UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNESEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9254
UNUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 01-0405657
(State or other jurisdiction
of incorporation or organization) (I.R.S. employer identification no.)
2211 CONGRESS STREET, PORTLAND, MAINE 04122
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (207) 770-2211
NONE
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNESEPTEMBER 30, 1997
COMMON STOCK, $0.10 PAR VALUE 139,533,374138,763,079 SHARES
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income - Three Months and
SixNine Months Ended JuneSeptember 30, 1997, and 1996 (Unaudited)
Consolidated Balance Sheets as of JuneSeptember 30, 1997,
(Unaudited) and December 31, 1996
Consolidated Statements of Cash Flows - SixNine Months
Ended JuneSeptember 30, 1997, and 1996 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Independent Accountant's Review Report
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ -----------------------------------
(Unaudited - Dollars in millions, except
per common share data)
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
REVENUES
Premiums $768.7 $762.3 $1,535.0 $1,530.4$ 813.5 $ 796.2 $2,348.5 $2,326.6
Investment income 164.9 212.2 329.7 421.9163.5 207.7 493.2 629.6
Net realized investment gains (losses) (3.0) (3.1) (5.2) 0.42.7 1.6 (2.5) 2.0
Fees and other income 43.9 19.1 158.0 39.245.3 17.6 203.3 56.8
- -------------------------------------------------------------------------------
Total revenues 974.5 990.5 2,017.5 1,991.91,025.0 1,023.1 3,042.5 3,015.0
BENEFITS AND EXPENSES
Benefits to policyholders 573.9 563.5 1,152.5 1,146.4617.0 605.2 1,769.5 1,751.6
Interest credited 18.9 50.0 52.3 101.416.4 50.2 68.7 151.6
Operating expenses 188.1 199.7 370.3 380.2193.7 216.7 564.0 596.9
Commissions 92.6 89.8 182.9 183.487.4 89.4 270.3 272.8
Increase in deferred policy
acquisition costs (36.0) (28.9) (59.4) (48.9)(31.3) (11.6) (90.7) (60.5)
Interest expense 10.6 10.4 20.8 20.79.9 31.2 30.6
- -------------------------------------------------------------------------------
Total benefits and expenses 848.1 884.5 1,719.4 1,783.2893.6 959.8 2,613.0 2,743.0
- -------------------------------------------------------------------------------
Income before income taxes 126.4 106.0 298.1 208.7131.4 63.3 429.5 272.0
INCOME TAXES (BENEFIT)
Current 17.0 17.1 35.6 43.829.7 20.3 65.3 64.1
Deferred 21.8 15.0 59.9 18.910.2 (1.0) 70.1 17.9
- -------------------------------------------------------------------------------
Total income taxes 38.8 32.1 95.5 62.739.9 19.3 135.4 82.0
- -------------------------------------------------------------------------------
NET INCOME $ 87.6 $73.991.5 $ 202.644.0 $ 146.0294.1 $ 190.0
===============================================================================
NET INCOME PER COMMON SHARE $ 0.63 $0.500.66 $ 1.440.30 $ 1.002.10 $ 1.30
===============================================================================
See notes to consolidated financial statements.
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q
C O N S O L I D A T E D B A L A N C E S H E E T S
JuneSeptember 30, 1997 December 31,
(Dollars in millions) (Unaudited) 1996
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments
Fixed maturities available for sale-at fair value
(amortized cost: 1997-$6,664.0;6,757.9; 1996-$6,656.7) $ 6,916.27,126.8 $ 6,942.7
Equity securities available for sale-at fair value
(cost: 1997-$22.2;22.7; 1996-$23.8) 32.536.2 31.3
Mortgage loans 1,120.91,143.1 1,132.1
Real estate, net 231.2231.1 248.1
Policy loans 140.9130.7 232.9
Other long-term investments 5.81.5 14.2
Short-term investments 203.2182.1 123.4
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total investments 8,650.78,851.5 8,724.7
Cash 39.045.6 77.0
Accrued investment income 158.2148.1 166.1
Premiums due 278.7277.9 252.4
Deferred policy acquisition costs 902.7932.3 844.2
Property and equipment, net 192.5197.0 181.0
Reinsurance receivables 1,228.11,303.2 1,113.8
Deposit assets 706.4807.2 2,846.6
Other assets 521.8482.4 518.0
Separate account assets 59.751.5 743.7
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets $12,737.8$13,096.7 $15,467.5
===============================================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Future policy benefits $ 1,955.61,960.3 $ 1,881.1
Unpaid claims and claim expenses 5,485.35,678.2 5,289.3
Other policyholder funds 1,275.01,204.6 3,533.6
Income taxes
Current 46.537.9 61.3
Deferred 397.4436.8 341.8
Notes payable 544.4632.0 526.9
Other liabilities 733.6749.0 826.7
Separate account liabilities 59.751.5 743.7
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,497.510,750.3 13,204.4
Stockholders' equity
Preferred stock (par value $0.10 per share, authorized
10,000,000 shares, none issued)
Common stock (par value $0.10 per share, authorized
240,000,000 shares, issued 199,975,916 sharesshares) 20.0 10.0
Additional paid-in capital 1,109.51,113.7 1,103.4
Unrealized gains on available for sale securities, net 75.5151.5 82.3
Unrealized foreign currency translation adjustment (10.1)(16.8) (1.2)
Retained earnings 2,034.42,106.0 1,871.4
- --------------------------------------------------------------------------------
3,229.3-------------------------------------------------------------------------------
3,374.4 3,065.9
Less:
Treasury stock, at cost (1997- 60,442,54261,212,837 shares;
1996- 56,331,188 shares) 973.01,012.8 792.2
Restricted stock deferred compensation 16.015.2 10.6
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,240.32,346.4 2,263.1
Total liabilities and stockholders' equity $12,737.8$13,096.7 $15,467.5
===============================================================================================================================================================
See notes to consolidated financial statements.
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
SixNine Months Ended
JuneSeptember 30,
----------------------------------
(Unaudited - Dollars in millions) 1997 1996
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $202.6 $146.0$294.1 $ 190.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in future policy benefits and unpaid
claims and claim expenses 291.7 315.4457.6 512.2
Increase in amounts receivable under reinsurance agreements (116.2) (98.7)(184.5) (116.4)
Increase in income tax liability 45.9 22.245.4 25.9
Increase in deferred policy acquisition costs (60.2) (48.9)
Decrease(90.9) (60.5)
Increase in deposit assets 29.8(56.6) --
Recognition of deferred gain on sale of tax-sheltered
annuities (67.4)(69.1) --
Other (88.5) (14.3)(29.0) 79.5
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 237.7 321.7367.0 630.7
INVESTING ACTIVITIES:
Maturities of fixed maturities available for sale 172.7 453.9234.3 642.0
Sales of fixed maturities available for sale 426.4 820.9506.7 2,279.8
Sales and maturities of other investments 111.9 115.9162.4 198.2
Purchases of fixed maturities available for sale (599.1) (1,474.7)(866.4) (1,601.8)
Purchases of other investments (89.9) (107.5)(154.4) (160.5)
Net (increase) decreaseincrease in short-term investments (79.6) 155.5(59.5) (1,642.8)
Net additions to property and equipment (23.2) (28.2)(26.6) (38.8)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (80.8) (64.2)(203.5) (323.9)
FINANCING ACTIVITIES:
Deposits and interest credited to investment contracts 221.3 304.1252.1 452.6
Maturities and withdrawals from investment contracts (213.4) (494.4)(273.7) (670.3)
Dividends to stockholders (39.5) (39.5)(59.4) (59.6)
Treasury stock acquired (197.1) (8.8)(240.8) (23.6)
Repayment of notes payable (15.0) (15.0)
Net increase (decrease) in short-term debt 32.4 (10.6)120.0 (5.0)
Other 16.9 10.222.7 14.3
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (194.4) (254.0)(194.1) (306.6)
Effect of exchange rate changes on cash (0.8) (0.5)
(0.6)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)decrease in cash (38.0) 2.9(31.4) (0.3)
Cash at beginning of year 77.0 42.5
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 39.045.6 $ 45.4
================================================================================42.2
===============================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 46.860.8 $ 32.147.2
Interest $ 20.928.0 $ 19.826.1
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
As discussed in Note 4, consent for assumption reinsurance has been given by
contractholders and participants owning approximately 84%87% of assets under
management related to the tax-sheltered annuity business UNUM sold in 1996. In
connection with the consents received through JuneSeptember 30, 1997, UNUM reduced
its deposit assets by $2,110.4$2,147.0 million, policy loan assets by $99.4$102.1 million,
other policyholder fund liabilities by $2,266.5$2,307.3 million, and separate account
assets and liabilities by $485.1$505.6 million.
