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Unum Group 2007 Investor Meeting
November 19, 2007
2
Welcome
Tom White
3
Safe Harbor Statement
Statements in this presentation that are not historical facts, such as our earnings per share, return on equity and our Unum US group income protection benefit ratio guidance, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include such general matters as general economic or business conditions; events or consequences relating to terrorism, acts of war and catastrophes, including natural and man-made disasters; competitive factors, including pricing pressures; legislative, regulatory, accounting, or tax law changes; and the interest rate environment. More specifically, they include fluctuations in insurance reserve liabilities; changes in projected new sales and renewals; variations between projections and actual experience in persistency rates, incidence and recovery rates, pricing and underwriting; retained risks in our reinsurance operations; availability and cost of reinsurance; the level and results of litigation, rating agency actions, and regulatory actions and investigations; actual experience in implementing and complying with the multistate market conduct regulatory settlement agreements and the California Department of Insurance settlement agreement; negative media attention; changes in assumptions relating to deferred acquisition costs, value of business acquired or goodwill; the level of pension benefit costs and funding; investment results, including credit deterioration of investments; the ability of our insurance company subsidiaries to pay dividends or extend credit to us and certain of our intermediate holding company subsidiaries and/or finance subsidiaries; and effectiveness of product support and customer service. For further information of risks and uncertainties that could affect actual results, see our filings with the Securities and Exchange Commission, including information in the sections titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and subsequently filed 10-Q. The forward-looking statements in this presentation are being made as of the date of this presentation, and we expressly disclaim any obligation to update or revise any forward-looking statement contained herein.
4
Agenda
9:00 a.m. Welcome Tom White
Opening Remarks Tom Watjen
Capital Management Bob Greving
Rating Agencies andInterest Rate Management Tom White
Question and Answer
10:15 a.m. Break
10:30 a.m. Operating Segment Reviews- Unum US Kevin McCarthy- Colonial Randy Horn- Unum UK Susan Ring
Concluding Comments Tom Watjen
Question and Answer
12:00 p.m. Lunch
5
Opening Remarks
Tom Watjen
6
Introduction
Charles GlickEVP
General Counsel
Joe FoleySVP & Chief Mkt Ofcr
Eileen FarrarSVP
Human Resources
Bob GrevingEVP
Chief Fin Officer
Frank WilliamsonSVP
Strat Plng & Corp Dev
Tom WhiteSVP
Investor Relations
David FussellSVP
Investments
Bob BestCOO
Unum US
Susan RingCEO
Unum UK
Randy HornPresident & CEO
Colonial
Finan
cial
Oper
atio
ns
• David Parker SVPFinance & Risk Mgmt Colonial
• Martha LeiperSVPPortfolio Management
• Roger MartinChief Financial Officer Unum US
• Martin Moule Chief Financial Officer Unum UK
Kevin McCarthyPresident & CEO
Unum US
Tom WatjenPresident and
Chief Executive Officer
Boardof
Directors
Corporate Staff Operations(Bold name indicates in attendance)
7
Introduction
• Operating earnings increased 30%*– Strong contribution from each business
• Completed claims reassessment process
• Completed securitization
• Formalized capital strategy guidelines– Announced $700 million share repurchase
2007 Highlights
* Nine months 2007 operating results
8
Unum US GIP Benefit Ratio Improvement *
* Excludes claim reassessment impact
95.3%
93.5%
92.4%
93.9%
95.5%
95.1%
94.5%
94.0%
93.4%
92.7%
92.1%92%
93%
94%
95%
96%
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Introduction
2007 Highlights
9
4,8235,099
2,000
4,000
6,000
9M-2006 9M-2007
+6%
Unum US GIP
5,0465,506
2,000
4,000
6,000
9M-2006 9M-2007
+9%
Colonial
1,458
1,193
400
800
1,200
1,600
9M-2006 9M-2007
+22%
Unum UK
3,8184,205
2,000
4,000
6,000
9M-2006 9M-2007
+10%
Unum US Group Life
Introduction
2007 Highlights
Growing Case Count in all Segments
10
Introduction
Recent Financial Results
0%
5%
10%
15%
20%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Core Consolidated CDB
Operating Return on Equity
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
2006 2007
Operating EPS
11
Introduction
Recent Financial Results
Unum Stock Price
0
50
100
150
200
Mar-03
Aug-03
Jan-04
Jun-04
Nov-04
Apr-05
Sep-05
Feb-06
Jul-06
Dec-06
May-07
Oct-07
UNM S&P 500
12
0
50
100
150
200
250
300
350
400
450
May-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07
UNM BB 5 yr CDX Investment Grade 5yr CDX
239 bps
0 bps2
1
Introduction
Recent Financial Results
Source: JPMorganNote: CDX are CDS indices traded by the street1 Difference between Unum 5yr CDS and Investment Grade 5yr CDX in May 20042 Difference between Unum 5yr CDS and Investment Grade 5yr CDX in October 2007
Unum CDS Spreads
13
3Q2007
Other0%
Unum US Supplemental& Voluntary
18%
Unum UK12%
Colonial11%IIP-Closed Block
13%
Unum USCore Market
20%
Unum USLarge-Case
26%
Unum US Supplemental& Voluntary
13%
IIP-Closed Block16%
Unum USLarge-Case
33%
Colonial9%
Unum UK4%
Other1%
Unum USCore Market
24%
2002
A Different Company
More Diversified Earned Premium Base
14
YTD 20072002
A Different Company
More Diversified Earnings Base*
* Excludes Corporate segment
Colonial13%
Unum UK7%
Other6%
Unum USGIP
27%
Unum USGroup Life
21%
Unum US Supplemental& Voluntary
18%
IIP-Closed Block8%
Colonial19%
Unum UK24%
Other1%
IIP-Closed Block9%
Unum US Supplemental& Voluntary
18%
Unum USGIP
13%
Unum USGroup Life
16%
15
A Different Company
More Sources of Premium Growth
$ million
$5,057 $5,018
$637 $906$403
$971$1,106
$1,014
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2002 2007 est.
Unum US Colonial Unum UK IIP - Closed Block
+10.3%
% Increase (Decrease)
-0.8%
+140.8%
-8.4%
$7,151
$7,890
+42.3%
16
3/31/03 2007 Guidance
RBC 210% 300%
Cash at Holding Company $ 925$ (755)
Debt to Total Capital (as adjusted) 30.2% 25%
Market Value $2,370 $9,000 (current)
($ millions)
A Different Company
Significant Financial Flexibility
17
Credit Quality of Bond Portfolio
Below Baa 6.3%
Baa37.7%
Aaa22.7%
Aa8.5%
A24.8%
9/30/07
A20.0%
Aa4.1%
Aaa 27.3%
Below Baa 10.5%
Baa38.1%
12/31/02
A Different Company
Solid Investment Portfolio
18
Actual vs. Estimated EPS – Previous 12 Quarters
Source: Company filings, IBES and FactSet
$0.30
$0.35
$0.40
$0.45
$0.50
$0.55
$0.60
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07*
Qu
art
erl
y E
PS
Actual EPS Median Estimate
A Different Company
More Predictable Results
* Includes net investment income, operating earnings as reported $.60
19
Outlook
• A continued move to voluntary products– Underinsured, aging population with limited savings creates demand for
coverage
• Employer budgets under continued pressure– Creates the need for providing simplicity and flexibility
• Market trends likely to lead to increased regulation– Requires management to be more aware of the environment
Environment
20
Outlook
• Consistent execution of our operating plans
• Maintain emphasis on disciplined, profitable growth
• Better leverage our leadership position
Focus
21
Outlook
• Direction of the economy
• Completion of regulatory claims examination
• Consistent execution
Outstanding Issues
22
Outlook
Financial Dynamics
2.3%
15.5%
3Q-2007Leveraged ROE
AllocatedStockholders’ Equity
IIP - Closed Block
Core Operations- Unum US- Colonial- Unum UK
$2,594
$6,392
$1,009
$4,540
32.4%
24.2%
10.2%
$843
3Q-2007Leveraged ROE
Allocated Stockholders’ Equity
Colonial
Unum UK
Unum US
$ Millions
23
Outlook
Earnings Per Share $2.35 to $2.40*
Return on Equity: Core 15.5% to 16.0%
Total Company 11.0% to 11.5%
Capital PositionLiquidity >$300mmLeverage 24% - 25%
RBC 315% - 325%
Short-term Guidance: 2008 Expectations
*Assumes ATOE growth of 9% - 10% and mid-year execution of announced share repurchase.
