Unum 2015 Annual Report Download - page 43

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Unum 2015 Annual Report
The consolidated benefit ratio was 83.9 percent in 2015 compared to 93.8 percent in 2014 and 86.5 percent in 2013. Excluding the
2014 and 2013 reserve adjustments, the benefit ratios for 2014 and 2013 were 84.8 percent and 86.4 percent, respectively. The underlying
benefits experience for each of our principal operating business segments is discussed more fully in “Segment Results” as follows.
Commissions and the deferral of acquisition costs increased year over year due primarily to sales growth in our Unum US and Colonial
Life segments. Amortization of acquisition costs was higher year over year due primarily to growth in the level of the deferred assets in our
Unum US and Colonial Life segments and a higher level of Unum US supplemental and voluntary policy terminations relative to assumptions
for certain issue years.
Interest and debt expense was lower in 2015 relative to 2014 due primarily to $13.2 million of costs incurred in 2014 related to the
early retirement of a portion of the debt issued by one of our U.K. subsidiaries. Interest and debt expense for 2014, excluding the costs
related to the early retirement of debt, was higher than 2013 due primarily to the issuance of $350 million of 4.00% senior notes in the
first quarter of 2014, partially offset by the second quarter of 2014 retirement of $145 million of principal outstanding on 6.85% debt.
See Note 8 of the “Notes to Consolidated Financial Statements” contained herein for further discussion of our debt.
Higher sales in certain of our product lines led to year over year increases in acquisition-related expenses as reported in compensation
expense and in other expenses. Our pension amendments and the associated expenses related to those amendments also impact the
comparability of expenses year over year, with the previously mentioned settlement loss recorded in 2014, higher expenses in both 2015
and 2014 related to increased contributions to our defined contribution plans resulting from the 2014 pension plan amendment, and a
lower level of net actuarial loss amortization related to plan amendments adopted in 2013. We also continue to invest in technology and
other growth-related investments, thereby increasing our level of spend related to 2013. See Note 9 in the “Notes to Consolidated Financial
Statements” contained herein for further discussion of our employee benefit plans.
Our effective income tax rate for 2015 was 30.0 percent, compared to 25.8 percent in 2014 and 30.6 percent in 2013. Our effective
tax rate differs from the U.S. statutory rate of 35 percent primarily due to tax credits and foreign earnings taxed at lower rates than the
U.S. statutory rate. Our effective tax rates for 2015 and 2013 were both favorably impacted by the enactment of income tax rate reductions
by the U.K. government. The enactments reduced the net deferred tax liability related to our U.K. operations by $6.5 million in 2015 and
$6.3 million in 2013. Our 2015 income tax also includes a reduction in federal income taxes of $6.8 million related to our resolution with
the Internal Revenue Service of certain outstanding issues. In 2014, our U.S. earnings included a long-term care reserve charge that
resulted in a larger proportion of our 2014 earnings derived from our foreign operations and taxed at the lower rate, therefore reducing
our overall effective tax rate. See Note 7 in the “Notes to Consolidated Financial Statements” contained herein for further information on
our income tax.
Further discussion of operating results for each of our segments and major product lines is included in “Segment Results” herein.