SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

------------------

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-9254

UNUM CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 01-0405657
(STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

2211 CONGRESS STREET, PORTLAND, MAINE 04122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (207) 770-2211

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------------------- -------------------------------------------

Common stock, $0.10 par value New York Stock Exchange
Pacific Stock Exchange
Preferred stock purchase rights New York Stock Exchange
Pacific Stock Exchange
8.8% Junior Subordinated New York Stock Exchange
Deferrable Interest
Debentures, Series A, Due 2025

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 8, 1996, was approximately $4,250,500,000.

As of March 8, 1996, 73,240,347 shares of the registrant's common stock were
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Information from the Registrant's proxy statement dated March 25, 1996, is
incorporated by reference into Part III.

Exhibit Index appears on page 70.

TABLE OF CONTENTS
PART I

ITEM PAGE
- ---- ----

1. Business...................................................................................................... 3
A. Description of Business................................................................................... 3
B. Disability Insurance Segment.............................................................................. 4
C. Special Risk Insurance Segment............................................................................ 5
D. Colonial Products Segment................................................................................. 6
E. Retirement Products Segment............................................................................... 7
F. Investments............................................................................................... 8
G. Risk Management and Reinsurance........................................................................... 9
H. Reserves.................................................................................................. 10
I. Employees................................................................................................. 10
J. Competition............................................................................................... 10
K. Regulation................................................................................................ 11
L. Participation Fund Account................................................................................ 12
2. Properties.................................................................................................... 12
3. Legal Proceedings............................................................................................. 12
4. Submission of Matters to a Vote of Security Holders........................................................... 12

PART II

5. Market for the Registrant's Common Equity and Related Stockholder Matters..................................... 12
6. Selected Financial Data....................................................................................... 13
7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 15
8. Financial Statements and Supplementary Data................................................................... 31
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 61

PART III

10. Directors and Executive Officers of the Registrant............................................................ 61
A. Directors of the Registrant............................................................................... 61
B. Executive Officers of the Registrant...................................................................... 61
11. Executive Compensation........................................................................................ 62
12. Security Ownership of Certain Beneficial Owners and Management................................................ 62
13. Certain Relationships and Related Transactions................................................................ 62

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................................. 62
Signatures.................................................................................................... 63
Index to Exhibits............................................................................................. 70

PART I

ITEM 1. BUSINESS

A. DESCRIPTION OF BUSINESS

UNUM Corporation is a Delaware corporation organized in 1985 as an insurance
holding company. UNUM Corporation and subsidiaries ("UNUM") are the leading
providers of group long term disability insurance ("group LTD") in the United
States and the United Kingdom. UNUM is also a major provider of employee
benefits, individual disability insurance and special risk reinsurance. UNUM
also markets long term care and retirement income products. The operations of
the following subsidiaries account for substantially all of UNUM's consolidated
assets and revenues. UNUM Corporation is based in Portland, Maine, and through
its affiliates has operations in North America, the United Kingdom and the
Pacific Rim.

UNUM conducts its operations in the United States through a number of
wholly-owned subsidiaries including: UNUM Life Insurance Company of America
("UNUM America"), a Maine life insurance company licensed in 49 states and
Canada, the leading provider of group disability insurance in the nation and
provider of employee benefits, long term care and retirement products; First
UNUM Life Insurance Company ("First UNUM"), a New York life insurance company;
Commercial Life Insurance Company, a Wisconsin life insurance company and a
leader in special risk insurance and professional association insurance
marketing; Duncanson & Holt, Inc., a New York corporation and a leading accident
and health reinsurance underwriting manager; Colonial Companies, Inc., a
Delaware holding company whose wholly-owned subsidiary, Colonial Life & Accident
Insurance Company, is a leader in payroll-deducted voluntary employee benefits
offered to employees at their worksites; and UNUM Holding Company, a Delaware
corporation. Through UNUM Holding Company, UNUM Corporation also owns UNUM Sales
Corporation, a licensed broker-dealer incorporated in Delaware, and Claims
Service International, Inc., a Delaware corporation, which provides claims
administration services.

UNUM Corporation also holds all of the outstanding capital stock of UNUM
European Holding Company, which is incorporated in the United Kingdom. UNUM's
United Kingdom operations are conducted by UNUM Limited, which is the United
Kingdom's leader in group disability insurance and a wholly-owned subsidiary of
UNUM European Holding Company, and Duncanson & Holt Europe Ltd., a wholly-owned
subsidiary of Duncanson & Holt, Inc.

UNUM's Japanese operations are conducted through a wholly-owned subsidiary,
UNUM Japan Accident Insurance Company Limited ("UNUM Japan"), a Japanese
non-life insurance company, which was established in 1994.

On December 3, 1992, UNUM and Colonial Companies, Inc. ("Colonial
Companies"), signed a definitive merger agreement. On March 26, 1993, Colonial
Companies Class A common stock shareholders voted to approve the merger. Under
the agreement, UNUM exchanged 0.731 shares of its common stock for each share of
Colonial Companies Class A and Class B common stock outstanding on March 26,
1993. UNUM issued approximately 11.4 million shares of common stock from
treasury in connection with the merger. In addition, outstanding options to
acquire shares of Colonial Companies Class B common stock were converted into
options to acquire shares of UNUM common stock. The merger was accounted for as
a pooling of interests.

On January 24, 1996, UNUM America entered into an agreement for the sale of
its group tax-sheltered annuity ("TSA") business to The Lincoln National Life
Insurance Company ("Lincoln Life"), a part of Lincoln National Corporation, and
to a new New York insurance subsidiary of Lincoln Life. The agreement also
contemplates that First UNUM will enter into a similar agreement with Lincoln
Life's New York insurance subsidiary. The sale, which is subject to regulatory
approvals, involves approximately 1,700 group contractholders and assets under
management of approximately $3 billion. The agreement initially contemplates the
reinsurance of these contracts under an indemnity reinsurance arrangement. These
contracts will then be reinsured pursuant to an assumption reinsurance
arrangement upon consent of the TSA contractholders and/or participants. The
purchase price (ceding commission) at closing is expected to be approximately
$70 million. It is anticipated that it will take several months (perhaps six to
nine months) to obtain the necessary approvals and otherwise close the sale.
There is no guarantee that the sale will close.

On February 7, 1996, UNUM announced plans to merge Commercial Life Insurance
Company into UNUM America to accelerate growth of its special risk business,
increase its commitment to the association group business and to improve
operating and capital efficiencies. The merger will be effective December 31,
1996, subject to regulatory approvals.

To more clearly reflect UNUM's management of its businesses and to more
appropriately group its product portfolios, UNUM began reporting its operations,
effective January 1, 1995, principally in four business segments: Disability
Insurance, Special Risk Insurance, Colonial Products and Retirement Products.
Corporate includes transactions that are generally non-insurance related and
interest expense on corporate borrowings. For comparative purposes, prior period
information has been restated to reflect reporting in these segments.

Refer to Item 7 and Item 8 (Note 16) for more information.

B. DISABILITY INSURANCE SEGMENT

The Disability Insurance segment, which in 1995 accounted for 60.0% of
UNUM's revenues and 56.8% of its income before income taxes, includes disability
products offered in North America, the United Kingdom and Japan including: group
LTD, individual disability, group short term disability, association group
disability, disability reinsurance and long term care insurance.

UNUM AMERICA AND FIRST UNUM:

UNUM America and First UNUM market their group and individual insurance
products, as well as long term care products, which are included in the
Disability Insurance and Special Risk Insurance segments, through a network of
33 offices in the United States and Canada that distribute these products
through brokers. As of December 31, 1995, these branch offices were organized
into four regions and were staffed with approximately 720 management, sales,
service and administrative personnel.

GROUP LONG TERM DISABILITY

UNUM America and First UNUM's group LTD product is the Disability Insurance
segment's principal product. UNUM America and First UNUM target sales of group
LTD to executive, administrative and management personnel, and other
professionals. Since 1976, UNUM America and First UNUM combined have been the
United States' leading provider of group LTD according to EMPLOYEE BENEFIT PLAN
REVIEW, a recognized industry publication.

Group LTD provides employees with insurance coverage for loss of income in
the event of inability to work due to sickness or injury. Most of these policies
begin providing benefits following 90- or 180-day waiting periods and continue
providing benefits until the employee reaches age 65-70. Group LTD benefits are
paid monthly and generally are limited to two-thirds of the employee's earned
income up to a specified maximum benefit. Premiums for group LTD insurance are
based upon the expected mortality, morbidity and persistency of the insured
group, as well as assumptions concerning operating expenses and future interest
rates.

INDIVIDUAL DISABILITY

Individual disability products provide coverage for loss of income for
professionals, corporate executives, business owners and administrative support
personnel in the event of disability. As reported in the Life Insurance
Marketing Research Association's 1994 INDIVIDUAL HEALTH ISSUES AND INFORCE
SURVEY for the United States and Canada, the most recent available data, UNUM
America and First UNUM combined were the fourth largest provider of individual
disability income policies measured by premium inforce.

UNUM announced in November 1994 that it would discontinue sales of the
traditional, fixed price, non-cancellable individual disability product
("non-cancellable product") in the United States upon introduction of the new
disability product in each state. During the second quarter of 1995, UNUM
introduced the guaranteed renewable Lifelong Disability Protection product,
which is replacing the non-cancellable product. The Lifelong Disability
Protection product provides benefits and transitional support for moderate
disabilities, while providing richer benefits for severe disabilities. Various
options are available that permit tailoring of an insurance policy to the
specific client's needs. The most common options include up to 60% base income
replacement coverage, an option to purchase up to 40% further coverage in the
event of catastrophic injury or illness involving the loss of two or more
Activities of Daily Living, and an automatic option to convert to a long term
care policy at retirement age. At the end of 1995, the Lifelong Disability
Protection product had been approved in 42 states and the District of Columbia.
Sales of the non-cancellable product are being discontinued in each state
following the regulatory approval of the Lifelong Disability Protection product.

Until the new products are approved, UNUM will continue to sell individual
disability products on a non-cancellable basis, with a fixed premium for the
duration of the policy. The basic individual disability policy provides the
insured with a portion of the earned income which is lost as a result of
sickness or injury. Monthly benefits available range from 30% to 70% of the
insured's earned income up to a specified maximum benefit. UNUM also markets
buy/sell and key person coverage and policies that provide reimbursement for
business overhead expenses incurred during a period of disability.

Individual disability insurance premium rates are based on expected
mortality, morbidity and persistency, as well as assumptions concerning policy
related expenses, inflation and investment income.

GROUP SHORT TERM DISABILITY

Group short term disability insurance ("group STD") provides employees with
insurance coverage for loss of income in the event of inability to work due to
sickness or injury. Most of these policies begin providing benefits immediately
for accidents, or following a one-week waiting period for sickness, and continue
providing benefits for up to 26 weeks. Group STD benefits are paid weekly and
generally are limited to 60% of the employee's earned income up to a specified
maximum benefit. As reported by EMPLOYEE BENEFIT PLAN REVIEW, UNUM America and
First UNUM combined were one of the top three providers of group STD for 1994,
based on premium and number of lives inforce.

LONG TERM CARE

UNUM America and First UNUM market long term care ("LTC") insurance to
employer groups, continuing care retirement communities and individuals. The
group LTC product is offered on an employer or employee-paid basis, and employer
groups may offer coverage to retirees, spouses, parents and grandparents, in
addition to the employee.

UNUM LIMITED:

UNUM Limited was the leading provider for 1994 of group LTD insurance in the
United Kingdom, as reported by Employers Re. International. UNUM Limited targets
group LTD sales to management personnel, other professionals, and technical and
skilled artisans. These products are marketed through a network of independent
brokers. UNUM Limited's group LTD products provide employees with insurance
coverage for loss of income in the event of inability to work due to sickness or
injury. UNUM Limited also markets individual disability insurance through
brokers and agents to self-employed individuals and those not covered under
group policies. Premiums for group LTD and individual disability insurance are
based upon the expected mortality, morbidity and persistency of the insured
group, as well as assumptions concerning operating expenses and future interest
rates.

In May 1994, UNUM Limited assumed the management of the group risk portfolio
of Windsor Life Assurance Company Limited ("Windsor Life"), which included group
LTD and group life products. Windsor Life was the third largest group LTD
provider in the United Kingdom in 1993, as reported by Employers Re.
International.

UNUM JAPAN:

On June 20, 1994, the Japanese Ministry of Finance granted UNUM a
provisional license that allowed UNUM to establish a non-life insurance company,
UNUM Japan Accident Insurance Company Limited ("UNUM Japan"), to market
disability and other accident products in Japan. UNUM Japan has subsequently
received an official license.

UNUM Japan targets sales of group LTD to executive, administrative and
management personnel, and other professionals. These products are marketed
through contracted independents and brokers. Group LTD provides employees with
insurance coverage for loss of income in the event of inability to work due to
sickness or injury. Most of these policies begin providing benefits following
90- or 365-day waiting periods and continue providing benefits until the
employee reaches age 65-70. Group LTD benefits are paid monthly and generally
are limited to 60% of the employee's earned income up to a specified maximum
benefit. Premiums for group LTD insurance are based upon the expected mortality,
morbidity and persistency of the insured group, as well as assumptions
concerning operating expenses and future interest rates.

OTHER:

Through Commercial Life Insurance Company ("Commercial Life"), UNUM is a
leader in the association group marketplace, offering disability income to
members of professional associations. Duncanson & Holt Services manages long
term disability reinsurance through UNUM America and a disability reinsurance
syndicate. Duncanson & Holt Services is a leading manager of group LTD
reinsurance in the United States.

Refer to Item 7 and Item 8 (Note 16) under the caption "Disability Insurance
Segment" for more information.

C. SPECIAL RISK INSURANCE SEGMENT

The Special Risk Insurance segment in 1995 accounted for 18.2% of UNUM's
revenues and 15.8% of its income before income taxes. The Special Risk Insurance
segment includes group life, special risk accident insurance, non-disability
reinsurance operations, reinsurance underwriting management operations and other
special risk insurance products.

The Special Risk Insurance segment's group insurance products are sold
primarily on a basis that permits annual repricing. This enables UNUM to adjust
the pricing of its products to more closely match the underlying claim
experience and interest rate environment.

UNUM America and First UNUM's group life insurance products provide term
insurance to a broad range of employees. As reported by EMPLOYEE BENEFIT PLAN
REVIEW for 1994, the most recent available data, UNUM America and First UNUM
combined were the fifth largest writer of group life insurance in the United
States, based on number of contracts inforce. UNUM America and First UNUM also
market other special risk insurance products, including group accidental death &
dismemberment insurance.

Through Commercial Life, UNUM is a leading provider of group special risk
accident products, including group travel and voluntary accident insurance.
Commercial Life also provides group universal life, group term life and payroll
deduction programs for employees through a network of independent brokers and
specialty agents. Commercial Life is a leader in the association group
marketplace, offering business overhead expense, accidental death and
dismemberment, hospital indemnity and term life insurance to members of
professional associations.

On July 30, 1992, UNUM purchased Duncanson & Holt, Inc. ("D&H"), a leading
accident and health reinsurance underwriting manager. As a reinsurance
underwriting manager, D&H is authorized to conduct reinsurance business on
behalf of the member companies participating in its reinsurance facilities. D&H
provides pool management services that may include marketing, underwriting,
administration, claims payment and actuarial services for client companies, but
does not bear any insurance risk. D&H has offices throughout the United States
and in London, Toronto and Singapore.

The non-disability reinsurance operations include UNUM America's
participation in reinsurance facilities managed by Duncanson & Holt, facilities
managed by non-related companies and direct reinsurance arrangements primarily
for accident and health, long term care and special risks. As a member company
in reinsurance facilities, UNUM America assumes a share of the insurance risk of
the facility.

During 1995, Duncanson & Holt Europe Ltd., an affiliate of D&H based in the
United Kingdom, was authorized by Lloyd's of London to establish two new Lloyd's
Managing Agents and to acquire a third existing Lloyd's Managing Agent. Each
manages a syndicate that underwrites primarily personal accident and other
"non-marine" classes of business at Lloyd's of London.

Refer to Item 7 and Item 8 (Note 16) under the caption "Special Risk
Insurance Segment" for more information.

D. COLONIAL PRODUCTS SEGMENT

The Colonial Products segment in 1995 accounted for 12.8% of UNUM's revenues
and 23.0% of its income before income taxes. The Colonial Products segment
includes Colonial Life & Accident Insurance Company ("Colonial") and affiliates.
Colonial, the principal subsidiary, markets a broad line of payroll-deducted,
voluntary benefits to employees at their worksites, while focusing on accident
and sickness, cancer and life products.

Colonial's accident policies generally provide benefit payments for
disability income, death, dismemberment or major injury. Accident policies are
designed to supplement other benefits available through Social Security,
workers' compensation, and other insurance plans. Colonial offers a wide range
of life insurance products, with universal life and whole life accounting for
most of the life insurance sold. Colonial's cancer policies are designed to
provide payments for hospitalization and scheduled medical benefits, with the
amounts of such payments established by the policies. All of Colonial's
insurance policies are issued on a nonparticipating basis.