===============================================================================================================================================================
See notes to consolidated financial statements.
UNUM Corporation and Subsidiaries
Form 10-Q
Notes to Consolidated Financial Statements (Unaudited)
JuneSeptember 30, 1997
NOTE 1. BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the requirements of Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. In the opinion of management,
all adjustments, consisting of normal recurring accruals and those discussed
elsewhere in the Form 10-Q, considered necessary for a fair presentation have
been included in the financial statements. Interim results for the three month
and sixnine month periods ended JuneSeptember 30, 1997, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997. For
further information, refer to the audited consolidated financial statements and
footnotes included in the 1996 annual report to stockholders of UNUM Corporation
and subsidiaries ("UNUM").
NOTE 2. COMMON STOCK SPLIT
- ---------------------------
On March 14, 1997, UNUM's Board of Directors declared a two-for-one common stock
split, subject to shareholder approval of a proposal to increase the number of
authorized shares of common stock. On May 9, 1997, UNUM's shareholders approved
an increase in the number of authorized shares of common stock to 240 million
from 120 million. The stock split was completed on June 2, 1997, through the
distribution of one additional share for each share of stock already issued, to
holders of record on May 19, 1997. Accordingly, all numbers of common shares
and per common share data have been restated to reflect the stock split. Par
value of $10.0 million was transferred to common stock from additional paid-in
capital in second quarter 1997.
NOTE 3. ACCOUNTING CHANGE
- --------------------------
Effective January 1, 1997, UNUM adopted Financial Accounting Standard ("FAS")
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which established accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. The statement provides guidance for recognition or derecognition
of assets and liabilities, focusing on the concepts of control and
extinguishment. The adoption of FAS 125 did not have a material effect on
UNUM's results of operations or financial position.
NOTE 4. SALE OF TAX-SHELTERED ANNUITY BUSINESS
- ----------------------------------------------
On October 1, 1996, UNUM Life Insurance Company of America ("UNUM America")
and First UNUM Life Insurance Company ("First UNUM") closed the sale of their
respective group tax-sheltered annuity ("TSA") businesses to The Lincoln
National Life Insurance Company and Lincoln Life & Annuity Company of New York
("Lincoln"), both subsidiaries of Lincoln National Corporation. The sale
involved approximately 1,700 group contractholders and assets under management
of approximately $3.3 billion. The contracts were initially reinsured on an
indemnity basis. Upon consent of the TSA contractholders and participants, the
contracts are considered reinsured on an assumption basis, legally releasing
UNUM America and First UNUM from future contractual obligation to the respective
contractholders and participants.
To effect the sale of the TSA business, UNUM transferred into a trust account
held for the benefit of Lincoln approximately $2,690 million of assets. The
amount of assets in the trust increases or decreases in conjunction with the on-
going activity in participant accounts, and assets are released from the trust
to Lincoln upon consents for assumption reinsurance. UNUM has recorded a
deposit asset in its Consolidated Balance Sheets representing the assets
remaining in the trust, which supports the TSA contracts of those
contractholders and participants that have not given consent for assumption
reinsurance. At JuneSeptember 30, 1997, the deposit asset related to the TSA
transaction was approximately $494$446 million.
The sale resulted in a deferred pretax gain of $80.8 million, which is being
recognized in income in proportion to consents for assumption reinsurance.
Through JuneSeptember 30, 1997, consent for assumption reinsurance has been provided
by TSA contractholders and participants owning approximately 84%87% of assets under
management.
Historical results of the TSA business included in UNUM's Consolidated
Statements of Income were as follows:
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ ---------------------------------
(Dollars in millions, except per
common share data) 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Revenues $20.2 $52.3 $106.3 $108.8$ 9.9 $50.6 $116.2 $159.4
Net income $ 6.11.1 $ 2.91.9 $ 44.645.7 $ 7.59.4
Net income per common share $0.04 $0.02$0.01 $0.01 $ 0.320.33 $ 0.050.06
================================================================================
The results shown above for the three month period ended JuneSeptember 30, 1997,
include $9.4$1.7 million of revenues, reported as fees and other income, $6.1$1.1
million of net income and $0.04$0.01 of net income per common share related to the
recognition of approximately 12%3% of the deferred pretax gain on the TSA sale.
The results shown above for the sixnine month period ended JuneSeptember 30, 1997,
include $67.4$69.1 million of revenues, reported as fees and other income, $43.6$44.7
million of net income and $0.31$0.32 of net income per common share related to the
recognition of approximately 84%87% of the deferred pretax gain on the TSA sale.
NOTE 5. INDIVIDUAL DISABILITY REINSURANCE
- ------------------------------------------
On October 23, 1996, UNUM announced the execution of a definitive reinsurance
agreement between UNUM America and Centre Life Reinsurance Limited ("Centre
Re"), a Bermuda-based reinsurance specialist, for reinsurance coverage of the
active life reserves of UNUM America's existing United States non-cancellable
individual disability ("ID") block of business. This agreement does not
reinsure any claims incurred prior to January 1, 1996. The agreement follows
UNUM's announcement in late 1994 that it would no longer market the non-
cancellable form of ID coverage in the United States.
The agreement is a finite reinsurance arrangement that transfers liabilities to
CenterCentre Re based on the level of statutory reserves. CenterCentre Re has an obligation
to fundabsorb losses within a defined risk layer, while UNUM must fund an experience
layer representing the difference between reserves related to the reinsured
block, based on generally accepted accounting principles ("GAAP"), and the
bottom of Centre Re's defined risk layer. Within this experience layer, UNUM
retains the earnings risk related to potential adverse claims experience upfrom the
reinsured block. Under the agreement, UNUM funds a trust account, initially
established in late 1996, with assets equal to a certain threshold. This thresholdthe amount representsof GAAP reserves
related to the existencereinsured block plus the amount of anits experience layer. The
value of UNUM's experience layer increases or decreases in conjunction with a valuethe
underlying operating results of approximately $213 million at June 30, 1997.the reinsured block. Additionally, realized
gains or losses on assets sold, and unrealized gains or losses on marketable
securities held in the trust and the related claim reserves, affect the
valuation of the experience layer. UNUM recordsreflects the carrying value of the
experience layer onin its Consolidated Balance SheetsSheet as a deposit asset. UNUM's
obligation underasset, which at
September 30, 1997, totaled approximately $280 million. Changes in the
agreement is funded by a trust account established in late
December 1996. Net cash flowsexperience layer derived from the underlying operating results of the reinsured
block are transferred to/reflected in fees and other income and realized gains or losses from
thesales of trust account and, together with changes in reserve levels, determine the
value of UNUM's deposit asset. Changes in the deposit assetassets are reflected as realized investment gains (losses) in
UNUM's Consolidated Statement of IncomeIncome. Changes in the experience layer
resulting from unrealized gains or losses on marketable securities held in the
trust and the related claim reserves are reflected as fees and other income.unrealized gains or losses
in the equity section of UNUM's Consolidated Balance Sheet.
NOTE 6. BUSINESS RESTRUCTURING AND OTHER CHARGES
- -------------------------------------------------
During the third quarter of 1996, UNUM recorded a restructuring charge related
to the merger of Commercial Life Insurance Company ("Commercial Life") into
UNUM America, which increased operating expenses in the Consolidated Statement
of Income by $7.2 million. The charge decreased net income by $4.7 million, or
$0.03 per share, for the three and nine month periods ended September 30, 1996.
The restructuring charge was taken to recognize $2.8 million of future severance
costs for 120 employees and $4.4 million of lease exit costs, primarily related
to the merger.
NOTE 7. INTANGIBLE ASSET WRITE-OFFS AND FUTURE LOSS RESERVES
- -------------------------------------------------------------
In connection with the merger of Commercial Life into UNUM America, the sale of
UNUM's TSA businesses, as well as UNUM's continued efforts to strengthen its
focus on its core products, the company initiated a review of certain products,
which resulted in the recognition of pretax charges totaling $39.4 million
during third quarter 1996. These charges reduced income before income taxes by
$13.1 million in the Disability Insurance segment, $11.3 million in the Special
Risk Insurance segment, and $15.0 million in the Retirement Products segment for
the three months and nine months ended September 30, 1996. On an after-tax
basis the charges reduced net income by $26.3 million, or $0.18 per share, for
both periods.
