10-Q

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 SEPTEMBER 30, 2007

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 033-37576

UNION SECURITY INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

IOWA	81-0170040
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
6941 VISTA DRIVE WEST DES MOINES, IOWA	50266
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (651) 361-4000

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  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨    No  x

As of November 1, 2007, there were 1,000,000 shares of common stock of the registrant outstanding, all of which are owned by Assurant, Inc.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

UNION SECURITY INSURANCE COMPANY

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

TABLE OF CONTENTS

Item Number		Page Number
	PART I FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS OF UNION SECURITY INSURANCE COMPANY	2
	Consolidated Balance Sheets at September 30, 2007 (Unaudited) and December 31, 2006	2
	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2007 and 2006	4
	Consolidated Statement of Changes in Stockholder’s Equity (Unaudited) from December 31, 2006 to September 30, 2007	5
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2007 and 2006	6
	Notes to the Consolidated Financial Statements (Unaudited)	7
2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK *	13
4.	CONTROLS AND PROCEDURES	13
	PART II OTHER INFORMATION
1A.	RISK FACTORS	13
2.	UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS*	13
3.	DEFAULTS UPON SENIOR SECURITIES *	13
4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS *	13
5.	OTHER INFORMATION	13
6.	EXHIBITS	13
SIGNATURES		15

* Not required under reduced disclosure pursuant to General Instruction H(1) (a) and (b) of Form 10-Q

Union Security Insurance Company

Consolidated Balance Sheets

At September 30, 2007 (Unaudited) and December 31, 2006

	September 30, 2007		December 31, 2006
	(in thousands except per share and share amounts)
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost - $2,671,768 in 2007 and $2,823,347 in 2006)	$	2,693,570	$	2,915,346
Equity securities available for sale, at fair value (cost - $321,735 in 2007 and $316,087 in 2006)		308,502		320,010
Commercial mortgage loans on real estate at amortized cost		802,662		750,283
Policy loans		7,718		7,840
Short-term investments		25,144		48,141
Collateral held under securities lending		306,321		176,937
Other investments		73,248		87,323
Total investments		4,217,165		4,305,880
Cash and cash equivalents		32,272		75,233
Premiums and accounts receivable, net		97,657		98,598
Reinsurance recoverables		1,310,078		1,303,620
Due from affiliates		1,820		19,306
Accrued investment income		49,083		46,332
Deferred acquisition costs		53,491		63,571
Property and equipment, at cost less accumulated depreciation		339		577
Deferred income taxes, net		68,741		41,267
Goodwill		156,817		156,817
Value of business acquired		23,761		26,667
Other assets		36,924		38,153
Assets held in separate accounts		3,021,676		3,020,811
Total assets	$	9,069,824	$	9,196,832

See the accompanying notes to the consolidated financial statements.

2

Union Security Insurance Company

Consolidated Balance Sheets

At September 30, 2007 (Unaudited) and December 31, 2006

	September 30, 2007		December 31, 2006
	(in thousands except per share and share amounts)
Liabilities
Future policy benefits and expenses	$	2,697,161	$	2,747,384
Unearned premiums		37,504		38,945
Claims and benefits payable		1,926,863		1,938,726
Commissions payable		14,328		16,188
Reinsurance balances payable		3,002		3,143
Funds held under reinsurance		114		107
Deferred gain on disposal of businesses		140,480		158,155
Obligations under securities lending		306,321		176,937
Accounts payable and other liabilities		108,019		134,466
Income taxes payable		11,236		62,706
Liabilities related to separate accounts		3,021,676		3,020,811
Total liabilities	$	8,266,704	$	8,297,568
Commitments and contingencies (Note 5)
Stockholder’s equity
Common stock, par value $5 per share, 1,000,000 shares authorized, issued, and outstanding		5,000		5,000
Additional paid-in capital		545,635		545,635
Retained earnings		246,927		286,350
Accumulated other comprehensive income		5,558		62,279
Total stockholder’s equity		803,120		899,264
Total liabilities and stockholder’s equity	$	9,069,824	$	9,196,832

See the accompanying notes to the consolidated financial statements.