More than 97% of Colonial's premiums for 1995 were derived from policies
marketed to employees at their worksites, with premiums in most cases to be
collected through payroll deduction. Such policies are issued on a "guaranteed
renewable" basis, which means that Colonial cannot refuse to renew any policy,
but it does reserve the right on a product-by-product basis to increase premiums
for inforce policies. This right to change premiums is or may be subject to
various state insurance department rules, regulations, and approvals.

Since 1985, Colonial has marketed its accident and health products as
qualified fringe benefits that can be purchased with pretax dollars as part of a
flexible benefits program pursuant to Section 125 of the Internal Revenue Code.
In 1995, premiums from sales to employees participating in such programs
accounted for approximately 50% of total premiums. A flexible benefits program
assists employers in managing their benefits and compensation packages and
provides policyholders with the ability to choose the benefits that best meet
their needs. Although Congress might change the tax laws to limit or eliminate
fringe benefits available on a pretax basis and such a change could limit or
eliminate Colonial's ability to continue marketing its products in this way,
Colonial believes its products provide policyholders value, which will remain
even if the tax advantages offered by flexible benefit programs are eliminated.

Colonial markets its products nationwide primarily through a 5,400-member
independent contractor sales force. Approximately 1,300 home office employees
provide corporate administration, sales support, internal services and systems,
claims processing, policyholder services and employer services.

Colonial Companies' subsidiary, BenefitAmerica, Inc. ("BenefitAmerica"),
offers employers administrative services for their employee benefit programs.
The services offered by BenefitAmerica include administration of flexible
spending accounts, which are offered under an employer's flexible benefits plan
pursuant to Section 125 of the Internal Revenue Code, as well as other
administrative services to those plans. The services offered by BenefitAmerica
complement the services and products offered to employers by Colonial.

Refer to Item 7 and Item 8 (Note 16) under the caption "Colonial Products
Segment" for more information.

E. RETIREMENT PRODUCTS SEGMENT

The Retirement Products segment accounted for 8.7% of UNUM's revenues and
11.9% of its income before income taxes in 1995. This segment markets and
services tax-sheltered annuities ("TSA") in UNUM America and First UNUM. This
segment also includes guaranteed investment contracts ("GICs"), deposit
administration accounts ("DAs"), 401(k) plans, individual life and group medical
insurance, all of which are no longer actively marketed by UNUM.

On September 11, 1995, UNUM announced plans to withdraw from the tax
sheltered annuity business to focus greater attention on core disability and
special risk businesses. On January 24, 1996, UNUM America entered into an
agreement for the sale of its group TSA business to The Lincoln National Life
Insurance Company ("Lincoln Life"), a part of Lincoln National Corporation, and
to a new New York insurance subsidiary of Lincoln Life. The agreement also
contemplates that First UNUM will enter into a similar agreement with Lincoln
Life's New York insurance subsidiary. The sale, which is subject to regulatory
approvals, involves approximately 1,700 group contractholders and assets under
management of approximately $3 billion. The agreement initially contemplates the
reinsurance of these contracts under an indemnity reinsurance arrangement. These
contracts will then be reinsured pursuant to an assumption reinsurance
arrangement upon consent of the TSA contractholders and/or participants. The
purchase price (ceding commission) at closing is expected to be approximately
$70 million. It is anticipated that it will take several months (perhaps six to
nine months) to obtain the necessary approvals and otherwise close the sale.
There is no guarantee that the sale will close.

TSA products (Section 403(b) plans under the Internal Revenue Code) are
marketed to non-profit hospitals and organizations. These contracts offer a
fixed fund that provides for annual renewable guarantees of principal and
interest. In addition, some TSA contracts offer variable annuity investment
alternatives. These investment alternatives are mutual funds offered as
subaccounts in a UNUM separate account. The mutual funds, managed by nationally
recognized investment managers, include a variety of choices such as growth,
balanced and stock index funds. UNUM also offers recordkeeping and reporting
services to TSA contractholders. UNUM America and First UNUM market their TSA
products through a network of 13 offices in the United States, which distribute
these products as well as the group and individual insurance products offered by
the Disability Insurance and Special Risk Insurance segments, primarily through
brokers.

In the fourth quarter of 1991, UNUM announced plans to withdraw from the
401(k) market by the end of 1992. UNUM has transferred 401(k) service
responsibilities to its formerly wholly-owned subsidiary, Preferred Benefits
Corporation, which was sold in the second quarter of 1992. UNUM discontinued
active marketing of GICs and DAs primarily due to the lack of demand and the
level of investment risk. UNUM discontinued new sales of universal life and
other individual life policies as of January 1, 1988. UNUM began exiting the
group medical product line in 1987 with the discontinuance of new sales on the
traditional group medical product. In 1990, management announced its intention
to exit the group medical product entirely. Beginning with the February 1991
renewals, policyholders had the option of transferring their group medical
product to another insurer. UNUM services commitments to inforce policyholders,
which include conversions of group life and group medical insurance.

Refer to Item 7 and Item 8 (Note 16) under the caption "Retirement Products
Segment" for more information.

F. INVESTMENTS

Refer to Item 7 under the caption "Investments" for more information.
Additional information about UNUM's mortgage loan portfolio is provided below:

UNUM management believes that its mortgage loan portfolio is well
diversified geographically and among property types. The mortgage loan portfolio
percentages by geographic region and property type at December 31, 1995, and
1994, were as follows:

GEOGRAPHIC REGION
1995 1994
----- -----

New England....................................... 12.3% 10.6%
Mid-Atlantic...................................... 20.0 17.4
Southeast......................................... 12.8 15.0
Southwest......................................... 7.8 8.4
Pacific........................................... 14.2 15.1
North Central..................................... 15.0 16.0
Farm Belt......................................... 10.2 9.5
Oil Patch......................................... 7.7 8.0
----- -----
Total......................................... 100.0% 100.0%
----- -----
----- -----

PROPERTY TYPE
1995 1994
----- -----

Office Building................................... 24.6% 26.2%
Retail............................................ 33.9 30.9
Industrial........................................ 22.6 19.5
Residential....................................... 6.5 7.2
Medical........................................... 3.7 6.5
Nursing Home...................................... 1.2 2.7
Hotel/Motel....................................... 5.5 5.8
Other............................................. 2.0 1.2
----- -----
Total......................................... 100.0% 100.0%
----- -----
----- -----

Mortgage loans delinquent 60 days or more on a contract delinquency basis by
geographic region and property type were as follows at December 31, 1995, and
1994 (dollars in millions):

GEOGRAPHIC REGION
1995 1994
---- -----

New England....................................... $ -- $15.7
Mid-Atlantic...................................... -- 3.5
Pacific........................................... -- 0.9
North Central..................................... 2.8 2.2
---- -----
Total......................................... $2.8 $22.3
---- -----
---- -----

PROPERTY TYPE
1995 1994
---- -----

Office Building................................... $2.2 $22.3
Medical........................................... 0.6 --
---- -----
Total......................................... $2.8 $22.3
---- -----
---- -----

Mortgage loans that were restructured prior to the adoption of Financial
Accounting Standard ("FAS") No. 114, "Accounting by Creditors for Impairment of
a Loan," by geographic region and property type were as follows at December 31,
1995, and 1994 (dollars in millions):

GEOGRAPHIC REGION
1995 1994
----- -----

New England....................................... $ 3.2 $ 3.3
Mid-Atlantic...................................... 4.3 4.4
Southeast......................................... 9.3 9.5
Southwest......................................... 7.8 7.9
Pacific........................................... 9.6 10.8
North Central..................................... 14.4 14.5
Farm Belt......................................... 8.7 8.8
Oil Patch......................................... 2.6 14.4
----- -----
Total......................................... $59.9 $73.6
----- -----
----- -----

PROPERTY TYPE
1995 1994
----- -----

Office Building................................... $25.0 $32.2
Retail............................................ 12.7 12.8
Industrial........................................ 5.8 8.6
Residential....................................... 6.9 7.1
Hotel/Motel....................................... 7.9 2.4
Other............................................. 1.6 10.5
----- -----
Total......................................... $59.9 $73.6
----- -----
----- -----

Effective January 1, 1995, UNUM adopted FAS 114, which defined the
principles to measure and record a loan when it is probable that a creditor will
be unable to collect all amounts due according to the contractual terms of the
loan agreement. In general, impaired loans as defined by FAS 114 compare with
loans previously defined and disclosed as problem and potential problem loans.

Impaired loans by geographic region and property type were as follows at
December 31, 1995 (dollars in millions):

GEOGRAPHIC REGION
1995
---------

New England.......................................... $ 14.9
Mid-Atlantic......................................... 15.2
Southwest............................................ 12.4
North Central........................................ 2.8
Oil Patch............................................ 4.8
---------
Total............................................ $ 50.1
---------
---------

PROPERTY TYPE
1995
---------

Office Building...................................... $ 23.3
Retail............................................... 16.0
Industrial........................................... 5.4
Medical.............................................. 5.4
---------
Total............................................ $ 50.1
---------
---------

Potential problem mortgage loans were defined by UNUM as current and
performing loans with which management had some concerns about the ability of
the borrower to comply with present loan terms and whose book value exceeded the
market value of the underlying collateral. Potential problem loans by geographic
region and property type were as follows at December 31, 1994 (dollars in
millions):

GEOGRAPHIC REGION
1994
---------

New England.......................................... $ 3.4
Mid-Atlantic......................................... 9.3
Southeast............................................ 6.3
Southwest............................................ 1.5
Pacific.............................................. 4.1
North Central........................................ 0.8
Farm Belt............................................ 5.9
Oil Patch............................................ 4.9
---------
Total............................................ $ 36.2
---------
---------

PROPERTY TYPE
1994
---------

Office Building...................................... $ 17.2
Retail............................................... 0.7
Residential.......................................... 2.2
Medical.............................................. 4.6
Hotel/Motel.......................................... 11.5
---------
Total............................................ $ 36.2
---------
---------

G. RISK MANAGEMENT AND REINSURANCE

Risk management, which includes product design, pricing, underwriting,
reserving and benefits management, involves a determination of the type and
amount of risk that an insurer is willing to accept, administration and
evaluation of business inforce, and control of claims. UNUM has underwriters
organized within business segments who evaluate policy applications on the basis
of information provided by the applicant and other sources.

UNUM reinsures with other companies portions of the insurance policies it
has underwritten. Reinsurance allows UNUM to sell policies with higher benefits
than the entire risk that UNUM is willing to assume. UNUM remains liable to the
insured for the payment of policy benefits if the reinsurers cannot meet their
obligations under the reinsurance agreements.

Within the Disability Insurance and Special Risk Insurance segments, UNUM
America and First UNUM have underwriters for group disability, individual
disability, group life and long term care products. These underwriting functions
are aligned geographically with UNUM America and First UNUM's four sales
regions. Quotes for prospective customers are based upon UNUM America and First
UNUM's experience with profitability and persistency of the respective
employer's risk category. The maximum group LTD, group STD, and LTC monthly
benefit varies, but the usual maximum monthly amount available is $35,000,
$10,000, and $6,000 respectively. For group life insurance products, UNUM
retains up to $750,000 per individual life and reinsures the balance with other
insurance carriers.

In 1994, UNUM America and First UNUM announced the discontinuance of sales
of its traditional fixed price, non-cancellable individual disability insurance
product in the United States and, during 1995, introduced the new guaranteed
renewable individual disability product. As of the end of 1995, this new product
has received regulatory approval in most states. UNUM requires medical
examinations, financial data, and other information to make a decision on the
acceptability of the individual risk and to appropriately classify an applicant
for individual disability insurance products. On new sales of the new guaranteed
renewable product, UNUM retains up to $8,000 plus 25% of amounts in excess of
$8,000 basic monthly indemnity per life for personal disability coverages,
$20,000 plus 25% of amounts in excess of $20,000 per life for business overhead
expense coverages and $500,000 per life for buy/sell coverages.

The financial and medical underwriting areas of UNUM Limited handle the
underwriting of group and individual disability policies and group life
policies. The maximum yearly benefit for group LTD is 326,000 pounds sterling.
UNUM

Limited retains 75,000 pounds sterling of this risk and reinsures the balance.
The maximum yearly initial benefit for individual disability insurance is
125,000 pounds sterling and amounts over 40,000 pounds sterling per annum are
reinsured. On group life business, UNUM Limited retains 60% of the risk up to a
maximum of 150,000 pounds sterling per individual life.

UNUM (except for Colonial and Commercial Life) reinsures the risk of
individual life insurance contracts that exceed $425,000 on any one life.
Colonial limits its risk for death and dismemberment benefits to $100,000 per
life. Colonial also has reinsurance on its cancer insurance products that
provides coverage for claim payments in excess of $50,000 in any one year, per
claimant, up to a lifetime maximum of $1 million per claimant. Commercial Life
reinsures the risk on its accidental death and dismemberment contracts that
exceed $400,000 on any one life. Commercial Life also reinsures the risk on
individual, group and franchise life contracts that exceed $250,000 on any one
life.

In addition to the reinsurance arrangements above, UNUM (except for
Colonial, UNUM Limited and Commercial Life) is covered by catastrophe
reinsurance, which provides additional protection against aggregate losses in
excess of $1 million up to a maximum of $100 million. This protection is
activated whenever one event causes the disability and/or death of five or more
people covered under UNUM's disability or life contracts. Colonial is covered by
catastrophe reinsurance for accidental deaths totaling more than $300,000 from a
single disaster, up to a limit of $5 million. UNUM Limited's group disability
business is partially covered by catastrophe reinsurance of 3 million pounds
sterling for losses from one event involving more than twenty-five lives.
Commercial Life is covered by catastrophe reinsurance, which provides additional
protection against aggregate losses in excess of $1 million up to a maximum of
$54 million for losses involving three or more covered lives. Also, UNUM
purchased excess-of-loss reinsurance totaling $60 million over three years
through a Lloyd's of London syndicate for the non-cancellable individual
disability business of UNUM America and First UNUM.

Reinsurance premiums assumed and ceded for the year ended December 31, 1995,
were $241.5 million and $66.2 million, respectively. No current or planned
reinsurance activity is expected to have a significant impact on the ability of
UNUM to underwrite additional insurance.

H. RESERVES
The reserves reported in the consolidated financial statements of UNUM
Corporation and subsidiaries have been computed in accordance with generally
accepted accounting principles ("GAAP"). These reserve balances generally differ
from those specified by the laws of the various states and those carried in the
statutory financial statements. The differences between GAAP and statutory
reserves arise from the use of different mortality, morbidity, interest, expense
and lapse assumptions.

Pursuant to insurance laws of the states of Maine, New York, South Carolina
and Wisconsin, the United Kingdom and Japan, UNUM's insurance subsidiaries (UNUM
America, First UNUM, Colonial Life, Commercial Life, UNUM Limited and UNUM
Japan, respectively) set up statutory reserves, carried as liabilities, to meet
obligations on their various policies. These statutory reserves are amounts
which, together with premiums to be received and interest on such reserves at
assumed rates, are calculated to be sufficient to meet the policy and contract
obligations of UNUM's insurance subsidiaries. Pursuant to federal insurance laws
of Canada, UNUM America has established regulatory reserves to meet the
obligations of policies written in its Canadian branch.

Statutory, GAAP and regulatory reserves are based upon UNUM's insurance
subsidiaries' experience as adjusted to provide for possible adverse deviations.
These estimates are periodically reviewed and compared to actual experience. The
assumptions are revised when it is determined that future expected experience
differs from the assumed estimates.

I. EMPLOYEES
At December 31, 1995, UNUM had approximately 6,900 full-time employees. UNUM
does not have collective bargaining agreements with employees.

J. COMPETITION
The principal competitive factors affecting UNUM's business are reputation,
financial strength, quality of service, risk management expertise, distribution,
product design and price. There is competition among insurance companies for the
types of individual and group insurance and retirement products sold by UNUM. At
the end of 1995, there were more than 1,800 legal reserve life insurance
companies in the United States and Canada and life assurance offices in the
United Kingdom, which may offer insurance products similar to those marketed by
UNUM. UNUM also competes with banks, investment advisors, mutual funds and other
financial entities to provide products and services. All areas of group
insurance are highly competitive because of the large number of insurance
companies and other entities offering these products.

K. REGULATION

UNUM's insurance subsidiaries are subject to regulation and supervision in
the jurisdictions in which they do business. Although the extent of such
regulation varies, U.S. state, Canadian, United Kingdom and Japanese insurance
laws generally establish supervisory agencies, such as state insurance
departments, the Office of the Superintendent of Financial Institutions
("OSFI"), The Department of Trade and Industry ("DTI") and the Ministry of
Finance ("MOF"), respectively, with broad administrative powers. These powers
relate chiefly to the granting and revocation of the licenses to transact
business, and establishing reserve requirements and the form and content of
required financial statements. Such powers also include the licensing of agents
in the U.S. and the approval of policy forms in the U.S. and Japan. UNUM's
insurance operations and subsidiaries must meet the standards and tests for its
investments promulgated by insurance laws and regulations of Maine, New York,
South Carolina, Wisconsin, Canada, the United Kingdom and Japan, as applicable.