The charges include the write-off of certain intangible assets, primarily
deferred acquisition costs, totaling $17.0 million. These intangible assets
were deemed unrecoverable primarily due to the expectation of continued losses
in the Association Group disability business. Additionally, in conjunction
with the completion of a review of UNUM's discontinued product portfolio, a
$22.4 million charge was taken to establish a reserve for the present value of
expected future losses on certain discontinued products. Future losses for
these products will be charged to the reserve at the time the losses are
realized. The products incorporated in the charge consist of certain
discontinued special risk, retirement and medical products. UNUM continues to
pursue the sale of some of these discontinued product lines.
NOTE 8. EARNINGS PER SHARE
- ---------------------------
The weighted average number of shares outstanding used to calculate earnings per
share was approximately 139,399,000139,231,000 and 146,621,000146,363,000 for secondthird quarter 1997 and
1996, respectively. The weighted average shares outstanding for the sixnine months
ended JuneSeptember 30, 1997, and 1996, were approximately 140,885,000140,328,000 and
146,428,000,146,406,000, respectively. The assumed exercise of outstanding stock options
would not result in a material dilution of earnings per share.
NOTE 7.9. DIVIDENDS TO STOCKHOLDERS
- ----------------------------------
On JulyOctober 10, 1997, UNUM's Board of Directors declared a fourteen and one
quarter cents per share cash dividend. The dividend is payable on August 15,November 21,
1997, to common stockholders of record at the close of business on July 28,October 27,
1997. During the first sixnine months of 1997, cash dividends of fourteen and one
quarter cents per share were paid August 15 and May 16, and thirteen and three
quarter cents per share werewas paid on May 16 and
February 21, respectively.21.
NOTE 8.10. CAPITAL STOCK
- ---------------------------------------------
Effective October 23, 1996, UNUM's Board of Directors approved an expansion of
the Company's stock repurchase program to 12.0 million shares by authorizing an
additional 7.4 million shares. At JuneSeptember 30, 1997, approximately 3.82.8 million
shares of common stock remained authorized for repurchase. Through the first
sixnine months of 1997, UNUM acquired approximately 5.26.2 million shares of its
common stock in the open market at an aggregate cost of $197.1$240.8 million.
NOTE 9.11. LITIGATION
- ---------------------------------------
In the normal course of its business operations, UNUM is involved in litigation
from time to time with claimants, beneficiaries and others, and a number of
lawsuits were pending at JuneSeptember 30, 1997. In some instances, these
proceedings include claims for punitive damages and similar types of relief in
unspecified or substantial amounts, in addition to amounts for alleged
contractual liability or other compensatory damages. In the opinion of
management, the ultimate liability, if any, arising from this litigation is not
expected to have a material adverse effect on the consolidated financial
position or the consolidated operating results of UNUM.
On December 29, 1993, UNUM filed a suit in the United States District Court for
the District of Maine seeking a federal income tax refund. The suit is based on
a claim for a deduction in certain prior tax years for $652 million in cash and
stock distributed to policyholders in connection with the 1986 conversion of
Union Mutual Life Insurance Company to a stock company. UNUM has fully paid,
and provided for in prior years' financial statements, the tax at issue in this
litigation. On May 23, 1996, the District Court issued its decision that the
distribution in question was not a deductible expenditure. UNUM believes its
claims are meritorious and has appealed the decision to the United States Court
of Appeals for the First Circuit. The ultimate recovery, if any, cannot be
determined at this time.
NOTE 10.12. NEW ACCOUNTING PRONOUNCEMENTS
- ---------------------------------------
In March 1997, the Financial Accounting Standards Board ("FASB") issued FAS
No. 128, "Earnings Per Share," which is intended to simplify the computation
and presentation of earnings per share ("EPS"). FAS 128 supersedes Accounting
Principles Board ("APB") Opinion No. 15, "Earnings Per Share." FAS 128 will
eliminate the concept of "primary" EPS and require dual presentation of
"basic" and "diluted" EPS. Diluted EPS under FAS 128 is similar to "fully
diluted" EPS as defined by APB 15. UNUM is required to adopt FAS 128 effective
December 31, 1997. As stated in Note 6,8, under the caption "Earnings Per
Share," the assumed exercise of UNUM's outstanding stock options does not
result in a material dilution of EPS.
In March 1997, the FASB issued FAS No. 129, "Disclosures of Information About
Capital Structure," which clarifies disclosure requirements related to the
type, and nature, of securities contained in an entity's capital structure.
UNUM is required to adopt FAS 129 effective December 31, 1997.
In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive income
and its components in a financial statement with the same prominence as other
financial statements. Comprehensive income is defined as net income adjusted
for changes in stockholders' equity resulting from events other than net income
or transactions related to an entity's capital instruments. UNUM is required to
adopt FAS 130 effective January 1, 1998, with reclassification of financial
statements for earlier years required.
In June 1997, the FASB issued FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
information about operating segments. Generally, FAS 131 requires that
financial information be reported on the basis that is used internally for
evaluating performance. UNUM is required to adopt FAS 131 effective January 1,
1998, and comparative information for earlier years must be restated. This
statement does not need to be applied to interim financial statements in the
initial year of application. UNUM has
not yet determinedis currently considering what impact FAS 131
may have on its current segment reporting structure.
NOTE 11.13. NEW ACCOUNTING POLICY DISCLOSURE
- -----------------------------------------
The United States Securities and Exchange Commission ("SEC") recently issued
Rule 4-08(n) under Regulation S-X, which requires additional disclosures
regarding accounting policies for derivative instruments. The additional
disclosures, as shown below, are required for SEC filings that include financial
statements for fiscal periods ending after June 15, 1997.
UNUM periodically uses options, futures, forward exchange contracts and interest
rate swaps, which are common derivative financial instruments, to hedge certain
risks associated with anticipated purchases and sales of investments,
anticipated debt issuance, and certain payments denominated in foreign
currencies, primarily British pounds sterling, Canadian dollars and Japanese
yen. These derivative financial instruments are used to protect UNUM from the
effect of market fluctuations in interest and exchange rates between the
contract date and the date on which the hedged transaction occurs.
In using these instruments, UNUM is subject to the off-balance-sheet risk that
the counterparties of the transactions will fail to perform as contracted. UNUM
manages this risk by only entering into contracts with highly rated institutions
and listed exchanges. UNUM does not hold or issue derivative financial
instruments for the purpose of trading.
Historically, all positions UNUM has taken in derivative contracts have
qualified for hedge accounting in accordance with the criteria established by
FAS 52, "Foreign Currency Translation," and FAS 80, "Accounting for Futures
Contracts." Upon entering a derivative contract, UNUM uses this criteria to
evaluate the correlation of risk protection provided by a derivative contract to
the risk created by market fluctuations to ensure hedge accounting is
appropriate. Accordingly, gains or losses related to qualifying hedges of firm
commitments or anticipated transactions involving investment purchases and debt
issuance are deferred and recognized as an adjustment of the carrying amount of
the underlying asset or liability when the hedged transaction occurs. Gains or
losses related to qualifying hedges of anticipated transactions involving the
sale of investments are deferred and recognized in income when the hedged
transaction occurs. No gains or losses related to qualifying hedges of
anticipated transactions involving payments denominated in foreign currencies
are recorded if the hedged transaction is likely to occur.
The amount of any deferred gains or losses on outstanding interest rate futures
contracts, which require daily cash settlement, are included in fixed maturities
in UNUM's Consolidated Balance Sheet. The fair values of any outstanding
forward exchange rate contracts, options and interest rate swap agreements,
which do not require daily cash settlement, are not recognized in UNUM's
Consolidated Balance Sheet.
Any resulting gains or losses from early termination of a derivative designated
as a hedge are deferred and recognized in income or as an adjustment of the
carrying amount of the underlying asset or liability when the hedged transaction
occurs. Any gains or losses that result when the designated item is
extinguished, such as maturity, sale, or termination, or when the
hedged transaction is no longer likely to occur, are included in income in the
period in which the extinguishment takes place or it is known that the hedged
transaction will not occur.
NOTE 12.14. SEGMENT INFORMATION
- -----------------------------
UNUM reports its operations principally in four business segments: Disability
Insurance, Special Risk Insurance, Colonial Products and Retirement Products.