3

Union Security Insurance Company

Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended September 30, 2007 and 2006

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
	(in thousands)
Revenues
Net earned premiums and other considerations	$	306,148		$	327,733		$	941,041		$	1,047,378
Net investment income		63,073			66,808			225,136			221,159
Net realized (losses) on investments		(6,305	)		(344	)		(5,959	)		(3,440	)
Amortization of deferred gain on disposal of businesses		5,892			6,802			17,675			20,406
Fees and other income		2,571			2,715			14,114			8,751
Total revenues		371,379			403,714			1,192,007			1,294,254
Benefits, losses and expenses
Policyholder benefits		224,656			238,895			705,150			792,002
Amortization of deferred acquisition costs and value of business acquired		11,085			10,889			32,451			36,141
Underwriting, general and administrative expenses		93,875			103,441			283,870			319,402
Total benefits, losses and expenses		329,616			353,225			1,021,471			1,147,545
Income before provision for income taxes		41,763			50,489			170,536			146,709
Provision for income taxes		13,946			15,064			47,841			48,255
Net income	$	27,817		$	35,425		$	122,695		$	98,454

See the accompanying notes to the consolidated financial statements.

4

Union Security Insurance Company

Consolidated Statement of Changes in Stockholder’s Equity (Unaudited)

From December 31, 2006 to September 30, 2007

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total
	(in thousands)
Balance, December 31, 2006	$	5,000	$	545,635	$	286,350		$	62,279		$	899,264
Dividends on common stock		—		—		(158,000	)		—			(158,000	)
Cumulative effect of change in accounting principle (Note 3)		—		—		(4,118	)		—			(4,118	)
Comprehensive income:
Net income		—		—		122,695			—			122,695
Other comprehensive income:
Net change in unrealized gains on securities		—		—		—			(56,781	)		(56,781	)
Net change in foreign currency translation		—		—		—			60			60
Total other comprehensive (loss)												(56,721	)
Total comprehensive income												65,974
Balance, September 30, 2007	$	5,000	$	545,635	$	246,927		$	5,558		$	803,120

See the accompanying notes to the consolidated financial statements.

5

Union Security Insurance Company

Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30, 2007 and 2006

	Nine Months Ended September 30,
	2007			2006
	(in thousands)
Net cash (used in) provided by operating activities	$	(12,955	)	$	38,667
Investing activities
Sales of:
Fixed maturities available for sale		281,985			543,358
Equity securities available for sale		87,102			101,678
Other invested assets		—			13,576
Property and equipment		—			22
Maturities, prepayments, and scheduled redemption of:
Fixed maturities available for sale		182,553			109,078
Purchase of:
Fixed maturities available for sale		(313,156	)		(601,185	)
Equity securities available for sale		(95,305	)		(159,228	)
Other invested assets		—			(30,229	)
Change in other investments		14,075			—
Change in commercial mortgage loans on real estate		(52,379	)		(4,770	)
Change in short-term investments		22,997			57,877
Change in collateral held under securities lending		(129,384	)		26,090
Change in policy loans		122			555
Net cash (used in) provided by investing activities		(1,390	)		56,822
Financing activities
Net cash received from transfer of Canadian operations		—			65,894
Dividends paid		(158,000	)		(150,000	)
Change in obligation under securities lending		129,384			(26,090	)
Contributed capital		—			10
Net cash (used in) financing activities		(28,616	)		(110,186	)
Change in cash and cash equivalents		(42,961	)		(14,697	)
Cash and cash equivalents at beginning of period		75,233			19,042
Cash and cash equivalents at end of period	$	32,272		$	4,345

See the accompanying notes to the consolidated financial statements.