UNUM's United States domiciled insurance subsidiaries are required to file
quarterly and annual statements with the various insurance departments in state
jurisdictions in which they do business. These statements comply with the rules
of the National Association of Insurance Commissioners ("NAIC"). UNUM's
insurance subsidiaries are examined periodically by examiners of the states of
Maine, New York, South Carolina and Wisconsin and of other states (on an
"association" or "zone" basis) in which they are licensed to do business. UNUM's
insurance branch operation in Canada is periodically examined by Canadian
insurance regulatory authorities and is required to file annual reports that
comply with the insurance laws of Canada and with the rules of the OSFI of the
Canadian Federal government and each of the provinces. UNUM's United Kingdom
subsidiary is required to file financial statements annually with the DTI, in
accordance with United Kingdom law and regulation. UNUM Japan is required to
file financial statements annually with the MOF, in accordance with Japanese
laws and regulations.

UNUM's insurance subsidiaries operate under insurance laws, which require
that they establish and carry, as liabilities, actuarial reserves to meet their
obligations on their disability, life, accident and health policies, and
annuities. These reserves are verified periodically by various regulators.

UNUM's reinsurance underwriting manager, Duncanson & Holt, Inc., ("D&H") is
a licensed reinsurance intermediary in New York. It is subject to regulation in
New York and other states where it does business. Duncanson & Holt Underwriters,
Ltd., a subsidiary of D&H, is a corporate member of Lloyd's of London and is
subject to all rules applicable to such members.

UNUM Sales Corporation, a registered broker-dealer, is regulated by the
National Association of Securities Dealers, Inc. and the Securities and Exchange
Commission. It is the principal underwriter for variable annuity contracts
offered by UNUM America and First UNUM. Future operations of UNUM Sales
Corporation may be affected by the completion of the TSA sale, as previously
discussed in Item 1A and Item 1E, and implementation of the details of the
transaction.

The laws of the State of Maine require periodic registration and reporting
by insurance companies domiciled within its jurisdiction, which control or are
controlled by other corporations or persons. This constitutes, by definition, a
holding company system. UNUM America is domiciled in Maine and is subject to
these laws. New York, which is the domiciliary state of First UNUM; South
Carolina, which is the domiciliary state of Colonial Life; and Wisconsin, which
is the domiciliary state of Commercial Life, have similar laws. Accordingly, the
UNUM insurance subsidiaries are registered as members of the UNUM holding
company system in the states of Maine, New York, South Carolina and Wisconsin.
The statutes of these states require periodic disclosure concerning the ultimate
controlling person and intercorporate transactions within the holding company
system, some of which require prior approval.

Effective December 31, 1991, UNUM America merged with two of UNUM
Corporation's wholly-owned Maine life insurance subsidiaries, UNUM Life
Insurance Company ("UNUM Life") and UNUM Pension and Insurance Company ("UPIC"),
with UNUM America remaining as the surviving corporation. In connection with the
merger of UNUM Life and UPIC into UNUM America, UNUM Life ceased to maintain its
licensing status in the State of New York effective December 31, 1991, with all
future New York business being transacted by First UNUM. As a condition of New
York regulatory approval, UNUM America agreed to maintain a security deposit in
the State of New York equal to 102% of outstanding statutory liabilities to New
York policyholders, insureds and claimants of UNUM Life. The security deposit
consists of certain cash and invested assets. An initial deposit was made in
February 1992 and, at December 31, 1995, the required deposit was $845.3
million. UNUM America has the ability to withdraw assets from this account and
to substitute other assets at its discretion. The balance of the security
deposit will be reviewed and adjusted at least annually based upon the
outstanding liabilities described above. In the event of the consummation of the
TSA sale, as described in Item 1A and 1E, the balance of the security deposit
may be adjusted based on the outstanding liabilities of the TSA business.

L. PARTICIPATION FUND ACCOUNT

Participating policies issued prior to November 14, 1986, by the former
Union Mutual Life Insurance Company ("Union Mutual") will remain participating
as long as they remain in force. A Participation Fund Account ("PFA") has been
established for the sole benefit of all of Union Mutual's individual
participating life and annuity policies and contracts. At December 31, 1995, the
PFA had $364.2 million in assets, which were held by UNUM America. UNUM agreed
to pay certain expenses associated with the PFA and at December 31, 1995, the
reserve for the present value of such expenses was $15.0 million.

PFA assets, investment earnings and income from operations are not available
to UNUM America or UNUM during the operation or upon the termination of the PFA.
In the unlikely event that the assets of the PFA are not adequate to provide for
policyholder benefits (exclusive of dividends, which are not guaranteed), UNUM
America would be required to provide for any shortfall, and such amounts, if
any, would reduce earnings of UNUM America and UNUM.

All operating data of the individual participating life and annuity
contracts has been excluded from the Consolidated Statements of Income and all
other operating data included in this report unless otherwise noted. The assets
and liabilities associated with the participating business are included in
UNUM's Consolidated Balance Sheets.

ITEM 2. PROPERTIES

UNUM owns home office property consisting of five office buildings and four
service buildings located throughout the Portland, Maine, area. UNUM also owns
an office building in the United Kingdom, which is the home office of UNUM
Limited. The home office of the Colonial Companies is located in Columbia, South
Carolina, and is also owned by UNUM. In addition, UNUM leases, on periods
principally from three to six years, office and warehouse space for use by its
home office, affiliates, and sales forces.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of its business operations, UNUM is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of lawsuits were pending at December 31, 1995. In the opinion of
management, the ultimate liability, if any, arising from this litigation is not
expected to have a material adverse effect on the consolidated financial
position or the consolidated operating results of UNUM.

On December 29, 1993, UNUM filed a suit in the United States District Court
for the District of Maine, seeking a federal income tax refund. The suit is
based on a claim for a deduction in certain prior tax years, for $652 million in
cash and stock distributed to policyholders in connection with the 1986
conversion of Union Mutual Life Insurance Company to a stock company. Although
UNUM believes its claims are meritorious, the United States is aggressively
resisting the claims and the ultimate recovery, if any, cannot be determined at
this time.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of shareholders, through solicitation of
proxies or otherwise, during the fourth quarter of 1995.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The principal markets in which UNUM's common stock is traded are the New
York Stock Exchange and the Pacific Stock Exchange. UNUM's ticker symbol is
"UNM." As of December 31, 1995, there were 24,153 shareholders of record of
common stock. Information concerning restrictions on the ability of UNUM's
subsidiaries to transfer funds to UNUM in the form of cash dividends is
described in Item 8 (Note 12).

The market price (as quoted by the New York Stock Exchange) and cash
dividends paid, per share of UNUM's common stock, by calendar quarter for the
past two years were as follows:

1995 1994
------------------------------------------ ------------------------------------------
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q

- --------------------------------------------------------------------------------------------------------------------------------
High.................................... $ 56.500 $ 54.000 $ 48.000 $ 46.000 $ 46.875 $ 50.000 $ 56.750 $ 58.000
Low..................................... $ 50.625 $ 45.375 $ 39.875 $ 37.750 $ 35.125 $ 43.000 $ 44.500 $ 48.000
Close................................... $ 55.000 $ 52.750 $ 46.875 $ 45.250 $ 37.750 $ 46.000 $ 44.750 $ 52.750
Dividend Paid........................... $ 0.265 $ 0.265 $ 0.265 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.20

ITEM 6. SELECTED FINANCIAL DATA

The following should be read in conjunction with UNUM's Consolidated
Financial Statements and related notes reported in Item 8.

UNUM CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)

------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987

- ------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Revenues:
Premiums and other income
(expense):
Disability Insurance
Segment...................... $1,879.9 $1,716.2 $1,547.9 $1,339.8 $1,214.6 $1,004.7 $ 803.8 $ 681.7 $ 630.8
Special Risk Insurance
Segment...................... 702.3 607.1 559.4 432.8 368.5 347.0 306.2 176.3 165.7
Colonial Products Segment..... 475.1 441.3 407.4 371.9 325.4 281.1 241.0 216.7 192.1
Retirement Products Segment... 34.1 31.4 42.5 52.5 64.4 92.8 130.2 180.0 238.5
Corporate..................... 0.1 0.8 -- 0.8 -- (0.1) 0.2 -- 0.9
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Total premiums and other
income..................... 3,091.5 2,796.8 2,557.2 2,197.8 1,972.9 1,725.5 1,481.4 1,254.7 1,228.0
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Net investment income (expense):
(a)
Disability Insurance
Segment...................... 592.9 400.3 369.8 370.5 333.8 285.4 239.4 193.1 167.8
Special Risk Insurance
Segment...................... 48.4 40.7 34.8 32.2 26.5 23.4 24.5 12.5 12.1
Colonial Products Segment..... 52.2 32.6 41.4 35.4 38.5 25.2 26.7 22.3 19.0
Retirement Products Segment... 323.7 338.0 387.6 408.7 411.3 426.1 424.0 413.2 418.2
Corporate..................... 14.2 4.2 6.2 3.9 1.5 (9.0) 5.9 20.3 19.1
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Total net investment
income..................... 1,031.4 815.8 839.8 850.7 811.6 751.1 720.5 661.4 636.2
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Total revenues.............. 4,122.9 3,612.6 3,397.0 3,048.5 2,784.5 2,476.6 2,201.9 1,916.1 1,864.2
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Benefits and expenses:
Disability Insurance
Segment...................... 2,255.8 2,060.3 1,603.6 1,446.6 1,306.4 1,093.7 878.8 756.0 701.4
Special Risk Insurance
Segment...................... 690.4 581.9 555.3 418.7 355.2 342.2 312.9 180.4 172.0
Colonial Products Segment..... 439.6 411.2 378.4 346.8 306.4 259.6 225.5 201.1 178.6
Retirement Products Segment... 312.3 327.4 375.8 427.5 484.4 491.6 535.9 580.1 685.0
Corporate..................... 42.9 33.2 23.6 10.4 12.5 10.8 12.3 9.5 15.7
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Total benefits and
expenses................... 3,741.0 3,414.0 2,936.7 2,650.0 2,464.9 2,197.9 1,965.4 1,727.1 1,752.7
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes and cumulative effects of
accounting changes:
Disability Insurance
Segment...................... 217.0 56.2 314.1 263.7 242.0 196.4 164.4 118.8 97.2
Special Risk Insurance
Segment...................... 60.3 65.9 38.9 46.3 39.8 28.2 17.8 8.4 5.8
Colonial Products Segment..... 87.7 62.7 70.4 60.5 57.5 46.7 42.2 37.9 32.5
Retirement Products Segment... 45.5 42.0 54.3 33.7 (8.7) 27.3 18.3 13.1 (28.3)
Corporate..................... (28.6) (28.2) (17.4) (5.7) (11.0) (19.9) (6.2) 10.8 4.3
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Total income before income
taxes and cumulative
effects of accounting
changes.................... 381.9 198.6 460.3 398.5 319.6 278.7 236.5 189.0 111.5
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Income taxes (credit)........... 100.8 43.9 148.3 107.3 74.3 60.9 51.1 30.1 (4.7)
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Cumulative effects of accounting
changes........................ -- -- (12.1)(b) -- -- -- -- -- --
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Net income.................. $ 281.1 $ 154.7 $ 299.9 $ 291.2 $ 245.3 $ 217.8 $ 185.4 $ 158.9 $ 116.2
-------- -------- ----------- -------- -------- -------- -------- -------- --------
-------- -------- ----------- -------- -------- -------- -------- -------- --------
Per common share:
Net income.................... $ 3.87 $ 2.09 $ 3.81(b) $ 3.71 $ 3.15 $ 2.73 $ 2.03 $ 1.57 $ 1.06
Dividends paid................ $ 1.035 $ 0.92 $ 0.765 $ 0.625 $ 0.49 $ 0.375 $ 0.285 $ 0.23 $ 0.20

- -------------
(a) Includes investment income and net realized investment gains.

(b) Effective January 1, 1993, UNUM adopted Financial Accounting Standard No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," which decreased net income by $32.1 million, or $0.40 per share,
and Financial Accounting Standard No. 109, "Accounting for Income Taxes,"
which increased net income by $20.0 million, or $0.25 per share.

UNUM CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS AND SHARES IN MILLIONS)

- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986

- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Assets............ $14,787.8 $13,127.2 $12,437.3 $11,959.8 $11,310.9 $10,063.4 $9,045.7 $8,592.3 $7,783.0 $7,333.8
Long-term debt.... $ 457.3 $ 182.1 $ 128.6 $ 77.2 $ 51.5 $ 77.2 $ 1.5 $ 1.5 $ 1.7 $ 1.4
Stockholders'
equity........... $ 2,302.9 $ 1,915.4 $ 2,102.7 $ 2,010.9 $ 1,755.5 $ 1,490.1 $1,445.0 $1,512.3 $1,463.8 $1,471.1
Shares
outstanding...... 73.0 72.4 76.0 79.1 78.2 77.4 82.0 96.8 104.2 111.4
Weighted average
shares
outstanding
during the
year............. 72.7 74.2 78.8 78.5 77.8 79.9 91.4 101.3 109.1 NA(a)

- ---------------
(a) In November 1986, UNUM converted to a stock company from a mutual company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This management's discussion and analysis reviews the consolidated financial
condition of UNUM at December 31, 1995, the consolidated results of operations
for the past three years and, where appropriate, factors that may affect future
financial performance are identified and discussed. Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with the Consolidated Financial Statements, Notes to Consolidated
Financial Statements and Selected Consolidated Financial Data.

CHANGE IN REPORTING SEGMENTS

SEGMENTS AFTER THE CHANGE
- --------------------------------------------------------------------------------
DISABILITY INSURANCE
- -Group Long Term
Disability ("LTD")
- -UNUM Limited
- -Individual Disability
- -Group Short Term Disability ("STD")
- -Long Term Care
- -LTD Reinsurance
- -Association Group Disability
- -UNUM Japan
SPECIAL RISK INSURANCE
- -Group Life
- -Group Accidental Death &
Dismemberment ("AD&D")
- -Reinsurance Pools
- -Special Risk Products
- -Duncanson & Holt ("D&H") Reinsurance Management
COLONIAL PRODUCTS
- -Accident & Sickness
- -Cancer
- -Life
RETIREMENT PRODUCTS
- -Tax Sheltered Annuities
- -401(k)
- -Other Retirement Products
- -Individual Life
- -Group Medical

- --------------------------------------------------------------------------------
SEGMENTS BEFORE THE CHANGE
- --------------------------------------------------------------------------------
EMPLOYEE BENEFITS
- -Group LTD
- -Group STD
- -Group Life
- -Group AD&D
RELATED BUSINESSES
- -UNUM Limited
- -LTD Reinsurance
- -Reinsurance Pools
- -Special Risk Products
- -D&H Reinsurance Management
- -Association Group Disability
COLONIAL COMPANIES
- -Accident & Sickness
- -Cancer
- -Life
INDIVIDUAL DISABILITY
- -Individual Disability
RETIREMENT SECURITY
- -Tax Sheltered
Annuities
- -Long Term Care
OTHER OPERATIONS
- -401(k)
- -Other
Retirement
Products
- -Individual Life
- -Group Medical
- --------------------------------------------------------------------------------
Corporate includes transactions that are generally non-insurance related.
For comparative purposes, prior period information has been restated to reflect
the new reporting segments.

