<PAGE>
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 MARCH 31, 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 MARCH 31, 1997
COMMON STOCK, $0.10 PAR VALUE 69,775,171 SHARES
<PAGE>
UNUM CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income - Three Months Ended
March 31, 1997, and 1996 (Unaudited) 3
Consolidated Balance Sheets as of March 31, 1997,
(Unaudited) and December 31, 1996 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1997, and 1996 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Independent Accountant's Review Report 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
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
March 31,
----------------
(Unaudited - Dollars in millions, except per common
share data)
1997 1996
- ---------------------------------------------------------------------------
REVENUES
Premiums $ 766.3 $ 768.1
Investment income 164.8 209.7
Net realized investment gains (losses) (2.2) 3.5
Fees and other income 114.1 20.1
- ---------------------------------------------------------------------------
Total revenues 1,043.0 1,001.4
BENEFITS AND EXPENSES
Benefits to policyholders 578.6 582.9
Interest credited 33.4 51.4
Operating expenses 182.2 180.5
Commissions 90.3 93.6
Increase in deferred policy acquisition costs (23.4) (20.0)
Interest expense 10.2 10.3
- ---------------------------------------------------------------------------
Total benefits and expenses 871.3 898.7
- ---------------------------------------------------------------------------
Income before income taxes 171.7 102.7
INCOME TAXES
Current 18.6 26.7
Deferred 38.1 3.9
- ---------------------------------------------------------------------------
Total income taxes 56.7 30.6
- ---------------------------------------------------------------------------
NET INCOME $ 115.0 $ 72.1
===========================================================================
NET INCOME PER COMMON SHARE $ 1.62 $ 0.99
===========================================================================
See notes to consolidated financial statements.
<PAGE>
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
March 31, 1997 December 31,
(Dollars in millions) (Unaudited) 1996
- ----------------------------------------------------------------------------
ASSETS
Investments
Fixed maturities available for sale-at fair value
(amortized cost: 1997-$6,478.4; 1996-$6,656.7) $ 6,628.5 $ 6,942.7
Equity securities available for sale-at fair value
(cost: 1997-$22.0; 1996-$23.8) 27.9 31.3
Mortgage loans 1,142.6 1,132.1
Real estate, net 239.5 248.1
Policy loans 148.6 232.9
Other long-term investments 11.2 14.2
Short-term investments 311.5 123.4
- ---------------------------------------------------------------------------
Total investments 8,509.8 8,724.7
Cash 61.9 77.0
Accrued investment income 145.0 166.1
Premiums due 280.6 252.4
Deferred policy acquisition costs 866.4 844.2
Property and equipment, net 187.6 181.0
Reinsurance receivables 1,154.9 1,113.8
Deposit assets 1,010.0 2,846.6
Other assets 470.7 518.0
Separate account assets 151.5 743.7
- ---------------------------------------------------------------------------
Total assets $12,838.4 $15,467.5
===========================================================================
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Future policy benefits 1,895.1 $ 1,881.1
Unpaid claims and claim expenses 5,321.1 5,289.3
Other policyholder funds 1,537.2 3,533.6
Income taxes
Current 76.0 61.3
Deferred 350.8 341.8
Notes payable 611.4 526.9
Other liabilities 766.9 826.7
Separate account liabilities 151.5 743.7
- ---------------------------------------------------------------------------
Total liabilities 10,710.0 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
120,000,000 shares, issued 99,987,958 shares) 10.0 10.0
Additional paid-in capital 1,112.8 1,103.4
Unrealized gains on available for sale securities, net 31.4 82.3
Unrealized foreign currency translation adjustment (11.9) (1.2)
Retained earnings 1,966.7 1,871.4
- ---------------------------------------------------------------------------
3,109.0 3,065.9
Less:
Treasury stock, at cost (1997-30,212,787 shares;
1996-28,165,594 shares) 966.0 792.2
Restricted stock deferred compensation 14.6 10.6
- ---------------------------------------------------------------------------
Total stockholders' equity 2,128.4 2,263.1
Total liabilities and stockholders' equity $12,838.4 $15,467.5
===========================================================================
See notes to consolidated financial statements.