24
Outlook
15% – 16%15.5%Core Total
20% – 22%24.2%Colonial
26% – 28%32.4%Unum UK
11% - 13%10.2%Unum US
TargetROE
3Q-2007ROE
Long-term Trends: 2009 and Beyond
11.5% - 13.0%11.2%Company Total
2% - 3%2.3%IIP - Closed Block
25
Closing Comments
• Strong Operating Performance
• Completed Claims Reassessment Process
• Completed Closed Block Securitization
• Formalized Capital Management Guidelines– Announced $700 million share repurchase
• Solid Plans for 2008
26
Capital Management
Bob Greving
27
• Capital Management– Northwind– Beyond Northwind
• Enterprise Risk Management
• Guidance for 2008
Agenda
28
Capital Management
29
• The Northwind securitization transaction creates a rating agency and market validated capital structure for our IIP - Closed Block of business that enhances the overall efficiency of our capital.
• The dynamics of the IIP - Closed Block securitization are similar to the mechanics involved in a XXX securitization.
• The basic steps with Northwind involved:Formation of a new holding company (Northwind Holdings, LLC) issuer of $800 million in debt securities; sold in a private placement transaction
Capitalization of a newly created captive reinsurance company (Northwind Re)
Reinsurance of the IIP - Closed Block business
Payment of extraordinary dividends to release excess capital from insurance subsidiaries to holding company
2
Securitization Overview
1
3
4
30
UnumHolding
Company
Northwind Re
Investors(non-recourse
to Unum)
Capital
Bond Insurer
Insurance subs –PLA, PRL, UA
NorthwindHoldings, LLC
Reinsurance contract
Ceding Commission
Premium
DividendsOver Time
Proceeds
Interest andprincipal
DividendsOver Time
Equity
Excess Capital Released with Risk Transfer Credit
wrap
3
12
4
Diagram of Transaction
31
Amount Represented by Unum’s Allocated Stockholders’ Equity
Amount Represented by Non-Recourse Debt
• Financial markets validate appropriate reserves and capital level; less total allocated stockholders’ equity
• Unum capital substituted with debt financing tied to block’s performance; no refinancing risk
• Debt issued is non-recourse to Unum Group creditors
• Transaction yield enhanced financial flexibility at both the subsidiary and holding company levels
$2,594
$2,190
$800
$1,390
($ millions)
Allocated Stockholders’ Equity, IIP – Closed Blockas of September 30, 2007
Pro Forma
Benefits
Actual
Improved Capital Structure
32
• Ceding companies capitalized at 300% RBC
• Northwind Re capitalized at 200% RBC
• Pricing of Northwind Holdings debt validates appropriate capitalization for reinsured policies
• $1.1 billion available for use by Unum Group
Results
($ millions)
Statutory CapitalPotentially
Available fromClosed Block
Non-recourseNorthwind Debt
Capitalization ofNorthwind Re
Net Proceedsfrom
Securitization
+$1,600
-$1,270
+$800
$1,130
Capital Movements
33
• This transaction added to our consistent operating performance, further strengthens our balance sheet position, and creates shareholder value through a share repurchase of up to $700 million.
• The use of Northwind proceeds coupled with the excess capital at the holding company level will be redeployed to meet the following metrics:– Boost RBC to 320%– Reduce debt by $800 million
• $150 million retired in Feb 2007• $150 million PINES call• $400 million debt tender• $100 million other debt retirement
– Target holding company liquidity of $300 million
Northwind Benefits
34
$400m Tender Offer Targets
$175
$325 $332$200
$500
$250 $250$300
$150
$00
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015 2018 2022 2027 2028 2032 2038
Long-term debt New Debt Callable bonds ACES
ACES Participation $150m
$150mPINEScalled
An additional $100 million of debt will be retired during 2008
Debt Maturity Profile
$ millions
35
• RBC increases to 320%
• Leverage maintained at 25%
• Holding company liquidity above target of one year of fixed charges
• Share repurchase of up to $700 million
• ROE enhanced by 70 basis points; EPS increases with share repurchase
Results
HoldingCompany
Liquidity - 2007Estimate Priorto Northwind
Net Proceedsfrom
Securitization
IncreaseCapital &Surplus ofInsurance
Companies
DebtRepurchase
Maximum StockRepurchase
Estimated NetCash Flow for
2008
HoldingCompany
Liquidity - 2008Estimate
+$1,130
-$700
-$350
-$800
($ millions)
$925
>$300
Capital Deployment Plan
36
• We have adopted a formal Capital Management Strategy.
• We intend to manage our business with these threshold targets:– 300% RBC– 25% leverage ratio, excluding non-recourse debt– Holding company cash equal to one year of fixed charges
• We may leverage our working knowledge of the securitization market to add further efficiencies.
Beyond Northwind
37
2007 pro forma
Special purpose reinsurance vehicles
Unum Group Excluding Special
Purpose Reinsurance Vehicles Tailwind UPIL Northwind
1) RBC - Traditional U.S Life Insurance Company 322% 228% 200% 200%
2) Leverage 25.0% 85.7% NM 34.9%
Adjusted for pensions and leases 30.1% 85.7% NM 34.9%
3) EBIT coverage 8.8x 3.0x NM 3.0x
Adjusted for pensions and leases 7.3x 3.0x NM 3.0x
4) Cash coverage 6.6x 4.2x NM 2.9x
Beyond Northwind
NM – not meaningful
38
Enterprise Risk Management
39
• We have established an appropriate governance structure for ERM at the Company.
• Our ERM structure allows for risk management oversight at both an enterprise level as well as a business unit level.
• ERM is embedded within our business planning process down to the functional level.