CONSOLIDATED OVERVIEW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER
COMMON SHARE AMOUNTS,
AND PERCENTAGE INCREASE (DECREASE) OVER
PRIOR YEAR) 1995 1994 1993

- ------------------------------------------------------------------------------------------
INCOME DATA
Revenues
Premiums.................................. $ 3,018.2 10.9% $ 2,721.3 10.0% $ 2,474.1
Investment income......................... 806.3 4.7 770.2 (2.6) 790.4
Net realized investment gains............. 225.1 nm 45.6 (7.7) 49.4
Fees and other income..................... 73.3 (2.9) 75.5 (9.1) 83.1
--------- ---- --------- ----- ---------
Total revenues.......................... 4,122.9 14.1 3,612.6 6.3 3,397.0

Benefits and expenses....................... 3,741.0 9.6 3,414.0 16.3 2,936.7
--------- ---- --------- ----- ---------
Income before income taxes and cumulative
effects of accounting changes.............. 381.9 92.3 198.6 (56.9) 460.3

Income taxes................................ 100.8 nm 43.9 (70.4) 148.3
--------- ---- --------- ----- ---------
Income before cumulative effects of
accounting changes......................... 281.1 81.7 154.7 (50.4) 312.0

Cumulative effects of accounting changes
Income taxes.............................. -- -- nm 20.0
Postretirement benefits other than
pensions, net of tax..................... -- -- nm (32.1)
--------- ---- --------- ----- ---------
Net income.............................. $ 281.1 81.7% $ 154.7 (48.4)% $ 299.9
--------- ---- --------- ----- ---------
--------- ---- --------- ----- ---------

Per common share:
Income before cumulative effects of
accounting changes....................... $ 3.87 $ 2.09 $ 3.96
Cumulative effects of accounting changes
Income taxes.............................. -- -- 0.25
Postretirement benefits other than
pensions, net of tax..................... -- -- (0.40)
--------- --------- ---------
Net income.............................. $ 3.87 $ 2.09 $ 3.81
--------- --------- ---------
--------- --------- ---------

Summary of income (loss) before income taxes
Disability Insurance Segment.............. $ 217.0 nm% $ 56.2 (82.1)% $ 314.1
Special Risk Insurance Segment............ 60.3 (8.5) 65.9 69.4 38.9
Colonial Products Segment................. 87.7 39.9 62.7 (10.9) 70.4
Retirement Products Segment............... 45.5 8.3 42.0 (22.7) 54.3
Corporate................................. (28.6) 1.4 (28.2) 62.1 (17.4)
--------- ---- --------- ----- ---------
Total income before income taxes........ $ 381.9 92.3% $ 198.6 (56.9)% $ 460.3
--------- ---- --------- ----- ---------
--------- ---- --------- ----- ---------

BALANCE SHEET DATA
Assets.................................... $14,787.8 $13,127.2 $12,437.3
Long-term debt............................ $ 457.3 $ 182.1 $ 128.6
Stockholders' equity...................... $ 2,302.9 $ 1,915.4 $ 2,102.7
Shares outstanding........................ 73.0 72.4 76.0
Weighted average shares outstanding during
the year................................. 72.7 74.2 78.8

- ------------
nm = not meaningful or in excess of 100%

CONSOLIDATED OVERVIEW

In 1995, net income increased by $126.4 million to $281.1 million, or $3.87
per share, from $154.7 million, or $2.09 per share, in 1994. When the following
significant items, as described below, are excluded: the increased realized
investment gains resulting primarily from the sale of the common stock
portfolio, the increased reserves resulting from the lowering of certain
disability product reserve discount rates, and the increased group long term
disability ("group LTD") reserves for incurred but not reported ("IBNR") claims,
all of which took place in 1995; and the individual disability reserve
strengthening recorded in 1994, income before income taxes slightly decreased in
1995. The decrease was primarily attributable to higher benefit ratios at UNUM
Limited and in the group LTD and group life businesses, increased interest
expense and lower interest spread margins on the tax sheltered annuity business.
Partially offsetting these items were increased investment income, a lower
benefit ratio in the individual disability line of business and continued
expense management. The decrease in income before income taxes in 1994 was
primarily due to unfavorable claims experience in the individual disability and
group LTD businesses.

SUMMARY OF SIGNIFICANT EVENTS FOR 1995 AND 1994

During second quarter 1995, UNUM sold virtually all of the common stock
portfolio of its United States subsidiaries, primarily due to consideration of
statutory capital requirements associated with investment in common stocks and
to increase future investment income. The sale of the common stock portfolio
contributed to significantly higher realized investment gains than in 1994. UNUM
reinvested the proceeds from the sale of the common stock portfolio primarily in
investment grade fixed income assets, which has decreased the required amount of
statutory capital for regulatory purposes and increased investment income.
Dependent on capital considerations and market conditions, UNUM may invest in
equity securities in the future.

Reserves for certain disability products are discounted using an interest
rate which is a composite yield of assets matched with each product. As a result
of the sale of the common stock portfolio, which had partially supported these
disability reserves, and the subsequent reinvestment of the proceeds primarily
in investment grade fixed income assets at yields below the average portfolio
yield, certain reserve discount rates were lowered during second quarter 1995.
The effect of lowering these discount rates was an increase to the reserve
liabilities and benefits to policyholders reported in the Disability Insurance
segment of $128.6 million and a decrease in net income of $83.6 million, or
$1.15 per share, for the year ended December 31, 1995. The discount rate used to
determine the group LTD reserves was reduced to 8.00% at June 30, 1995, as
compared with 9.18% at December 31, 1994. At December 31, 1995, the group LTD
discount rate was 7.94%. Management expects the reserve discount rate for
certain disability products will further decline, since current cash flows are
invested in high quality assets at current yields, which are below the composite
yield of the existing assets purchased in prior years. UNUM periodically adjusts
prices on both existing and new business in an effort to mitigate the impact of
the current interest rate environment.

During 1995, UNUM increased the group LTD reserves for IBNR claims by $38.4
million, which decreased net income by $25.0 million, or $0.34 per share, for
the year ended December 31, 1995. IBNR reserves, which are established to fund
anticipated case reserves for claims that have been incurred but not reported to
UNUM, are actuarially established based on various factors, including incidence
levels and claims severity. The increased IBNR reserves were based on
management's judgment that claims currently incurred but not yet reported will
reflect increased levels of claims incidence and severity. It is not possible to
predict whether future incidence levels or claims severity will be consistent
with UNUM's assumptions, or will improve or deteriorate.

Throughout 1994, UNUM's individual disability business experienced a higher
incidence of new claims and a disproportionate number of large claims, which
management attributed to certain geographic and occupational segments of the
business, particularly physicians. During the third quarter of 1994, management
concluded that the deterioration of claims experience was not a temporary
fluctuation in certain segments of the business, but was indicative of expected
claim trends for the future. As a result, in third quarter 1994, UNUM increased
reserves for existing claims by $83.3 million and strengthened reserves for
estimated future losses by $109.1 million. These increased reserves reflected
management's expectations of morbidity trends for the existing non-cancellable
individual disability business. This reserve strengthening resulted in an
increase to benefits to policyholders in the Consolidated Statement of Income of
$192.4 million and a decrease to net income of $125.1 million, or $1.69 per
share, for the year ended December 31, 1994. It is not possible to predict
whether morbidity trends will be consistent with UNUM's assumptions; however, as
of December 31, 1995, management believes that the strengthened reserve levels
continue to be adequate.

SUBSEQUENT EVENTS

On February 7, 1996, UNUM announced plans to merge its Commercial Life
Insurance Company affiliate into UNUM America to accelerate growth of its
special risk business, increase its commitment to the association group business
and to improve operating and capital efficiencies. The merger will be effective
December 31, 1996, subject to regulatory approvals. During 1996, UNUM expects to
incur costs of approximately $7 million related to the merger and anticipates
annual savings of a similar amount following the merger due to reductions in
operating costs.

ACCOUNTING CHANGES

Effective January 1, 1995, UNUM adopted FAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and FAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures," which defined
the principles to measure and record a loan when it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms of
the loan agreement. The adoption of FAS 114 and FAS 118 did not have a material
effect on UNUM's results of operations or financial position.

Effective January 1, 1994, UNUM adopted FAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which specified the accounting and
reporting for certain investments in equity securities and for all investments
in debt securities. Upon the adoption of FAS 115, UNUM increased unrealized
gains on available for sale securities included in stockholders' equity on
January 1, 1994, by $41.8 million (net of deferred taxes of $22.5 million) to
reflect the unrealized holding gains on fixed maturities classified as available
for sale that were previously carried at amortized cost. In accordance with FAS
115, prior year consolidated financial statements have not been restated to
reflect the change in accounting principle. The adoption of FAS 115 did not
affect 1994 net income.

Effective January 1, 1993, UNUM adopted FAS 106, which changed the method
for recognition of the cost of postretirement benefits other than pensions from
a cash basis to an accrual basis over the years in which employees render the
related services. UNUM elected to recognize the FAS 106 liability at January 1,
1993, of $48.8 million as a cumulative effect of an accounting change, which
decreased net income by $32.1 million, or $0.40 per share, in 1993.

Also effective January 1, 1993, UNUM adopted FAS 109, which changed the
method for calculating and reporting deferred income taxes in the financial
statements from the deferred method to the liability method. The cumulative
effect of this accounting change amounted to a $20.0 million increase, or $0.25
per share, in 1993 net income.

INCOME TAXES

Effective tax rates, which reflect income tax expense as a percentage of
pretax income, were 26.4%, 22.1% and 32.2% for 1995, 1994 and 1993,
respectively. The increase in the effective tax rate for 1995 was primarily due
to increased pretax earnings, as compared with 1994. Reported income tax expense
was below the federal statutory tax rate of 35% for 1995, 1994 and 1993,
primarily due to tax savings from investments in tax-exempt securities.
Management anticipates the effective tax rate for 1996 will be higher than 1995,
primarily related to reduced levels of tax-exempt income. Although investments
in tax-exempt securities result in increased consolidated net income, these
investments reduce UNUM's business segments' income before income taxes.

On August 10, 1993, legislation was enacted to increase the federal
corporate income tax rate of 34% to 35%, retroactive to January 1, 1993. The
change in tax rates resulted in a $7.8 million, or $0.10 per share, charge
related to the adjustment of deferred tax liabilities. Excluding the adjustment
to deferred income tax expense of $7.8 million for the enacted tax rate change,
the 1993 effective tax rate would have been 30.5%.

DISABILITY INSURANCE SEGMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
(DECREASE) OVER PRIOR YEAR) 1995 1994 1993

-----------------------------------------------------------------------------------------------------
Revenues
Premiums
Group LTD........................................ $1,088.6 14.0% $ 955.0 2.3% $ 933.4
UNUM Limited..................................... 125.2 (11.2) 141.0 79.4 78.6
Individual disability............................ 357.6 3.1 346.8 11.2 312.0
Group STD........................................ 132.9 23.5 107.6 19.8 89.8
Other disability insurance....................... 151.0 5.2 143.5 25.7 114.2
-------- ----- -------- ----- ----------
Total premiums................................. 1,855.3 9.5 1,693.9 10.9 1,528.0

Investment income.................................... 408.2 14.0 358.2 6.5 336.4
Net realized investment gains........................ 184.7 nm 42.1 26.0 33.4
Fees and other income................................ 24.6 10.3 22.3 12.1 19.9
-------- ----- -------- ----- ----------
Total revenues................................. 2,472.8 16.8 2,116.5 10.4 1,917.7

Benefits and expenses
Benefits to policyholders.......................... 1,711.2 8.8 1,572.1 37.3 1,144.9
Operating expenses................................. 421.3 1.5 415.0 7.7 385.4
Commissions........................................ 193.5 (0.9) 195.3 11.3 175.4
Increase in deferred policy acquisition costs...... (70.2) (42.5) (122.1) 19.6 (102.1)
-------- ----- -------- ----- ----------
Total benefits and expenses.................... 2,255.8 9.5 2,060.3 28.5 1,603.6
-------- ----- -------- ----- ----------

Income before income taxes........................... $ 217.0 nm% $ 56.2 (82.1)% $ 314.1
Sales (annualized new premiums)
Group LTD.......................................... $ 197.9 $ 215.4 $ 196.2
UNUM Limited....................................... $ 14.2 $ 15.5 $ 9.2
Individual disability.............................. $ 30.9 $ 65.5 $ 62.2
Group STD.......................................... $ 52.4 $ 47.8 $ 38.0
Persistency (premiums)
Group LTD.......................................... 82.8% 84.0% 88.7%
UNUM Limited....................................... 89.1% 89.9% 89.6%
Individual disability.............................. 91.8% 92.4% 92.1%
Group STD.......................................... 84.8% 83.8% 85.9%
Benefit ratio (% of premiums)........................ 92.2% 92.8% 74.9%
Operating expense ratio (% of premiums).............. 22.7% 24.5% 25.2%

- ------------
nm = not meaningful or in excess of 100%

The Disability Insurance segment includes disability products offered
through: UNUM America, First UNUM Life Insurance Company ("First UNUM") and
Commercial Life Insurance Company ("Commercial Life") in North America; UNUM
Limited in the United Kingdom; and UNUM Japan Accident Insurance Company Limited
in Japan. The products included in this segment are group LTD, individual
disability, group short term disability ("group STD"), association group
disability, disability reinsurance and long term care insurance.

SUMMARY

The Disability Insurance segment reported slightly decreased income before
income taxes in 1995, as compared with 1994, when the following items, as
described below, are excluded: the increased realized investment gains resulting
primarily from the sale of the common stock portfolio, the increased reserves
resulting from the lowering of certain disability product reserve discount
rates, the increased group LTD reserves for IBNR claims, and the increased
reserves for unpaid claims related to the association group disability business,
all of which took place in 1995; and the individual disability reserve
strengthening and the related restructuring charge, recorded in 1994. This
decrease was primarily attributable to a higher benefit ratio at UNUM Limited
and in group LTD, and the inclusion of the results of UNUM

Japan's operations in the Disability Insurance segment effective January 1,
1995. Partially offsetting these decreases were increased investment income, a
lower benefit ratio in the individual disability business, and continued expense
management.

During 1995, UNUM sold virtually all of the common stock portfolio of its
United States subsidiaries, primarily due to consideration of statutory capital
requirements associated with investment in common stocks and to increase future
investment income. The sale of the common stock portfolio contributed to
significantly higher realized investment gains in 1995 for the Disability
Insurance segment. UNUM reinvested the proceeds from the sale of the common
stock portfolio primarily in investment grade fixed income assets, which has
decreased the required amount of statutory capital for regulatory purposes and
increased investment income. Dependent on capital considerations and market
conditions, UNUM may invest in equity securities in the future.

Reserves for certain disability products are discounted using an interest
rate that is a composite yield of assets matched with each product. The sale of
the common stock portfolio, which partially supported these disability reserves,
and the subsequent reinvestment of the proceeds primarily in investment grade
fixed income assets with yields below the average portfolio yield, resulted in
lower reserve discount rates. The result of lowering these discount rates was an
increase to the reserve liabilities and benefits to policyholders of $128.6
million, reported in the second quarter of 1995. The discount rate used to
determine the group LTD reserves was reduced to 8.00% at June 30, 1995, as
compared with 9.18% at December 31, 1994. At December 31, 1995, the group LTD
discount rate was 7.94%.

Increased investment income in the Disability Insurance segment for 1995 was
primarily a result of the reinvestment of the proceeds from the sale of the
common stock portfolio into investment grade fixed income assets. This increase
in investment income was partially offset by the effects of lower discount rates
for certain disability products. Management expects the reserve discount rate
for certain disability products will further decline, since current cash flows
are invested in high quality assets at current yields, which are below the
composite yield of the existing assets purchased in prior years. UNUM
periodically adjusts prices on both existing and new business in an effort to
mitigate the impact of the current interest rate environment.

During 1995, UNUM increased the group LTD reserves for IBNR claims by $38.4
million. IBNR reserves, which are established to fund anticipated case reserves
for claims that have been incurred but not reported to UNUM, are actuarially
established based on various factors, including incidence levels and claims
severity. The increased IBNR reserves were based on management's judgment that
claims currently incurred but not yet reported will reflect increased levels of
claims incidence and severity. It is not possible to predict whether future
incidence levels or claims severity will be consistent with UNUM's assumptions,
or will improve or deteriorate.

During the fourth quarter of 1995, UNUM increased reserves for unpaid claims
related to the association group disability business by $15.0 million, which
decreased net income by $9.8 million, or $0.14 per share, for the year ended
December 31, 1995. These increased reserves reflect management's expectations of
slower than expected claim recoveries. In 1995, the association group line of
business has been negatively affected by unfavorable claims experience, which
management has attributed to certain geographical and occupational segments,
particularly dentists and physicians. Management is taking pricing actions and
strengthening underwriting standards to address this claims experience.

In the fourth quarter of 1994, UNUM recorded a pretax charge of $14.4
million related to the decision to discontinue the individual disability
non-cancellable product and the acceleration of organizational changes within
UNUM America, which increased operating expenses and decreased net income by
$9.4 million, or $0.13 per share, for the year ended December 31, 1994. The
charge consisted of $9.2 million for severance costs for approximately 150 field
and 250 home office employees and $5.2 million for exit costs of certain leased
facilities and equipment.

Reserves for unpaid claims are estimates based on UNUM's historical
experience and other actuarial assumptions that consider the effects of current
developments, anticipated trends, risk management programs and renewal actions.
Many factors affect actuarial calculations of claim reserves, including but not
limited to interest rates and current and anticipated incidence rates, recovery
rates, and economic and societal conditions. Reserve estimates and assumptions
are periodically reviewed and updated with any resulting adjustments to reserves
reflected in current operating results. Given the complexity of the reserving
process, the ultimate liability may be more or less than such estimates
indicate.

In 1995, 1994 and 1993, claim block acquisitions generated one-time premium
in the Disability Insurance segment of $63.8 million, $8.6 million and $58.3
million, respectively, for group LTD; $4.3 million and $15.0 million in 1995 and
1994, respectively, for long term care; and $25.8 million in 1994 for UNUM
Limited. Management intends to pursue additional claim block acquisitions in the
future.

The ratio of operating expenses to premiums was 22.7%, 24.5% and 25.2% in
1995, 1994 and 1993, respectively. The decreases in 1995 and 1994 were primarily
attributable to continued efforts to manage expenses and increased premium from
1995 claim block acquisitions, which do not have proportionally higher expenses.
Deferrals of policy acquisition costs decreased in 1995 primarily due to lower
levels of individual disability sales. The increase in deferred policy
acquisition costs in 1994 was primarily attributable to deferrals of higher
marketing costs associated with increased sales and renewal activity.

Excluding the individual disability reserve strengthening and the related
restructuring charge, income before income taxes decreased in 1994, as compared
with 1993. This decrease was primarily attributable to a higher benefit ratio in
individual disability and in group LTD, partially offset by continued expense
management.

