Introduction

Unum Group, a Delaware general business corporation, and its insurance and non-insurance subsidiaries, which collectively with Unum Group we refer to as the Company, operate in the United States, the United Kingdom, and, to a limited extent, in certain other countries around the world. The principal operating subsidiaries in the United States are Unum Life Insurance Company of America (Unum America), Provident Life and Accident Insurance Company (Provident), The Paul Revere Life Insurance Company (Paul Revere Life), and Colonial Life & Accident Insurance Company, and in the United Kingdom, Unum Limited. We are the largest provider of disability insurance products in the United States and the United Kingdom. We also provide a complementary portfolio of other insurance products, including long-term care insurance, life insurance, employer- and employee-paid group benefits, and other related services.

We have three major business segments: Unum US, Unum UK, and Colonial Life. Our other segments are the Individual Disability - Closed Block segment and the Corporate and Other segment. These segments are discussed more fully under "Segment Results" contained in this Item 2.

As one of the leading providers of employee benefits, we offer a broad portfolio of products and services to meet the diverse needs of the marketplace. We try to achieve a competitive advantage by offering group, individual, and voluntary benefits products that can be offered as stand alone products or that can be combined with other coverages to provide comprehensive benefits solutions for customers. We offer competitive benefit plans to businesses of all sizes to help them attract and retain a stronger workforce and protect the incomes and lifestyles of employees and their families. Through a variety of technological tools and trained professionals, we offer services which are designed to meet the evolving needs of our customers. We strive to provide the highest level of service excellence.

We believe that we are a well positioned and competitive force in our sector. However, due to the nature of our business, we are sensitive to economic and financial market movements, including consumer confidence, employment levels, and the level of interest rates. Our business outlook recognizes both the challenges of the current economic environment as well as the mitigating impact of risk-reducing actions we have taken in recent years. Our outlook is responsive to our risk management framework and is consistent with our risk appetite. Although occurrence of one or more of the risk factors discussed in our 2008 annual report on Form 10-K may cause our results to differ from our outlook, we believe that our business outlook is built on sound operating plans that have been tested against many of the challenges presented by the current economic environment.

This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto in Part I, Item 1 contained in this Form 10-Q and with the discussion, analysis, and consolidated financial statements and notes thereto in Part I, Items 1 and 1A, and Part II, Items 6, 7, 7A, and 8 of our annual report on Form 10-K for the year ended December 31, 2008.

Executive Summary

We believe we have successfully developed an overall risk management structure that focuses on risk at all levels of our organization. Through our operational risk strategy, we continue to focus on delivering the highest quality customer experience and continuous improvement initiatives, which we believe will both mitigate future business volatility and further strengthen our reputation. Through our insurance risk strategy, we have maintained our emphasis on pricing our business for profitable growth, and we have improved our risk profile through the development of a more balanced business mix across our product lines and the markets we serve. Through our investment risk strategy, we have managed our claim reserve discount rates relative to investment portfolio yield rates, reduced our exposure to high risk securities holdings, and avoided certain asset class problems. Through the implementation of our capital management risk strategy, we have strengthened our balance sheet and maintained financial flexibility which we believe will support our operations over various economic cycles. Collectively, these efforts will help us manage operational, insurance, and investment risk across our enterprise.

Throughout 2009, we intend to continue our focus on a number of key areas. Objectives for 2009 include:

• Consistent execution of our operating plans. We will continue our emphasis on disciplined, profitable growth.

• Maintain a strong investment portfolio. We will maintain disciplined credit analysis in our selection of investment assets and continue to be conservative within our investment risk tolerances.

• Build and effectively use capital. We intend to continue to build capital and manage it effectively within our stated capital management strategy objectives.

• Professional development of our employees. We will continue our focus on employee training and development as well as talent management.

A discussion of our operating performance, investments, and capital follows.