Board of DirectorsAudit Committee
Unum UKRisk
Committee
Unum USRisk
Committee
ColonialRisk
Committee
CRO
CorporateRisk
Committee
Executive RiskManagementCommittee
Enterprise Risk Management
40
Unum Group
Credit Risk Market Risk Insurance Risk Customers, Products, and ServicesOperational Risk
Portfolio Strategy/Hedging
Interest Rate
Bonds
Reinsurance
Pricing and Underwriting
Reserving
Business Concentrations
Catastrophe
Risk andCapital Allocation
Claims Mgmt
Customer Service
IT Security
Human Resources
Business Continuity
Regulatory and Compliance
Governance and Legal
Products and Services
Distribution
Reputation
Strategic Risk
FX
Rating/Financial Flexibility
Key:Major Risk CategoryRisk Type
Enterprise Risk Map
41
• Enterprise risk management focus areas include:– Credit risk and Interest Rate risk– Business Diversification– Financial Flexibility – including liquidity, capital adequacy, and market access
• Management has taken several steps in these areas to better position the organization’s risk profile, including:– Maintenance of a conservative, high quality asset portfolio– Increased diversification within operating segments and across the organization– A stronger financial platform which includes greater holding company liquidity
and flexibility, as well as stronger subsidiary capital– Development of access to the capital markets through our securitization efforts
and credit facility development
Enterprise Risk Activities
42
Unum Group
Credit Risk Market Risk Insurance Risk Customers, Products, and ServicesOperational Risk
Portfolio Strategy/Hedging
Interest Rate
Bonds
Reinsurance
Pricing and Underwriting
Reserving
Business Concentrations
Catastrophe
Risk andCapital Allocation
Claims Mgmt
Customer Service
IT Security
Human Resources
Business Continuity
Regulatory and Compliance
Governance and Legal
Products and Services
Distribution
Reputation
Strategic Risk
FX
Rating/Financial Flexibility
Key:Major Risk CategoryFocus Areas
Enterprise Risk Areas of Focus
43
Credit Risk
Investment Grade75.7%
Other3.0% Equities
1.1%
Real Estate0.1%
Policy Loans0.5%
High Yield6.0%
ABS/MBS10.8%
Mortgages2.8%
Unum’s Asset Mix as a % of Invested Assets Industry’s Asset Mix as a % of Invested Assets
Investment Grade58.1%
Other2.0% Equities
1.1%
Real Estate0.6%
Policy Loans3.8%
High Yield4.1%
ABS/MBS17.5%
Mortgages12.8%
44
Overexposures
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
A a2 A 1 A 2 A 3 B aa1 B aa2 B aa3 B a1 B a2 B a3 B 1 B 2 B 3 C aa1
4Q02 3Q07
$ million
Credit Risk
Below Inv Grade Credit Exposure
10.8%
8.7%
13.9%
10.0%
8.4%7.6%
6.9%6.4% 6.4%
6.0% 6.0%5.8% 6.0%5.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
12/01 12/02 12/03 12/04 12/05 12/06 9/07
Book Value Market Value
45
0
200
400
600
800
1,000
1,200
1,400
2008 2009 2010 2011 2012-2017
GIP IIP LTC
30
40
50
60
70
80
90
Basi
s P
oin
ts
GIP IIP LTC
Mismatch
12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 9/30/07
Asset Duration 7.81 8.95 7.55 7.71 7.66 7.31
Liability Duration 9.33 9.65 8.00 8.09 7.97 8.03
Mismatch (1.52) (0.70) (0.45) (0.38) (0.31) (0.72)
• Mismatch remains within our tolerance level of ± 10% of liability duration.
Cash Flow To Be HedgedInterest Margin
Interest Rate Risk
46
• Strengthened Asset Position.– Reduced exposure to credit risk
– Hedging and reserve crediting strategies have reduced exposure to interest rate risk
• Improved Capital Position.– More capital in holding company, and access to capital through credit
facilities
– Both cash levels and RBC levels are positioned with “rainy day” funds in the event of a 2007-2008 down-turn
Source: Company filings, Factset and IBES1 As of 31-Mar-2003; net of inter-company loans2 As of 31-Dec-20023 As of 31-Mar-20034 Projected at year-end 2007
2003 9/30/2007
Holding Company Liquidity $(755) mm1 $925mm 4
Consolidated Risk-based Capital 210%2 300%
Debt to Total Capital (ex. AOCI) 30.2%3 24.2%
Capital Position
47
Criteria Guideline Year-end 2008
RBC ratio for traditional U.S. Insurance Cos. >300% 320%
Leverage 25% 24%
Coverage
Earnings before interest and taxes/interest 5 – 6x 8.8x
Cash coverage of interest 3 – 4x 6.6x
Holding Company liquidity 1x fixed charges Approx. $300m
Capital Position
48
• Reserves are evaluated annually - at a minimum.
• The IBNR reserve is a relatively small component of the overall reserve. – Address some questions we have had
• The IBNR reserve is set up to pay claims that have been incurred but not yet reported to the company.– It is a relatively short term reserve with approximately 90% typically released
within a year of initial valuation.
• The IBNR reserve increases or decreases based upon the underlying risk including:– The size of the business – measured in premium or lives– The expected claim incidence– The expected average cost of each claim
Reserves
49
• In addition to the normal movements due to the underlying risk we have had movement in the IBNR reserve due to the claim reassessment process.
• Since the beginning of the reassessment process we have recorded IBNR based upon our estimate of the ultimate claims cost and subsequently released those reserves as the claims moved to an approved status.– IBNR reserves are released but flow into paid claims and reserves.
Reserves
50
• Actions in recent years have reduced our exposure to a recession similar to that experienced in 2001-2002.
• During 2001 the primary sensitivities to the slower economic cycle were felt by our investment portfolio and by Unum US disability performance.
• Today we have:– A more diversified business– Stronger operational practices– A lower credit risk profile– Improved management of our investments– Stronger capital and improved liquidity– A more comprehensive enterprise risk management platform
ERM – Summary Comments
51
Guidance for 2008
52
• Earnings per Share: $2.35 to $2.40– After-tax operating earnings: expected growth of 9% to 10%– Share repurchase: expected mid-year 2008 execution of up to $700 million
share repurchase– Unum US: continued improvement in GIP benefit ratio to drive slightly above
trend line earnings growth– Unum UK: below trend line earnings growth reflecting return to more
sustainable long-term benefit ratio– Colonial: below trend line earnings growth reflecting return to more sustainable
long-term benefit ratio– IIP – Closed Block: lower earnings in 2008 reflecting lower net investment
income and continued run-off– Corporate and Other: increased net investment income and lower interest
expense
2008 Guidance
53
Rating Agencies and Interest Rate Management
Tom White
54
• Rating Agency Update
• Interest Rate Management
Agenda
55
Rating Agency Update
56
• Current Financial Strength Ratings:– A.M. Best A- (Negative Outlook)– Fitch A- (Stable Outlook)– Moody’s Baa1 (Negative Outlook)– Standard & Poor’s BBB+ (Positive Outlook)
• We believe that our capital management targets combined with continued consistency in operating results will allow us to achieve our targeted rating.
• Our message to the agencies:– Claim reassessment is complete– GIP results improving and more consistent– Business mix is improving– Franchise is strong– Financial flexibility is strong
Targeting an “A” Rating
57
Actual2005
Actual2006
Forecast*2007
Pro forma**2007
RBC Ratio for traditional US Insurance Companies
308% 300% 305% 320%
Leverage 30% 25% 25% 25%
CoverageEBITCash Coverage of Interest
4.8x4.1x
5.7x5.4x
7.8x5.5x
8.8x6.6x
Holding Company Liquidity $610mm $445mm $925mm >$300mm
* Excludes Northwind transaction** Assumes full year benefit of Northwind transaction
Targeting an “A” Rating
58
Source: JPMorganNote: CDX are CDS indices traded by the street1 Difference between Unum 5yr CDS and Investment Grade 5yr CDX in May 20042 Difference between Unum 5yr CDS and Investment Grade 5yr CDX in October 2007
0
50
100
150
200
250
300
350
400
450
May-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07
UNM BB 5 yr CDX Investment Grade 5yr CDX
239 bps
0 bps2
1
Increasing concerns regarding the sub-prime mortgage market contribute to significant widening of spreads
Targeting an “A” Rating
59
Interest Rate Management
60
• The mission of the Investment Department is to support corporate objectives by delivering consistent, quality net investment income.
• We will quantify and limit interest rate risk. – Asset/liability cash match– Minimize duration mismatch– Hedge future cash flows
• We will invest in assets that support product portfolios in a capital-efficient manner according to pricing and reserving assumptions.
Interest Rate Management: Philosophy
61
Interest Reserve Margins are at or above Target Range
30
40
50
60
70
80
Unum USGIP
Unum USIIP -
RecentlyIssued
IIP - ClosedBlock
LTC Unum UK
Target Range
Basis Points
Interest Reserve Margins as of 9/30/07
Interest Rate Margin
62
4.5
5.0
5.5
6.0
6.5
7.0
Swap
Rat
es
USD SWAP 20Y rate USD SWAP 10Y rate
Note: Hedge activity represented by circles.
