Unum 2012 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 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 61
Year Ended December 31, 2012 Compared with Year Ended December 31, 2011
Total premium income decreased in 2012 compared to 2011, with lower individual disability premium income partially offset by
higher long-term care premium income. The decrease in individual disability premium income was due to the run-off of this closed line of
business, driven by expected policy terminations and maturities. The increase in long-term care premium income was due to issuances
of group long-term care policies and the implementation of rate increases on certain of our individual long-term care policies. Although we
announced in the first quarter of 2012 that we would no longer sell group long-term care, we had group cases which were already in the
quoting and/or underwriting process at the time of our announcement and for which we have now issued the policies.
We continue to file requests with various state insurance departments for premium rate increases on certain of our individual
and group long-term care policies. The rate increases reflect current interest rates and claim experience, higher expected future claims,
persistency, and other factors related to pricing long-term care coverage. In states for which a rate increase is submitted and approved,
customers are also given options for coverage changes or other approaches that might fit their current financial and insurance needs.
Net investment income was higher in 2012 compared to 2011 due to higher asset levels, higher bond call premiums, and higher
prepayment income on mortgage-backed securities and other fees, partially offset by a decline in yield on invested assets. Other income,
which includes the underlying results of certain blocks of reinsured business and the net investment income of portfolios held by those
ceding companies to support the block we have reinsured, was lower in 2012 compared to 2011 due to lower investment income in the
portfolios held by the ceding companies.
Individual disability risk results for 2012 were favorable compared to 2011 due to the previously discussed 2011 reserve charge.
Excluding this charge, individual disability risk results were favorable compared to 2011 due to higher claim recovery rates and a decrease
in reserves for existing claims. Long-term care risk results were favorable in 2012 compared to 2011 due primarily to the 2011 reserve
charge. Excluding this charge, risk results were unfavorable compared to 2011 due to higher claim incidence rates, partially offset by higher
claim resolutions.
Interest and debt expense in 2012 was generally consistent with 2011, as principal repayments on the amount of outstanding
debt issued by Northwind Holdings were offset by an increase in floating-rate interest on this debt. We had no amortization of deferred
acquisition costs in 2012 due to the long-term care impairment charge recognized at December 31, 2011. The other expense ratio was
lower in 2012 compared to 2011 due primarily to a decrease in selling and underwriting costs due to our discontinuance of the sale of group
long-term care in 2012 and our continued focus on operating effectiveness and expense management.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Total premium income decreased in 2011 compared to 2010, with lower individual disability premium income partially offset by
higher long-term care premium income. The decrease in individual disability premium income is due to the continued run-off of this closed
line of business. The increase in long-term care premium income for 2011 relative to 2010 was driven by strong persistency and higher
sales of group long-term care.
Net investment income was higher in 2011 compared to 2010 due primarily to higher asset levels, partially offset by a decline in the
level of prepayment income on mortgage-backed securities and lower income from bond call premiums. Other income decreased in 2011
compared to 2010 due to lower investment income in the portfolios held by the ceding companies.
Individual disability risk results in 2011 were unfavorable relative to 2010 due to the previously discussed 2011 reserve charge.
Excluding the reserve charge, risk results were slightly favorable compared to 2010 due to higher claim recovery rates, partially offset by
higher claim incidence rates. Long-term care risk results were unfavorable in 2011 compared to 2010 due primarily to the 2011 reserve
charge. Excluding the reserve charge, risk results were unfavorable compared to 2010 due to increases in active life reserves, which were
driven by favorable premium persistency relative to assumptions for certain issue years. Claim incidence rates for long-term care were
also higher in 2011 compared to 2010.