Segment Information

We have three principal operating business segments: Unum US, Unum UK, and Colonial Life. Our other segments are Closed Block and Corporate.

The Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment products, and supplemental and voluntary lines of business. The supplemental and voluntary lines of business are comprised of individual disability, voluntary benefits, and dental and vision products. These products are marketed through our field sales personnel who work in conjunction with independent brokers and consultants.

The Unum UK segment includes insurance for group long-term disability, group life, and supplemental lines of business, which include dental, individual disability, and critical illness products. Unum UK's products are sold primarily in the United Kingdom through field sales personnel and independent brokers and consultants.

The Colonial Life segment includes insurance for accident, sickness, and disability products, life products, and cancer and critical illness products marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agency sales force and brokers.

The Closed Block segment consists of individual disability, group and individual long-term care, and other insurance products no longer actively marketed. The individual disability line of business in this segment generally consists of policies we sold prior to the mid-1990s and entirely discontinued selling in 2004, other than update features contractually allowable on existing policies. We discontinued offering individual long-term care in 2009 and group long-term care in 2012. Other insurance products include group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations, and other miscellaneous product lines.

The Corporate segment includes investment income on corporate assets not specifically allocated to a line of business, interest expense on corporate debt other than non-recourse debt, and certain other corporate income and expense not allocated to a line of business.

Acquisitions of Business

In August 2016, we acquired 100 percent of the shares and voting interests in H&J Capital, L.L.C., parent of Starmount Life Insurance Company and AlwaysCare Benefits (Starmount), for a total cash purchase price of $140.3 million plus contingent cash consideration of $10.0 million to be paid in two increments of $5.0 million each, at 18 and 24 months from the date of acquisition upon satisfaction of certain conditions. Starmount Life Insurance Company is an independent provider of dental and vision insurance in the U.S. workplace, and AlwaysCare Benefits is a nationally licensed, third-party administrator. The acquisition of Starmount will broaden our employee benefit offerings in the U.S. Starmount's dental and vision products and new dental and vision products to be marketed by Unum US are reported in our Unum US segment within our supplemental and voluntary product lines. Colonial Life dental and vision products are expected to be introduced in 2018 and will be reported in our Colonial Life segment.

Starmount's revenues totaled $129.9 million in 2015. Total assets were valued at $93.1 million as of the acquisition date and were primarily comprised of bonds, cash, accounts receivable, and intangible assets attributable to the value of business acquired and the value of existing state licenses. Total liabilities were valued at $55.7 million as of the acquisition date and were primarily comprised of outstanding claim liabilities and reserves for future claims. The total purchase price exceeded the fair value of the identifiable net assets by $111.2 million and has been identified as goodwill, primarily attributable to the value of adding dental and vision to our current employee benefit offerings. Goodwill was allocated to the reporting units expected to benefit from the acquisition. Approximately 75 percent was allocated to our Unum US supplemental and voluntary product lines and approximately 25 percent to Colonial Life. The goodwill is not deductible for income tax purposes except upon disposition of the acquired entity. This acquisition, the results of which are included in our consolidated financial statements for the period subsequent to the date of acquisition, did not have a material impact on revenue or operating results for 2016.

In September 2015, we acquired 100 percent of the common shares and voting interests in National Dental Plan Limited and associated companies (National Dental) for a total cash purchase price of £35.9 million or $54.3 million. National Dental, a provider of dental insurance in the U.K. workplace, is reported in our Unum UK segment as part of our supplemental product line. The acquisition of National Dental extends our market reach, broadening our employee benefit offerings in the U.K. National Dental's revenues totaled £14.7 million, or $24.2 million, in 2014. Total assets were £18.6 million, or $28.1 million as of the acquisition date, and were primarily comprised of short-term investments, accounts receivable, and intangible assets attributable to benefits derived from National Dental's customer relationships and dental provider network. Total liabilities were £5.0 million, or $7.5 million as of the acquisition date, and were primarily comprised of outstanding claims liabilities, unearned premiums, and a deferred tax liability. The purchase price exceeded the fair value of the identifiable net assets by £22.3 million, or $33.7 million, and has been identified as goodwill, primarily attributable to the value of adding dental to our current employee benefit offerings. The goodwill is not deductible for income tax purposes except upon disposition of the acquired entity. This acquisition, the results of which are included in our consolidated financial statements for the period subsequent to the date of acquisition, did not have a material impact on revenue or operating results for 2015.