The Disability Insurance segment includes disability products offered in North
America, the United Kingdom and Japan including: group long term disability,
group short term disability, individual disability, Association Group
disability, disability reinsurance operations and long term care insurance. The
Special Risk Insurance segment includes group life, special risk accident
insurance, non-disability reinsurance operations, reinsurance underwriting
management operations and other special risk insurance products. The Colonial
Products segment includes Colonial Companies, Inc. and subsidiaries, which offer
payroll-deducted, voluntary employee benefits including accident and sickness,
cancer and life insurance products to employees at their worksites. The
Retirement Products segment includes those products no longer actively marketed by
UNUM including: tax-sheltered annuities, guaranteed investment contracts,
deposit administration accounts, 401(k) plans, individual life and group medical
products. Corporate includes transactions that are generally non-insurance
related.
Summarized financial information for the four business segments and Corporate is
as follows:
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ ---------------------------------
(Dollars in millions) 1997 1996 1997 1996
- -------------------------------------------------------------------------------
REVENUES
Disability Insurance $570.4 $582.7 $1,134.1 $1,166.0$ 609.3 $ 601.9 $1,743.4 $1,767.9
Special Risk Insurance 218.8 193.9 450.9 396.9241.8 209.8 692.7 606.7
Colonial Products 148.0 137.3 290.6 271.2147.3 137.4 437.9 408.6
Retirement Products 35.7 71.5 138.5 147.924.9 70.7 163.4 218.6
Corporate 1.61.7 3.3 5.1 3.4 9.913.2
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total revenue $974.5 $990.5 $2,017.5 $1,991.9
================================================================================revenues $1,025.0 $1,023.1 $3,042.5 $3,015.0
===============================================================================
INCOME (LOSS) BEFORE INCOME TAXES
Disability Insurance $ 75.581.7 $ 68.358.8 $ 151.1232.8 $ 132.6191.4
Special Risk Insurance 28.4 19.3 55.8 38.331.4 11.1 87.2 49.4
Colonial Products 24.8 23.5 46.7 42.226.3 25.7 73.0 67.9
Retirement Products 10.2 2.6 69.9 8.93.6 (12.7) 73.5 (3.8)
Corporate (12.5) (7.7) (25.4) (13.3)(11.6) (19.6) (37.0) (32.9)
- -------------------------------------------------------------------------------
Total income before income taxes 126.4 106.0 298.1 208.7131.4 63.3 429.5 272.0
Income taxes 38.8 32.1 95.5 62.739.9 19.3 135.4 82.0
- -------------------------------------------------------------------------------
Net income $ 87.691.5 $ 73.944.0 $ 202.6294.1 $ 146.0190.0
===============================================================================
JuneSeptember 30, December 31,
(Dollars in millions) 1997 1996
- -------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Disability Insurance $ 7,849.98,099.3 $ 7,846.8
Special Risk Insurance 1,401.41,487.5 1,297.1
Colonial Products 1,243.71,289.0 1,094.1
Retirement Products 1,429.91,359.7 4,478.8
Corporate 455.3497.4 396.7
Individual Participating Life and Annuity 357.6363.8 354.0
- -------------------------------------------------------------------------------
Total assets $12,737.8$13,096.7 $15,467.5
===============================================================================
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
--------------------------------------
To the Board of Directors and Stockholders
UNUM Corporation
We have reviewed the accompanying consolidated balance sheet of UNUM Corporation
and subsidiaries as of JuneSeptember 30, 1997, and the related consolidated
statements of income for the three month and sixnine month periods ended JuneSeptember
30, 1997, and 1996, and consolidated statements of cash flows for the sixnine month
periods then ended. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Portland, Maine
July 23,October 22, 1997
UNUM Corporation and Subsidiaries
Form 10-Q
JuneSeptember 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Consolidated Financial
Statements (Unaudited) and Notes to Consolidated Financial Statements
(Unaudited) included elsewhere in the Form 10-Q.10-Q, and in conjunction with the
audited consolidated financial statements and footnotes included in the 1996
annual report to stockholders of UNUM Corporation and subsidiaries ("UNUM").
CONSOLIDATED OVERVIEW
Effective June 2, 1997, UNUM completed a two-for-one common stock split as
discussed in Note 2 of the Consolidated Financial Statements. Accordingly, all
numbers of common shares and per common share data have been restated to reflect
the stock split. Net income for the quarter ended JuneSeptember 30, 1997, was $87.6$91.5
million, or $0.63$0.66 per share, as compared with net income of $73.9$44.0 million, or
$0.50$0.30 per share, for the same quarter in 1996. For the sixnine months ended
JuneSeptember 30, 1997, net income was $202.6$294.1 million, or $1.44$2.10 per share, as
compared with $146.0$190.0 million, or $1.00$1.30 per share, for the same period in 1996.
Revenues for UNUM were $974.5$1,025.0 million for secondin third quarter 1997 and $990.5$1,023.1
million for secondthird quarter 1996. For the sixnine months ended JuneSeptember 30, 1997,
revenues were $2,017.5$3,042.5 million as compared with $1,991.9$3,015.0 million for the same
period in 1996.
A comparison of net income is impacted by the inclusion of realized investment
gains or losses(losses) and a special itemitems that occurred in both first1997 and second
quarter of 1997.1996. This
management's discussion and analysis discusses the results of operations on a
pretax operating income basis, which is defined as income (loss) before income
taxes exclusive of realized investment gains (losses) and special items.
Special items are excluded from pretax operating income as management considers
them to be unusual, and also believes a discussion of the results on a pretax
operating income basis provides a better understanding of the results of
operations. The following table summarizes pretax operating income (loss) for
the four business segments and Corporate for the three months and sixnine months
ended JuneSeptember 30, 1997, and 1996, and is followed by a discussion of the
1997 special itemitems and a reconciliation of income (loss) before income tax to pretax
operating income (loss).
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
--------------------- -------------------------------------------
(Dollars in millions) 1997 1996 Change 1997 1996 Change
- --------------------------------------------------------------------------------
SUMMARY OF PRETAX OPERATING
INCOME (LOSS)
Disability Insurance Segment $ 77.880.1 $ 70.0 11.1% $154.6 $132.5 16.7%14.4% $234.7 $202.5 15.9%
Special Risk Insurance Segment 28.5 19.3 47.7 55.5 37.9 46.430.8 22.0 40.0 86.3 59.9 44.1
Colonial Products Segment 25.0 23.6 5.9 47.3 42.0 12.626.1 25.7 1.6 73.4 67.7 8.4
Retirement Products Segment 1.2 4.3 (72.1) 3.2 9.7 (67.0)1.5 3.1 (51.6) 4.7 12.8 (63.3)
Corporate (12.5) (8.1) 54.3 (24.7) (13.8) 79.0(11.5) (9.6) 19.8 (36.2) (23.4) 54.7
- --------------------------------------------------------------------------------
Total pretax operating
income $120.0 $109.1 10.0% $235.9 $208.3 13.3%$127.0 $111.2 14.2% $362.9 $319.5 13.6%
================================================================================
UNUM reported increased pretax operating income for the three months and six
months ended
JuneSeptember 30, 1997, as compared with the same periodsperiod in 1996. The increase was
primarily attributable to increased investment income across most
product lines, improved premium growth in our group long term disability
("group
LTD"),businesses, reported in the Disability Insurance segment, and in group life,
reported in the Special Risk Insurance segment, increased investment income and
favorable expense growth across most product lines, and an improved benefit
ratio for UNUM Limited's disability business, reported in the Disability
Insurance segment. Partially offsetting these favorable items were unfavorable
claims experience in certain disability businesses, including group long term
disability ("group LTD") and individual disability ("ID"), reported in the
Disability Insurance segment, reduced pretax operating income in the Retirement
Products segment as a result of continued expense management,the sale of the group tax-sheltered annuity
("TSA") business, and favorableunfavorable claims experience for
group LTD. In addition, forin certain Special Risk
Insurance and Colonial segment products.
For the six month periodnine months ended JuneSeptember 30, 1997, as compared with the same period
in 1996, UNUM reported increased pretax operating income. As in the three month
period, the increase was primarily attributable to improved premium growth in
our group disability businesses and in group life, and increased investment
income and continued favorable expense growth across most product lines. In
addition, pretax operating income for the nine month period was favorably
affected by increased fee income from reinsurance management operations,
reported in the Special Risk Insurance segment.operations.
Partially offsetting these increases in both the three and six month periodsfavorable items were unfavorable claims experience in
certain disability businesses, including individual disability
("ID"), UNUM Limited, andID, group short term disability
("group STD"), and long term disability reinsurance operations, all of which
are reported in the Disability Insurance segment, reduced pretax operating
income in the Retirement Products segment as a result of the sale of the group
tax-sheltered annuityTSA
business, and unfavorable claims experience in certain reinsurance pools, reported
in the Special Risk Insurance segment.segment, and increased operating expenses in
Corporate.