6

Union Security Insurance Company

Notes to the Consolidated Financial Statements (Unaudited)

(in thousands, except per share and share amounts)

1. Nature of Operations

Union Security Insurance Company (the “Company”) is a provider of life and health insurance products including group disability insurance, group dental insurance, group life insurance, small employer group health insurance and pre-funded funeral insurance. The Company is an indirect wholly-owned subsidiary of Assurant, Inc. (the “Parent”). The Parent’s common stock is traded on the New York Stock Exchange under the symbol AIZ.

The Company was redomesticated to Iowa from Minnesota in 2004. The Company distributes its products in all states except New York.

Effective December 31, 2006, International Dental Plans, Inc. (“IDP”), an indirect wholly-owned subsidiary of the Parent, was merged into the operations of the Company. Accordingly, all prior period amounts have been restated to conform to the 2007 presentation.

2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair statement of the consolidated financial statements have been included. Certain prior period amounts have been reclassified to conform to the 2007 presentation.

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company transactions and balances are eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

3. Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

On January 1, 2007, the Company adopted AICPA Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts, (“SOP 05-1”). SOP 05-1 provides guidance on internal replacements of insurance and investment contracts. An internal replacement is a modification in product benefits, features, rights or coverages that occurs by the exchange of a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.

7

Union Security Insurance Company

Notes to the Consolidated Financial Statements (Unaudited)

Nine Months Ended September 30, 2007 and 2006

(in thousands, except per share and share amounts)

Modifications that result in a new contract that is substantially different from the replaced contract are accounted for as an extinguishment of the replaced contract, and the associated unamortized deferred acquisition cost (“DAC”), unearned revenue liabilities and deferred sales inducements from the replaced contract must be reported as an expense immediately. Modifications resulting in a new contract that is substantially the same as the replaced contract are accounted for as a continuation of the replaced contract. Prior to the adoption of the SOP 05-1, certain internal replacements that did not meet the new criteria were accounted for as continuations of the replaced contract. Therefore, the accounting policy for certain internal replacements has changed as a result of the adoption of this SOP. At adoption, the Company recognized a $4,118 decrease to deferred acquisition costs, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

On January 1, 2007, the Company adopted FAS No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 (“FAS 133”) and 140 (“FAS 155”). This statement resolves issues addressed in FAS 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. FAS 155 (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FAS 133; (c) establishes a requirement to evaluate beneficial interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (e) eliminates restrictions on a qualifying special-purpose entity’s ability to hold passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial instrument. FAS 155 also requires presentation within the financial statements that identifies those hybrid financial instruments for which the fair value election has been applied and information on the income statement impact of the changes in fair value of those instruments. The adoption of FAS 155 did not have a material impact on the Company’s results of operations or financial condition.

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). There was no impact as a result of adoption on the Company’s January 1, 2007 retained earnings. At adoption, total unrecognized tax benefits were $50,251. Of the total unrecognized tax benefits, $44,217, if recognized, would impact the Company’s consolidated effective tax rate. The Company files income tax returns in the U.S. and various state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2002. During 2007, the Company settled an appealed matter with the Internal Revenue Service, which resulted in a decrease to income tax expense of $8,695 and a decrease to tax related interest of $3,262. Substantially all state, local and non-U.S. income tax matters have been concluded for the years through 1999. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. At the date of adoption, the Company had $7,381 accrued for tax related interest and penalties on its Consolidated Balance Sheets.

8

Union Security Insurance Company

Notes to the Consolidated Financial Statements (Unaudited)

Nine Months Ended September 30, 2007 and 2006

(in thousands, except per share and share amounts)

Recent Accounting Pronouncements Outstanding

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FAS No. 157, Fair Value Measurements (“FAS 157”). FAS 157 defines fair value, addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP, and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Therefore, the Company is required to adopt FAS 157 on January 1, 2008. The Company is currently evaluating the requirements of FAS 157 and the potential impact on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”). FAS 159 provides a choice to measure many financial instruments and certain other items at fair value on specified election dates and requires disclosures about the election of the fair value option. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. FAS 159 is effective for fiscal years beginning after November 15, 2007. Therefore, the Company is required to adopt FAS 159 on January 1, 2008. The Company is currently evaluating the requirements of FAS 159 and the potential impact on the Company’s consolidated financial position or results of operations.