Historic 10 & 20 yr Swap Rates (3 yrs Forward)
NUGGETTAG:userName=null&plotName=null
2002 2003 2004 2005 2006 2007
Source: LehmanLive.com
$302 $157 $100
$221
$2,900$800
$110
$170 $230
Hedging Strategies
63
IIP GIP LTC Total
4Q07 $95 $90 $85 $270
2008 $160 $80 $325 $565
2009 $85 – $295 $380
2010 – – $240 $240 2011 – – $205 $205
Total $340 $170 $1,150 $1,660
IIP GIP LTC Total
4Q07 – – – –
2008 $57 – $98 $155
2009 $22 – $138 $160
2010 $38 – $174 $212
2011 $24 – $181 $205
Total $141 – $591 $732
Unhedged Cash FlowsCurrent Hedged Position
Given the current interest rate environment in conjunction with our current hedge position, we anticipate no near-term adjustments to our new claim discount rate.
Hedging Schedule
64
8.02%7.76%
7.15%6.93% 6.85% 6.73% 6.72% 6.69% 6.70%
0%
2%
4%
6%
8%
10%
12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 3/31/07 6/30/07 9/30/07
Current Portfolio Yield 10-Year Treasury
New Money Rates Versus Portfolio Yield
65
• As part of our interest rate management, we monitor the impact of changes of our discount rate on reserve requirements for our business lines.
• As of quarter-end 3Q07, a 25 basis point reduction in our discount rate would have necessitated an increase in product line reserves of– $4 million for Group Long-term Income Protection – $5 million for Individual Income Protection - Closed Block– $1 million for Individual Income Protection – Recently Issued
• We do not anticipate the need to make discount rate changes over the next several quarters.
Discount Rate Sensitivity
66
Operating Segment Review
Unum US
67
• Review of 2007 Business Operations
• Unum US Today
• 2008 Outlook and Opportunities
• Summary
Agenda
68
Review of 2007 Business Operations
69
• Group Income Protection performance and benefit ratio trend has continued to meet stated objectives.
• Initiatives to diversify the business away from a predominantly income protection product base and employer-paid product focus has been met with initial success and we plan to build on this momentum.
• Our growth strategy remains consistent with our commitment to pricing discipline.
2007 Business Operations Review
70
• Group Income Protection performance has had significant and noticeable improvement. – GIP benefit ratio decreased 60 basis points from 2Q07 to 92.1% in 3Q07– Current ratio represents a significant improvement from 3Q06 of 94.5%– Remain on target to achieve 90%-92% target by the end of 4Q07
• We are targeting an 88% to 89% GIP Benefit Ratio in the 2008 to 2009 time frame.– Benefit ratio improvement will be driven by continued sales mix shift,
underwriting discipline and benefit operations improvements
• Improvement to target ranges will result in BTOE/Premium margin of 13.0% to 15.0% for the Unum US operating segment and a leveraged ROE of 11% to 13%.
2007 Business Operations Review
Group Income Protection
71
• The Benefits Operations organization is now positioned for stable, sustainable performance.
• The key elements of Benefits Operations performance are:– Increased staffing levels, decreased span of control and greater management
involvement in day to day claim decisions– An enhanced claim inventory management system– A greater focus on quality reviews leading to more consistent and predictable
outcomes
• Benefits Center Operations includes Legal Department oversight.– Dedicated team of attorneys provide oversight controls, monitoring and assisting
in both claims response and complaint resolution• Relatively steady decline in the number of new legal cases opened in a given
year – New cases have decreased by 76.7% since 2003
Benefits Operations
72
* Excludes claim reassessment impact
Unum US GIP Benefit Ratio
Benefits Operations
92.4%
95.5%
95.1%
94.5%
94.0%
93.4%
92.7%
92.1%
93.9%
92%
93%
94%
95%
96%
3Q05* 4Q05 1Q06* 2Q06 3Q06* 4Q06 1Q07 2Q07* 3Q07
73
Group Long-term Income Protection
Business Mix Shift
2001 New Sales
9M-2007New Sales
CurrentInforce Mix
2006 New Sales
37% Small
16% Mid
47% Large
28% Small
17% Mid
55% Large
40% Small
20% Mid
40% Large
36% Small
16% Mid
48% Large
40% Small
16% Mid
44% Large
InforceGoal
74
Group Long-term Income Protection-Average Case Size
Business Mix Shift
$18,114
$28,461
$26,412
$30,298
$40,086$39,426$38,469
$10,000
$20,000
$30,000
$40,000
$50,000
2001 2002 2003 2004 2005 2006 9M-07
$ in millions
75
Group Life and AD&D
• Continuing to see a positive trend in the benefit ratio.
• Despite increasing competition, we are maintaining our position while continuing our pricing discipline.
• Bundled with GIP product.
Benefit Ratio
76.3%76.0%76.6%77.0%77.7% 73.9%
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005 2006 9M-07
Premium Income
$932 $1,051
$1,399$1,463
$1,623$1,662
$1,606
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2002 2003 2004 2005 2006 9M-06 9M-07
$ in millions
76
93.4%90.2%
85.1%81.0%76.6%
73.1%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 9M-07
42.4%43.5%43.8%46.0%
41.5%39.9%
0%
10%
20%
30%
40%
50%
60%
70%
2002 2003 2004 2005 2006 9M-07
• Better risk-reward tradeoff than “pure” individual business.
• Benefit ratio performance trending lower, as a result of both pricing discipline and a stronger claims management process.
• Complementary line to GIP and VWB.
Multi-Life Sales as % IIP Sales
Interest Adjusted Loss Ratio *
* As adjusted for special items (’04 to ’05)
IIP Recently Issued
77
• Focus has shifted from individual product to group product, leveraging our existing distribution system.
• Maintaining pricing discipline with new policy issuance.
• Rate increase activity is underway on the in-force individual block.
Total LTC Sales$ in millions
$22.2 $28.0
$87.2 $70.9
$38.2 $34.1 $36.1
$0
$20
$40
$60
$80
$100
2002 2003 2004 2005 2006 9M-06 9M-07
LTC Sales Mix
76%70%62%
49%38%
27%
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005 2006 9M-07
Group LTC Individual LTC
Long Term Care
78
• We are currently in the process of repricing our individual long- term care product and are seeking approval on a state by state basis.
• For those effected, the repricing will increase premiums by a total of 20.0% to 30.0% within a phased-in two year period.
• Rate increases will impact less than 16% of our current policyholders.
• At present this process has resulted in 46 state approvals and $38.0 million in annual additional premium.
• We are experiencing strong persistency.
Individual LTC Rate Increase Activity
Long Term Care
79
• Positive trends in the benefit ratio as the business mix shifts to disability, accident and supplemental health lines.
• Positive growth trend as VWB portfolio expands into the supplemental health lines.
• Continued opportunities for integration with Group products through Simply Unum offering.
Benefit Ratio
59.4%
77.9% 72.5%
69.0% 66.3% 62.6%
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005 2006 9M-07
Premium Income
$302$286
$382
$340
$293
$259
$209$200
$250
$300
$350
$400
2002 2003 2004 2005 2006 9M-06 9M-07
Voluntary Benefits
$ in millions
80
Unum US Today
81
• A more diversified business with a focus on core markets and the emerging employee paid product area.
• A profitable growth focus that emphasizes underwriting discipline rather than sales volume and market share.
• A stronger operational focus on consistent quality enabling us to better withstand any downward economic shift.
Unum US Today
82
Business Mix – Inforce Premium
Portfolio Diversification
GSTIP, 12.0%
IIP RI, 8.0%
VWB, 4.3%
Group Life and AD&D, 30.0%
LTC, 7.4%
GLTIP, 38.3%
2002
GLTIP, 37.9%
GSTIP, 9.7%
Group Life and AD&D, 22.9%
LTC, 10.7%
VWB, 9.0%
IIP RI, 9.6%
3Q2007
83
Services, 15.5%
Education, 7.5%
Transportation and Utilities, 4.8%
Healthcare, 20.8%
Construction and Manufacturing,
17.0%
Other,13.0%
Public Sector,5.0%
Retail,9.0%
Banking and Finance,
7.4%
* In-force premium as of 3Q07
Industry Diversification
84
NYC
WA
OR
NV
AZ NM
TX
OK
KS
COUT
WY
MTND
SD
NEIA
MO
AR
LA
MS
ALGA
FL
SC
NC
KY
IL
MN
WI
IN
VA
NJ
ME
VT
CT
NH
PARI
WV
ID
MD
MA
TN
OH
NY
CA
$5 million - $20 million
$5 million and below
$20 million - $50 million
$50 million - $100 million
$100 million plus Alaska
Hawaii
DE
Puerto Rico
*In-force premium as of 3Q07.