SPECIAL ITEM IN FIRST, SECOND AND SECONDTHIRD QUARTER 1997
- -------------------------------------------------------------------------------------------------
On October 1, 1996, UNUM Life Insurance Company of America ("UNUM America")
and First UNUM Life Insurance Company ("First UNUM") closed the sale of their
respective group tax-sheltered annuity ("TSA")TSA businesses to The Lincoln National Life Insurance Company and
Lincoln Life & Annuity Company of New York, both subsidiaries of Lincoln
National Corporation. The sale involved approximately 1,700 group
contractholders, assets under management of approximately $3.3 billion and
resulted in a deferred pretax gain which is being recognized in income as a special item, in
proportion to contractholder and participant consents for assumption
reinsurance. For the three month period ended JuneSeptember 30, 1997, consent for
assumption reinsurance was provided by TSA contractholders and participants
owning approximately 12%3% of assets under management. For the sixnine months ended
JuneSeptember 30, 1997, consents have been received relating to approximately 84%87% of
assets under management. For the three month and sixnine month periods ended
JuneSeptember 30, 1997, these consents resulted in the recognition of $9.4$1.7 million
and $67.4$69.1 million, respectively, of the total deferred pretax gain of $80.8
million. The recognized gains are reflected as fees and other income in the
Retirement Products segment.
SPECIAL ITEMS IN THIRD QUARTER 1996
- -----------------------------------
Merger and Integration Costs
During the third quarter of 1996, actions related to the merger of Commercial
Life Insurance Company ("Commercial Life") into UNUM America resulted in a
$10.1 million increase in operating expenses for Corporate, reducing income
before income taxes for the three months and nine months ended September 30,
1996. The $10.1 million charge consisted of $2.9 million of direct costs
incurred and the recording of a $7.2 million restructuring charge to recognize
$2.8 million of future severance costs for 120 employees and $4.4 million of
lease exit costs, primarily related to the merger.
Intangible Asset Write-offs and Future Loss Reserves
In connection with the merger of Commercial Life into UNUM America, the sale of
UNUM's TSA businesses, as well as UNUM's continued efforts to strengthen its
focus on its core products, the company initiated a review of certain products,
which resulted in the recognition of pretax charges totaling $39.4 million
during third quarter 1996. These charges reduced income before income taxes by
$13.1 million in the Disability Insurance segment, $11.3 million in the Special
Risk Insurance segment, and $15.0 million in the Retirement Products segment for
the three months and nine months ended September 30, 1996.
The charges include the write-off of certain intangible assets, primarily
deferred acquisition costs, totaling $17.0 million. These intangible assets
were deemed unrecoverable primarily due to the expectation of continued losses
in the Association Group disability business. Additionally, in conjunction with
the completion of a review of UNUM's discontinued product portfolio, a $22.4
million charge was taken to establish a reserve for the present value of
expected future losses on certain discontinued products. Future losses for
these products will be charged to the reserve at the time the losses are
realized. The products incorporated in the charge consist of certain
discontinued special risk, retirement and medical products. UNUM continues to
pursue the sale of some of these discontinued product lines.
RECONCILIATION OF INCOME (LOSS) BEFORE INCOME TAXES TO PRETAX OPERATING INCOME
(LOSS)
- ------------------------------------------------------------------------------
The following table reconciles income (loss) before income taxes to pretax
operating income (loss) for the four business segments and Corporate for the
three months and sixnine months ended JuneSeptember 30, 1997, and 1996:
Disability Special Risk Colonial Retirement Consolidated
(Dollars in millions) Insurance Insurance Products Products Corporate UNUM
(Dollars in millions)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended JuneSeptember 30, 1997:
- -----------------------------------------------------------------------
Income (loss) before
income taxes $ 75.5 $28.4 $24.8 $10.2 $(12.5) $126.481.7 $31.4 $26.3 $ 3.6 $(11.6) $131.4
Exclude realized
investment (gains) losses 2.3(1.6) (0.6) (0.2) (0.4) 0.1 0.2 0.4 -- 3.0(2.7)
- ---------------------------------------------------------------------------------------------------
77.8 28.5 25.0 10.6 (12.5) 129.4--------------------------------------------------------------------------------------------------
80.1 30.8 26.1 3.2 (11.5) 128.7
Special item:
TSA deferred gain
recognition -- -- -- (9.4)(1.7) -- (9.4)(1.7)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $ 77.8 $28.5 $25.080.1 $30.8 $26.1 $ 1.2 $(12.5) $120.0
====================================================================================================1.5 $(11.5) $127.0
==================================================================================================
Three Months Ended JuneSeptember 30, 1996:
- -----------------------------------------------------------------------
Income (loss) before
income taxes $ 68.3 $19.3 $23.558.8 $11.1 $25.7 $(12.7) $(19.6) $ 2.6 $ (7.7) $106.063.3
Exclude realized investment
(gains)losses 1.7(1.9) (0.4) -- 0.1 1.7 (0.4) 3.10.8 (0.1) (1.6)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
56.9 10.7 25.7 (11.9) (19.7) 61.7
Special items:
Merger and integration costs -- -- -- -- 10.1 10.1
Write-offs and future loss
reserves 13.1 11.3 -- 15.0 -- 39.4
- --------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $ 70.0 $19.3 $23.6$22.0 $25.7 $ 4.33.1 $ (8.1) $109.1
====================================================================================================
Six(9.6) $111.2
==================================================================================================
Nine Months Ended JuneSeptember 30, 1997:
- --------------------------------------------------------------------
Income (loss) before
income taxes $151.1 $55.8 $46.7 $69.9 $(25.4) $298.1$232.8 $87.2 $73.0 $ 73.5 $(37.0) $429.5
Exclude realized investment
(gains)losses 3.5 (0.3) 0.6 0.7 0.7 5.21.9 (0.9) 0.4 0.3 0.8 2.5
- ----------------------------------------------------------------------------------------------------
154.6 55.5 47.3 70.6 (24.7) 303.3--------------------------------------------------------------------------------------------------
234.7 86.3 73.4 73.8 (36.2) 432.0
Special item:
TSA deferred gain
recognition -- -- -- (67.4)(69.1) -- (67.4)(69.1)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $154.6 $55.5 $47.3$234.7 $86.3 $73.4 $ 3.2 $(24.7) $235.9
====================================================================================================
Six4.7 $(36.2) $362.9
==================================================================================================
Nine Months Ended JuneSeptember 30, 1996:
- --------------------------------------------------------------------
Income (loss) before
income taxes $132.6 $38.3 $42.2$191.4 $49.4 $67.9 $ 8.9 $(13.3) $208.7(3.8) $(32.9) $272.0
Exclude realized investment
(gains)losses (0.1) (0.4)(2.0) (0.8) (0.2) 0.8 (0.5) (0.4)1.6 (0.6) (2.0)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
189.4 48.6 67.7 (2.2) (33.5) 270.0
Special items:
Merger and integration costs -- -- -- -- 10.1 10.1
Write-offs and future loss
reserves 13.1 11.3 -- 15.0 -- 39.4
- --------------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $132.5 $37.9 $42.0$202.5 $59.9 $67.7 $ 9.7 $(13.8) $208.3
====================================================================================================
12.8 $(23.4) $319.5
==================================================================================================
PREMIUMS:
- ---------
Premiums for the three months and sixnine months ended JuneSeptember 30, 1997, and
1996, are summarized by segment in the table below.