Operating Performance

Our Unum US segment reported an increase in segment operating income of 11.5 percent and 13.6 percent for the second quarter and first six months of 2009 compared to the same periods last year. The benefit ratio for Unum US was 79.6 percent and 79.5 percent for the second quarter and first six months of 2009 compared to 80.7 percent and 80.6 percent in the comparable prior year periods. The group disability benefit ratio was 87.0 percent and 87.5 percent for the second quarter and first six months of 2009 compared to 90.5 percent and 90.8 percent for the second quarter and first six months of 2008. This is consistent with our goal of continual profit margin improvement for our Unum US group disability line of business. Unum US sales increased 10.8 percent and 6.9 percent in the second quarter and first six months of 2009 compared to the same periods last year. Our group core market segment, which we define for Unum US as employee groups with fewer than 2,000 lives, reported sales increases of 18.7 percent and 17.6 percent relative to the prior year second quarter and first six months. The number of new accounts in our core market segment increased 20 percent and 24 percent in the second quarter and first six months of 2009 relative to the same periods last year. Our supplemental and voluntary sales, which have been negatively impacted by the current economic conditions, decreased 14.4 percent and 2.4 percent relative to the prior year second quarter and first six months. Sales in the group large case market segment increased 29.0 percent and 9.5 percent compared to the second quarter and first six months of the prior year, with the growth attributable primarily to one large case. New products and initiatives include significant technology investments in our underwriting and claim management systems; expansion of our Simply Unum platform and the next generation of products; an increase in our enrollment teams to build enrollment capacity; and investments in training, development, and expansion of our sales force.

Our Unum UK segment reported a decrease in segment operating income of 6.6 percent and 2.7 percent for the second quarter and first six months of 2009, as measured in Unum UK's local currency, relative to the same periods last year. Although before-tax operating margins were higher than last year's results, premium income declined due to a lower in-force block of group disability business from lower sales and persistency during 2008, affecting year over year operating income growth. The benefit ratio for Unum UK was 54.4 percent and 53.8 percent for the second quarter and first six months of 2009 compared to 58.3 percent and 57.8 percent in the comparable prior year periods, reflecting our continued effective claim management performance. Overall sales in Unum UK increased 21.0 percent and 29.9 percent in the second quarter and first six months of 2009 compared to the comparable prior year periods. Persistency for group disability improved over the level of last year but declined for group life and individual disability. New initiatives include the relaunch of our group life product and the development of new products intended to further expand the group market in the U.K.

Our Colonial Life segment reported an increase in segment operating income of 4.5 percent and 4.9 percent in the second quarter and first six months of 2009 compared to the same periods last year. The benefit ratio for Colonial Life was 46.4 percent for both the second quarter and first six months of 2009 compared to 46.9 percent and 47.1 percent in the comparable prior year periods, with continued overall favorable risk experience. Colonial Life's sales in this year's second quarter decreased 3.9 percent relative to the same period last year, negatively impacted by the high unemployment rate and the resulting effect on sales to existing accounts and to a lesser extent, new account sales. Sales growth in the commercial market segment for employee groups with 500 or more lives were offset by sales declines within that same market segment for employee groups with fewer than 500 lives. Sales in the public sector market increased due to sales growth in the local government market. Sales on a year-to-date basis decreased 2.2 percent relative to the first six months of 2008. The number of new accounts and the average new case size for

the first six months of 2009 both increased relative to the comparable prior year period. New initiatives include additional investments in tools and capabilities to support the Colonial Life brand position; continued implementation of a new enrollment system and platform; and investments in growing and expanding the sales force with particular focus on recruiting, training, and sales incentives.