<PAGE>
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
Three Months Ended
March 31,
---------------
(Unaudited - Dollars in millions) 1997 1996
- ---------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 115.0 $ 72.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Increase in future policy benefits and unpaid claims and
claim expenses 135.5 153.2
Increase in amounts receivable under reinsurance agreements (44.0) (19.5)
Increase in income tax liability 51.9 43.0
Increase in deferred policy acquisition costs (23.5) (20.0)
Decrease in deposit assets 45.0 --
Recognition of deferred gain on sale of tax-sheltered
annuities (58.0) --
Other 0.9 2.8
Net cash provided by operating activities 222.8 231.6
INVESTING ACTIVITIES:
Maturities of fixed maturities available for sale 100.1 166.6
Sales of fixed maturities available for sale 341.3 389.3
Sales and maturities of other investments 38.7 60.1
Purchases of fixed maturities available for sale (286.3) (973.2)
Purchases of other investments (44.9) (52.4)
Net (increase) decrease in short-term investments (188.1) 308.0
Net additions to property and equipment (14.5) (14.2)
Net cash used in investing activities (53.7) (115.8)
FINANCING ACTIVITIES:
Deposits and interest credited to investment contracts 83.7 155.8
Maturities and withdrawals from investment contracts (156.7) (273.9)
Dividends to stockholders (19.7) (19.4)
Treasury stock acquired (184.9) --
Net increase in short-term debt 84.4 17.3
Other 9.7 4.9
Net cash used in financing activities (183.5) (115.3)
Effect of exchange rate changes on cash (0.7) (0.2)
Net increase (decrease) in cash (15.1) 0.3
Cash at beginning of year 77.0 42.5
Cash at end of period $ 61.9 $ 42.8
===========================================================================
<PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Income taxes $ 2.6 $ (12.9)
Interest $ 5.3 $ 5.3
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
As discussed in Note 3, consent for assumption reinsurance has been given
by contractholders and participants owning approximately 72% of assets under
management related to the tax-sheltered annuity business UNUM sold in 1996.
In connection with the consents received in first quarter 1997, UNUM reduced
its deposit assets by $1,791.7 million, policy loan assets by $85.5 million,
other policyholder fund liabilities by $1,923.4 million, and separate
account assets and liabilities by $401.7 million.
===========================================================================
See notes to consolidated financial statements.
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q
Notes to Consolidated Financial Statements (Unaudited)
March 31, 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, considered necessary for a fair presentation
have been included in the financial statements. Interim results for the
three month period ended March 31, 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. 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 3. 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 March 31, 1997, the deposit asset
related to the TSA transaction was approximately $805 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 March 31, 1997, consent for assumption reinsurance
has been provided by TSA contractholders and participants owning
approximately 72% of assets under management.
Historical results of the TSA business included in UNUM's Consolidated
Statements of Income were as follows:
Three Months Ended
March 31,
---------------
(Dollars in millions, except per common share data) 1997 1996
Revenues $ 86.1 $ 56.5
Net income $ 38.6 $ 4.7
Net income per common share $ 0.54 $ 0.06
=======================================================================
The first quarter 1997 results shown above include $58.0 million of fees
and other income, $37.5 million of net income and $0.53 per common share
related to the recognition of approximately 72% of the deferred pretax gain
on the TSA sale.
NOTE 4. 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 Center Re based on the level of statutory reserves. Center
Re has an obligation to fund a defined risk layer, while UNUM retains the
earnings risk related to potential adverse claims experience up to a
certain threshold. This threshold amount represents the existence of an
experience layer with a value of approximately $205 million at March 31,
1997. UNUM records the value of the experience layer on its Consolidated
Balance Sheets as a deposit asset. UNUM's obligation under the agreement
is funded by a trust account established in late December 1996. Net cash
flows of the reinsured block are transferred to/from the trust account and,
together with changes in reserve levels, determine the value of UNUM's
deposit asset. Changes in the deposit asset are reflected in UNUM's
Consolidated Statement of Income as fees and other income.