Segment information is as follows:



	Year Ended December 31
	2016		2015		2014
	(in millions of dollars)
Premium Income
Unum US
Group Disability
Group Long-term Disability	$	1,726.6	$	1,644.7	$	1,553.5
Group Short-term Disability	626.1		607.4		558.1
Group Life and Accidental Death & Dismemberment
Group Life	1,410.0		1,347.4		1,262.3
Accidental Death & Dismemberment	140.3		131.7		125.9
Supplemental and Voluntary
Individual Disability	480.3		478.9		466.1
Voluntary Benefits	796.5		749.9		693.8
Dental and Vision	61.1		—		—
	5,240.9		4,960.0		4,659.7
Unum UK
Group Long-term Disability	355.2		397.4		418.9
Group Life	105.7		121.5		133.2
Supplemental	68.4		57.3		55.1
	529.3		576.2		607.2
Colonial Life
Accident, Sickness, and Disability	830.0		789.0		759.8
Life	273.8		252.4		231.8
Cancer and Critical Illness	313.3		297.2		282.1
	1,417.1		1,338.6		1,273.7
Closed Block
Individual Disability	521.9		572.4		624.8
Long-term Care	643.9		633.5		630.9
All Other	4.6		1.7		0.9
	1,170.4		1,207.6		1,256.6
Total Premium Income	$	8,357.7	$	8,082.4	$	7,797.2



	Unum US		Unum UK		Colonial Life		Closed Block		Corporate			Total
	(in millions of dollars)
Year Ended December 31, 2016

Premium Income	$	5,240.9	$	529.3	$	1,417.1	$	1,170.4	$	—		$	8,357.7
Net Investment Income	828.7		118.1		141.5		1,352.2		18.5			2,459.0
Other Income	113.3		0.2		1.2		86.0		4.9			205.6
Operating Revenue	$	6,182.9	$	647.6	$	1,559.8	$	2,608.6	$	23.4		$	11,022.3

Operating Income (Loss)	$	914.2	$	128.6	$	314.2	$	129.5	$	(146.7	)	$	1,339.8
Interest and Debt Expense	$	—	$	—	$	—	$	6.9	$	159.1		$	166.0
Depreciation and Amortization	$	353.0	$	16.4	$	222.9	$	6.9	$	1.0		$	600.2

Year Ended December 31, 2015

Premium Income	$	4,960.0	$	576.2	$	1,338.6	$	1,207.6	$	—		$	8,082.4
Net Investment Income	865.3		124.9		145.4		1,320.0		25.6			2,481.2
Other Income	119.2		—		0.1		89.3		2.9			211.5
Operating Revenue	$	5,944.5	$	701.1	$	1,484.1	$	2,616.9	$	28.5		$	10,775.1

Operating Income (Loss)	$	850.0	$	140.6	$	309.1	$	119.1	$	(124.8	)	$	1,294.0
Interest and Debt Expense	$	—	$	—	$	—	$	6.6	$	146.2		$	152.8
Depreciation and Amortization	$	347.0	$	18.0	$	214.6	$	6.6	$	0.9		$	587.1

Year Ended December 31, 2014

Premium Income	$	4,659.7	$	607.2	$	1,273.7	$	1,256.6	$	—		$	7,797.2
Net Investment Income	878.9		151.0		145.5		1,281.5		35.3			2,492.2
Other Income	122.1		—		0.1		91.8		5.0			219.0
Operating Revenue	$	5,660.7	$	758.2	$	1,419.3	$	2,629.9	$	40.3		$	10,508.4

Operating Income (Loss)	$	844.9	$	147.8	$	299.0	$	120.0	$	(104.4	)	$	1,307.3
Interest and Debt Expense Excluding Costs Related to Early Retirement of Debt	$	—	$	—	$	—	$	7.3	$	147.0		$	154.3
Depreciation and Amortization	$	314.2	$	19.2	$	194.1	$	5.9	$	1.0		$	534.4



							Colonial
	Unum US			Unum UK			Life			Total
	(in millions of dollars)
Deferred Acquisition Costs

Year Ended December 31, 2016
Beginning of Year	$	1,136.4		$	27.1		$	845.0		$	2,008.5
Capitalization	314.1			8.2			270.1			592.4
Amortization	(275.2		)	(9.7		)	(208.1		)	(493.0		)
Adjustment Related to Unrealized Investment Gains and Losses	1.2			—			(10.7		)	(9.5		)
Foreign Currency	—			(4.2		)	—			(4.2		)
End of Year	$	1,176.5		$	21.4		$	896.3		$	2,094.2

Year Ended December 31, 2015
Beginning of Year	$	1,096.5		$	30.4		$	774.4		$	1,901.3
Capitalization	307.3			9.6			252.8			569.7
Amortization	(272.3		)	(11.3		)	(198.7		)	(482.3		)
Adjustment Related to Unrealized Investment Gains and Losses	4.9			—			16.5			21.4
Foreign Currency	—			(1.6		)	—			(1.6		)
End of Year	$	1,136.4		$	27.1		$	845.0		$	2,008.5