Investments

Our investment strategy continues to serve as an important component of our overall business performance. We are focused on both the quality of our investment portfolio and on investing new money in investments appropriate for our liabilities. The weighted average credit rating of our portfolio was A3 as of the end of the second quarter of 2009. Our net investment income in the second quarter of 2009 was 2.5 percent below the level of the prior year's second quarter due primarily to the weaker pound to dollar exchange rate, fewer bond call premiums and consent fees, lower income on bonds in Unum UK for which interest income is linked to an inflation index, and lower interest rates on floating rate assets, partially offset due to the investment of new cash at higher rates than that of prior periods. Net investment income for the first six months of 2009 declined 2.8 percent relative to the first six months of 2008. Included in the second quarter and first six months of 2009 results are net realized investment losses from sales and write-downs of investments related primarily to fixed maturity securities in the financial services, media, and automotive sectors that we either sold or considered other-than-temporarily impaired. We believe our investment portfolio is well positioned for the current environment, with historically low levels of below-investment-grade securities, no exposure to subprime mortgages, "Alt-A" loans, or collateralized debt obligations in our asset-backed or mortgage-backed securities portfolios, and minimal exposure to collateralized debt obligations within our public bond portfolio. Further discussion is included in "Investments" contained in this Item 2.

Capital

The first priority of our capital management strategy is to maintain sufficient financial flexibility to support our operations over various economic cycles and to respond to opportunities in the marketplace while positioning our Company for improvements in its credit ratings. We have several financial targets, as specified in our 2008 annual report on Form 10-K, which we continue to use to guide our capital management decisions. These include targets for our risk-based capital, leverage, holding company cash and liquidity, and common stock dividend yield. At the end of the second quarter of 2009, all of our financial measurements for capital management continued to compare favorably to our target levels. See "Liquidity and Capital Resources" contained in this Item 2 for further detail.

Critical Accounting Estimates

We prepare our financial statements in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in our financial statements and accompanying notes. Estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in our financial statements.

The accounting estimates deemed to be most critical to our results of operations and financial condition are those related to reserves for policy and contract benefits, deferred acquisition costs, valuation of investments, pension and postretirement benefit plans, and income taxes. There have been no significant changes in our critical accounting estimates during the first six months of 2009.

For additional information concerning our accounting policies and critical accounting estimates, see Note 1 of the "Notes to Consolidated Financial Statements" in Part II, Item 8 and "Critical Accounting Estimates" in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2008.

Accounting Pronouncements

For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 2 of the "Notes to Consolidated Financial Statements" contained herein in Item 1.

Consolidated Operating Results



(in millions of dollars)
                                         Three Months Ended June 30                    Six Months Ended June 30
                                     2009         % Change         2008           2009         % Change         2008
Revenue
Premium Income                     $ 1,875.9          (4.7 )%    $ 1,968.6      $ 3,748.7          (4.3 )%    $ 3,919.1
Net Investment Income                  597.6          (2.5 )         613.1        1,171.3          (2.8 )       1,204.5
Net Realized Investment Gain
(Loss)                                  87.3         234.5            26.1           22.7         153.5           (42.4 )
Other Income                            67.2          (0.4 )          67.5          134.2          (0.4 )         134.7

Total                                2,628.0          (1.8 )       2,675.3        5,076.9          (2.7 )       5,215.9


Benefits and Expenses
Benefits and Change in Reserves
for Future Benefits                  1,584.2          (5.4 )       1,674.7        3,159.9          (5.2 )       3,331.6
Commissions                            212.4          (0.2 )         212.9          428.6          (0.7 )         431.8
Interest and Debt Expense               30.4         (25.5 )          40.8           63.0         (25.6 )          84.7
Deferral of Acquisition Costs         (148.7 )        (3.2 )        (153.6 )       (302.3 )         1.0          (299.2 )
Amortization of Deferred
Acquisition Costs                      132.8           4.3           127.3          264.6           2.8           257.3
Compensation Expense                   196.2           2.3           191.8          386.3           2.3           377.7
Other Expenses                         209.5          (2.3 )         214.4          415.0          (1.3 )         420.3


Total                                2,216.8          (4.0 )       2,308.3        4,415.1          (4.1 )       4,604.2


Income Before Income Tax               411.2          12.0           367.0          661.8           8.2           611.7
Income Tax                             144.0          13.7           126.7          229.7          10.3           208.3


Net Income                         $   267.2          11.2       $   240.3      $   432.1           7.1       $   403.4