GROUP LONG TERM DISABILITY

The group LTD premium growth in 1995 and 1994 reflected annualized premium
from new sales, selected price increases and acquisitions of closed blocks of
claims. Group LTD sales decreased in 1995, which management attributed to
significant price increases in certain segments of the business. Rate increases
to address unfavorable experience on selected segments of the inforce business
also contributed to the decline in persistency rates for 1995 and 1994. In
general, case terminations from rate increases have occurred in less profitable
segments of the business. Management expects to continue to seek inforce case
rate increases, as appropriate, given claims experience, to improve
profitability. However, such rate actions may increase case terminations and
decrease the persistency rate of the group LTD business.

During 1995 and 1994, management implemented and strengthened various risk
management programs to address the unfavorable claims experience in group LTD.
In addition to the selected price increases on new and inforce business, more
stringent underwriting practices, and the reduction of benefit options for
certain segments of the business, management established special claims units
for both its group LTD and individual disability businesses to address specific
aspects of disability claims, including complex and fraudulent claims.
Additionally, management implemented new group LTD contract provisions that
provide risk management features and claimant rehabilitation incentives.
Management continually reviews the benefits management process to identify and
strengthen risk management policies and procedures.

During 1995, group LTD's benefit ratio increased slightly after excluding
the effects of lowering the group LTD discount rate as a result of the sale of
the common stock portfolio in the second quarter of 1995 and of increasing the
group LTD reserves for IBNR claims. This increase was primarily attributable to
increased claims severity. However, the effect of the increase in claims
severity was partially offset by continued improvements in claim incidence rates
and claim recoveries, which management attributes to risk management programs.

Management continues to address the unfavorable claim trends in group LTD by
periodically adjusting prices on selected new and inforce business, implementing
more stringent underwriting guidelines and strengthening risk management
programs. Management believes these actions have strengthened UNUM's ability to
deal with these claim trends and the current interest rate environment. The
level of earnings of the group LTD product will be a function of various
factors, including but not limited to, the effectiveness of these continuing
actions over time.

UNUM LIMITED

During 1995, UNUM Limited's group long term disability business continued to
be adversely affected by unfavorable claims experience, which began to emerge in
late 1994. UNUM Limited has experienced a higher incidence of new claims and a
disproportionate number of large claims in 1995, as compared with 1994, which
management has attributed to certain segments of the business, particularly
lawyers and accountants. To address the current claims environment, management
has increased prices on those segments of the business that have experienced a
higher incidence of new

claims, implemented more stringent underwriting standards and strengthened risk
management programs. The level of earnings for UNUM Limited will be a function
of various factors, including but not limited to, the effectiveness of these
actions over time. Due to the relative size of the U.K. block of business, UNUM
Limited's operating results can exhibit claims variability.

During 1995, the U.S. dollar weakened slightly against the British pound
sterling, increasing UNUM Limited's earnings as reported in U.S. dollars. The
weighted average exchange rate was approximately $1.58, $1.53 and $1.51 for the
years ended December 31, 1995, 1994 and 1993. At December 31, 1995, the spot
rate had decreased to $1.55.

INDIVIDUAL DISABILITY

During 1995, the growth in individual disability's premium slowed as a
result of management's decision in late 1994 to discontinue selling the
non-cancellable individual disability insurance product in the United States and
to transition to the new guaranteed renewable Lifelong Disability Protection
product, which was introduced during the second quarter of 1995. Sales of the
traditional, fixed price, non-cancellable individual disability product are
being discontinued in each state following regulatory approval of the new
product. As of the end of 1995, the new product has been approved for sale in
most states.

Throughout 1994, UNUM's individual disability business experienced a higher
incidence of new claims and a disproportionate number of large claims, which
management attributed to certain geographic and occupational segments of the
business, particularly physicians. Management believes that changes in and
consolidation of the health care delivery system in the United States and the
increased prevalence of emerging and often subjective types of disabilities
contributed to increased benefit costs. Unlike the group long term disability
product, management has limited ability to manage the claims risk associated
with non-cancellable individual disability business, since UNUM is contractually
unable to reprice or cancel inforce policies that became unprofitable because of
changes in claims experience that were unforeseen when the policy was sold.
During the third quarter of 1994, management concluded that the deterioration of
claims experience was not a temporary fluctuation in certain segments of the
business, but was indicative of expected claim trends for the future. As a
result, in third quarter 1994, UNUM increased reserves for existing claims by
$83.3 million and strengthened reserves for estimated future losses by $109.1
million. These increased reserves reflected management's expectations of
morbidity trends for the existing non-cancellable individual disability
business. It is not possible to predict whether morbidity trends will be
consistent with UNUM's assumptions; however, as of December 31, 1995, management
believes that the strengthened reserve levels continue to be adequate.

The individual disability business experienced a lower benefit ratio in
1995, as compared with 1994, after excluding the effects of increased reserves
resulting from lowering the individual disability reserve discount rate in
second quarter 1995 and the reserve strengthening recorded in 1994. The lower
benefit ratio was primarily due to lower new claims incidence rates for
physicians in 1995; however, such claims incidence rates can exhibit
variability. During 1995, lower expenses, partially offset by reduced deferrals
of policy acquisition costs resulting from lower individual disability sales in
1995, also contributed to the improved results of the individual disability
business.

During the fourth quarter of 1994, excess-of-loss reinsurance totaling $60
million over three years was purchased through a Lloyd's of London syndicate to
cover UNUM's exposure to claims exceeding levels assumed in the strengthened
reserves. Management continues to evaluate its financial options for this
business, including reinsurance opportunities.

GROUP SHORT TERM DISABILITY

Group STD's contribution to the Disability Insurance segment's income before
income taxes increased significantly in 1995 and 1994. These increases were
primarily attributable to group STD's strong premium growth and continued risk
and expense management. The record sales reported in 1995 reflected management's
continuing efforts to cross-sell the group STD products with the group LTD
business.

SPECIAL RISK INSURANCE SEGMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
(DECREASE) OVER PRIOR YEAR) 1995 1994 1993

---------------------------------------------------------------------------------------------
Revenues
Premiums
Group life insurance............................. $355.1 13.7% $312.3 14.8% $272.0
Other special risk products...................... 307.5 22.6 250.8 5.4 237.9
------ ------ ------ ----- ------
Total premiums................................. 662.6 17.7 563.1 10.4 509.9

Investment income.................................... 44.0 8.6 40.5 18.4 34.2
Net realized investment gains........................ 4.4 nm 0.2 (66.7) 0.6
Fees and other income................................ 39.7 (9.8) 44.0 (11.1) 49.5
------ ------ ------ ----- ------
Total revenues................................. 750.7 15.9 647.8 9.0 594.2

Benefits and expenses
Benefits to policyholders.......................... 492.3 24.8 394.4 7.8 366.0
Operating expenses................................. 153.1 4.8 146.1 (6.2) 155.7
Commissions........................................ 60.9 11.7 54.5 9.2 49.9
Increase in deferred policy acquisition costs...... (15.9) 20.5 (13.2) (20.0) (16.5)
Interest expense................................... -- (100.0) 0.1 (50.0) 0.2
------ ------ ------ ----- ------
Total benefits and expenses.................... 690.4 18.6 581.9 4.8 555.3
------ ------ ------ ----- ------

Income before income taxes........................... $ 60.3 (8.5)% $ 65.9 69.4% $ 38.9
------ ------ ------ ----- ------
------ ------ ------ ----- ------
Sales (annualized new premiums)
Group life insurance............................... $106.1 $ 90.8 $ 89.2
Persistency (premiums)
Group life insurance................................ 83.0% 84.8% 89.2%
Benefit ratio (% of premiums)........................ 74.3% 70.0% 71.8%
Operating expense ratio (% of premiums).............. 23.1% 25.9% 30.5%

- ------------
nm = not meaningful or in excess of 100%

The Special Risk Insurance segment includes group life products sold by UNUM
America and First UNUM, special risk accident insurance sold by Commercial Life
and other special risk insurance products. The segment also includes non-
disability reinsurance operations, which represent UNUM's participation in
various reinsurance pools, and the reinsurance underwriting management
operations of Duncanson & Holt, Inc.

Increased sales and selected price increases on new and inforce cases
contributed to the group life premium growth of 13.7%. Rate increases to address
unfavorable experience on certain segments of the inforce business contributed
to the decline in group life persistency rates for 1995 and 1994. Management
expects to continue to seek inforce case rate increases, as appropriate, to
improve profitability. Premium growth in 1995 for other special risk products
was primarily attributable to reinsurance operations, which had claim block
acquisitions totaling $39.1 million and increased pool participation.

The decrease in income before income taxes for 1995, as compared with 1994,
was primarily attributable to increased claims in the group life and special
risk accident insurance businesses, combined with reduced fee income from the
reinsurance underwriting management operations. Partially offsetting these
decreases were continued premium growth, increased realized investment gains
from the sale of the common stock portfolio and favorable claims experience in
certain reinsurance pools. Due to the nature of the risks underwritten and the
relative size of the blocks of businesses, several of the Special Risk Insurance
segment's products can exhibit claims variability.

The Special Risk Insurance segment's income before income taxes increased in
1994, primarily due to favorable claims experience in the group life business
and in special risk accident insurance, combined with premium growth and expense
management. Partially offsetting these increases were reduced fee income from
the reinsurance underwriting management operations and unfavorable claims
experience in certain reinsurance pools.

COLONIAL PRODUCTS SEGMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
(DECREASE) OVER PRIOR YEAR) 1995 1994 1993

----------------------------------------------------------------------------------------------
Revenues
Premiums........................................... $472.7 7.7% $439.1 8.7% $403.9
Investment income.................................. 41.3 33.7 30.9 3.7 29.8
Net realized investment gains...................... 10.9 nm 1.7 (85.3) 11.6
Fees and other income.............................. 2.4 9.1 2.2 (37.1) 3.5
------ ------ ------ ------ ------
Total revenues................................... 527.3 11.3 473.9 5.6 448.8

Benefits and expenses
Benefits to policyholders.......................... 235.1 6.3 221.1 6.6 207.5
Interest credited.................................. 6.5 30.0 5.0 19.0 4.2
Operating expenses................................. 114.7 7.1 107.1 13.7 94.2
Commissions........................................ 108.9 12.6 96.7 4.3 92.7
Increase in deferred policy acquisition costs...... (25.6) 36.9 (18.7) (7.9) (20.3)
Interest expense................................... -- -- -- (100.0) 0.1
------ ------ ------ ------ ------
Total benefits and expenses...................... 439.6 6.9 411.2 8.7 378.4
------ ------ ------ ------ ------

Income before income taxes........................... $ 87.7 39.9% $ 62.7 (10.9)% $ 70.4
------ ------ ------ ------ ------
------ ------ ------ ------ ------

Sales (annualized first month's premiums)............ $200.4 $183.1 $171.4
Benefit ratio (% of premiums)........................ 49.7% 50.4% 51.4%
Operating expense ratio (% of premiums).............. 24.3% 24.4% 23.3%

- ------------
nm = not meaningful or in excess of 100%

The Colonial Products segment includes Colonial Life & Accident Insurance
Company ("Colonial") and affiliates. Colonial, the principal subsidiary, offers
payroll-deducted, voluntary employee benefits to employees at their worksites.
Accident and sickness, cancer and life insurance products are marketed by
Colonial primarily through independent sales representatives.

During 1995, Colonial experienced improved sales growth as compared with
1994. These improved sales levels were attributed to increased productivity and
the offering of a number of new products. During 1995, Colonial made further
investments to automate policy enrollment for new sales and to realign the sales
organization. These investments reflect management's continued focus on
strategies to improve sales through increasing productivity, enhancing
effectiveness, and differentiating Colonial in the marketplace. Premium growth
slowed slightly again in 1995, reflecting the effects of weaker sales growth
during 1994 and 1993; however, management believes that the record sales levels
experienced during 1995, combined with the continuation of customer conservation
programs and investments being made in the sales organization, will have a
positive effect on future premium growth.

Investment income increased during 1995, primarily because of increased cash
flows and additional income realized from the reinvestment of the proceeds from
the second quarter 1995 sale of Colonial's equity portfolio into investment
grade fixed income assets. The sale of the equity portfolio also contributed to
the higher level of realized investment gains during the year. Realized
investment gains for 1993 include gains associated with Colonial's sales of
higher yielding but callable investments to realign its investment portfolio
with UNUM's investment philosophy.

Colonial's benefit ratio improved again in 1995 to 49.7%, as compared with
50.4% in 1994 and 51.4% in 1993. The lower benefit ratio was driven by continued
favorable claims experience and improved incidence rates across most product
lines. The expense ratio remained virtually unchanged for 1995 reflecting
management's continued investment in the sales organization, offset by continued
efforts to control expenditures and improved operating effectiveness. During
1994, the expense ratio increased because of higher than expected costs
associated with sales organization realignment and litigation expenses, which
were partially offset by continued expense control efforts.

Colonial's income before income taxes increased in 1995, primarily because
of increased investment income, higher realized investment gains and an improved
benefit ratio. For 1994, income before income taxes decreased primarily because
of reduced realized investment gains and increased expenses, partially offset by
favorable claims experience.

RETIREMENT PRODUCTS SEGMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
(DECREASE) OVER PRIOR YEAR) 1995 1994 1993

--------------------------------------------------------------------------------------------------
Revenues
Premiums........................................... $ 27.6 9.5% $ 25.2 (22.0)% $ 32.3
Investment income.................................. 298.9 (11.0) 335.8 (12.6) 384.3
Net realized investment gains...................... 24.8 nm 2.2 (33.3) 3.3
Fees and other income.............................. 6.5 4.8 6.2 (39.2) 10.2
-------- ----- -------- ----- --------
Total revenues................................... 357.8 (3.1) 369.4 (14.1) 430.1

Benefits and expenses
Benefits to policyholders.......................... 54.4 5.8 51.4 (10.3) 57.3
Interest credited.................................. 220.9 (7.1) 237.7 (14.1) 276.8
Operating expenses................................. 33.4 10.6 30.2 3.8 29.1
Commissions........................................ 6.6 (29.8) 9.4 6.8 8.8
(Increase) decrease in deferred policy acquisition
costs............................................. (3.0) nm (1.3) nm 3.8
-------- ----- -------- ----- --------
Total benefits and expenses...................... 312.3 (4.6) 327.4 (12.9) 375.8
-------- ----- -------- ----- --------

Income before income taxes........................... $ 45.5 8.3% $ 42.0 (22.7)% $ 54.3
-------- ----- -------- ----- --------
-------- ----- -------- ----- --------

Invested assets under management for tax sheltered
annuities, at end of period......................... $3,074.3 $3,065.0 $3,033.0

- ------------
nm = not meaningful or in excess of 100%

The Retirement Products segment includes tax sheltered annuities ("TSAs"),
which are marketed by UNUM America and First UNUM, and products which are no
longer actively marketed by UNUM, including guaranteed investment contracts
("GICs"), deposit administration accounts ("DAs") and 401(k) plans.

As previously discussed in the Consolidated Overview, UNUM America entered
into an agreement for the sale of its group TSA business to Lincoln Life, a part
of Lincoln National Corporation, and to a new New York insurance subsidiary of
Lincoln Life. The agreement also contemplates that First UNUM will enter into a
similar agreement with Lincoln Life's New York insurance subsidiary. The group
TSA business of UNUM America and First UNUM accounted for approximately $34
million of the Retirement Products segment's income before income taxes in 1995,
1994 and 1993.

During 1995 and 1994, investment income declined primarily due to
investments in lower yielding tax-exempt securities, a reduced average
investment yield caused by the low interest rate environment, and a reduced
invested asset base under management for GICs, DAs and 401(k) plans. To
facilitate the expected sale of the TSA business later in 1996, management
expects to primarily liquidate fixed maturities and accumulate cash and
short-term investments, which will further reduce investment yields earned on
TSA assets during 1996.

During 1994, UNUM implemented an investment strategy to increase investments
in tax-exempt securities. Although investments in tax-exempt securities resulted
in increased consolidated net income, these investments reduced the Retirement
Products segment's income before income taxes by $7.6 million and $6.7 million
in 1995 and 1994, respectively. During 1995, primarily due to market conditions,
UNUM ceased the purchase of tax-exempt securities and sold the majority of
tax-exempt securities held by the TSA business.

Since 1993, UNUM has offered the holders of certain types of TSA contracts
the opportunity to modify their contracts. The proposed contract amendments
provide for UNUM to increase the minimum guaranteed credited interest rates in
return for contractholders relinquishing the right to make lump-sum withdrawals
without an associated fee. As expected, certain contract holders elected to
withdraw their funds rather than convert to the modified contract provisions,
which has affected the overall growth of invested assets under management.

During 1995, interest spread margins declined, as compared with the
unusually favorable levels experienced during 1994 and 1993. As interest rates
declined in 1993, the rate and level of interest credited to TSA contractholders
declined as well. Despite a rising interest rate environment in 1994, the level
of interest credited to TSA contractholders continued to

decline. As a result, the TSA business experienced unusually favorable interest
spread margins during those years. Management expects the lower interest spread
margins in 1995 on TSAs to continue, which may reduce future earnings of the
Retirement Products segment.