4. Retirement and Other Employee Benefits

The Parent sponsors a defined benefit pension plan and certain other post retirement benefits covering employees and certain agents who meet eligibility requirements as to age and length of service. Pension costs allocated to the Company were $1,725 and $1,908 for the three months ended September 30, 2007 and 2006, respectively, and $5,176 and $5,724 for the nine months ended September 30, 2007 and 2006, respectively.

The Company participates in a contributory profit sharing plan, sponsored by the Parent, covering employees and certain agents who meet eligibility requirements as to age and length of service. The amounts expensed by the Company were $1,317 and $1,177 for the three months ended September 30, 2007 and 2006, respectively, and $4,513 and $4,454 for the nine months ended September 30, 2007 and 2006, respectively.

5. Commitments and Contingencies

The Company is regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Company’s current and past business operations. While the Company cannot predict the outcome of any pending or future litigation, examination or investigation, the Company does not believe that any pending matter will have a material adverse effect on the Company’s financial condition or results of operations.

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PART I

FINANCIAL INFORMATION

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.

(Dollar amounts in thousands.)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) addresses the financial condition of Union Security Insurance Company and its subsidiaries (collectively, USIC or the Company) as of September 30, 2007, compared with December 31, 2006, and its results of operations for the three and nine months ended September 30, 2007, compared with the equivalent 2006 periods. This discussion should be read in conjunction with the Company’s MD&A and annual audited financial statements as of December 31, 2006 included in the Company’s Form 10-K for the year ended December 31, 2006 filed with the U.S. Securities and Exchange Commission (hereafter referred to as the Company’s 2006 Form 10-K) and unaudited interim consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Some of the statements in this MD&A and elsewhere in this report may contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in this report. We believe that these factors include but are not limited to those described under the subsection entitled “Risk Factors” in our 2006 Form 10-K. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity.

Critical Factors Affecting Results

Our results depend on the adequacy of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims, returns on invested assets and our ability to manage our expenses. Therefore, factors affecting these items may have a material adverse effect on our results of operations or financial condition.

Critical Accounting Policies and Estimates

Our 2006 Form 10-K described the accounting policies and estimates that are critical to the understanding of our results of operations, financial condition and liquidity. The accounting policies and estimates described in the 2006 Form 10-K were consistently applied to the unaudited interim consolidated financial statements for the three and nine months ended September 30, 2007.

Recent Accounting Pronouncements

See – Financial Statement Footnote 3.

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The tables below present information regarding our consolidated results of operations:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
	(in thousands)
Revenues:
Net earned premiums and other considerations	$	306,148		$	327,733		$	941,041		$	1,047,378
Net investment income		63,073			66,808			225,136			221,159
Net realized (losses) on investments		(6,305	)		(344	)		(5,959	)		(3,440	)
Amortization of deferred gains on disposal of businesses		5,892			6,802			17,675			20,406
Fees and other income		2,571			2,715			14,114			8,751
Total revenues		371,379			403,714			1,192,007			1,294,254
Benefits, losses and expenses:
Policyholder benefits		(224,656	)		(238,895	)		(705,150	)		(792,002	)
Selling, underwriting and general expenses (1)		(104,960	)		(114,330	)		(316,321	)		(355,543	)
Total benefits, losses and expenses		(329,616	)		(353,225	)		(1,021,471	)		(1,147,545	)
Income before income tax expense		41,763			50,489			170,536			146,709
Income tax expense		(13,946	)		(15,064	)		(47,841	)		(48,255	)
Net income	$	27,817		$	35,425		$	122,695		$	98,454

(1) Includes amortization of deferred acquisition costs and value of business acquired and underwriting, general and administrative expenses.