The comparability of our financial results between years is affected by the fluctuation in the British pound sterling to dollar exchange rate. The functional currency of our U.K. operations is the British pound sterling. In periods when the pound weakens, translating pounds into dollars decreases current period results relative to the prior period. In periods when the pound strengthens, translating pounds into dollars increases current period results in relation to the prior period. Our weighted average pound/dollar exchange rate was 1.533 and 1.486 for the second quarter and first six months of 2009 and 1.971 and 1.975 for the comparable periods of 2008. If the 2009 results for our U.K. operations had been translated using the exchange rate for the second quarter and first six months of 2008, our operating revenue and operating income by segment would have been higher by approximately $57.2 million and $19.4 million, respectively, for the second quarter of 2009 and approximately $130.3 million and $44.1 million, respectively, for the first six months of 2009. However, it is important to distinguish between translating and converting foreign currency. Except for a limited number of transactions, we do not actually convert pounds into dollars. As a result, we view foreign currency translation as a financial reporting issue and not a reflection of operations or profitability in the U.K.

Consolidated premium income for the second quarter and first six months of 2009 includes premium growth, relative to the prior year periods, for Unum US supplemental and voluntary lines of business and Colonial Life. Unum US group disability and group life and accidental death and dismemberment lines of business experienced year over year declines in premium income. A portion of this decline was expected and is attributable to our continued pricing discipline for our Unum US group business and our strategy of developing a more balanced business mix. Premium growth for Unum US group business has also been negatively impacted by lower premium growth from existing customers due to lower salary growth and lower growth in the number of employees covered under an existing policy. Unum UK premium income, in local currency, declined in the second quarter and first six months of 2009 due to a decline in the inforce block of business resulting from lower persistency and sales. Premium income in the Individual Disability - Closed Block segment decreased as expected in this closed block of business.

Net investment income was lower in the second quarter and first six months of 2009 relative to the prior year periods. The weaker pound in 2009 relative to 2008 unfavorably affected translated results for net investment income. We also received lower investment income on bonds in Unum UK for which interest income is linked to a U.K. inflation index, which was completely offset in the second quarter of 2009 and partially offset for the first six months of 2009 by lower claim reserves due to lower claim payments which are also linked to inflation. In addition, we earned lower interest rates on our floating rate assets, largely offset by lower interest expense on our floating rate debt. We also received fewer bond call premiums and consent fees during the second quarter and first six months of 2009 compared to the prior year periods. Somewhat mitigating the impact of these items is continued growth in the level of invested assets, an increase in the level of prepayment income on mortgage-backed securities, and a slight increase in our portfolio yield due to the investment of new cash at higher rates than that of prior periods.

We recognized in earnings a net realized investment gain of $87.3 million in the second quarter of 2009 compared to $26.1 million in the comparable period of 2008. For the first six months, we recognized in earnings a net realized investment gain of $22.7 million in 2009 and a loss of $42.4 million in 2008. During the second quarter and first six months of 2009, we recognized other-than-temporary impairment losses of $55.0 million and $128.6 million related to fixed maturity securities. Of those amounts, $48.1 million and $121.7 million were recognized in earnings during the second quarter and first six months of 2009, and $6.9 million was recognized in other comprehensive income for each of those two periods. Also recognized in earnings through realized investment gains and losses was the change in the fair value of an embedded derivative in a modified coinsurance arrangement. During the second quarter and first six months of 2009, changes in the fair value of this embedded derivative resulted in realized gains of $140.1 million and $163.7 million, respectively, compared to a realized gain of $25.0 million and a net realized loss of $39.1 million for the comparable prior year periods. The gains and losses on this embedded derivative resulted primarily from a change in credit spreads in the overall investment market. See "Investments" contained in this Item 2 for further discussion.

The benefit ratio was 84.5 percent and 84.3 percent in the second quarter and first six months of 2009 compared to 85.1 percent and 85.0 percent in the comparable periods of 2008, with continuing improved risk results in each of our segments and in most lines of business within the Unum US segment. See "Segment Results" as follows for discussions of line of business risk results and claims management performance in each of our segments.

