen overall earnings growth. We expect
that the challenging economic and competitive pricing environment in the U.K. which has continued to negatively impact Unum UK’s
premium growth may continue in the near term. The current economic conditions may lead to a higher rate of claim incidence, lower levels
of claim recoveries, or lower claim discount rates. We continuously monitor key indicators to assess our risks and attempt to adjust our
business plans accordingly.
In our group disability business, we continue to have a cautious outlook for growth given the current environment. We anticipate
returning to more normal levels of premium growth as our rate increases continue to be placed in the market, as persistency stabilizes, and
as we continue to increase sales to new and existing customers. In addition, we continue to focus on new market opportunities by raising
awareness of the need for income protection. Expanding group disability market penetration remains a significant opportunity and priority
in the U.K.
In our group life business, we continue to implement rate increases, and we exited certain group life product lines in 2012. We expect
group life premium income to decline in the near term as a result of these actions as well as a shift in business mix, but we believe profit
margins will improve. We also entered into reinsurance agreements effective January 1, 2013 to cede a portion of our group life business.
These reinsurance agreements will significantly decrease premium income and benefit payments during 2013 but are expected to reduce
volatility in our group life line of business.