NOTE 5. COMMON STOCK SPLIT
- ---------------------------
On March 14, 1997, UNUM's Board of Directors authorized 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. To effect the stock
split, on or about June 2, 1997, one additional share will be distributed
for each share of common stock already issued, to holders of record on May
19, 1997. The financial information contained in this report has not been
adjusted to reflect the impact of the common stock split.
NOTE 6. EARNINGS PER SHARE
- ---------------------------
The weighted average number of shares outstanding used to calculate
earnings per share was approximately 71,194,000 and 73,118,000 for first
quarter 1997 and 1996, respectively. The assumed exercise of outstanding
stock options would not result in a material dilution of earnings per
share.
NOTE 7. DIVIDENDS TO STOCKHOLDERS
- ----------------------------------
On April 11, 1997, UNUM's Board of Directors declared a twenty-eight and
one half cents per share cash dividend. The dividend is payable on May 16,
1997, to common stockholders of record at the close of business on April
28, 1997. During the first three months of 1997, a twenty-seven and one
half cents per share cash dividend was paid on February 21, 1997.
NOTE 8. CAPITAL STOCK
- ----------------------
Effective October 23, 1996, UNUM's Board of Directors approved an expansion
of the Company's stock repurchase program to 6.0 million shares by
authorizing an additional 3.7 million shares. At March 31, 1997,
approximately 2.1 million shares of common stock remained authorized for
repurchase. Through the first three months of 1997, UNUM acquired
approximately 2.4 million shares of its common stock in the open market at
an aggregate cost of $184.9 million.
NOTE 9. 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 March 31, 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. 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 6, 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.
NOTE 11. 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.
<PAGE>
Summarized financial information for the four business segments and
Corporate is as follows:
Three Months Ended
March 31,
------------------
(Dollars in millions) 1997 1996
- ----------------------------------------------------------------------
REVENUES
Disability Insurance $ 563.7 $ 583.3
Special Risk Insurance 232.1 203.0
Colonial Products 142.6 133.9
Retirement Products 102.8 76.4
Corporate 1.8 4.8
- ----------------------------------------------------------------------
Total revenues $1,043.0 $1,001.4
======================================================================
INCOME (LOSS) BEFORE INCOME TAXES
Disability Insurance $ 75.6 $ 64.3
Special Risk Insurance 27.4 19.0
Colonial Products 21.9 18.7
Retirement Products 59.7 6.3
Corporate (12.9) (5.6)
- -----------------------------------------------------------------------
Total income before income taxes 171.7 102.7
Income taxes 56.7 30.6
- ----------------------------------------------------------------------
Net income $ 115.0 $ 72.1
======================================================================
March 31, December 31,
(Dollars in millions) 1997 1996
- -------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Disability Insurance $ 7,747.1 $ 7,846.8
Special Risk Insurance 1,326.5 1,297.1
Colonial Products 1,123.6 1,094.1
Retirement Products 1,898.3 4,478.8
Corporate 393.0 396.7
Individual Participating Life and Annuity 349.9 354.0
Total assets $12,838.4 $15,467.5
======================================================================
<PAGE>
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 March 31, 1997, and the related consolidated statements
of income and cash flows for the three-month periods ended March 31, 1997, and
1996. 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
April 23, 1997, except for Note 5
for which the date is May 9, 1997
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q
March 31, 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.
CONSOLIDATED OVERVIEW
Net income for the quarter ended March 31, 1997, was $115.0 million, or $1.62
per share, as compared with net income of $72.1 million, or $0.99 per share, for
the same quarter in 1996. Revenues for UNUM were $1,043.0 million for first
quarter 1997 and $1,001.4 million for first quarter 1996.