Interest and debt expense for the second quarter and first six months of 2009 was lower than the prior year periods due primarily to lower levels of outstanding debt and lower rates of interest on our floating rate debt. See "Debt" contained in this Item 2 for additional information.

The deferral of acquisition costs was higher in the first six months of 2009 relative to the prior year comparable period due primarily to continued growth in certain of our product lines and the associated growth in deferrable expenses. Deferred costs were lower in the second quarter of 2009 relative to last year's second quarter due to lower acquisition expenses for Unum UK and Colonial Life. The amortization of acquisition costs was higher in the second quarter and first six months of 2009 due to an acceleration of amortization resulting from lower persistency in the Unum US supplemental and voluntary lines.

Other expenses, as reported, decreased in the second quarter and first six months of 2009 relative to last year's comparable periods. Other expenses, excluding the effect of the lower exchange rate for Unum UK expenses, have increased year over year due primarily to an increase in our pension costs. We continue to aggressively manage our operating expenses as we seek to increase the effectiveness of our operating processes.

Consolidated Sales Results



(in millions of dollars)
                                                 Three Months Ended June 30          Six Months Ended June 30
                                                2009      % Change       2008      2009     % Change       2008
Unum US
Fully Insured Products                        $   170.7       10.6 %    $ 154.4   $ 351.0        7.0 %    $ 328.1
Administrative Services Only (ASO) Products         2.2       29.4          1.7       2.9         -           2.9

Total Unum US                                     172.9       10.8        156.1     353.9        6.9        331.0

Unum UK                                            29.5       (4.5 )       30.9      49.1       (1.0 )       49.6

Colonial Life                                      78.0       (3.9 )       81.2     145.6       (2.2 )      148.9

Individual Disability - Closed Block                0.4         -           0.4       0.8      (11.1 )        0.9


Consolidated                                  $   280.8        4.5      $ 268.6   $ 549.4        3.6      $ 530.4

Sales results shown in the preceding chart generally represent the annualized premium or annualized fee income on new sales which we expect to receive and report as premium income or fee income during the next 12 months following or beginning in the initial quarter in which the sale is reported, depending on the effective date of the new sale. Sales do not correspond to premium income or fee income reported as revenue in accordance with GAAP. This is because new annualized sales premiums reflect current sales performance and what we expect to recognize as premium or fee income over a 12 month period, while premium income and fee income reported in our financial statements are reported on an "as earned" basis rather than an annualized basis and also include renewals and persistency of in force policies written in prior years as well as current new sales.

Premiums for fully insured products are reported as premium income. Fees for ASO products (those where the risk and responsibility for funding claim payments remain with the customer and we only provide services) are included in other income. Sales, persistency of the existing block of business, and the effectiveness of the renewal program are indicators of growth in our premium and fee income. Trends in new sales, as well as existing market share, also indicate our potential for growth in our respective markets and the level of market acceptance of price changes and new product offerings. Sales results may fluctuate significantly due to case size and timing of sales submissions.

We intend to continue with our disciplined approach to pricing and also with our strategy of developing a more balanced business mix. This strategy could result in a lower premium persistency or market share, particularly in the large case Unum US group market, but historically the profitability of business that terminates has generally been lower than the profitability of retained business. We do not anticipate any meaningful decline in the number of cases, or case persistency, for our Unum US group market on an aggregate basis.

See "Segment Results" as follows for additional discussion of sales by segment.

Segment Results

Our reporting segments are comprised of the following: Unum US, Unum UK, Colonial Life, Individual Disability - Closed Block, and Corporate and Other. In the following segment financial data and discussions of segment results, "operating revenue" excludes net realized investment gains and losses. "Operating income" or "operating loss" excludes net realized investment gains and losses and income tax. These are considered non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

These non-GAAP financial measures of "operating revenue" and "operating income" or "operating loss" differ from revenue and income (loss) from continuing operations before income tax as presented in our consolidated operating results . . .