MI
DC
Geographic Diversification
85
• We have adopted more conservative underwriting practices compared to 2001. – Focus on profitable growth, not market share– Heightened accuracy of rate calculation and the addition of a formal quality
review program
• Significantly higher GLTIP premium per life:
$205
$245
$305
$0
$100
$200
$300
$400
2001 2001* 2007
GLTIP Prem/Life
* Adjusted for salary and aging changes over time.
Pricing Discipline
Underwriting
86
Long-term Disability Incidence Index
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22Quarters from end of 2001 Recession
100%
Incidence Trends
87
Group Long-term Income Protection: Incidence by Case Size
Relative Incidence by Case Size
Small Mid Large
Aggregate
0.80
1.00
1.10
88
• Benefit operations are now positioned for stable, sustainable performance levels.
• Management changes and the new organizational structure have led to improved results.– Increased staffing levels, decreased span of control, and greater management
involvement are paying dividends– The claim inventory management system has improved management
effectiveness
• We are better positioned to maintain performance levels in the event of a potential recession.– Integration issues associated with the merger are behind us– The new claims process forged from the RSA agreement is a more sustainable
business model
Operational Efficiency
Benefits Operations
89
2008 Outlook and Opportunities
90
Business Mix – Sales Premium
2008 Outlook and Opportunities
Group Core , 33.3%
Group Large, 44.7%
VWB, 7.8%
IIP RI, 8.4%
LTC, 5.8%
2002
Group Large, 23.3%
Group Core,
32.2%
IIP RI, 10.8%
VWB, 26.8%
LTC, 6.9%
3Q2007
91
VWB Sales Growth
$109.3$108.7
$134.2$130.2
$114.1
$105.8
$79.1
$0
$40
$80
$120
$160
2002 2003 2004 2005 2006 9M-06 9M-07
$ in millions
2008 Outlook and Opportunities
92
Unum Short Term Disability Sales
100% EE Funded100% ER Funded or Mixed
45%
81%
55%19%
2001 2006
• The market continues to move toward greater employee-funding.
• The growth of employee CHOICE elevates the importance of DELIVERY EXCELLENCE to customers and their advisors:– Enrollment– Communication– Individual employee
administration– Post-termination relationship
with carrier (portability)
2008 Outlook and Opportunities
93
Converging Trends Point to a Customer Solution
Benefits people desireeasy administration
“Just make it easy for me”
Growth in voluntary and mixed funding
“We have no choice but to pass on more of the cost to employees”
One size does not fit all
“I want to provide a plan that will meet the specific needs of my customers.”
Need for reduced complexity
“I want to feel knowledgeable when I talk about this with customers”
Easy administration
Voluntary and mixed funding
Reduced complexityChoice
2008 Outlook and Opportunities
94
• Simply Unum combines Group & Voluntary coverages on one fully- integrated platform, Unum enrollment resources, and employer cost management capabilities.
• In 3Q07, Simply Unum was launched in four markets.
• Marketplace reaction from brokers and customers has been very positive.
• The national roll-out of Simply Unum is scheduled for 1Q08.
Simply Unum.Simply Better.
2008 Outlook and Opportunities
95
• Simply Unum offering is geared toward increasing customer integration with customers in the <500 lives group.
• Approximately 60,000 customers in the less than 500 lives segment.
• Have had success in integration with customers with greater than 500 lives.– 80+% of Group Long Term Income Protection customers are integrated with
another group coverage– 15+% of Group Long Term Income Protection customers are integrated with one
of our Voluntary Benefits products or our Individual Income Protection product
Growth Through Customer Integration
2008 Outlook and Opportunities
96
Case Sales Growth
2003 2007 2011
2008 Outlook and Opportunities
97
Earned Premium Growth
2003 2007 2011
Total Core & Supp Group Large
Earned premium growth emerges in 2009 as large case earned premium flattens and growth accelerates in group core and supplemental benefits segment.
2008 Outlook and Opportunities
98
Summary
99
• We will continue to enhance the performance of our Group Income Protection line.– We will meet our 2007 objective of a 90% to 92% benefit ratio within this line– We anticipate to be within a 88% to 89% benefit ratio range by late 2008 to
early 2009
• We are focused on diversifying our product portfolio through new initiatives such as Simply Unum and increased focus on voluntary benefits sales.– Case sales will continue to grow at 10% to 15% per year and core and
supplemental sales premium growth will improve to 10% to 15%
• Our growth strategy remains consistent with our commitment to pricing discipline.– Continued focused renewal program– Continued large case discipline in both sales and in inforce management– BTOE/Premium margin will improve to 13.0% to 15.0% and leveraged ROE will
improve to 11% to 13%
Unum US Summary
100
Operating Segment Review
Colonial
101
• Review of 2007 Business Operations
• Colonial Today
• 2008 Outlook and Opportunities
• Summary
Agenda
102
Review of 2007 Business Operations
103
2007 Business Operations Review
• Sales & Marketing– Continued emphasis on the growth and development of the agency system– Implemented nationwide prospecting program targeted at small employers– Completed next phase of brand development with rollout in January 2008
• Products– Enhanced product manufacturing capabilities and improved speed to market– Broadened product portfolio with a new limited benefit medical plan – Revamped medical gap product to be simpler and more competitive
• Enrollment & Customer Services– Released update to new enrollment platform with expanded capabilities– Introduced new capabilities to enhance service for plan administrators
• Financial Stability– Continued to deliver strong profit margins through disciplined expense and risk
management
104
New Health Products
• Medical gap product– Indemnity insurance plan that offers employees a solution to fill coverage
gaps in their major medical plan
• Group limited benefit medical plan– Designed for employees without major medical coverage – Targeted at small employers – Market for product is growing as employers increasingly abandon
comprehensive health insurance due to escalating costs• Not a major medical plan• Pays for a limited set of benefits at a fixed benefit amount• Includes coverages for prescription drugs and outpatient services• Affordable:
– $50-$200 / month (employee only)– $150-$500 / month (family)
2007 Business Operations Review
105
2006 2007 % Change
New Rep Contracts 1,886 1,965 4.2%
Tier 1 Producers * 554 630 13.7%
Tier 3 Producers ** 234 291 24.4%
Average Weekly Producers 1,804 1,858 3.0%
Total Sales Reps 6,047 6,345 4.9%
Total District Managers 401 430 7.2%
New Accounts 5,046 5,506 9.1%
September
Sales Metrics
*Tier 1 producers are sales reps who have produced $1,800 in new account opener premium and one new case in their first 52 weeks with Colonial.
**Tier 3 producers are sales reps who have produced $10,000 in new account opener premium and three new cases in their first 52 weeks with Colonial.
106
Sales and Premium
$220.7$213.2
$315.1
$286.4$278.5
$285.2
$257.1
$0
$50
$100
$150
$200
$250
$300
$350
2002 2003 2004 2005 2006 9M-06 9M-07
$ Millions
New Sales
$675.2$636.7
$693.5$741.0
$787.0
$842.1
$624.9
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2002 2003 2004 2005 2006 9M-06 9M-07
$ Millions
Premium
107
Benefit and Expense Ratios
48.3%
52.5%52.4%
55.0%55.1%57.0%56.1%
30%
35%
40%
45%
50%
55%
60%
2002 2003 2004 2005 2006 9M-06 9M-07
Benefit Ratio
19.2%
18.3%
19.2%19.6%
18.4% 18.3%
19.2%
10%
12%
14%
16%
18%
20%
22%
2002 2003 2004 2005 2006 9M-06 9M-07
Expense Ratio
108
Earnings and Margin
$146.7$137.5$155.6
$168.1
$198.7
$148.2
$187.0
$0
$50
$100
$150
$200
$250
2002 2003 2004 2005 2006 9M-06 9M-07
$ MillionsPretax Operating Earnings
27.7%
23.7%23.6%
21.4%21.0%21.2%21.6%
0%
5%
10%
15%
20%
25%
30%
2002 2003 2004 2005 2006 9M-06 9M-07
Pretax Profit Margin
109
Colonial Today
110
Colonial Today
• Financially sound business with consistently strong profit margins and a disciplined approach to risk and expense management.