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------------ -----------------------------
(Dollars in millions) 1997 1996 Change 1997 1996 Change
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Disability Insurance
Group LTD $295.2 $265.9 11.0%$314.3 $274.3 14.6% $ 586.6900.9 $ 534.8 9.7%809.1 11.3%
Group STD 49.4 38.6 28.0 96.8 75.2 28.752.5 39.8 31.9 149.3 115.0 29.8
UNUM Limited 36.9 33.9 8.8 73.6 66.2 11.235.8 32.0 11.9 109.4 98.1 11.5
ID 35.3 102.5 (65.6) 70.5 205.3 (65.7)38.2 110.1 (65.3) 108.7 315.5 (65.5)
Other Disability
Insurance 23.5 19.0 23.7 46.1 40.7 13.327.5 21.3 29.1 73.6 62.0 18.7
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total 440.3 459.9 (4.3) 873.6 922.2 (5.3)468.3 477.5 (1.9) 1,341.9 1,399.7 (4.1)
Special Risk Insurance
Group Life 126.4 106.2 19.0 252.1 210.0 20.0134.1 115.2 16.4 386.2 325.2 18.8
Other Special Risk
Products 67.6 66.4 1.8 143.2 141.9 0.979.6 72.5 9.8 222.8 214.4 3.9
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total 194.0 172.6 12.4 395.3 351.9 12.3213.7 187.7 13.9 609.0 539.6 12.9
Colonial Products 132.7 124.6 6.5 261.4 246.0 6.3130.8 124.0 5.5 392.2 370.0 6.0
Retirement Products 1.7 5.2 (67.3) 4.7 10.3 (54.4)0.7 7.0 (90.0) 5.4 17.3 (68.8)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total premiums $768.7 $762.3 0.8% $1,535.0 $1,530.4 0.3%
================================================================================$813.5 $796.2 2.2% $2,348.5 $2,326.6 0.9%
===============================================================================
Total premiums declined in the Disability Insurance segment for the three months
and sixnine months ended JuneSeptember 30, 1997, as compared with the same periods in
1996 due to the cession of $62.6$60.6 million and $128.5$189.1 million, respectively, of
premium under the ID reinsurance agreement discussed in the Disability Insurance
segment section of this ManagementManagement's Discussion and Analysis. The strong
premium growth exhibited in most lines of business is the result of improved
sales growth in recent quarters and improved persistency.
Claim block acquisitions, which generated one-time premium in the Disability
Insurance and Special Risk Insurance segments for the three months and sixnine
months ended JuneSeptember 30, 1997, and 1996, are summarized in the table below.
Management intends to pursue additional claim block acquisitions in the future.
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ ---------------------------------
(Dollars in millions) 1997 1996 1997 1996
- -----------------------------------------------------------------------
Disability Insurance
Group LTD $2.9 $0.7 $3.8$10.0 $ 2.01.2 $13.8 $ 3.2
UNUM Limited 0.3 6.0 1.2 7.21.4 0.5 2.6 7.7
Disability Reinsurance
Operations 2.1 -- 2.1 --
Special Risk Insurance
Group Life -- -- -- 0.1 3.5 0.1 3.6
Non-disability Reinsurance
Operations -- 5.8 -- -- 10.516.3
- -----------------------------------------------------------------------
Total $3.2 $6.7 $5.0 $19.8$13.6 $11.0 $18.6 $30.8
=======================================================================
PRETAX OPERATING INCOME (LOSS) BY SEGMENT:
- ------------------------------------------
The following sections discuss the results of the four business segments and
Corporate for the three months and sixnine months ended JuneSeptember 30, 1997, and
1996. Within these business segment discussions, reference is made to pretax
operating income (loss), which excludes realized investment gains (losses) and
the special itemitems previously defined.
DISABILITY INSURANCE SEGMENT
On October 23, 1996, UNUM announced the execution of a definitive reinsurance
agreement between UNUM America and Centre Life Reinsurance Limited ("Centre
Re"), a Bermuda-based reinsurance specialist, for reinsurance coverage of the
active life reserves of UNUM America's existing United States non-cancellable ID
block of business. This agreement does not reinsure any claims incurred prior
to January 1, 1996. The agreement follows UNUM's announcement in late 1994 that
it would no longer market the non-cancellable form of ID coverage in the United
States.
The agreement is a finite reinsurance arrangement that transfers liabilities to
CenterCentre Re based on the level of statutory reserves. CenterCentre Re has an obligation
to fundabsorb losses within a defined risk layer, while UNUM must fund an experience
layer representing the difference between reserves related to the reinsured
block, based on generally accepted accounting principles ("GAAP"), and the
bottom of Centre Re's defined risk layer. Within this experience layer, UNUM
retains the earnings risk related to potential adverse claims experience upfrom the
reinsured block. Under the agreement, UNUM funds a trust account, initially
established in late 1996, with assets equal to a certain threshold. This thresholdthe amount representsof GAAP reserves
related to the existencereinsured block plus the amount of anits experience layer. The
value of UNUM's experience layer increases or decreases in conjunction with a valuethe
underlying operating results of approximately $213 million at June 30, 1997.the reinsured block. Additionally, realized
gains or losses on assets sold, and unrealized gains or losses on marketable
securities held in the trust and the related claim reserves, affect the
valuation of the experience layer. UNUM recordsreflects the carrying value of the
experience layer onin its Consolidated Balance SheetsSheet as a deposit asset. UNUM's
obligation underasset, which at
September 30, 1997, totaled approximately $280 million. Changes in the
agreement is funded by a trust account established in late
December 1996. Net cash flowsexperience layer derived from the underlying operating results of the reinsured
block are transferred to/reflected in fees and other income and realized gains or losses from
sales of trust assets are reflected as realized investment gains (losses) in
UNUM's Consolidated Statement of Income. Changes in the experience layer
resulting from unrealized gains or losses on marketable securities held in the
trust account and together with changesthe related claim reserves are reflected as unrealized gains or losses
in reserve levels, will determine
the valueequity section of UNUM's deposit asset.Consolidated Balance Sheet.
Starting January 1, 1997, the individual components of the operating results for
the reinsured ID business are not reflected on separate lines in UNUM's
Consolidated Statement of Income; instead, as stated above, changes in the
deposit asset whichthat represent the operating results of the reinsured business are
reflected as fees and other income. Accordingly, UNUM continues to focus on the underlying
trends of the reinsured business, and in the following discussion, reference to
ID includes both the reinsured and unreinsurednon-reinsured portions of the business.
The Disability Insurance segment reported increased pretax operating income for
the three months ended September 30, 1997, as compared with the same period in
1996. Pretax operating income benefited from improved premium growth for the
segment, increased investment income and sixfavorable expense growth in all major
product lines, and improved claims experience at UNUM Limited. Partially
offsetting these favorable factors was unfavorable claims experience in group
LTD and ID.
For the nine months ended JuneSeptember 30, 1997, as compared with the same period
in 1996, the Disability Insurance segment reported increased pretax operating
income. Improved premium growth for the segment, increased investment income
and favorable expense growth in all major product lines, and favorable claims
experience in group LTD and long-term care ("LTC") contributed to the
increase. Unfavorable claims experience in ID, group STD and long term
disability reinsurance operations partially offset these positive factors.
Group LTD pretax operating results were favorably affected by strong premium
growth, increased investment income and a lower expense ratio for the three
months and nine months ended September 30, 1997, as compared with the same
periods in 1996. For the three month and sixperiod, favorable results were partially
offset by a higher benefit ratio, primarily the result of increased levels of
claims incidence compared with very favorable levels in third quarter 1996.
Additionally, claim severity, while within expected levels, was higher than in
the same quarter of 1996. For the nine month periods, pretax operating
income benefited from increased investment income in all major product lines,
improved premium growth for the segment, favorable expense growth, and favorable
claims experience in group LTD. Partially offsetting these favorable factors
was unfavorable claims experience in ID, at UNUM Limited, and in group STD.
Pretax operatingperiod, results for group LTD were favorably
affectedimpacted by a lowerdecreased benefit ratio, improved premiumas compared with the same period in 1996.
Premium growth from strongercontinues to be driven by record levels of sales in recent
quarters and improved persistency, increased investment income and a lower operating
expense ratio for the three months and six months ended June 30, 1997, as
compared with the same periods in 1996. The lower benefit ratio was primarily
the result of lower claims incidence, which management primarily attributes to
the continued success of its risk management programs.persistency. Management continues to monitor claim trends
in group LTD and responds by periodically adjusting prices on selected new and
inforce business, refining underwriting guidelines and strengthening risk
management programs.
Continued expense management andWhen compared with the improved premium growth combined to resultsame period in the improvement in the operating
expense ratio.
For the three month period ended June 30, 1997,1996, UNUM Limited's pretax operating
results for the three months ended September 30, 1997, were unfavorablyfavorably affected
by an increased premium growth, a decreased benefit ratio in its group long term
disability business partially offset by a lower operating expense
ratio and increased investment income, as compared with the corresponding period
in 1996. Pretax operating results for the sixincome. The nine month period
ended JuneSeptember 30, 1997, when compared with the same period in 1996, werewas
favorably impacted by improved premium growth, increased investment income and a
lower operating expense ratio, partially offset by an
increased benefit ratio. Management believes that the level of future earnings
for UNUM Limited will be a function of various factors, including but not
limited to, the effectiveness of continuing risk management actions over time. Due to the relative size of UNUM Limited's block
of business, operating results can exhibit claims variability.