A comparison of net income is impacted by the inclusion of realized investment
gains or losses and a special item that occurred in first quarter 1997. 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 ended March 31,
1997, and 1996, and is followed by a discussion of the first quarter 1997
special item and a reconciliation of income (loss) before income taxes to
pretax operating income (loss).
Three Months Ended
March 31,
-----------------------
(Dollars in millions and percentage increase
(decrease) over prior period) 1997 1996 Change
- --------------------------------------------------------------------------------
SUMMARY OF PRETAX OPERATING INCOME (LOSS)
Disability Insurance Segment $ 76.8 $62.5 22.9%
Special Risk Insurance Segment 27.0 18.6 45.2
Colonial Products Segment 22.3 18.4 21.2
Retirement Products Segment 2.0 5.4 (63.0)
Corporate (12.2) (5.7) nm
- -----------------------------------------------------------------------------
Total pretax operating income $115.9 $99.2 16.8%
=============================================================================
nm = not meaningful or in excess of 100%
UNUM reported increased pretax operating income for the three months ended March
31, 1997, as compared with the same period in 1996. The increase was primarily
attributable to increased investment income across most product lines and
improved benefit ratios for certain disability businesses, particularly group
long term disability ("group LTD") and at UNUM Limited, reported in the
Disability Insurance segment. Additionally, improved premium growth in group
LTD, reported in the Disability Insurance segment, and in group life, reported
in the Special Risk Insurance segment, contributed to the increase in pretax
operating income. Partially offsetting these increases were unfavorable claims
experience in the individual disability line reported in the Disability
Insurance segment, increased operating expenses in Corporate, and reduced pretax
operating income in the Retirement Products segment as a result of the sale of
the group tax-sheltered annuity business.
<PAGE>
SPECIAL ITEM IN FIRST 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") businesses to The Lincoln
National Life Insurance Company and Lincoln Life & Annuity Company of New
York, both subsidiaries of Lincoln National Corporation. The sale 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. Through March 31, 1997, consent for assumption reinsurance has
been provided by TSA contractholders and participants owning approximately
72% of assets under management, which resulted in the recognition of $58.0
million of the total deferred pretax gain of $80.8 million. The $58.0
million gain is reflected as fees and other income in the Retirement Products
segment for first quarter 1997.
RECONCILIATION OF INCOME (LOSS) BEFORE INCOME TAXES TO PRETAX OPERATING INCOME
(LOSS)
- ------------------------------------------------------------------------------
<TABLE>
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 ended March 31, 1997, and 1996:
Disability Special Risk Colonial Retirement Consolidated
(Dollars in millions) Insurance Insurance Products Products Corporate UNUM
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1997:
- ----------------------------------
Income (loss) before
income taxes $75.6 $27.4 $21.9 $59.7 $(12.9) $171.7
Exclude realized
investment (gains) losses 1.2 (0.4) 0.4 0.3 0.7 2.2
- ---------------------------------------------------------------------------------------------
76.8 27.0 22.3 60.0 (12.2) 173.9
Special item:
TSA deferred gain
recognition -- -- -- (58.0) -- (58.0)
- ----------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $76.8 $27.0 $22.3 $ 2.0 $(12.2) $115.9
===============================================================================================
Three Months Ended March 31, 1996:
- ----------------------------------
Income (loss) before
income taxes $64.3 $19.0 $18.7 $ 6.3 $ (5.6) $102.7
Exclude realized investment
gains (1.8) (0.4) (0.3) (0.9) (0.1) (3.5)
- ----------------------------------------------------------------------------------------------
PRETAX OPERATING INCOME
(LOSS) $62.5 $18.6 $18.4 $ 5.4 $ (5.7) $ 99.2
==============================================================================================
</TABLE>
<PAGE>
PREMIUMS:
- ---------
Premiums for the three months ended March 31, 1997, and 1996, are summarized by
segment in the table below.
