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. Individual disability 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 broadens our employee benefit offerings in the U.S. Starmount's dental and vision products and new dental and vision products marketed by Unum US are reported in our Unum US segment within our supplemental and voluntary product lines. Colonial Life dental and vision products will be introduced in 2018 and will be reported in our Colonial Life segment.

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. 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.

Definitive Purchase Agreement

In January of 2018, we entered into a definitive agreement to acquire Pramerica Zycie TUiR SA ("Pramerica"), a financial protection benefits provider in Poland. The acquisition of Pramerica will expand our European presence, which we believe to be an attractive market for financial protection benefits. The transaction is expected to close by the end of 2018 subject to customary approvals and closing conditions.

Segment information is as follows:



	Year Ended December 31
	2017		2016		2015
	(in millions of dollars)
Premium Income
Unum US
Group Disability
Group Long-term Disability	$	1,749.6	$	1,726.6	$	1,644.7
Group Short-term Disability	639.8		626.1		607.4
Group Life and Accidental Death & Dismemberment
Group Life	1,467.5		1,410.0		1,347.4
Accidental Death & Dismemberment	147.5		140.3		131.7
Supplemental and Voluntary
Individual Disability	420.2		480.3		478.9
Voluntary Benefits	849.4		796.5		749.9
Dental and Vision	169.5		61.1		—
	5,443.5		5,240.9		4,960.0
Unum UK
Group Long-term Disability	340.3		355.2		397.4
Group Life	103.1		105.7		121.5
Supplemental	69.6		68.4		57.3
	513.0		529.3		576.2
Colonial Life
Accident, Sickness, and Disability	884.2		830.0		789.0
Life	300.4		273.8		252.4
Cancer and Critical Illness	326.8		313.3		297.2
	1,511.4		1,417.1		1,338.6
Closed Block
Individual Disability	471.8		521.9		572.4
Long-term Care	648.7		643.9		633.5
All Other	8.7		4.6		1.7
	1,129.2		1,170.4		1,207.6
Total Premium Income	$	8,597.1	$	8,357.7	$	8,082.4



	Unum US		Unum UK		Colonial Life		Closed Block		Corporate			Total
	(in millions of dollars)
Year Ended December 31, 2017

Premium Income	$	5,443.5	$	513.0	$	1,511.4	$	1,129.2	$	—		$	8,597.1
Net Investment Income	811.2		120.2		144.9		1,354.0		21.4			2,451.7
Other Income	113.2		0.7		1.1		79.8		2.9			197.7
Adjusted Operating Revenue	$	6,367.9	$	633.9	$	1,657.4	$	2,563.0	$	24.3		$	11,246.5

Adjusted Operating Income (Loss)	$	1,009.5	$	111.7	$	325.0	$	123.9	$	(146.8	)	$	1,423.3
Interest and Debt Expense	$	—	$	—	$	—	$	6.7	$	153.2		$	159.9
Depreciation and Amortization	$	371.3	$	17.3	$	239.9	$	6.7	$	0.9		$	636.1

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
Adjusted Operating Revenue	$	6,182.9	$	647.6	$	1,559.8	$	2,608.6	$	23.4		$	11,022.3

Adjusted Operating Income (Loss)	$	914.2	$	128.6	$	314.2	$	129.5	$	(163.0	)	$	1,323.5
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
Adjusted Operating Revenue	$	5,944.5	$	701.1	$	1,484.1	$	2,616.9	$	28.5		$	10,775.1

Adjusted Operating Income (Loss)	$	850.0	$	140.6	$	309.1	$	119.1	$	(136.7	)	$	1,282.1
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



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

Year Ended December 31, 2017
Beginning of Year	$	1,176.5		$	21.4		$	896.3		$	2,094.2
Capitalization	325.5			7.0			295.5			628.0
Amortization	(293.6		)	(9.1		)	(224.4		)	(527.1		)
Adjustment Related to Unrealized Investment Gains and Losses	(3.0		)	—			(9.5		)	(12.5		)
Foreign Currency	—			2.0			—			2.0
End of Year	$	1,205.4		$	21.3		$	957.9		$	2,184.6

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



	December 31
	2017		2016
	(in millions of dollars)
Assets
Unum US	$	18,109.1	$	18,036.6
Unum UK	3,428.1		3,101.4
Colonial Life	4,184.1		3,923.2
Closed Block	35,051.2		33,734.3
Corporate	3,240.6		3,146.0
Total Assets	$	64,013.1	$	61,941.5

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, 2017 and 2016, goodwill was $338.6 million and $335.1 million, respectively, with $271.1 million attributable to Unum US in each year, $39.8 million and $36.3 million, respectively, attributable to Unum UK, and $27.7 million attributable to Colonial Life in each year. Changes in the goodwill balance for 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 "adjusted operating revenue" and "adjusted operating income" or "adjusted 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 certain other items specified in the reconciliations below. We believe adjusted operating revenue and adjusted 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. Effective December 31, 2017, we changed the naming convention of "operating revenue" to "adjusted operating revenue" and "operating income" to "adjusted operating income." The definition of these labels remains unchanged.

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.

We previously excluded the amortization of prior period actuarial gains or losses, a component of the net periodic benefit cost for our pension and other postretirement benefit plans. Effective January 1, 2017, the amortization of prior period actuarial gains or losses is now reported as a component of "adjusted operating income" in the following chart. Amounts for periods prior to January 1, 2017 have been adjusted to conform to current year reporting.

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. See "Executive Summary" contained herein in Item 7 and Note 14 of the "Notes to the Consolidated Financial Statements" contained herein in this Item 8 for further discussion regarding the loss from a guaranty fund assessment and the unclaimed death benefit reserve increase.

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



	Year Ended December 31
	2017			2016		2015
	(in millions of dollars)
Total Revenue	$	11,286.8		$	11,046.5	$	10,731.3
Excluding:
Net Realized Investment Gain (Loss)	40.3			24.2		(43.8		)
Adjusted Operating Revenue	$	11,246.5		$	11,022.3	$	10,775.1

Income Before Income Tax	$	1,404.0		$	1,347.7	$	1,238.3
Excluding:
Net Realized Investment Gain (Loss)	40.3			24.2		(43.8		)
Loss from Guaranty Fund Assessment	(20.6		)	—		—
Unclaimed Death Benefit Reserve Increase	(39.0		)	—		—
Adjusted Operating Income	$	1,423.3		$	1,323.5	$	1,282.1