For the three month and sixnine month periods ended JuneSeptember 30, 1997, pretax
operating results for ID decreased as compared with the corresponding periods in
1996. UNUM's ID business consists primarily of a closed blocksblock of non-cancellable policies
and small blocks of guaranteed renewable products, including the new
Lifelong Disability
Protection product.Protection. These types of blocks of business, by nature, can exhibit
volatility in claims experience and operating results. The reduction in
operating results for the three month and six month periodsperiod was primarily due to unfavorable
claims experience. As evidenced in firstWhile third quarter of 1997 ID continued to incur increasedshowed decreased levels of
claims incidence, increased
severity andthis factor was more than offset by lower claim recoveries in
the non-cancellable blocks of business.
As seenbusiness, as compared with the same period in
the past, the non-cancellable blocks are experiencing a higher
incidence of new claims and a disproportionate number of large claims that
management has attributed to certain occupational segments of the business,
particularly physicians.1996. For the sixnine month period, the effect of unfavorable claims experience
was partially offset by increased investment income and lower commissions.
CommissionsExcluding the impact of amounts ceded to Centre Re, premium and commissions for
ID were lower than in the same periods of 1996 as the result of reduced sales
during the transition from the non-cancellable form of ID product to the new
guaranteed renewable Lifelong Disability Protection product. During 1994, UNUM
increased reserves for existing claims by $83.3 million and strengthened
reserves for estimated future losses by $109.1 million. These increased
reserves reflected management's expectations of morbidity trends for the
existing non-cancellable individual disability business. It is not possible to
predict whether morbidity trends will be consistent with UNUM's assumptions;
however, as of JuneSeptember 30, 1997, management believes that the strengthened reserves continue to
be adequate.
ForPretax operating results for group STD for the three month and sixnine month
periods ended JuneSeptember 30, 1997, group STD's
pretax operating resultsas compared with the same periods in 1996,
were favorably affected by premium growth from strong sales and improved
persistency in recent quarters and a lower operating expense ratio. These favorable
factors wereA higher
benefit ratio has partially offset by a higher benefit ratio.
Long term care ("LTC")these favorable factors.
LTC pretax operating results improved for the three month and sixnine month periods
ended JuneSeptember 30, 1997, compared with the same periods in 1996. While the LTC
block of business is still relatively small, it has shown improvedsignificant premium
growth during 1997 and its contribution to the segment's pretax operating income
increasedcontinues to increase when compared with 1996.
SPECIAL RISK INSURANCE SEGMENT
The Special Risk Insurance segment reported an increase in pretax operating
income for the three months ended JuneSeptember 30, 1997, as compared with secondthe same
quarter in 1996. The increase was primarily driven by strong premium growth as
a result of improved sales and persistency in the group life business. In addition,
improved benefitOther
favorable factors affecting pretax operating income included reduced operating
expense ratios inacross certain other life product lines of business resulting from favorable expense
growth combined with the strong premium growth, and increased investment income
for the segment contributed tosegment. A higher benefit ratio for the increase in pretax
operating income. The effects of unfavorable claims experience in certain
reinsurance poolsaccidental death and
dismemberment product line partially offset these favorable factors.
The increase in pretax operating income in the Special Risk Insurance segment
for the sixnine months ended JuneSeptember 30, 1997, was also primarily driven by
strong premium growth as a result of improved sales and persistency in the group
life business. In addition, pretax operating income for this period was
favorably affected by increased investment income for the segment, improved
operating expense ratios across certain lines of business and additional fee
income largely from the reinsurance underwriting management operations, improved
benefit ratios in certain life product lines, and improved operating expense
ratios across certain lines of business resulting from favorable expense growth
combined with the strong premium growth.operations.
Partially offsetting these increases were the effects from unfavorable claims
experience in certain reinsurance pools. Due to the nature of the risks
underwritten and the relative size of the blocks of business, several of the
products in the Special Risk Insurance segment can exhibit claims variability.
COLONIAL PRODUCTS SEGMENT
ThePretax operating income for the Colonial Products segment reported increased pretax operating incomeslightly for
the three months ended JuneSeptember 30, 1997, as compared with the same period in
1996. The increase was primarily attributable to increased investment income. In
addition, an improved operating expense
ratio for the segmentresulting from continued expense management efforts, and a lower
benefit ratio in the life product line favorably affected pretax operating
income. Partially offsetting these favorable items was a higher benefit ratio
in the accident and sickness product line.
For the six months ended June 30, 1997, pretax operating income for the Colonial
Products segment was favorably affected by increased
investment income, a lowerincome. A higher benefit ratio in the cancer product line and reduced commission andlargely
offset the effects of these favorable items.
For the nine months ended September 30, 1997, the Colonial Products segment
reported increased pretax operating expense ratios,income as compared with the corresponding
period in 1996. The increase was primarily due to additional investment income
and reduced
commission and operating expense and commission ratios. These improved ratios were
primarily the result of slower sales growth and continuingcontinued expense management
efforts. Partially offsetting these favorable items was an increasedincreases were higher benefit ratioratios in the
accident and sickness and cancer product line.lines.
Management continues its efforts to increase sales and premium at Colonial by
enhancing collaborative sales across UNUM and focusingimplementing organizational
changes to focus on recently developedspecific distribution channels to market Colonial products.
During second quarter 1997, Colonial formed a strategic marketing alliance with
The Lincoln National Life Insurance Company ("Lincoln Life") which willin order to
create cross-selling opportunities in the worksite market. In addition,
Colonial will coinsurecoinsures and administeradministers Lincoln Life's existing block of worksite-marketedworksite-
marketed universal life insurance. This reinsurance agreement affects reported
line items in Colonial's income statement, including premium,premiums, investment
income, operating expenses and interest credited, in relation to the amount of
business coinsured.
RETIREMENT PRODUCTS SEGMENT
For the three months and six months ended June 30, 1997, theThe Retirement Products segment reported decreased pretax operating income for
the three months and nine months ended September 30, 1997, as compared with the
same periods in 1996. The decrease was primarily due to the sale of UNUM's TSA
business in October 1996, as discussed below. The TSA business accounted for
$4.0$3.7 million and $8.7$12.4 million of the Retirement Products segment's pretax
operating income for the three months and sixnine months ended JuneSeptember 30, 1996,
respectively, while the TSA business was essentially break-even in the first
twothree quarters of 1997. The reduction in pretax operating income as a result of
the TSA sale was partially offset by favorable volatility in the run-off of
certain other discontinued products.
On October 1, 1996, UNUM America and First UNUM closed the sale of their
respective TSA businesses to The Lincoln National Life Insurance Company and
Lincoln Life & Annuity Company of New York ("Lincoln"), both subsidiaries of
Lincoln National Corporation. The sale involved approximately 1,700 group
contractholders and assets under management of approximately $3.3 billion. The
contracts were initially reinsured on an indemnity basis. Upon consent of the
TSA contractholders and participants, the contracts are considered reinsured on
an assumption basis, legally releasing UNUM America and First UNUM from future
contractual obligation to the respective contractholders and participants. The
sale resulted in a deferred pretax gain of $80.8 million, which is being
recognized in income, as a special item, in proportion to consents for
assumption reinsurance, as discussed in the consolidated overview section of
this Management's Discussion and Analysis. During the first sixnine months of
1997, consent for assumption reinsurance has been provided by TSA
contractholders and participants owning approximately 84%87% of assets under
management.
To effect the sale of the TSA business, UNUM transferred into a trust account
held for the benefit of Lincoln approximately $2,690 million of assets. The
amount of assets in the trust increases or decreases in conjunction with the on-
going activity in participant accounts, and assets are released from the trust
to Lincoln upon consents for assumption reinsurance. Due to the reduced asset
base under management resulting from the transfer of assets related to the TSA
business to Lincoln,
investment income for the Retirement Products segment declined significantly for
the three month and sixnine month periods ended JuneSeptember 30, 1997, as compared
with the same periods in 1996.
UNUM continues to report the amount of interest credited to TSA contracts for
which the consent to transfer from indemnity reinsurance to assumption
reinsurance has not been received, with an equivalent amount being reported in
fees and other income to reflect reimbursement from Lincoln. For the three
month and sixnine month periods ended JuneSeptember 30, 1997, $9.0$6.8 million and $33.4$40.2
million, respectively, of interest credited reimbursement is included in fees
and other income in the Consolidated Statement of Income.
CORPORATE
TheCorporate reported an increased pretax operating loss in Corporate for the three months ended
JuneSeptember 30, 1997, as compared with the second quarter of 1996,same period in 1996. The increase was
primarily due tothe result of decreased investment income and increased operating expenses, which were largely
attributableinterest
expense due to additional investments ina higher level of corporate advertising and
international development.borrowing.