Three Months Ended
March 31,
---------------------
(Dollars in millions and percentage increase
(decrease) over prior period) 1997 1996 Change
- ------------------------------------------------------------------
Disability Insurance
Group LTD $291.3 $268.9 8.3%
Group Short Term Disability 47.4 36.6 29.5
UNUM Limited 36.7 32.3 13.6
Individual Disability 35.2 102.8 (65.8)
Other Disability Insurance 22.7 21.7 4.6
- -------------------------------------------------------------------
Total 433.3 462.3 (6.3)
Special Risk Insurance
Group Life 125.7 103.8 21.1
Other Special Risk Products 75.6 75.5 0.1
- -------------------------------------------------------------------
Total 201.3 179.3 12.3
Colonial Products 128.7 121.4 6.0
Retirement Products 3.0 5.1 (41.2)
- -------------------------------------------------------------------
Total premiums $766.3 $768.1 (0.2)%
=====================================================================
Total premiums declined in the Disability Insurance segment for the three months
ended March 31, 1997, as compared to the same period in 1996 due to the cession
of $65.9 million of premium under the individual disability reinsurance
agreement discussed in the Disability Insurance segment section.
Claim block acquisitions, which generated one-time premium in the Disability
Insurance and Special Risk Insurance segments, for the three months ended March
31, 1997, and 1996, are summarized in the table below. Management intends to
pursue additional claim block acquisitions in the future.
Three Months Ended
March 31,
---------------------
(Dollars in millions) 1997 1996
- ------------------------------------------------------------------
Disability Insurance
Group LTD $0.9 $1.3
UNUM Limited 0.9 1.2
Special Risk Insurance
Group Life -- 0.1
Reinsurance Operations -- 10.5
- -------------------------------------------------------------------
Total $1.8 $13.1
===================================================================
<PAGE>
PRETAX OPERATING INCOME (LOSS) BY SEGMENT:
- ------------------------------------------
The following sections discuss the results of the four business segments and
Corporate for the three months ended March 31, 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 item
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
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
Center Re based on the level of statutory reserves. Center Re has an
obligation to fund a defined risk layer, while UNUM retains the earnings risk
related to potential adverse claims experience up to a certain threshold. This
threshold amount represents the existence of an experience layer with a value
of approximately $205 million at March 31, 1997. UNUM records the value of the
experience layer on its Consolidated Balance Sheets as a deposit asset. UNUM's
obligation under the agreement is funded by a trust account established in late
December 1996. Net cash flows of the reinsured block are transferred to/from
the trust account and, together with changes in reserve levels, will determine
the value of UNUM's deposit asset.
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, changes in the deposit asset, which
represent the operating results of the reinsured business, are reflected as
fees and other income. Since the operating results of the reinsured business
are still recognized by UNUM, management continues to focus on the underlying
trends of the reinsured business, and in the following discussion, reference to
ID includes both the reinsured and unreinsured portions of the business.
The Disability Insurance segment reported increased pretax operating income for
the three months ended March 31, 1997, as compared with the same period in
1996. The increase was primarily attributable to increased investment income
in all major product lines, lower benefit ratios in group LTD and at UNUM
Limited, and decreased commissions and operating expenses in ID. Partially
offsetting these favorable factors was unfavorable claims experience in ID.
Pretax operating income for group LTD was favorably affected by a lower benefit
ratio and increased investment income for the three months ended March 31,
1997, as compared with the same period in 1996. The lower benefit ratio was
primarily the result of lower claims incidence and higher claim recoveries,
which management primarily attributes to the continued success of its risk
management programs, and increased premium growth from stronger sales and
improved 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.