For The Three Months Ended September 30, 2007 Compared to The Three Months Ended September 30, 2006.

Net Income

Net income decreased $7,608, or 21%, to $27,817 for the three months ended September 30, 2007 from $35,425 for the three months ended September 30, 2006. This decrease was attributable to less favorable experience in our group life business and an increase in net realized losses on investments of $3,875, (after-tax) due to an increase in other than temporary impairments. Also contributing to the decrease in net income was an increase in the effective income tax rate, as the prior quarter received a greater tax benefit from the dividend received deduction.

Total Revenues

Total revenues decreased $32,335, or 8%, to $371,379 for the three months ended September 30, 2007 from $403,714 for the three months ended September 30, 2006. This decrease is primarily due to a decrease in net earned premiums and other considerations of $21,585 and an increase in net realized losses on investments of $5,961. Net earned premiums and other considerations decreased primarily due to a decline in our small employer group health business as a result of lower sales and membership, declines in our group disability and group life businesses resulting from the continuing implementation of the business’ small case strategy and adherence to pricing discipline. Also contributing to the decrease in net earned premiums and other considerations was the sale of the Independent–U.S. distribution channel in our pre-funded funeral (“preneed”) business and the loss of a client in our accidental death and dismemberment (“AD&D”) business. Net realized losses increased primarily due to an increase in other than temporary impairments.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $23,609, or 7%, to $329,616 for the three months ended September 30, 2007 from $353,225 for the three months ended September 30, 2006. This decrease is due to policyholder benefits and selling, underwriting and general expenses decreasing $14,239 and $9,370, respectively. The decrease in policyholder benefits is driven by favorable experience in our group disability and group dental businesses, partially offset by less favorable group life experience relative to the prior year. Policyholder benefits and selling, underwriting and general

11

expenses also decreased due to the sale of our Independent – U.S. distribution channel in our preneed business, the loss of a client in our AD&D business and lower sales and renewals in our small employer group health business.

Income Tax Expense

Income tax expense decreased by $1,118, or 7%, to $13,946 for the three months ended September 30, 2007 from $15,064 for the three months ended September 30, 2006. The effective income tax rate in the current quarter increased compared with the comparable 2006 period due to a greater tax benefit received from the dividend received deduction in 2006.

For The Nine Months Ended September 30, 2007 Compared to The Nine Months Ended September 30, 2006.

Net Income

Net income increased $24,241, or 25%, to $122,695 for the nine months ended September 30, 2007 from $98,454 for the nine months ended September 30, 2006. This increase is primarily due to favorable group disability experience, an increase in net investment income from real estate partnerships, and an increase in fees and other income related to the sale of the Independent – U.S. distribution channel in our pre-funded funeral business. Net income also increased due to a reduction of our income tax expense due to lower tax contingencies associated with a favorable tax settlement. These increases to net income were partially offset by a decline in our small employer group health and group dental businesses.