Year Ended December 31, 2014
Beginning of Year	$	1,051.5		$	34.3		$	743.4		$	1,829.2
Capitalization	292.7			10.5			220.8			524.0
Amortization	(248.1		)	(12.5		)	(180.2		)	(440.8		)
Adjustment Related to Unrealized Investment Gains and Losses	0.4			—			(9.6		)	(9.2		)
Foreign Currency	—			(1.9		)	—			(1.9		)
End of Year	$	1,096.5		$	30.4		$	774.4		$	1,901.3



	December 31
	2016		2015
	(in millions of dollars)
Assets
Unum US	$	18,036.6	$	18,242.4
Unum UK	3,101.4		3,432.4
Colonial Life	3,923.2		3,776.8
Closed Block	33,734.3		33,000.9
Corporate	3,146.0		2,111.1
Total Assets	$	61,941.5	$	60,563.6

Revenue is primarily derived from sources in the United States and the United Kingdom. There are no material revenues or assets attributable to foreign operations other than those reported in our Unum UK segment.

We report goodwill in our Unum US, Unum UK, and Colonial Life segments, which are the segments expected to benefit from the originating business combinations. At December 31, 2016 and 2015, goodwill was $335.1 million and $230.9 million, respectively, with $271.1 million and $187.6 million, respectively, attributable to Unum US, $36.3 million and $43.3 million, respectively, attributable to Unum UK, and $27.7 million in 2016 attributable to Colonial Life. Changes in the goodwill balances for our Unum US and Colonial Life segments are attributable to the acquisition of Starmount, while changes in our Unum UK segment result from fluctuation in foreign currency exchange rates.

Stockholders' equity is allocated to the operating segments on the basis of an internal allocation formula that reflects the volume and risk components of each operating segment's business and aligns allocated equity with our target capital levels for regulatory and rating agency purposes. We modify this formula periodically to recognize changes in the views of capital requirements.

We measure and analyze our segment performance on the basis of "operating revenue" and "operating income" or "operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of net realized investment gains and losses and non-operating retirement-related gains or losses as specified in the reconciliations below. We believe operating revenue and operating income or loss are better performance measures and better indicators of the revenue and profitability and underlying trends in our business. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income.

Realized investment gains or losses depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our segments. Our investment focus is on investment income to support our insurance liabilities as opposed to the generation of realized investment gains or losses. Although we may experience realized investment gains or losses which will affect future earnings levels, a long-term focus is necessary to maintain profitability over the life of the business since our underlying business is long-term in nature, and we need to earn the interest rates assumed in calculating our liabilities.

The amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pensions and other postretirement benefit plans, is driven by market performance as well as plan amendments and is not indicative of the operational results of our businesses. We believe that excluding the amortization of prior period gains or losses, as well as the 2014 settlement loss resulting from our pension plan amendment, from operating income or loss provides investors with additional information for comparison and analysis of our operating results. Although we manage our non-operating retirement-related gains or losses separately from the operational performance of our business, these gains or losses impact the overall profitability of our company and have historically increased or decreased over time, depending on plan amendments and market conditions and the resulting impact on the actuarial gains or losses in our pensions and other postretirement benefit plans.

We believe that excluding the 2014 costs related to the early retirement of debt is appropriate because in conjunction with the debt redemption, we recognized in realized investment gains and losses a deferred gain from previously terminated derivatives which were associated with the hedge of this debt. The amount recognized as a realized investment gain, which basically offsets the cost of the debt redemption, is also excluded from our non-GAAP financial measures since we analyze our performance excluding amounts reported as realized investment gains or losses. We believe it provides investors with a more realistic view of our overall profitability if we are consistent in excluding both the cost of the debt retirement as well as the gain on the hedge of the debt.

We may at other times exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace net income or net loss as a measure of our overall profitability.

A reconciliation of total revenue to "operating revenue" and income before income tax to "operating income" is as follows:



	Year Ended December 31
	2016			2015			2014
	(in millions of dollars)
Total Revenue	$	11,046.5		$	10,731.3		$	10,524.5
Excluding:
Net Realized Investment Gain (Loss)	24.2			(43.8		)	16.1
Operating Revenue	$	11,022.3		$	10,775.1		$	10,508.4

Income Before Income Tax	$	1,347.7		$	1,238.3		$	542.0
Excluding:
Net Realized Investment Gain (Loss)	24.2			(43.8		)	16.1
Non-operating Retirement-related Loss	(16.3		)	(11.9		)	(70.0		)
Costs Related to Early Retirement of Debt for Corporate	—			—			(13.2		)
Long-term Care Reserve Increase for Closed Block	—			—			(698.2		)
Operating Income	$	1,339.8		$	1,294.0		$	1,307.3