The reduced asset base under management for GICs, DAs and 401(k) plans has
also resulted in lower revenues from investment income and reduced amounts of
interest credited. Management expects continued decreases in the amounts of
investment income and interest credited as the related GICs, DAs and 401(k)
contracts mature or terminate. Management expects future earnings for these
closed blocks of businesses to decline, reflecting their run-off nature.

Income before income taxes increased in 1995, as compared with 1994,
primarily due to increased realized investment gains from the sale of UNUM's
equity portfolio during the second quarter of 1995, partially offset by lower
interest spread margins on TSAs. For 1994, the decrease in income before income
taxes was primarily attributable to the declining income levels of the closed
blocks of businesses.

CORPORATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS) 1995 1994 1993

---------------------------------------------------------
Loss before income taxes......... $(28.6) $(28.2) $(17.4)

Corporate includes transactions that are generally non-insurance related.
The increased loss before income taxes in 1995 was primarily attributable to
increased interest expense on corporate borrowings, partially offset by reduced
operating expenses. The increased loss before income taxes in 1994 was primarily
due to increased interest expense and increased operating expenses related to
UNUM's investment in Japan. Effective January 1, 1995, the operations of UNUM
Japan are reported in the Disability Insurance segment. Costs related to UNUM's
investment in Japan prior to January 1, 1995, are reported as operating expenses
in Corporate.

BUSINESS RESTRUCTURING AND OTHER CHARGES

Charges of $8.4 million and $14.4 million were recorded in 1995 and 1994,
respectively, related to the acceleration of organizational changes within UNUM
America and the decision to discontinue the individual disability
non-cancellable product. Partially offsetting the charge recorded in 1995 was a
$3.4 million curtailment gain, related to workforce reductions in UNUM
Corporation's noncontributory defined benefit pension plan. Of the total $22.8
million charge, UNUM paid $15.9 million during 1995, which represented severance
costs of $13.3 million for 373 of the 379 individuals included in the charges
and $2.6 million of lease costs. The remaining $6.9 million includes $0.4
million of severance costs and $6.5 million of lease costs, the total of which
is expected to be paid as follows: $3.4 million in 1996, $3.2 million in 1997,
and $0.3 million in 1998.

INVESTMENTS

UNUM's investment portfolio is concentrated in investment grade bonds. UNUM
evaluates total expected return after consideration of all associated expenses
and losses, within criteria established for each product line. Product line
investment strategies are developed to complement business risks by meeting the
liquidity and solvency requirements of each product. UNUM purchases assets with
maturities, expected cash flows and prepayment conditions that are consistent
with these strategies. The nature and quality of the types of investments comply
with policies established by management, which are more stringent overall than
the statutes and regulations imposed by the jurisdictions in which UNUM's
insurance subsidiaries are licensed.

UNUM's investments are reported in the consolidated financial statements at
net realizable value or net of any applicable allowances for probable losses.
Allowances for mortgages and real estate held for sale are established based on
a review of specific assets as well as the overall portfolio, considering the
carrying value of the underlying assets. If a decline in market value is
considered to be other than temporary, the investment is reduced to estimated
net realizable value and the reduction is recorded as a realized investment
loss. UNUM discontinues the accrual of investment income on invested assets when
it is determined that collectability is doubtful. Management monitors the risk
associated with the invested asset portfolio and regularly reviews and adjusts
the allowance for probable losses.

During the second quarter of 1995, UNUM sold virtually all of the common
stock portfolio of its United States subsidiaries, primarily due to
consideration of statutory capital requirements associated with investment in
common stocks and to increase future investment income. UNUM has reinvested the
proceeds from the sale of the common stock portfolio primarily in investment
grade fixed income assets. Dependent on capital considerations and market
conditions, UNUM may invest in equity securities in the future.

At December 31, 1995, the composition of UNUM's $11.7 billion of invested
assets was 78.1% fixed maturities, 10.0% mortgage loans, 1.9% real estate, 0.2%
equity securities, and 9.8% other invested assets. To facilitate the expected
sale of the TSA business later in 1996, management expects to primarily
liquidate fixed maturities and accumulate cash and short-term investments.

Gross realized investment gains were $287.0 million, $117.0 million, and
$85.2 million, and gross realized investment losses were $61.9 million, $71.4
million, and $35.8 million for the years ended December 31, 1995, 1994, and
1993, respectively.

FIXED MATURITIES

Effective January 1, 1994, UNUM adopted Financial Accounting Standard
("FAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which specified the accounting and reporting for certain
investments in equity securities and for all investments in debt securities.
UNUM adopted the provisions for FAS 115 for these investments held or acquired
after January 1, 1994. Upon the adoption of FAS 115, UNUM increased unrealized
gains on available for sale securities included in stockholders' equity on
January 1, 1994, by $41.8 million (net of deferred taxes of $22.5 million) to
reflect the unrealized holding gains on fixed maturities classified as available
for sale which were previously carried at amortized cost. In addition, UNUM
reclassified certain fixed maturities from held to maturity to available for
sale on January 1, 1994, in connection with the adoption of FAS 115.

In November 1995, the FASB issued "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities," which
provided a one-time opportunity to reassess the appropriateness of the
classifications of securities described in FAS 115, and to reclassify fixed
maturities from the held to maturity category without calling into question the
intent to hold other debt securities to maturity in the future. On December 31,
1995, UNUM reassessed its fixed maturity portfolio and as allowed under the
implementation guidance, reclassified fixed maturities with an amortized cost of
$6,082.8 million and a related net unrealized gain of $393.0 million from the
held to maturity category to available for sale. In connection with the
reclassification of the held to maturity fixed maturities to available for sale,
on December 31, 1995, UNUM adjusted its unpaid claims by $261.2 million to
reflect the changes that would have been necessary if the unrealized gains and
losses related to fixed maturities classified as available for sale had been
realized.

At December 31, 1995, the fixed maturity portfolio included $139.4 million
of below investment grade bonds (below "Baa") recorded at fair value, which
represented 1.5% of the fixed maturity portfolio, and had an associated
amortized cost of $133.8 million. At December 31, 1994, the carrying value of
below investment grade bonds included in the fixed maturity portfolio was $193.8
million, which represented 2.5% of the fixed maturity portfolio, and had an
associated market value of $193.4 million. Virtually all of the nonconvertible,
below investment grade bonds were purchased at investment grade, but were
subsequently downgraded. UNUM's investment policy is to invest primarily in
fixed maturities of investment grade quality. Selected purchases of convertible
subordinated debentures, which UNUM considered to be part of its investment
strategy for equity securities, have contributed to the amount of below
investment grade bonds. Fixed maturity ratings are obtained from external rating
agencies, and if not externally rated, are rated by UNUM internally using
similar methods. Management does not expect any risks or uncertainties
associated with below investment grade bonds to have a significant affect on
UNUM's consolidated financial position or results of operations. UNUM had no
fixed maturities delinquent 60 days or more at December 31, 1995. The percentage
of fixed maturities delinquent 60 days or more, compared to total fixed
maturities, was 0.25% at December 31, 1994.

During 1995, UNUM sold fixed maturities of two issuers classified as held to
maturity with an amortized cost of $4.0 million, and realized a net loss of $1.2
million on the sales. The bonds were sold due to significant deterioration of
the issuers' creditworthiness, as evidenced by bankruptcy filings. During 1994,
UNUM sold fixed maturities of five issuers classified as held to maturity with
an amortized cost of $49.8 million due to evidence of significant deterioration
of the issuers' creditworthiness. These sales resulted in a net realized loss of
$3.0 million.

MORTGAGES

At December 31, 1995, and 1994, UNUM's mortgage loans were $1,163.4 million
and $1,216.3 million, respectively. Management establishes allowances for
mortgage loans based upon a review of individual loans and the overall loan
portfolio, considering the value of the underlying collateral. UNUM uses a
comprehensive rating system to evaluate the investment and credit risk of each
mortgage loan and to target specific properties for inspection and reevaluation.
The percentage of mortgage loans delinquent 60 days or more on a contract
delinquency basis was 0.2% and 1.8% at December 31, 1995, and 1994,
respectively.

Management believes that its mortgage loan portfolio is well diversified
geographically and among property types. UNUM's incidence of new problem
mortgage loans has continued to decline in 1995, as overall economic activity
improved modestly, and many of the real estate markets in which UNUM has
mortgage loans stabilized. Management expects a modest level of additional
delinquencies and problem loans in the future. Management believes the allowance
provided on mortgage loans as of December 31, 1995, is adequate to cover
probable losses.

In general, impaired loans as defined by FAS 114 compare with loans
previously defined and disclosed as problem and potential problem loans. Problem
loans were defined as loans that were delinquent 60 days or more on a contract
delinquency basis. Potential problem loans were defined as current and
performing loans with which management had some concerns about the ability of
the borrower to comply with present loan terms and whose book value exceeded the
market value of the underlying collateral. At December 31, 1995, impaired loans
totaled $50.1 million, as compared with $58.5 million of problem and potential
problem loans at December 31, 1994. Included in the $50.1 million of impaired
loans was $38.4 million of loans which had a related allowance for probable
losses of $7.1 million, and $11.7 million of loans which had no related
allowance for probable losses. Interest lost on impaired loans in 1995, and
problem and potential problem loans in 1994 and 1993, was not material.

Mortgage loans that were restructured prior to the adoption of FAS 114, are
defined by UNUM as loans whose terms have been modified to interest rates less
than market at the time of restructure and are currently expected to perform
pursuant to such modified terms. UNUM modifies loans to protect its investment
and only when it is anticipated that the borrower will be able to meet the
modified terms. As of December 31, 1995, restructured mortgage loans totaled
$59.9 million, as compared with $73.6 million at December 31, 1994. Interest
lost on restructured loans was not material in 1995, 1994 or 1993.

Realized investment losses related to impaired mortgage loans in 1995
amounted to $9.2 million, compared with realized investment losses related to
restructured and problem mortgage loans of $8.5 million and $4.8 million for
1994 and 1993, respectively. Impaired mortgage loans as of December 31, 1995,
are not expected to have a significant impact on UNUM's results of operations,
liquidity, or capital resources.

REAL ESTATE

At December 31, 1995, investment real estate amounted to $222.2 million
compared with $190.8 million at December 31, 1994. UNUM purchases investment
real estate in selected markets when certain investment criteria are met.
Investment real estate is intended to be held long-term and is carried at cost
less accumulated depreciation. Occasionally, investment real estate is
reclassified and revalued as real estate held for sale when it no longer meets
UNUM's investment criteria.

At December 31, 1995, real estate held for sale amounted to $35.5 million
compared with $31.0 million at December 31, 1994. Real estate acquired through
foreclosure is valued at fair value at the date of foreclosure. Real estate held
for sale is included in other assets in the Consolidated Balance Sheets and is
valued net of an allowance which reduces the carrying value to the lower of fair
value less estimated costs to sell, or cost. Additions to the allowance for
probable losses related to real estate held for sale resulted in realized
investment losses of $6.3 million, $0.8 million and $18.8 million for the years
ended December 31, 1995, 1994 and 1993, respectively. Additions to the allowance
represent charges to net realized investment gains less recoveries.

Given the current real estate environment, additional foreclosures are
anticipated, but at a reduced level from the early 1990s. Current and
anticipated real estate acquired through foreclosure is not expected to have a
significant affect on UNUM's results of operations, liquidity, or capital
resources.

LIQUIDITY AND CAPITAL RESOURCES

UNUM's businesses produce positive cash flows, which are invested primarily
in intermediate, fixed maturity investments intended to reflect the nature of
anticipated cash obligations of insurance benefit payments and insurance
contract maturities and to optimize investment returns at appropriate risk
levels. Unexpected cash requirements and liquidity needs

can be met through UNUM's investment portfolio of fixed maturities classified as
available for sale, equity securities, cash and short-term investments. To
facilitate the expected sale of the TSA business later in 1996, management
expects to primarily liquidate fixed maturities and accumulate cash and
short-term investments.

From time to time, dividend payments, which may be subject to approval by
insurance regulatory authorities, are made from UNUM's affiliates and insurance
subsidiaries to UNUM Corporation. These dividends, along with other funds, are
used to service the needs of UNUM Corporation including: debt service, common
stock dividends, stock repurchase, administrative costs and corporate
development. Income determined using statutory accounting is one of the major
determinants of an insurance company's dividend capacity to its parent in the
following fiscal year. Statutory accounting rules and practices, which differ in
certain respects from generally accepted accounting principles, are mandated by
regulators in an insurance company's state of domicile.

In 1995, UNUM America's statutory net income increased to $226.4 million, as
compared with $39.2 million in 1994, which was primarily due to significant
improvements in the income of certain disability products, and significantly
higher realized investment gains as a result of the sale of the common stock
portfolio. As described in the Disability Insurance segment, in 1994 UNUM
America strengthened reserves for existing claims related to the traditional
non-cancellable individual disability products, which resulted in a statutory
after-tax charge of $69.6 million in third quarter 1994. This charge combined
with unfavorable claims experience in certain disability businesses contributed
to the decline in UNUM America's statutory income in 1994.

As a result of the increase in UNUM America's statutory earnings in 1995,
the amount available under current law for payment of dividends during 1996 to
UNUM Corporation from all U.S. domiciled insurance subsidiaries without state
insurance regulatory approval, increased to approximately $135 million, as
compared with approximately $81 million for 1995. UNUM Corporation also has the
ability to draw a dividend of approximately $19 million from its United Kingdom-
based affiliate, UNUM Limited, subject to certain U.S. tax consequences.

Cash flow requirements are also supported by a committed revolving credit
facility totaling $500 million, which expires October 1, 1999. UNUM
Corporation's commercial paper program is supported by the revolving credit
facility, and is available for general liquidity needs, capital expansion,
acquisitions and stock repurchase. The committed revolving credit facility
contains certain covenants which, among other provisions, require maintenance of
certain levels of stockholders' equity and limits on level of debt.

In September 1993, UNUM filed an omnibus shelf registration statement with
the Securities and Exchange Commission which became effective on October 8,
1993, relating to $450 million of securities (including debt securities,
preferred stock, common stock and other securities). On October 8, 1993, UNUM
filed a prospectus supplement to establish a $250 million medium-term note
("MTN") program under the shelf registration. On May 11, 1995, UNUM Corporation
issued $172.5 million of 8.80% Monthly Income Debt Securities ("MIDS") (Junior
Subordinated Deferrable Interest Debentures, Series A) under the shelf
registration, which mature in 2025.

At December 31, 1995, UNUM had short-term and long-term debt totaling $126.5
million and $457.3 million, respectively. At December 31, 1995, approximately
$417 million was available for additional financing under the existing revolving
credit facility and approximately $96 million of investment grade debt
instruments were available for issuance under the shelf registration. Contingent
upon market conditions and corporate needs, management may refinance short-term
notes payable with longer term securities.

At December 31, 1995, approximately 2.7 million shares of common stock
remained authorized for stock repurchase. During 1995, UNUM did not acquire any
shares in the open market. During 1994 and 1993, UNUM repurchased 3.9 million
and 3.7 million shares, respectively, in the open market. The aggregate cost of
the 1994 and 1993 repurchases was $183.3 million and $192.5 million,
respectively, which was primarily funded through additional borrowings.

During 1995, 1994 and 1993, withdrawals of 401(k), GIC and DA contracts
reported in the Retirement Products segment, including contract terminations,
payments to participants and transfers to other carriers, were approximately $46
million, $130 million and $309 million, respectively. Withdrawals during 1995,
1994 and 1993, were at levels expected by management and reflect the run-off
nature of these closed blocks of businesses. UNUM manages liquidity objectives
by including certain conditions in pension contracts which prohibit or restrict
availability of funds.

UNUM was committed at December 31, 1995, to purchase fixed maturities and
other invested assets in the amount of $91.2 million. Independent of the cash
flows of UNUM Corporation, management anticipates that the operating cash flows
of the subsidiaries of UNUM Corporation will be sufficient to meet benefit
obligations, planned investment commitments and operational needs of those
companies.

RATINGS

Standard & Poor's Corporation ("Standard & Poor's"), Moody's Investors
Service ("Moody's") and A.M. Best Company ("A.M. Best") are among the third
parties that provide UNUM independent assessments of its overall financial
position. Ratings from these agencies for financial strength and claims paying
ability are available for the individual United States domiciled insurance
company subsidiaries rather than on a consolidated basis, since the financial
information used to develop the ratings is based on statutory accounting
practices in the United States. Debt ratings for UNUM Corporation are based on
consolidated financial information under generally accepted accounting
principles.

