Unum 2012 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2012 Unum annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 168

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168

UNUM 2012 ANNUAL REPORT 59
Colonial Life’s sales were lower in 2012 relative to 2011, with a decrease in new account sales partially offset by an increase in existing
account sales. Commercial market sales in 2012 were lower than 2011, with a 6.8 percent decrease in large case commercial market segment
sales partially offset by a slight increase in the core commercial market segment, which we define as accounts with fewer than 1,000 lives.
Sales were 1.8 percent lower in the public sector market in 2012 compared to 2011. The number of new accounts decreased 5.0 percent in
2012 compared to 2011, while the average new case size was 4.2 percent lower.
Colonial Life’s sales were higher in 2011 compared 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 4.5 percent in the core commercial market segment. 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 compared to 2010. Sales results
for 2011 were unfavorably impacted by our decision to discontinue selling our limited benefit medical product. 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 compared to 2010.
Segment Outlook
Current economic conditions continue to affect employment growth and buying conditions which, in turn, impact sales and premium
growth. While lower than expected sales presents a challenge in the near term, we believe proper execution of our growth strategy and
a gradual improvement in the economy will deliver sales and premium growth that are in line with long-term expectations. We see the
continuing U.S. economic conditions and the increasing competition in the voluntary market as external risks to achievement of our
business plans. We continuously monitor key indicators to assess our risks and attempt to adjust our business plans accordingly.
Premium growth has remained positive during 2012 and 2011, due in part to strong persistency, and we expect the level of sales to
improve in 2013. We expect volatility in net investment income to continue in 2013 as a result of fluctuations in bond calls and other types
of miscellaneous net investment income. Periods of economic downturns have historically had minimal impact on the risk results of
Colonial Life, due primarily to a diversified product portfolio that is designed with short duration, indemnity benefits. We believe that strong
profit margins will continue, and we expect our overall benefit ratio in 2013 to be generally consistent with the 2012 level.
We believe we have a stable business model, with service levels and customer retention that allow us to focus on and deliver
premium growth despite the recent marketplace changes and uncertainties. We believe we are well positioned for growth and that
opportunities exist to accelerate growth during the next several years by (i) focusing on target market segments, (ii) driving new sales
in the public sector market, (iii) growing the reach and effectiveness of our distribution, and (iv) effectively serving our customers.
Closed Block Segment
The Closed Block segment consists of our closed individual disability and individual and group long-term care lines of business,
as well as certain other insurance products. The individual disability line of business generally consists of those policies in-force before the
substantial changes in product offerings, pricing, distribution, and underwriting, which generally occurred during the period 1994 through
1998. Long-term care includes group long-term care, which we announced in the first quarter of 2012 that we would discontinue selling,
and individual long-term care, which we discontinued selling in 2009. The other insurance products line of business consists of certain other
products no longer actively marketed, including individual life and corporate-owned life insurance, reinsurance pools and management
operations, group pension, health insurance, and individual annuities.