Unum 2012 Annual Report Download - page 60

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
58 UNUM 2012 ANNUAL REPORT
The benefit ratio was higher in 2012 compared to 2011 for the life and cancer and critical illness lines of business, partially offset
by a lower benefit ratio for the accident, sickness, and disability line of business. The increase in the life benefit ratio in 2012 was driven by
higher mortality rates, which can exhibit volatility from period to period. The slight increase in the cancer and critical illness benefit ratio in
2012 was due primarily to a higher level of paid claims in the cancer line of business and a higher active life reserve change due to favorable
persistency for certain issue years. The slight decrease in the accident, sickness, and disability benefit ratio in 2012 was due to favorable
claim experience in the disability product line.
Commissions and the deferral of acquisition costs were both higher in 2012 compared to 2011 due primarily to an increase in costs
related to growth in new business premium. The amortization of deferred acquisition costs was higher in 2012 compared to 2011 due
to an increase in the level of the deferred asset as well as a less favorable year-over-year impact from the prospective unlocking for actual
experience for assumptions which deviate compared to anticipated experience for our interest-sensitive life product. The other expense
ratio was lower in 2012 compared to 2011 due primarily to higher premium income and a continued focus on expense management.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Premium income was higher in 2011 compared to 2010 due primarily to prior period sales growth and stable persistency for the life
and cancer and critical illness lines of business, partially offset by lower persistency for the accident, sickness, and disability line of business.
Net investment income was higher in 2011 compared to 2010 due primarily to growth in the level of assets and higher bond call premiums,
partially offset by a decrease in income from private equity partnership investments.
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 was higher due to an increase in the level of the
deferred asset. The other expense ratio was lower in 2011 compared to 2010 due primarily to higher premium income and a continued
focus on expense management.
Sales
Year Ended December 31
(in millions of dollars) 2012 % Change 2011 % Change 2010
Sales by Product
Accident, Sickness, and Disability $233.0 (4.1)% $242.9 2.3% $237.4
Life 67.3 2.7 65.5 (0.3) 65.7
Cancer and Critical Illness 61.6 7.1 57.5 3.2 55.7
Total Sales $361.9 (1.1) $365.9 2.0 $358.8
Sales by Market Sector
Commercial
Core Market (< 1,000 lives) $248.3 0.1% $248.0 4.5% $237.4
Large Case Market 40.9 (6.8) 43.9 (7.4) 47.4
Subtotal 289.2 (0.9) 291.9 2.5 284.8
Public 72.7 (1.8) 74.0 — 74.0
Total Sales $361.9 (1.1) $365.9 2.0 $358.8