Unum 2015 Annual Report Download - page 159

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Unum 2015 Annual Report
Revenue is primarily derived from sources in the United States and the United Kingdom. There are no material revenues or assets
attributable to foreign operations other than those reported in our Unum UK segment.
We report goodwill in our Unum US segment and in our Unum UK segment, which are the segments expected to benefit from the
originating business combinations. At December 31, 2015 and 2014, goodwill was $230.9 million and $198.7 million, respectively, with
$187.6 million attributable to Unum US in each year and the remainder attributable to Unum UK.
Stockholders’ equity is allocated to the operating segments on the basis of an internal allocation formula that reflects the volume and
risk components of each operating segment’s business and aligns allocated equity with our target capital levels for regulatory and rating
agency purposes. We modify this formula periodically to recognize changes in the views of capital requirements.
We measure and analyze our segment performance using non-GAAP financial measures. A non-GAAP financial measure is a numerical
measure of a company’s performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or
included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures of
“operating revenue” and “operating income” or “operating loss” differ from total revenue and income before income tax as presented in
our consolidated statements of income due to the exclusion of net realized investment gains and losses, non-operating retirement-related
gains or losses, and certain other items as specified in the reconciliations below. We believe operating revenue and operating income or
loss are better performance measures and better indicators of the revenue and profitability and underlying trends in our business.
Realized investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying
business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation
of realized investment gains or losses. Although we may experience realized investment gains or losses which will affect future earnings
levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in
nature, and we need to earn the interest rates assumed in calculating our liabilities.
The amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pensions and other
postretirement benefit plans, is driven by market performance as well as plan amendments and is not indicative of the operational results
of our businesses. We believe that excluding the amortization of prior period gains or losses, as well as the 2014 settlement loss resulting
from our pension plan amendment, from operating income or loss provides investors with additional information for comparison and
analysis of our operating results. Although we manage our non-operating retirement-related gains or losses separately from the operational
performance of our business, these gains or losses impact the overall profitability of our company and have historically increased or decreased
over time, depending on plan amendments and market conditions and the resulting impact on the actuarial gains or losses in our pensions
and other postretirement benefit plans.
We believe that excluding the 2014 costs related to the early retirement of debt is appropriate because in conjunction with the debt
redemption, we recognized in realized investment gains and losses a deferred gain from previously terminated derivatives which were
associated with the hedge of this debt. The amount recognized as a realized investment gain, which basically offsets the cost of the debt
redemption, is also excluded from our non-GAAP financial measures since we analyze our performance excluding amounts reported as
realized investment gains or losses. We believe it provides investors with a more realistic view of our overall profitability if we are consistent
in excluding both the cost of the debt retirement as well as the gain on the hedge of the debt.
We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the
understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication
that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.