For the three months ended March 31, 1997, UNUM Limited's pretax operating
income was favorably affected by a lower benefit ratio and increased investment
income, as compared with the corresponding period in 1996. The lower benefit
ratio was primarily the result of a continuing focus on risk management
programs. 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 these 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 period ended March 31, 1997, pretax operating income for ID
decreased compared to the same period in 1996. The reduction in operating
income was primarily due to a higher benefit ratio, partially offset by lower
commissions and operating expenses. The higher benefit ratio was primarily
attributable to an increased level of claims incidence and lower claim
recoveries combined with a reduction in premium. This reduction in premium, and
the lower commissions and operating expenses, were the result of 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
March 31, 1997, management believes that the strengthened reserves continue
to be adequate.
Pretax operating income for the disability reinsurance operations was adversely
affected by a higher benefit ratio, primarily attributable to continued
unfavorable claims experience combined with a decrease in premium for the
three months ended March 31, 1997, as compared with the same period in 1996.
Management continues to focus on improving risk management programs and
strengthening underwriting standards to address this claims experience.
SPECIAL RISK INSURANCE SEGMENT
The Special Risk Insurance segment reported an increase in pretax operating
income for the three months ended March 31, 1997, as compared with the same
period in 1996. The increase was primarily due to premium growth driven by
strong sales in the group life business in late 1996 and improved persistency.
In addition, increased investment income for the segment and additional fee
income from the reinsurance underwriting management operations contributed to
the improved operating results. 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
businesses, several of the products in the Special Risk Insurance segment can
exhibit claims variability.
COLONIAL PRODUCTS SEGMENT
The Colonial Products segment reported increased pretax operating income for
the three months ended March 31, 1997, as compared with the same period in
1996. The increase was primarily due to a lower benefit ratio in the cancer
product line and increased investment income, principally from increased cash
flows. Management continues its efforts to increase sales and premium at
Colonial by enhancing collaborative sales across the UNUM enterprise,
introducing new products and developing alternative distribution channels.
RETIREMENT PRODUCTS SEGMENT
For the three months ended March 31, 1997, the Retirement Products segment
reported decreased pretax operating income as compared with the same period in
1996. The decrease was primarily due to the sale of UNUM's TSA business in
October 1996. The TSA business accounted for $1.2 million and $4.8 million of
the Retirement Products segment's pretax operating income in first quarter 1997
and 1996, respectively.
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. During
the first quarter of 1997, consent for assumption reinsurance has been
provided by TSA contractholders and participants owning approximately 72% 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, net investment income for the Retirement Products segment
declined significantly in first quarter of 1997 as compared to the same period
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. In the first
quarter of 1997, $24.4 million of interest credited reimbursement is included
in fees and other income in the Consolidated Statement of Income.
CORPORATE
The increased pretax operating loss in Corporate for the three months ended
March 31, 1997, as compared with the first quarter of 1996, was primarily due
to higher operating expenses, primarily related to increased international
development and advertising costs, and decreased net investment income.
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 classified as available for sale,
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, stock repurchase, corporate development and administrative
costs. Net statutory operating income, which excludes realized investment
gains net of tax, is one of the major determinants of an insurance company's
dividend capacity to its parent in the following fiscal year. 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. In the first quarter of 1997, UNUM's
insurance subsidiaries domiciled in the United States reported net statutory
operating income of approximately $51 million, as compared with approximately
$49 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
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 March 31, 1997, UNUM had short-term and long-term debt totaling $202.1
million and $409.3 million, respectively. At March 31, 1997, approximately
$354 million was available for additional financing under the existing
revolving credit facility and $500 million of investment grade debt
instruments were 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 $84.7 million at
March 31, 1997.
Effective October 23, 1996, UNUM's Board of Directors approved an expansion
of the Company's stock repurchase program to 6.0 million shares by
authorizing an additional 3.7 million shares. At March 31, 1997,
approximately 2.1 million shares of common stock remained authorized for
repurchase. Through the first three months of 1997, UNUM acquired
approximately 2.4 million shares of its common stock in the open market
at an aggregate cost of $184.9 million.