Total Revenues

Total revenues decreased $102,247, or 8%, to $1,192,007 for the nine months ended September 30, 2007 from $1,294,254 for the nine months ended September 30, 2006. This decrease is primarily due to a decrease in net earned premiums and other considerations of $106,337. Net earned premiums and other considerations decreased due to declines in our small employer group health business as a result of lower sales and membership, declines in our group dental and group life businesses resulting from the continuing implementation of the business’ small case strategy and adherence to pricing discipline. Also contributing to the decrease in net earned premiums and other considerations is the loss of a client in our AD&D business, the sale of the Independent – U.S. distribution channel in our preneed business and the transfer of our Canadian preneed business to an affiliate. Partially offsetting the decreased net earned premiums and other considerations are increases in fees and other income and net investment income of $5,363 and $3,977, respectively. Fees and other income increased due to the sale of the marketing rights of the Independent-U.S. distribution channel in our preneed business, while net investment income increased due to an increase in real estate investment income.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $126,074, or 11%, to $1,021,471 for the nine months ended September 30, 2007 from $1,147,545 for the nine months ended September 30, 2006. This decrease was primarily due to a decrease in policyholder benefits of $86,852 driven by favorable experience in our group disability and group life businesses, a reduction in policyholder benefits related to closed blocks of business and the decline of our small employer group health business. Policyholder benefits and selling, underwriting and general expenses also decreased due to the loss of a client in our AD&D business, the sale of the Independent–U.S. distribution channel in our preneed business, and the transfer of our Canadian preneed business to an affiliate.

Income Taxes

Income taxes decreased $414, or 1%, to $47,841 for the nine months ended September 30, 2007 from $48,255 for the nine months ended September 30, 2006. The effective income tax rate of 28.1% for nine months ended September 30, 2007 decreased compared with 32.9% as of nine months ended September 30, 2006 due to a $12,500 reduction in certain tax contingencies in 2007 associated with a favorable tax settlement.

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Item 3. Quantitative And Qualitative Disclosures About Market Risk.

Not required under the reduced disclosure format.

Item 4T. Controls And Procedures.

Evaluation of disclosure controls and procedures under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2007. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods in United States Securities and Exchange Commission (“SEC”) rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II

OTHER INFORMATION

Item 1A. Risk Factors.

Our 2006 Annual Report on Form 10-K described our Risk Factors. As discussed in Note 11—Commitments and Contingencies and in Item 1—Legal Proceedings of the Parent’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, additional developments in the Parent’s SEC investigation have occurred since we filed our 2006 Annual Report on Form 10-K. The disclosures in the aforementioned sections of the Parent’s third quarter 2007 10-Q are incorporated by reference into our Risk Factors. Please see the Parent’s third quarter 2007 10-Q filed with the SEC and available on the SEC’s website at www.sec.gov or through Assurant’s website at www.assurant.com for further details.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not required under the reduced disclosure format.

Item 3. Defaults Upon Senior Securities.

Not required under the reduced disclosure format.

Item 4. Submission of Matters to a Vote of Security Holders.

Not required under the reduced disclosure format.

Item 5. Other Information.

(a) None.

(b) Because all of the Company’s outstanding common stock is held indirectly by Assurant, Inc., the Company does not file a Schedule 14A and has not adopted any procedures by which security holders may recommend nominees to the registrant’s board of directors.

Item 6. Exhibits

The following exhibits are filed with this report. Exhibits are available upon request at the investor relations section of our website, located at www.assurant.com.

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

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31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Certification of Chief Executive Officer of Union Security Insurance Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer of Union Security Insurance Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on November 9, 2007.

UNION SECURITY INSURANCE COMPANY
By:	/s/ John S. Roberts
Name:	John S. Roberts
Title:	Interim President and Chief Executive Officer
By:	/s/ Stacia N. Almquist
Name:	Stacia N. Almquist
Title:	Treasurer and Chief Financial Officer

15

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, John S. Roberts, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Union Security Insurance Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007

/s/ John S. Roberts

John S. Roberts

Interim President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Stacia N. Almquist, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Union Security Insurance Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2007

/s/ Stacia N. Almquist

Stacia N. Almquist

Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF

UNION SECURITY INSURANCE COMPANY

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

§ 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Union Security Insurance Company (the “Company”) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John S. Roberts, Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2007

/s/ John S. Roberts

John S. Roberts

Interim President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER OF

UNION SECURITY INSURANCE COMPANY

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

§ 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Union Security Insurance Company (the “Company”) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stacia N. Almquist, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2007

/s/ Stacia N. Almquist

Stacia N. Almquist

Treasurer and Chief Financial Officer