The table below reflects the debt ratings for UNUM Corporation and the
claims paying ability and financial strength ratings for UNUM's United States
domiciled insurance company subsidiaries at March 8, 1996:

- -------------------------------------------------------------------------------------------------------------------------------
UNUM CORPORATION RATINGS:
Senior Debt (MTN program) A+ A1
(Strong) (Upper Medium Grade)
Commercial Paper A-1 P-1
(Strong) (Superior Ability)
Subordinated Debt (MIDS) A A2
(Strong) (Upper Medium Grade)

UNITED STATES SUBSIDIARIES' RATINGS: CLAIMS PAYING
ABILITY RATING FINANCIAL STRENGTH RATING
UNUM America AA Aa2 A++
(Excellent) (Excellent) (Superior)
First UNUM AA Aa2 A+
(Excellent) (Excellent) (Superior)
Colonial Life & Accident AA- Aa3 A+
(Excellent) (Excellent) (Superior)
Commercial Life AA A
(Excellent) (Excellent)

At March 8, 1996, the unsold portion of the shelf registration related to
preferred stock carried a rating of "(P)"a1"" (Upper-Medium Quality) from
Moody's Investors Service.

INSURANCE REGULATION

The Risk-Based Capital standards for life insurance companies, as prescribed
by the National Association of Insurance Commissioners, are based on a formula
that establishes capital requirements relating to existing asset default risk,
insurance risk, interest rate (asset/liability mismatch) risk and business risk.
A company's Total Adjusted Capital (statutory capital, surplus and Asset
Valuation Reserve plus certain other adjustments) is compared to the Authorized
Control Level ("ACL") of Risk-Based Capital produced by the formula. Subject to
certain trend tests to determine the change in the ACL ratio from year to year,
companies with Total Adjusted Capital above 200% of ACL are assumed to be
adequately capitalized. Companies below 200% of ACL are identified as requiring
various levels of regulatory action ranging from increased information
requirements for companies between 150% and 200% of ACL, to mandatory control by
the domiciliary insurance department for companies below 70% of ACL.

At December 31, 1995, the ACL ratios for UNUM America, First UNUM, Colonial
Life and Commercial Life were 382%, 382%, 436% and 329%, respectively. This
compares with ACL ratios at December 31, 1994, of 307%, 357%, 442% and 378%,
respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

UNUM periodically uses common derivative financial instruments such as
options, futures and forward exchange contracts to hedge certain risks
associated with future investments and certain payments denominated in foreign
currencies, primarily British pound sterling, Canadian dollar and Japanese yen.
These derivative financial instruments are used to protect UNUM from the effect
of market fluctuations in interest and exchange rates between the contract date
and the

date on which the hedged transaction occurs. In using these instruments, UNUM is
subject to the off-balance-sheet risk that the counterparties of the
transactions will fail to completely perform as contracted. UNUM manages this
risk by only entering into contracts with highly rated institutions and listed
exchanges. UNUM does not intend to hold derivative financial instruments for the
purpose of trading. At December 31, 1995 and 1994, UNUM had no open derivative
financial instruments.

LITIGATION

In the normal course of its business operations, UNUM is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of lawsuits were pending at December 31, 1995. In the opinion of
management, the ultimate liability, if any, arising from this litigation is not
expected to have a material effect on the consolidated financial position or the
consolidated operating results of UNUM.

EFFECT OF INFLATION

Inflation is one of the factors that has increased the need for insurance.
Many policyholders who once had adequate insurance programs at lower coverage
levels have increased their disability insurance coverage to provide the same
relative financial benefits and protection.

Changing interest rates, which are traditionally linked to changes in
inflation, affect UNUM's level of discounted reserves. While rising interest
rates are beneficial when investing current cash flows, they can also reduce the
fair value of existing fixed rate long-term investments. In addition, lower
interest rates can lead to early payoffs and refinancing of some of UNUM's fixed
rate investments. Management generally invests in fixed rate instruments that
are structured to limit the exposure to such reinvestment risk.

NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, the FASB issued FAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. UNUM will adopt FAS 121 effective January 1, 1996. The adoption
of FAS 121 is not expected to have a material effect on UNUM's results of
operations or financial position.

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting standards
for stock-based employee compensation plans. FAS 123 defines a new method of
accounting for employee stock compensation plans using a fair value based
method, under which compensation cost is measured and recognized in results of
operations. Alternatively, FAS 123 allows an entity to retain the accounting
method for employee stock compensation plans defined under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." If an entity retains the accounting
defined under APB 25, certain pro forma disclosures of net income and earnings
per share must be made as if the fair value based method defined under FAS 123
had been applied. UNUM is required to adopt FAS 123 effective January 1, 1996.
UNUM has determined that it will retain the accounting methodology prescribed by
APB 25 and will disclose the pro forma effects of such stock-based compensation
as required in 1996.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX PAGE
- ---------------------------------------------------------------------------------------------------------------------------- ---

Report of Independent Accountants........................................................................................... 32
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993.................................... 33
Consolidated Balance Sheets as of December 31, 1995 and 1994.............................................................. 34
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993...................... 35
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993................................ 36
Notes to Consolidated Financial Statements.................................................................................. 37

REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Stockholders
UNUM Corporation

We have audited the consolidated financial statements of UNUM Corporation
and subsidiaries as listed in Item 8 and the financial statement schedules as
listed in Item 14(a) of this Form 10-K. These consolidated financial statements
and financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
UNUM Corporation and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

As discussed in Notes 2, 7, and 9 to the consolidated financial statements,
the Corporation changed its method of accounting for certain investments in debt
securities in 1994 and its method of accounting for postretirement benefits
other than pensions, and accounting for income taxes in 1993.

/s/ COOPERS & LYBRAND L.L.P.
Portland, Maine
February 6, 1996

UNUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)

- ----------------------------------------------------------------------------------------------------------------------------------
Revenues
Premiums.......................................................................................... $3,018.2 $2,721.3 $2,474.1
Investment income................................................................................. 806.3 770.2 790.4
Net realized investment gains..................................................................... 225.1 45.6 49.4
Fees and other income............................................................................. 73.3 75.5 83.1
-------- -------- --------
Total revenues................................................................................ 4,122.9 3,612.6 3,397.0
Benefits and expenses
Benefits to policyholders......................................................................... 2,493.0 2,239.0 1,775.7
Interest credited................................................................................. 227.4 242.7 281.0
Operating expenses................................................................................ 728.2 713.0 675.6
Commissions....................................................................................... 369.9 355.9 326.8
Increase in deferred policy acquisition costs..................................................... (114.7) (155.3) (135.1)
Interest expense.................................................................................. 37.2 18.7 12.7
-------- -------- --------
Total benefits and expenses................................................................... 3,741.0 3,414.0 2,936.7
-------- -------- --------
Income before income taxes and cumulative effects of accounting changes............................. 381.9 198.6 460.3
Income taxes
Current........................................................................................... 98.6 30.4 73.4
Deferred.......................................................................................... 2.2 13.5 74.9
-------- -------- --------
Total income taxes............................................................................ 100.8 43.9 148.3
-------- -------- --------
Income before cumulative effects of accounting changes.............................................. 281.1 154.7 312.0
Cumulative effects of accounting changes
Income taxes...................................................................................... -- -- 20.0
Postretirement benefits other than pensions, net of tax........................................... -- -- (32.1)
-------- -------- --------
Net income.......................................................................................... $ 281.1 $ 154.7 $ 299.9
-------- -------- --------
-------- -------- --------
Per common share
Income before cumulative effects of accounting changes............................................ $ 3.87 $ 2.09 $ 3.96
Cumulative effects of accounting changes
Income taxes...................................................................................... -- -- 0.25
Postretirement benefits other than pensions, net of tax........................................... -- -- (0.40)
-------- -------- --------
Net income.......................................................................................... $ 3.87 $ 2.09 $ 3.81
-------- -------- --------
-------- -------- --------

See notes to consolidated financial statements.

UNUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

DECEMBER 31,
----------------------
1995 1994

- -------------------------------------------------------------------------------------------------------------------------------
Assets
Investments
Fixed maturities:
Available for sale-at fair value (amortized cost: 1995-$8,583.5; 1994-$1,701.4).................. $ 9,135.4 $ 1,640.6
Held to maturity-principally at amortized cost (fair value: 1994-$6,168.6)....................... -- 6,227.2
Equity securities available for sale-at fair value (cost: 1995-$21.1; 1994-$492.2)................. 25.2 627.9
Mortgage loans..................................................................................... 1,163.4 1,216.3
Real estate, net................................................................................... 222.2 190.8
Policy loans....................................................................................... 219.2 201.0
Other long-term investments........................................................................ 30.4 38.1
Short-term investments............................................................................. 896.7 291.9
---------- ----------
Total investments................................................................................ 11,692.5 10,433.8
Cash................................................................................................. 42.5 36.1
Accrued investment income............................................................................ 208.5 195.9
Premiums due......................................................................................... 224.3 189.7
Deferred policy acquisition costs.................................................................... 1,142.3 1,035.2
Property and equipment, net.......................................................................... 153.7 153.4
Other assets......................................................................................... 791.8 737.2
Separate account assets.............................................................................. 532.2 345.9
---------- ----------
Total assets..................................................................................... $ 14,787.8 $ 13,127.2
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity
Liabilities
Future policy benefits............................................................................. $ 1,718.7 $ 1,591.6
Unpaid claims and claim expenses................................................................... 4,856.4 3,853.9
Other policyholder funds........................................................................... 3,840.3 4,058.8
Income taxes
Current.......................................................................................... 20.7 12.4
Deferred......................................................................................... 392.0 348.6
Notes payable...................................................................................... 583.8 428.7
Other liabilities.................................................................................. 540.8 571.9
Separate account liabilities....................................................................... 532.2 345.9
---------- ----------
Total liabilities................................................................................ 12,484.9 11,211.8
Stockholders' equity
Preferred stock, par value $0.10 per share, authorized 10,000,000 shares, none issued..............
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 99,987,958 shares... 10.0 10.0
Additional paid-in capital......................................................................... 1,088.2 1,080.5
Unrealized gains on available for sale securities, net............................................. 213.1 49.6
Unrealized foreign currency translation adjustment................................................. (23.1) (23.7)
Retained earnings.................................................................................. 1,713.2 1,507.2
---------- ----------
3,001.4 2,623.6
Less:
Treasury stock, at cost (1995-26,980,331 shares; 1994-27,575,430 shares)......................... 691.6 706.6
Restricted stock deferred compensation........................................................... 6.9 1.6
---------- ----------
Total stockholders' equity....................................................................... 2,302.9 1,915.4
---------- ----------
Total liabilities and stockholders' equity....................................................... $ 14,787.8 $ 13,127.2
---------- ----------
---------- ----------
See notes to consolidated financial statements.

UNUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

COMMON UNREALIZED GAINS UNREALIZED
STOCK (LOSSES) ON FOREIGN RESTRICTED
$0.10 ADDITIONAL AVAILABLE FOR CURRENCY STOCK
PAR PAID-IN SALE SECURITIES, TRANSLATION RETAINED TREASURY DEFERRED
VALUE CAPITAL NET ADJUSTMENT EARNINGS STOCK COMPENSATION TOTAL

- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1,
1993.................... $10.0 $1,066.6 $121.1 $ (20.9) $1,182.3 $ (345.5) $ (2.7) $2,010.9
1993 Transactions:
Net income............. 299.9 299.9
Unrealized gains on
equity securities,
net................... 28.0 28.0
Unrealized foreign
currency translation
adjustment............ (3.2) (3.2)
Dividends to
stockholders
($0.765 per common
share)................ (61.4) (61.4)
Treasury stock
acquired.............. (192.5) (192.5)
Employee stock option
and other
transactions.......... 11.8 8.2 1.0 21.0
------ ---------- ------ ------------- ---------- -------- ------ --------
Balance at December 31,
1993.................... 10.0 1,078.4 149.1 (24.1) 1,420.8 (529.8) (1.7) 2,102.7
1994 Transactions:
Net income............. 154.7 154.7
Unrealized losses on
available for sale
securities, net....... (99.5) (99.5)
Unrealized foreign
currency translation
adjustment............ 0.4 0.4
Dividends to
stockholders
($0.92 per common
share)................ (68.3) (68.3)
Treasury stock
acquired.............. (183.3) (183.3)
Employee stock option
and other
transactions.......... 2.1 6.5 0.1 8.7
------ ---------- ------ ------------- ---------- -------- ------ --------
Balance at December 31,
1994.................... 10.0 1,080.5 49.6 (23.7) 1,507.2 (706.6) (1.6) 1,915.4
1995 Transactions:
Net income............. 281.1 281.1
Unrealized gains on
available for sale
securities, net....... 163.5 163.5
Unrealized foreign
currency translation
adjustment............ 0.6 0.6
Dividends to
stockholders
($1.035 per common
share)................ (75.1) (75.1)
Employee stock option
and other
transactions.......... 7.7 15.0 (5.3) 17.4
------ ---------- ------ ------------- ---------- -------- ------ --------
Balance at December 31,
1995.................... $10.0 $1,088.2 $213.1 $ (23.1) $1,713.2 $ (691.6) $ (6.9) $2,302.9
------ ---------- ------ ------------- ---------- -------- ------ --------
------ ---------- ------ ------------- ---------- -------- ------ --------

See notes to consolidated financial statements.

UNUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993

- --------------------------------------------------------------------------------------------------------------
Operating activities:
Net income.......................................................... $ 281.1 $ 154.7 $ 299.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effects of accounting changes, net of tax.............. -- -- 12.1
Increase in future policy benefits and unpaid claims and claim
expenses......................................................... 905.3 720.1 412.9
Increase in amounts receivable under reinsurance agreements....... (61.0) (18.6) (129.1)
Increase (decrease) in income tax liability....................... (3.5) (3.3) 109.8
Increase in deferred policy acquisition costs..................... (114.9) (155.4) (125.5)
Realized investment gains......................................... (242.0) (59.0) (69.2)
Other............................................................. (8.9) 62.3 46.4
---------- --------- ----------
Net cash provided by operating activities....................... 756.1 700.8 557.3
---------- --------- ----------
Investing activities:
Maturities of fixed maturities...................................... -- -- 924.6
Maturities of fixed maturities held to maturity..................... 835.7 754.8 --
Maturities of fixed maturities available for sale................... 99.3 41.2 --
Sales of fixed maturities held to maturity.......................... 2.8 46.8 45.7
Sales of fixed maturities available for sale........................ 577.3 407.6 218.2
Sales of equity securities available for sale....................... 836.7 314.1 --
Sales and maturities of other investments........................... 312.0 414.9 550.2
Purchases of investments............................................ -- -- (1,832.2)
Purchases of fixed maturities held to maturity...................... (230.2) (795.2) --
Purchases of fixed maturities available for sale.................... (1,971.9) (943.9) --
Purchases of equity securities available for sale................... (131.3) (216.6) --
Purchases of other investments...................................... (322.4) (211.5) --
Net (increase) decrease in short-term investments................... (604.8) (221.7) 38.8
Net additions to property and equipment............................. (28.9) (29.9) (18.2)
Investments in subsidiaries, net.................................... -- -- 0.9
---------- --------- ----------
Net cash used in investing activities........................... (625.7) (439.4) (72.0)
---------- --------- ----------
Financing activities:
Deposits and interest credited to investment contracts.............. 669.6 608.6 735.2
Maturities and withdrawals from investment contracts................ (888.1) (800.5) (1,022.4)
Dividends to stockholders........................................... (75.1) (68.3) (61.4)
Treasury stock acquired............................................. -- (183.3) (192.5)
Proceeds from notes payable......................................... 291.5 54.7 51.5
Repayment of notes payable.......................................... (1.3) (1.2) (50.1)
Net increase (decrease) in short-term debt.......................... (135.1) 136.6 37.3
Other............................................................... 13.8 7.2 15.1
---------- --------- ----------
Net cash used in financing activities........................... (124.7) (246.2) (487.3)
---------- --------- ----------
Effect of exchange rate changes on cash............................... 0.7 0.1 2.4
---------- --------- ----------
Net increase in cash.................................................. 6.4 15.3 0.4
Cash at beginning of year............................................. 36.1 20.8 20.4
---------- --------- ----------
Cash at end of year................................................... $ 42.5 $ 36.1 $ 20.8
---------- --------- ----------
---------- --------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes...................................................... $ 82.6 $ 48.8 $ 67.3
Interest.......................................................... $ 44.7 $ 20.4 $ 13.3

See notes to consolidated financial statements.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements of UNUM Corporation and
subsidiaries ("UNUM") have been prepared on the basis of generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of UNUM
Corporation and subsidiaries. Significant intercompany accounts and transactions
have been eliminated.

RECLASSIFICATION

Certain 1994 and 1993 amounts have been reclassified in 1995 for comparative
purposes.

INVESTMENTS

Investments are reported as follows:

- Fixed maturities available for sale (certain bonds and redeemable
preferred stocks) -- at fair value.

- Fixed maturities held to maturity (certain bonds and redeemable preferred
stocks) -- principally at amortized cost.

- Equity securities available for sale (common stocks and non-redeemable
preferred stocks) -- at fair value.

- Mortgage loans -- at amortized cost less an allowance for probable losses.

- Real estate -- at cost less accumulated depreciation.

- Policy loans -- at unpaid principal balance.

- Other long-term investments -- at cost plus UNUM's equity in undistributed
net earnings since acquisition.

- Short-term investments -- are considered available for sale and are
carried at cost which approximates fair value.