For the sixnine months ended JuneSeptember 30, 1997, as compared with the same period
in 1996, Corporate's increased pretax operating loss was primarily due to
decreased investment income and higher operating expenses, primarilymostly related to
additional investments in corporate advertising and international development, and decreased investment income.development.
LIQUIDITY AND CAPITAL RESOURCES
UNUM's businesses produce positive cash flows which are invested primarily in
intermediate, fixed maturity investments intended to reflect the anticipated
cash obligations of insurance benefit payments and insurance contract maturities
and to optimize investment returns at appropriate risk levels. Unexpected cash
requirements and liquidity needs can be met through UNUM's investment portfolio
of fixed maturities, equity securities, cash and short-term investments.
From time to time, dividend payments, which may be subject to approval by
insurance regulatory authorities, are made from UNUM's affiliates and insurance
subsidiaries to UNUM Corporation. These dividends, along with other funds, are
used to service the needs of UNUM Corporation including: debt service, common
stock dividends, corporate development, stock repurchase corporate development and administrative
costs. Net statutory operating income, which excludes realized investment gains
and losses net of tax, is one of the major determinants of an insurance
company's dividend capacity to its parent in the following fiscal year.parent. Statutory accounting rules and
practices, which differ in certain respects from generally accepted accounting
principles, are mandated by regulators in an insurance company's state of
domicile. Through JuneSeptember 30, 1997, UNUM's insurance subsidiaries domiciled
in the United States reported net statutory operating income of approximately
$129$177 million, as compared with approximately $88$103 million for the same period in
1996.
Cash flow requirements are also supported by a committed revolving credit
facility totaling $500 million, which expires on October 1, 2001. UNUM's
commercial paper program is supported by the revolving credit facility and is
available for general liquidity needs, capital expansion, acquisitions and stock
repurchase. The committed revolving credit facility contains certain covenants
that, among other provisions, require maintenance of certain levels of
stockholders' equity and limits on debt levels.
On July 16, 1996, UNUM filed an omnibus shelf registration with the United
States Securities and Exchange Commission, which became effective August 2,
1996, relating to $500 million of securities (including debt securities,
preferred stock, common stock and other securities). On August 15, 1996, UNUM
filed a prospectus supplement to establish a $250 million medium-term note
program under the shelf registration.
At JuneSeptember 30, 1997, UNUM had short-term and long-term debt totaling $173.1$260.6
million and $371.3$371.4 million, respectively. At JuneSeptember 30, 1997, approximately
$407$319 million was available for additional financing under the existing revolving
credit facility and $500 million of investment grade debt instruments was
available for issuance under the shelf registration. Contingent upon market
conditions and corporate needs, management may refinance short-term notes
payable for longer term securities.
In the normal course of business, UNUM enters into letters of credit, primarily
to satisfy capital requirements related to certain subsidiary transactions.
UNUM had outstanding letters of credit of approximately $86$83 million at JuneSeptember
30, 1997.
Effective October 23, 1996, UNUM's Board of Directors approved an expansion of
the Company's stock repurchase program to 12.0 million shares by authorizing an
additional 7.4 million shares, adjusted for the two-for-one common stock split.
Approximately 3.82.8 million shares of common stock remained authorized for
repurchase at JuneSeptember 30, 1997. Through the first sixnine months of 1997, UNUM
acquired approximately 5.26.2 million shares of its common stock in the open market
at an aggregate cost of $197.1$240.8 million.
RATINGS
In October 1997, Standard & Poor's Corporation ("S&P") affirmed the claims
paying ability ratings of UNUM America, First UNUM and Colonial Life and
Accident Insurance Company at "AA" (Excellent). In addition, S&P affirmed the
following debt ratings for UNUM Corporation: senior debt (medium-term notes
program) at "A+" (Strong), commercial paper at "A-1" (Strong), and monthly
income debt securities at "A" (Strong).
LITIGATION
In the normal course of its business operations, UNUM is involved in litigation
from time to time with claimants, beneficiaries and others, and a number of
lawsuits were pending at JuneSeptember 30, 1997. In some instances, these
proceedings include claims for punitive damages and similar types of relief in
unspecified or substantial amounts, in addition to amounts for alleged
contractual liability or other compensatory damages. In the opinion of
management, the ultimate liability, if any, arising from this litigation is not
expected to have a material adverse effect on the consolidated financial
position or the consolidated operating results of UNUM.
On December 29, 1993, UNUM filed a suit in the United States District Court for
the District of Maine, seeking a federal income tax refund. The suit is based
on a claim for a deduction in certain prior tax years, for $652 million in cash
and stock distributed to policyholders in connection with the 1986 conversion of
Union Mutual Life Insurance Company to a stock company. UNUM has fully paid,
and provided for in prior years' financial statements, the tax at issue in this
litigation. On May 23, 1996, the District Court issued its decision that the
distribution in question was not a deductible expenditure. UNUM believes its
claims are meritorious, and has appealed the decision to the United States Court
of Appeals for the First Circuit. The ultimate recovery, if any, cannot be
determined at this time.
EFFECTS OF YEAR 2000
The year 2000 issue relates to whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Management has
established processes for evaluating and managing this risk in relation to
internal software and processes, as well as impacts from relationships with
external parties. UNUM has incurred, and will continue to incur, costs
management believes are necessary to address both internal and external risks
associated with year 2000. The financial impact of addressing the year 2000
issue has not been, and is not anticipated to be, material to the financial
position, results of operations or liquidity of UNUM.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard ("FAS") No. 128, "Earnings Per Share," which is
intended to simplify the computation and presentation of earnings per share
("EPS"). FAS 128 supersedes Accounting Principles Board ("APB") Opinion No.
15, "Earnings Per Share." FAS 128 will eliminate the concept of "primary"
EPS and require dual presentation of "basic" and "diluted" EPS. Diluted EPS
under FAS 128 is similar to "fully diluted" EPS as defined by APB 15. UNUM is
required to adopt FAS 128 effective December 31, 1997. As stated in Note 68 of
the Consolidated Financial Statements, under the caption "Earnings Per Share,"
the assumed exercise of UNUM's outstanding stock options does not result in a
material dilution of EPS.
In March 1997, the FASB issued FAS No. 129, "Disclosures of Information About
Capital Structure," which clarifies disclosure requirements related to the
type, and nature, of securities contained in an entity's capital structure.
UNUM is required to adopt FAS 129 effective December 31, 1997.
In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive income
and its components in a financial statement with the same prominence as other
financial statements. Comprehensive income is defined as net income adjusted
for changes in stockholders' equity resulting from events other than net income
or transactions related to an entity's capital instruments. UNUM is required to
adopt FAS 130 effective January 1, 1998, with reclassification of financial
statements for earlier years required.
In June 1997, the FASB issued FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information,"which establishes standards for reporting
information about operating segments. Generally, FAS 131 requires that
financial information be reported on the basis that is used internally for
evaluating performance. UNUM is required to adopt FAS 131 effective January 1,
1998, and comparative information for earlier years must be restated. This
statement does not need to be applied to interim financial statements in the
initial year of application. UNUM has
not yet determinedis currently considering what impact if any, FAS 131
haswill have on its current segment reporting structure.
UNUM Corporation and Subsidiaries
Form 10-Q
September 30, 1997
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of UNUM Corporation held on May 9, 1997,
the following proposals were approved (share amounts are on a pre-split basis):
Votes
Votes Votes Withheld/
For Against Abstentions
---------- --------- -----------
1. Ratification of the appointment of 61,654,016 52,449 139,137
Coopers & Lybrand L.L.P. as the
Corporation's independent auditors
for the year 1997.
2. Approval of the Corporation's 58,449,004 2,528,943 480,130
Incentive Compensation Plan for
Designated Executive Officers.
3. Approval of an increase in the 61,144,896 472,434 228,272
authorized shares of Common
Stock of the Corporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Page
(a) Exhibit Index
12. Statement re: Computation of ratio of earnings to fixed charges.
15. Letter re: Unaudited interim financial information.
27. Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant with the United States
Securities and Exchange Commission during the quarter ended JuneSeptember 30, 1997.
UNUM Corporation and Subsidiaries
Form 10-Q
September 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date August 8,November 7, 1997 /s//S/ ROBERT W. CRISPINE. BROATCH
-------------------- -----------------------------
Robert W. Crispin
ExecutiveE. Broatch
Senior Vice President and
Chief Financial Officer
Date August 8,November 7, 1997 /s//S/ JOHN M. LANG, JR.
-------------------- ------------------------------
John M. Lang, Jr.
Vice President and
Corporate Controller