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 March 31, 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.
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q
March 31, 1997
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Page
(a) Exhibit Index
12. Statement re: Computation of ratio of earnings to fixed charges. 20
15. Letter re: Unaudited interim financial information. 21
27. Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant with the Securities and
Exchange Commission during the quarter ended March 31, 1997.
<PAGE>
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 May 9, 1997 /s/ ROBERT W. CRISPIN
-------------------- -----------------------------
Robert W. Crispin
Executive Vice President and
Chief Financial Officer
Date May 9, 1997 /s/ JOHN M. LANG, JR.
-------------------- ------------------------------
John M. Lang, Jr.
Vice President and
Corporate Controller
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q
March 31, 1997
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
March 31,
---------------
(Unaudited - Dollars in millions) 1997 1996
- ---------------------------------------------------------------------------
Earnings:
Income from continuing operations before income taxes $ 171.7 $ 102.7
Add: Fixed charges 12.7 13.3
Earnings as adjusted $ 184.4 $ 116.0
============================================================================
Fixed charges:
Interest expense $ 10.2 $ 10.3
Interest portion of rent expense 2.5 3.0
Total fixed charges $ 12.7 $ 13.3
============================================================================
Ratio of earnings to fixed charges 14.5 8.7
============================================================================
For purposes of computing the ratio of earnings to fixed charges, earnings as
adjusted consist of income from continuing operations before income taxes and
fixed charges. Fixed charges consist of interest expense and the estimated
interest portion of rent expense.
<PAGE>
UNUM Corporation and Subsidiaries
Form 10-Q
March 31, 1997
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
We are aware that our report dated April 23, 1997, except for Note 5 for which
the date is May 9, 1997, on our review of interim financial information of
UNUM Corporation for the three month periods ended March 31, 1997, and 1996,
and included in the Company's quarterly report on Form 10-Q for the quarters
then ended is incorporated by reference in the following Registration
Statements:
o Form S-8 No. 33-31270 pertaining to the UNUM Employees Retirement Savings
Plan and Trust
o Form S-8 No. 33-19090 pertaining to the 1987 Executive Stock Option Plan
o Form S-8 No. 33-38225 pertaining to the 1990 Long-Term Stock Incentive Plan
o Form S-8 No. 33-52741 pertaining to the 1990 Long-Term Stock Incentive Plan
o Form S-3 No. 33-36873
o Form S-3 No. 33-69132
o Post-Effective Amendment No. 1 on Form S-8 to Registration Statement on
Form S-4 No. 33-55870
o Form S-3 No. 333-08187
Pursuant to Rule 436 (c) under the Securities Act of 1933, this report should
not be considered a part of the registration statements prepared or certified by
accountants within the meaning of Sections 7 and 11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly consolidated financial statements of UNUM Corporation and Subsidiaries
and is qualified in its entirety by reference to such contained in UNUM
Corporation's SEC Form 10-Q for the period ended March 31, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 6,628,500
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 27,900
<MORTGAGE> 1,142,600
<REAL-ESTATE> 239,500
<TOTAL-INVEST> 8,509,800
<CASH> 61,900
<RECOVER-REINSURE> 1,154,900
<DEFERRED-ACQUISITION> 866,400
<TOTAL-ASSETS> 12,838,400
<POLICY-LOSSES> 7,216,200
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 1,537,200
<NOTES-PAYABLE> 611,400
<COMMON> 10,000
0
0
<OTHER-SE> 2,118,400
<TOTAL-LIABILITY-AND-EQUITY> 12,838,400
766,300
<INVESTMENT-INCOME> 164,800
<INVESTMENT-GAINS> (2,200)
<OTHER-INCOME> 114,100
<BENEFITS> 578,600