• Well positioned as a market leader offering enrollment services, benefits communication and a diversified product portfolio.
• Consistently providing top-quality service that is recognized by the industry and creates a market differentiator.
• Limited sensitivity to economic cycles due to broad market reach and low-premium products relative to consumer disposable income.
• Strong leadership team focused on profitable growth in the worksite market.
111
Public Sector16.1%
< 100 Emps30.5%
2,500-9,999 Emps9.1%
100-499 Emps12.2%
> 10,000 Emps22.2%
500-2,499 Emps9.9%
$20+ billion market with < 30% penetration137 million total employees
Source: Eastbridge Consulting / Bureau of Labor Statistics
Industry Market Mix
112
Public Sector26.7%
Core Commercial Market54.8%
All Other Commercial
18.3%
Public Sector20.5%
Core Commercial Market61.2%
All Other Commercial
18.5%
Core market is defined as groups with less than 500 employees.
Colonial Market Mix
New Sales By Market
2002 YTD 2007
113
Colonial Product Mix
New Sales By Product
Life19.6%
Cancer &Critical Illness
15.3%
Disability 38.7%
Accident & Health26.4%
2002
Life20.3%
Cancer &Critical Illness
16.6%
Disability 35.6%
Accident & Health
27.5%
YTD 2007
114
NYC
DC
WA
OR
NV
AZ NM
TX
OK
KS
COUT
WY
MTND
SD
NEIA
MO
AR
LA
MS
ALGA
FL
SC
NC
KY
IL
MN
WI
IN
VA
NJ
ME
VT
CT
NH
PA
RI
WV
ID
MD
TN
OH
NY
CA
$5 million - $20 million
$5 million and below
$20 million - $50 million
$50 million - $100 million
$100 million plus Alaska
Hawaii
DE
In-force premium as of 3Q07
MA
MI
Geographic Distribution
115
2008 Outlook and Opportunities
116
• Maintain focus on growth and development of agency sales system.– Recruiting and development – Expand sales support team to improve success rate of new reps and managers– Deliver consistent sales performance
• Leverage products and enrollment capabilities.– New limited benefit medical plan will enhance recruiting and sales– Expand enrollment services to increase the number of new accounts and
penetration in existing accounts– Develop and introduce new whole life and universal life products
• Enhance broker distribution and large case capabilities.
• Increase brand awareness with key audiences.– Invest in brand development, product promotion and marketing programs– Distinct brand, complementary with Unum
• Collaborate with Unum US on cross-referral opportunities.
• Expand capacity and depth of talent to drive growth initiatives.
2008 Outlook and Opportunities
Sales and Premium Growth
117
Multifaceted approach to brand development and implementation
Building Our Brand
Sales organization
Cause marketing & community involvement
Advertising
Marketing campaigns &
collateral
Home office
Trade shows
Colonial
Sales organization Home officeSales organization
Advertising
Home officeSales organization
Marketing campaigns &
collateral
Advertising
Home officeSales organization
Cause marketing & community involvement
Marketing campaigns &
collateral
Advertising
Home officeSales organization
Media relations
Trade shows Cause marketing & community involvement
Marketing campaigns &
collateral
Advertising
Home officeSales organization
118
Summary
119
• Business segment with:– Solid operational foundation– Strong profit margins and predictable cash flows
• Well positioned to capitalize on market shift to employee-paid benefits.
• Market recognizes high value of our innovative products and top- quality service.
• Investing in the business to ensure consistent, profitable sales growth.
• Solid progress toward growth and development of agency sales system.
• Leveraged ROEs expected to remain strong in the 20%-22% range.
Summary
120
Operating Segment Review
Unum UK
121
Agenda
• Review of 2007 Business Operations
• Unum UK Today
• 2008 Outlook and Opportunities
• Summary
122
Review of 2007 Business Operations
123
2007 UK Business Operations Review
• Innovative products launched and new service offerings introduced.
• Enhanced core capabilities through market leading techniques.
• Strengthened service proposition and positioned as a service leader.
• Market leader in education on the implications of legislative changes and disability issues.
• Initiated VWB pilots.
• Maintained leadership position in increasingly competitive market.
• Maintained pricing discipline and hit record profits.
124
Operating Income and Margin
Before-Tax Operating Income
$ Millions
BTOE % of Premium
* Before exceptionals
0
50
100
150
200
250
300
2002 2003 2004 2005* 2006 9M - 06 9M - 070%
5%
10%
15%
20%
25%
30%
35%
40%
BTOE BTOE % of premium Income
125
Premium Growth
$785.3
$313.8
$659.1
$477.0
$716.9
$842.8
$611.8
0
300
600
900
2002 2003 2004 2005 2006 9M - 06 9M - 07
$785.3
$313.8
$659.1
$477.0
$716.9
$842.8
$611.8
$ Millions
126
Sales Growth
$94.2
$132.3
$182.5
$128.6
$ 57.0
$ 71.1
$100.5
0
40
80
120
160
200
2002 2003 2004 2005 2006 9M - 06 9M - 07Group New Business Group Expansions Other
$ Millions
$94.2
$132.3
$182.5
$128.6
$ 57.0
$ 71.1
$100.5
127
New Sales and Existing Block by Case Size
Small (<500 lives) Mid (500 - 2,000 Lives) Large (>2,000 Lives)
Group New Sales (Premium)
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005 2006 2007 YTD
% N
ew S
ales
Existing Group Block (Premium)
0%
20%
40%
60%
80%
100%
% T
otal
Blo
ck
128
Expense Efficiency
Operating Expense Ratio
26.9%
21.4%19.6%
17.6%18.1%
23.9%
0%
5%
10%
15%
20%
25%
30%
2002 2003 2004 2005 2006 9M-07
129
Unum UK Today
130
Capabilities – Our Platform for the Future
• Service delivery strengthened, and set to be further enhanced through our “Build the Future” programme.
• Recognised as pre-eminent group risk provider in the UK; deep relationships with all major business producers.
• Strong product portfolio.– GIP - traditional strength– GL - now major player– GCI - now market leader– Individual - leading product in market
• Leading edge in risk selection and claims management expertise.
• Strong leadership team – blend of highly experienced market specialists and new talent from wider financial services.
131
Market Position
1 Unum 35% 1 Unum 56%2 Canada Life 18% 2 Canada Life 19%3 Swiss Life 16% 3 Legal and General 8%4 Others 9% 4 Aegon 5%5 Legal and General 8% 5 Norwich Union 4%
1 Canada Life 32% 1 Canada Life 32%2 Others 20% 2 Legal and General 22%3 Swiss Life 18% 3 Unum 18%4 Legal and General 15% 4 Norwich Union 13%5 Unum 4% 5 Aegon 7%
1 Swiss 55% 1 Unum 25%2 Aegon 18% 2 Legal and General 25%3 Unum 13% 3 Aegon 23%4 Canada Life 7% 4 Canada Life 15%5 Legal and General 2% 5 BUPA 8%
GCI 2002 GCI 2006
GIP 2002 GIP 2006
GL 2002 GL 2006
132
Business Mix
Group Long-termIncome Protection
78.1%
Group Life17.7%
Other4.1%
YTD-2007Earned Premium$ 716.9 million
Group Long-termIncome Protection
77.8%
Group Life8.6%
Other13.5%
2002Earned Premium$ 313.8 million
133
Resilience
Diversification
• UK business monitors and manages accumulation of risk.• Strategic focus on new revenue growth (eg, VWB) will realise
further diversification benefits.