<UNDERWRITING-AMORTIZATION> (23,400)<F1>
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 171,700
<INCOME-TAX> 56,700
<INCOME-CONTINUING> 115,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,000
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>This item contains the amounts of deferred and amortized policy acquisition
costs for the period presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly consoldiated financial statements of UNUM Corporation and Subsidiaries
and is qualified in its entirety by reference to such contained in UNUM
Corporation's SEC Form 10-Q for the period ended March 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 9,301,400
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 25,000
<MORTGAGE> 1,149,900
<REAL-ESTATE> 225,900
<TOTAL-INVEST> 11,540,900
<CASH> 42,800
<RECOVER-REINSURE> 439,700
<DEFERRED-ACQUISITION> 1,162,000
<TOTAL-ASSETS> 14,746,500
<POLICY-LOSSES> 6,605,500
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 3,722,200
<NOTES-PAYABLE> 601,300
<COMMON> 10,000
0
0
<OTHER-SE> 2,241,500
<TOTAL-LIABILITY-AND-EQUITY> 14,746,500
768,100
<INVESTMENT-INCOME> 209,700
<INVESTMENT-GAINS> 3,500
<OTHER-INCOME> 20,100
<BENEFITS> 582,900
<UNDERWRITING-AMORTIZATION> (20,000)<F1>
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 102,700
<INCOME-TAX> 30,600
<INCOME-CONTINUING> 72,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,100
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>This item contains the amounts of deferred and amortized policy acquisition
costs for the period presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly consolidated financial statements of UNUM Corporation and Subsidiaries
and is qualified in its entirety by reference to such contained in UNUM
Corporation's SEC Form 10-Q for the period ended dated June 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 8,993,500
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 27,200
<MORTGAGE> 1,140,300
<REAL-ESTATE> 227,800
<TOTAL-INVEST> 11,385,000
<CASH> 45,400
<RECOVER-REINSURE> 520,100
<DEFERRED-ACQUISITION> 1,191,200
<TOTAL-ASSETS> 14,869,500
<POLICY-LOSSES> 6,700,700
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 3,650,000
<NOTES-PAYABLE> 558,500
<COMMON> 10,000
0
0
<OTHER-SE> 2,282,500
<TOTAL-LIABILITY-AND-EQUITY> 14,869,500
1,530,400
<INVESTMENT-INCOME> 421,900
<INVESTMENT-GAINS> 400
<OTHER-INCOME> 39,200
<BENEFITS> 1,146,400
<UNDERWRITING-AMORTIZATION> (48,900)<F1>
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 208,700
<INCOME-TAX> 62,700
<INCOME-CONTINUING> 146,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,000
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>This item contains the amounts of deferred and amortized policy acquisition
costs for the period presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly consolidated financial statements of UNUM Corporation and Subsidiaries
and is qualified in its entirety by reference to such contained in UNUM
Corporation's SEC Form 10-Q for the period ended September 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 7,469,800
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 27,300
<MORTGAGE> 1,118,900
<REAL-ESTATE> 233,600
<TOTAL-INVEST> 11,633,100
<CASH> 42,200
<RECOVER-REINSURE> 538,100
<DEFERRED-ACQUISITION> 1,203,000
<TOTAL-ASSETS> 15,152,100
<POLICY-LOSSES> 6,937,200
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 3,622,600
<NOTES-PAYABLE> 564,100
<COMMON> 10,000
0
0
<OTHER-SE> 2,276,300
<TOTAL-LIABILITY-AND-EQUITY> 15,152,100
2,326,600
<INVESTMENT-INCOME> 629,600
<INVESTMENT-GAINS> 2,000
<OTHER-INCOME> 56,800
<BENEFITS> 1,751,600
<UNDERWRITING-AMORTIZATION> (60,500)<F1>
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 272,000
<INCOME-TAX> 82,000
<INCOME-CONTINUING> 190,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190,000
<EPS-PRIMARY> 2.60
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>This item contains the amounts of deferred and amortized policy acquisition
costs for the period presented.
</FN>
</TABLE>