Positioning
• Experience suggests that UK business resilient to softer economy:– Strong growth achieved despite 2001/2002 economic slow down– Workers’ benefits protected in employment contracts– UK business coverage often relates to senior executives rather than the whole
workforce
• Performance based on strong claims management and pricing discipline.
134
2008 Outlook and Opportunities
135
Focus on Growth
• Maintain pricing discipline whilst delivering profitable sales growth and persistency.
• Increase UK market penetration – initiatives to deliver persistency and sales goals:– Launch new product variants to target new market sectors– Restructure GL business– Market new propositions attractive to large, self-insured employers– Establish proactive cross-sell/up-sell campaigns– Add new service offerings
• Leverage US experience to develop a Voluntary Worksite Benefits proposition as a strategic development.
• Maximise short-term growth opportunities, including those presented by legislative changes.
136
Present
Future
Tax Benefits available for the purchase of certain products
Preferential Terms offered, e.g. discounts and reduced underwriting
Simple Purchase of products and services paid for through future wages
Employers permitted to give financial promotions in the workplace.
Regulators pressuring employers to increase financial literacy of workforce.
Unions and Staff Associations are seeking new ways of supporting their members through added value services.
Pensions Review favouring introduction of Personal Accounts in 2011/2012 is likely to provoke a review by employers of existing staff benefits.
Self Provision rather than dependence on State is increasing in emphasis.
Drivers
Scope of drivers is widening
Future Market Change
137
Voluntary Workplace Benefits Initiative
Opportunity to reach new customers and leverage Unum Group assets
• VWB is under penetrated, with limited foothold in the UK.– Relatively small market– Few specialist enrollers/VWB specialists
• VWB offers the opportunity of untapped growth potential.– Estimated current value: £700 million– Worksite penetration: 4-5% of life and pension market– Consumer research estimates 60% of workers have potential interest in worksite
products– Less than 50% of companies have ever been approached
• Unum UK’s likely operating model:– Initially distribute through a selected few working partners– Leverage off US systems and know-how
138
Summary
139
Key Messages
• Reshaped the business to create the UK’s pre-eminent Group Risk provider.
• Positioned as product and service provider.
• Enhanced core capabilities in risk selection and claims management expertise.
• Positioned to leverage parent capabilities to develop UK voluntary worksite benefits market.
• Built a platform for the future that we are confident will be profitable, resilient and conducive to growth.
140
Concluding Comments
141
Concluding Comments
• Strong Operating Performance
• Completed Claims Reassessment Process
• Completed Closed Block Securitization
• Formalized Capital Management Guidelines– Announced $700 million share repurchase
• Solid Plans for 2008
142
Outlook
Short-term Guidance: 2008 Expectations
*Assumes ATOE growth of 9% - 10% and mid-year execution of announced share repurchase.
Earnings Per Share $2.35 to $2.40*
Return on Equity: Core 15.5% to 16.0%
Total Company 11.0% to 11.5%
Capital PositionLiquidity >$300mmLeverage 24% - 25%
RBC 315% - 325%
143
Non-GAAP Reconciliation
144
Reconciliation of Non-GAAP Financial Measures
Regulatory Unum UK Debt Regulatory BrokerReassessment Reserve Extinguishment Reassessment Compensation
As Reported Charge Release As Adjusted As Reported Cost Charge Settlement As Adjusted % Change2007 - 2006
Operating Income (Loss) by Segment Before Income Tax and Net Realized Investment Gain (Loss)Unum US
Group Income Protection 63.7$ (66.2)$ -$ 129.9$ (336.2)$ -$ (364.2)$ -$ 28.0$ Group Life and Accidental Death and Dismemberment 157.1 - - 157.1 131.7 - - - 131.7 Supplemental and Voluntary 178.2 - - 178.2 164.3 - - - 164.3 Total Unum US 399.0 (66.2) - 465.2 (40.2) - (364.2) - 324.0
Unum UK 253.8 - 16.6 237.2 176.0 - - - 176.0 Colonial 187.0 - - 187.0 148.2 - - - 148.2
Primary Operating Segments 839.8 (66.2) 16.6 889.4 284.0 - (364.2) - 648.2 Individual Income Protection - Closed Block 94.5 13.2 - 81.3 42.6 - (47.2) - 89.8 Other 11.2 - - 11.2 18.0 - - - 18.0 Corporate (134.3) - - (134.3) (146.3) (23.1) - (18.5) (104.7) Operating Income by Segment 811.2$ (53.0)$ 16.6$ 847.6$ 198.3$ (23.1)$ (411.4)$ (18.5)$ 651.3$ 30%
(in millions) benefit ratio (in millions) benefit ratio (in millions) benefit ratio (in millions) benefit ratio
Unum US Group Income ProtectionPremium Income 609.3$ 615.7$ 619.8$ 626.0$ Benefits and Change in Reserves for Future Benefits 641.2 105.2% 858.4 139.4% 664.4 107.2% 606.0 96.8%Regulatory Reassessment Charge (76.5) (276.4) (72.8) (27.3) Benefits and Change in Reserves for Future Benefits, Excluding Regulatory Reassessment Charge 564.7 92.7% 582.0 94.5% 591.6 95.5% 578.7 92.4%
Three Months EndedJune 30, 2007 September 30, 2006
Three Months EndedMarch 31, 2006
Three Months EndedSeptember 30, 2005
Nine Months Ended Nine Months EndedSeptember 30, 2007 September 30, 2006
(in millions)(in millions)
Three Months Ended
145
Reconciliation of Non-GAAP Financial Measures
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006 3/31/2006 12/31/2005
Net Income (Loss) 0.52$ 0.43$ 0.51$ 0.80$ (0.19)$ 0.38$ 0.23$ 0.43$ Net Realized Investment Gain (Loss) (0.08) 0.02 (0.01) - 0.01 (0.01) - - Income from Discontinued Operations - - 0.02 0.01 - 0.01 0.01 0.01 After-tax Operating Income (Loss) from Continuing Operations Excluding Net Realized Investment Gain (Loss) 0.60 0.41 0.50 0.79 (0.20) 0.38 0.22 0.42 UK Reserve Release, Net of Tax 0.03 - - - - - - - UK Tax Law Change 0.01 - - - - - - - Regulatory Reassessment Charges, Net of Tax - (0.10) - - (0.62) - (0.17) - Special Tax Items - - - 0.28 - - - 0.03 Broker Compensation Settlement, Net of Tax - - - - (0.04) - - - Cost Related to Early Retirement of Debt, Net of Tax - - - (0.01) - (0.04) (0.01) - Contract Termination Fee, Net of Tax - - - - - - - (0.02) Litigation Costs, Net of Tax - - - - - - - (0.01) After-tax Operating Income from Continuing Operations Excluding Net Realized Investment Gain (Loss) and Special Items 0.56$ 0.51$ 0.50$ 0.52$ 0.46$ 0.42$ 0.40$ 0.42$
9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004
Net Income (Loss) 0.17$ 0.55$ 0.49$ 0.45$ 0.55$ 0.02$ (1.91)$ Net Realized Investment Gain (Loss) (0.14) 0.13 (0.01) 0.06 0.14 (0.18) 0.05 Income from Discontinued Operations 0.01 - - 0.01 0.01 (0.23) 0.03 After-tax Operating Income (Loss) from Continuing Operations Excluding Net Realized Investment Gain (Loss) 0.30 0.42 0.50 0.38 0.40 0.43 (1.99) Regulatory Reassessment Charges, Net of Tax (0.16) - - (0.29) - - - Special Tax Items 0.03 - 0.10 0.17 - - - SFAS No. 91 Adjustment, Net of Tax - - - 0.07 - - - Boston Seguros Restructuring, Net of Tax - - - 0.01 - - - Individual Income Protection - Closed Block Restructuring, Net of Tax - - - - - - (2.37) Gain on Sale of Netherlands Branch, Net of Tax 0.01 - - - - - - After-tax Operating Income from Continuing Operations Excluding Net Realized Investment Gain (Loss) and Special Items 0.42$ 0.42$ 0.40$ 0.42$ 0.40$ 0.43$ 0.38$
* Amounts per diluted common share
Three Months Ended *
Three Months Ended *
146
As of As of As of As of As of As of As of As ofSeptember 30 June 30 March 31 December 31 September 30 June 30 March 31 December 31
2007 2007 2007** 2006 2006 2006 2006 2005
Total Stockholders' Equity, As Adjusted 7,347.2$ 7,158.2$ 6,705.8$ 6,989.8$ 6,725.4$ 6,800.0$ 6,108.2$ 6,049.9$ Net Unrealized Gain on Securities 346.6 78.0 490.3 534.8 687.9 60.7 256.2 1,040.7 Net Gain on Cash Flow Hedges 137.0 135.4 180.5 194.2 181.1 126.2 203.6 273.3 Total Stockholders' Equity (Book Value) 7,830.8$ 7,371.6$ 7,376.6$ 7,718.8$ 7,594.4$ 6,986.9$ 6,568.0$ 7,363.9$
Average Equity, As Adjusted 7,252.7$ 6,932.0$ 6,636.6$ 6,857.6$ 6,762.7$ 6,454.2$ 6,079.0$
** Average adjusted for cumulative effect of accounting principle changes of $422.5 million effective January 1, 2007
Operating Operating Income (Loss) Income (Loss)
Before Net Allocated Before Net AnnualizedAverage Average Average Realized After-tax After-tax Realized Leveraged
Allocated Allocated Leveraged Investment Special Item Interest Investment Return Equity Debt Equity Gain/Loss Adjustments Expense Gain/Loss On Equity
Three Months Ended September 30, 2007Unum US 4,527.6$ (1,194.1)$ 3,333.5$ 99.4$ -$ (14.1)$ 85.3$ 10.2%Unum UK 962.1 (235.1) 727.0 75.0 (13.3) (2.9) 58.8 32.4%Colonial 835.1 (204.1) 631.0 40.6 - (2.4) 38.2 24.2%Core Operations 6,324.8 (1,633.3) 4,691.5 215.0 (13.3) (19.4) 182.3 15.5%Individual Income Protection - Closed Block 2,627.2 (641.9) 1,985.3 19.1 - (7.7) 11.4 2.3%Corporate and Other (1,699.3) 2,275.2 575.9 (17.1) - 27.1 10.0 6.9%Total 7,252.7$ -$ 7,252.7$ 217.0$ (13.3)$ -$ 203.7$ 11.2%
Three Months Ended June 30, 2007Core Operations 6,183.9$ (1,660.4)$ 4,523.5$ 159.4$ 43.1$ (19.6)$ 182.9$ 16.2%Individual Income Protection - Closed Block 2,657.3 (675.4) 1,981.9 27.8 (8.6) (8.1) 11.1 2.2%Corporate and Other (1,909.2) 2,335.8 426.6 (40.2) - 27.7 (12.5) -11.7%Total 6,932.0$ -$ 6,932.0$ 147.0$ 34.5$ -$ 181.5$ 10.5%
(in millions)
(in millions)
Reconciliation of Non-GAAP Financial Measures
147
Operating Operating Income (Loss) Income (Loss)
Before Net Allocated Before Net AnnualizedAverage Average Average Realized After-tax After-tax Realized Leveraged
Allocated Allocated Leveraged Investment Special Item Interest Investment Return Equity Debt Equity Gain/Loss Adjustments Expense Gain/Loss On Equity
Three Months Ended March 31, 2007Core Operations 6,085.9$ (1,734.5)$ 4,351.4$ 186.4$ -$ (21.0)$ 165.4$ 15.2%Individual Income Protection - Closed Block 2,647.2 (714.7) 1,932.5 14.6 - (8.8) 5.8 1.2%Corporate and Other (2,096.5) 2,449.2 352.7 (26.4) - 29.8 3.4 3.9%Total 6,636.6$ -$ 6,636.6$ 174.6$ -$ -$ 174.6$ 10.5%
Three Months Ended December 31, 2006Core Operations 6,443.0$ (1,791.7)$ 4,651.3$ 272.9$ (81.7)$ (20.6)$ 170.6$ 14.7%Individual Income Protection - Closed Block 2,627.2 (711.2) 1,916.0 18.7 - (8.1) 10.6 2.2%Corporate and Other (2,212.6) 2,502.9 290.3 (17.9) (12.2) 28.7 (1.4) -1.9%Total 6,857.6$ -$ 6,857.6$ 273.7$ (93.9)$ -$ 179.8$ 10.5%
Three Months Ended September 30, 2006Core Operations 6,337.8$ (1,741.1)$ 4,596.7$ (29.6)$ 189.4$ (19.5)$ 140.3$ 12.2%Individual Income Protection - Closed Block 2,610.3 (717.1) 1,893.2 (3.5) 22.1 (8.0) 10.6 2.2%Corporate and Other (2,185.4) 2,458.2 272.8 (35.3) 12.7 27.5 4.9 7.2%Total 6,762.7$ -$ 6,762.7$ (68.4)$ 224.2$ -$ 155.8$ 9.2%
Three Months Ended June 30, 2006Core Operations 6,260.0$ (1,851.9)$ 4,408.1$ 143.0$ -$ (21.6)$ 121.4$ 11.0%Individual Income Protection - Closed Block 2,582.1 (763.9) 1,818.2 21.6 - (8.9) 12.7 2.8%Corporate and Other (2,387.9) 2,615.8 227.9 (37.6) 11.6 30.5 4.5 7.9%Total 6,454.2$ -$ 6,454.2$ 127.0$ 11.6$ -$ 138.6$ 8.6%
Three Months Ended March 31, 2006Core Operations 6,157.7$ (2,062.5)$ 4,095.2$ 89.7$ 47.3$ (23.2)$ 113.8$ 11.1%Individual Income Protection - Closed Block 2,549.0 (853.8) 1,695.2 9.5 8.6 (9.6) 8.5 2.0%Corporate and Other (2,627.7) 2,916.3 288.6 (29.3) 3.4 32.8 6.9 9.6%Total 6,079.0$ -$ 6,079.0$ 69.9$ 59.3$ -$ 129.2$ 8.5%
(in millions)
Reconciliation of Non-GAAP Financial Measures
148
As of As of As of As ofSeptember 30 December 31 December 31 March 31
2007 2006 2005 2003
Debt 2,460.2$ 2,659.6$ 3,261.6$ 2,421.2$ Exclude: 50% of Adjustable Conversion Rate Equity Units (ACEs) - 150.0 437.5 - Tailwind Non-recourse Debt 115.0 130.0 - - Debt, As Adjusted 2,345.2$ 2,379.6$ 2,824.1$ 2,421.2$
Debt 2,460.2$ 2,659.6$ 3,261.6$ 2,421.2$ Total Stockholders' Equity 7,830.8 7,718.8 7,363.9 6,545.3 Exclude: Net Unrealized Gain on Securities and Cash Flow Hedges 483.6 729.0 1,314.0 951.7 Tailwind's Capital and Non-recourse Debt 133.3 162.0 - - Total Debt and Stockholders' Equity, As Adjusted 9,674.1$ 9,487.4$ 9,311.5$ 8,014.8$
Leverage Ratio 24.2% 25.1% 30.3% 30.2%
Twelve MonthsEnded BTOE as a
12/31/2005 Percent of(in millions) Premium Income
Unum UK Segment Operating Income Before Income Tax and Net Realized Investment Gain (Loss), As Reported 187.7$ 23.9% Exclude Gain on Sale of Netherlands Branch 5.7 As Adjusted 182.0$ 23.2%
(in millions)
Reconciliation of Non-GAAP Financial Measures