Fixed maturities and equity securities are classified as available for sale
as they may be sold in response to changes in interest rates, resultant
prepayment risk, liquidity and capital needs, or other similar economic factors.
Unrealized gains and losses related to securities classified as available for
sale are excluded from net income and reported in a separate component of
stockholders' equity, net of applicable deferred taxes and related adjustments
to unpaid claims. The unrealized gains and losses are determined based on
estimated market values at the balance sheet date and are not necessarily the
amounts which would be realized upon sale of the securities or representative of
future market values. Changing interest rates affect the level of unrealized
gains and losses related to securities classified as available for sale. While
rising interest rates are beneficial when investing current cash flows, they can
also reduce the fair value of existing fixed rate long-term investments. In
addition, lower interest rates can lead to early payoffs and refinancing of some
of UNUM's fixed rate investments. Management generally invests in fixed rate
instruments that are structured to limit the exposure to such reinvestment risk.

Fixed maturities that UNUM has the positive intent and ability to hold to
maturity are classified as held to maturity.

Realized investment gains and losses, which are determined on the basis of
specific identification and include adjustments for allowances for probable
losses, are reported separately in the Consolidated Statements of Income.

If a decline in fair value of an invested asset is considered to be other
than temporary, the investment is reduced to its net realizable value and the
reduction is accounted for as a realized investment loss.

UNUM discontinues the accrual of investment income on invested assets when
it is determined that collectability is doubtful. UNUM recognizes investment
income on impaired loans when the income is received.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Real estate held for sale, which is included in other assets in the
Consolidated Balance Sheets, is valued at the lower of fair value less estimated
costs to sell, or cost. UNUM has provided an allowance for probable losses on
real estate held for sale that reduces the carrying value of the asset to fair
value.

Purchases and sales of short-term financial instruments are part of
investing activities and not necessarily a part of the cash management program.
Therefore, short-term financial instruments are classified as investments in the
Consolidated Balance Sheets and are included as investing activities in the
Consolidated Statements of Cash Flows.

DERIVATIVE FINANCIAL INSTRUMENTS

Gains or losses on hedges of existing assets or liabilities are deferred and
included in the carrying amounts of those assets or liabilities. Gains or losses
related to qualifying hedges of firm commitments or anticipated transactions are
also deferred and recognized in the carrying amount of the underlying asset or
liability when the hedged transaction occurs.

RECOGNITION OF PREMIUM REVENUES AND RELATED EXPENSES

Group insurance premiums are recognized as income over the period to which
the premiums relate. Individual disability premiums are recognized as income
when due. Benefits and expenses are associated with earned premiums to result in
recognition of profits over the life of the contracts. This association is
accomplished by recording a provision for future policy benefits and unpaid
claims and claim expenses, and by amortizing deferred policy acquisition costs.

For retirement and universal life products, premium and other policy fee
revenue consist of charges for the cost of insurance, policy administration and
surrenders assessed during the period. Charges related to services to be
performed in the future are deferred until earned. The amounts received in
excess of premium and fees are recorded as deposits and included in other
policyholder funds in the Consolidated Balance Sheets. Benefits and expenses
include benefit claims in excess of related account balances, interest credited
at various rates and amortization of deferred policy acquisition costs.

DEFERRED POLICY ACQUISITION COSTS

The costs of acquiring new business that vary with and that are related
primarily to the production of new business have been deferred to the extent
such costs are deemed recoverable from future profits. Such costs include
commissions, certain costs of policy issue and underwriting, and certain
variable field office expenses.

For individual disability, group disability, and group life and health
business, the costs are amortized in proportion to expected future premiums. For
universal life and certain retirement products, the costs are amortized in
proportion to estimated gross profits from interest margins, mortality and other
elements of performance under the contracts. Amortization is adjusted
periodically to reflect differences between actual experience and original
assumptions, with any resulting changes reflected in current operating results.
The amounts deferred and amortized were as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,
-------------------------------
(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------------------------
Deferred......................................................................................... $ 308.3 $ 308.1 $ 282.8
Less amortized................................................................................... (193.6) (152.8) (147.7)
--------- --------- ---------
Increase in deferred policy acquisition costs.................................................. $ 114.7 $ 155.3 $ 135.1
--------- --------- ---------
--------- --------- ---------

RESERVES FOR FUTURE POLICY BENEFITS

Reserves for future policy benefits are calculated by the net-level premium
method, and are based on UNUM's expected morbidity, mortality and interest rate
assumptions at the time a policy is issued. These reserves represent the portion
of premiums received, accumulated with interest and held to provide for claims
that have not yet been incurred. The reserve assumptions are periodically
reviewed and compared to actual experience and are revised if it is determined
that future expected experience is different from the reserve assumptions.
Reserves for group insurance policies consist primarily of unearned premiums.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The interest rates used in the calculation of reserves for future policy
benefits at December 31, 1995, and 1994, principally ranged from:

Individual disability.......................................................... 5.5% to 9.5%
Individual life................................................................ 5.0% to 9.0%
Individual accident and health................................................. 5.0% to 9.0%
Individual and group annuities................................................. 5.0% to 9.0%

Certain reserve calculations are based on interest rates within these ranges
graded down over periods from 15 to 20 years.

RESERVES FOR UNPAID CLAIMS AND CLAIM EXPENSES

Unpaid claims and claim expense reserves represent the amount estimated to
fund claims that have been reported but not settled and claims incurred but not
reported. Reserves for unpaid claims are estimated based on UNUM's historical
experience and other actuarial assumptions that consider the effects of current
developments, anticipated trends, risk management programs and renewal actions.
Many factors affect actuarial calculations of claim reserves, including but not
limited to interest rates and current and anticipated incidence rates, recovery
rates, and economic and societal conditions. Reserve estimates and assumptions
are periodically reviewed and updated with any resulting adjustments to reserves
reflected in current operating results. Given the complexity of the reserving
process, the ultimate liability may be more or less than such estimates
indicate.

The interest rates used in the calculation of disability claims reserves at
December 31, 1995, and 1994, were principally as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

1995 1994

- ---------------------------------------------------------------------------------------------------------------------------------
Group long term disability (North America)............................................... 7.94% 9.18%
Group long term disability (United Kingdom).............................................. 9.67% 9.94%
Individual disability.................................................................... 6.75% to 9.67% 6.75% to 9.94%

The interest rate used to discount the disability reserves is a composite of
the yields on assets specifically matched with each block of business.
Management expects the reserve discount rate for certain disability products
will further decline, since current cash flows are invested in high quality
assets at current yields, which are below the composite yield of the existing
assets purchased in prior years. UNUM periodically adjusts prices on both
existing and new business in an effort to mitigate the impact of the current
interest rate environment.

For other accident and health business, reserves are based on projections of
historical claims run-out patterns.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Activity in the liability for unpaid claims and claim expenses is summarized
as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS) 1995 1994 1993

- -------------------------------------------------------------------------------------------------------------------------------
Balance at January 1.......................................................................... $ 3,853.9 $ 3,341.5 $ 2,983.6
Less reinsurance recoverables............................................................... (82.7) (68.0) --
--------- --------- ---------
Net Balance at January 1...................................................................... 3,771.2 3,273.5 2,983.6
Incurred related to:
Current year................................................................................ 1,825.0 1,609.3 1,417.8
Prior years................................................................................. 507.0 436.0 238.0
--------- --------- ---------
Total incurred................................................................................ 2,332.0 2,045.3 1,655.8
Paid related to:
Current year................................................................................ 523.9 517.6 471.0
Prior years................................................................................. 1,099.5 1,030.0 894.9
--------- --------- ---------
Total paid.................................................................................... 1,623.4 1,547.6 1,365.9
Net Balance at December 31.................................................................... 4,479.8 3,771.2 3,273.5
Plus reinsurance recoverables............................................................... 115.4 82.7 68.0
Effect of unrealized gains on fixed maturities................................................ 261.2 -- --
--------- --------- ---------
Balance at December 31........................................................................ $ 4,856.4 $ 3,853.9 $ 3,341.5
--------- --------- ---------
--------- --------- ---------

The increase in incurrals related to prior years was $507.0 million, $436.0
million, and $238.0 million (net of reinsurance), for 1995, 1994 and 1993,
respectively. These increases were primarily the result of interest accrued on
reserves, changes in reserve estimates and assumptions of interest rates,
morbidity, mortality and expense costs, and changes in foreign exchange rates,
primarily related to the disability reserves of UNUM's United Kingdom-based
affiliate, UNUM Limited. Due to the long-term claims payment pattern of some of
UNUM's businesses, certain reserves, particularly disability, are discounted for
interest. Changes in reserve estimates and assumptions were primarily a result
of increased reserves from lower discount rates for certain disability products
following the sale of the common stock portfolio in 1995, and adjustments to
strengthen certain disability reserves in 1995 and 1994.

The components of the increase in unpaid claims and claims expenses incurred
and related to prior years were as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------------------------
Interest accrued on reserves.............................................................................. $270.0 $267.0 $237.0
Changes in reserve estimates and assumptions.............................................................. 239.0 154.0 6.0
Changes in foreign exchange rates......................................................................... (2.0) 15.0 (5.0)
------ ------ ------
Increase in incurrals related to prior years............................................................ $507.0 $436.0 $238.0
------ ------ ------
------ ------ ------

In connection with the transfer of all fixed maturities previously
classified as held to maturity to available for sale, explained in Note 2,
unpaid claims were adjusted by $261.2 million on December 31, 1995. Unpaid
claims are adjusted to reflect changes that would have been necessary if the
unrealized gains and losses related to fixed maturities classified as available
for sale had been realized. Where applicable, UNUM has reflected those
adjustments in the liability balances with corresponding credits or charges, net
of related deferred taxes, reported as a component of unrealized gains on
available for sale securities in stockholders' equity.

Effective January 1, 1993, UNUM adopted Financial Accounting Standard
("FAS") No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts," which eliminated the practice by insurance

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
enterprises of reporting assets and liabilities relating to reinsured contracts
net of the effects of reinsurance. Since UNUM did not restate its financial
statements upon adoption of FAS 113, reserve balances prior to December 31,
1993, are shown net of reinsurance recoverables.

CHANGES IN ACCOUNTING ESTIMATES

During 1995, UNUM sold virtually all of the common stock portfolio of its
United States subsidiaries. The sale of the common stock portfolio, which
partially supported certain disability reserves, and the reinvestment of the
proceeds primarily in investment grade fixed income assets at yields below the
average portfolio yield, resulted in lower reserve discount rates for certain
disability products reported in the Disability Insurance segment. This change in
accounting estimate to lower certain discount rates resulted in an increase of
$128.6 million to benefits to policyholders in the Consolidated Statement of
Income, and a decrease to net income of $83.6 million, or $1.15 per share.

During 1995, UNUM increased the group long term disability reserves for
incurred but not reported ("IBNR") claims, as reported in the Disability
Insurance segment. The increased IBNR reserves were based on management's
judgment that claims currently incurred but not yet reported will reflect
increased levels of claims incidence and severity. This change in accounting
estimate resulted in an increase to benefits to policyholders in the
Consolidated Statement of Income of $38.4 million, and a decrease to net income
of $25.0 million, or $0.34 per share.

During 1995, UNUM increased reserves for unpaid claims related to the
association group disability business by $15.0 million to reflect management's
expectations of slower than expected claim recoveries. This change in accounting
estimate, which was reflected in the Disability Insurance segment, decreased net
income by $9.8 million, or $0.14 per share.

During 1994, UNUM increased reserves for existing claims by $83.3 million
and strengthened reserves for estimated future losses by $109.1 million. These
increased reserves reflected management's expectations of morbidity trends for
the non-cancellable individual disability business, as reported in the
Disability Insurance Segment. This change in accounting estimate resulted in an
increase to benefits to policyholders in the Consolidated Statement of Income of
$192.4 million, and a decrease to net income of $125.1 million, or $1.69 per
share.

OTHER POLICYHOLDER FUNDS

Other policyholder funds are liabilities for investment-type contracts and
represent customer deposits plus interest credited to those deposits at various
rates.

LIABILITIES FOR RESTRUCTURING ACTIVITIES

Liabilities for restructuring activities are recorded when management, prior
to the balance sheet date, commits to execute an exit plan that will result in
the incurral of costs that have no future economic benefit, or approves a plan
of termination and communicates sufficient detail of the plan to employees.

SEPARATE ACCOUNTS

Certain assets of UNUM's defined benefit plans and tax sheltered annuity
contracts are in separate accounts that are pooled investment funds of
securities. Investment income and realized gains and losses on these accounts
accrue directly to the contractholders. Assets, carried at market value, and
liabilities of the separate accounts are shown separately in the Consolidated
Balance Sheets. The assets of the separate accounts are legally segregated and
are not subject to claims that arise out of any other business of UNUM.

ACCOUNTING FOR PARTICIPATING INDIVIDUAL LIFE INSURANCE

Participating policies issued by the former Union Mutual Life Insurance
Company ("Union Mutual") prior to UNUM's conversion to a stock life insurance
company on November 14, 1986, will remain participating as long as they remain
in force. A Participation Fund Account ("PFA") was established for the sole
benefit of all of Union Mutual's individual participating life and annuity
policies and contracts.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The assets of the PFA are to provide for the benefit, dividend and certain
expense obligations of the participating individual life insurance policies and
annuity contracts. This line of business participates in the experience of the
PFA and its operations have been excluded from the Consolidated Statements of
Income. The PFA represented approximately 2.5% and 2.5% of total assets and 2.8%
and 3.0% of total liabilities at December 31, 1995, and 1994, respectively.

INCOME TAXES

The provision for income taxes includes amounts currently payable and
deferred income taxes, which result from differences between financial reporting
and tax bases of assets and liabilities, and are measured using enacted tax
rates and laws. Deferred U.S. income taxes have not been provided on accumulated
earnings of UNUM's foreign subsidiaries. These earnings could generate
additional U.S. tax if remitted to UNUM Corporation.

FOREIGN CURRENCY TRANSLATION

Foreign subsidiaries' balance sheet and income statement accounts expressed
in local functional currencies are translated into U.S. dollars using ending and
quarterly average exchange rates, respectively. The resulting translation
adjustments are reported in a separate component of stockholders' equity.

EARNINGS PER SHARE

The weighted average number of shares outstanding used to calculate earnings
per share was approximately 72,677,000, 74,158,000 and 78,779,000 in 1995, 1994
and 1993, respectively. The assumed exercise of outstanding stock options does
not result in a material dilution of earnings per share.

NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard ("FAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. UNUM will adopt FAS 121 effective January 1, 1996. The adoption
of FAS 121 is not expected to have a material effect on UNUM's results of
operations or financial position.

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting standards
for stock-based employee compensation plans. FAS 123 defines a new method of
accounting for employee stock compensation plans using a fair value based
method, under which compensation cost is measured and recognized in results of
operations. Alternatively, FAS 123 allows an entity to retain the accounting
method for employee stock compensation plans defined under Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." If an
entity retains the accounting defined under APB 25, certain pro forma
disclosures of net income and earnings per share must be made as if the fair
value based method defined under FAS 123 had been applied. UNUM is required to
adopt FAS 123 effective January 1, 1996. UNUM has determined that it will retain
the accounting methodology prescribed in APB 25 and will disclose the pro forma
effects of such stock-based compensation as required in 1996.

NOTE 2. INVESTMENTS
Effective January 1, 1994, UNUM adopted FAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," which specified the accounting and
reporting for certain investments in equity securities and for all investments
in debt securities. UNUM adopted the provisions of FAS 115 for these investments
held or acquired after January 1, 1994. Upon the adoption of FAS 115, UNUM
increased unrealized gains on available for sale securities included in
stockholders' equity on January 1, 1994, by $41.8 million (net of deferred taxes
of $22.5 million) to reflect the unrealized holding gains on fixed maturities
classified as available for sale that were previously carried at amortized cost.
In addition, UNUM reclassified certain fixed maturities from held to maturity to
available for sale on January 1, 1994, in connection with the adoption of FAS
115.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. INVESTMENTS (CONTINUED)
classifications of securities described in FAS 115, and to reclassify fixed
maturities from the held to maturity category without calling into question the
intent to hold other debt securities to maturity in the future. On December 31,
1995, UNUM reassessed its fixed maturity portfolio and as allowed under the
implementation guidance, reclassified fixed maturities with an amortized cost of
$6,082.8 million and a related net unrealized gain of $393.0 million from the
held to maturity category to available for sale. In connection with the
reclassification of the held to maturity fixed maturities to available for sale,
on December 31, 1995, UNUM adjusted its unpaid claims by $261.2 million to
reflect the changes that would have been necessary if the unrealized gains and
losses related to fixed maturities classified as available for sale had been
realized.

The following tables summarize the components of investment income, net
realized investment gains and changes in unrealized investment gains (losses):

INVESTMENT INCOME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER
31,
----------------------
(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------------------------
Fixed maturities:
Held to maturity........................................................................................ $488.0 $548.1 $570.1
Available for sale...................................................................................... 182.2 87.9 59.5
Equity securities available for sale...................................................................... 5.3 10.4 12.6
Mortgage loans............................................................................................ 119.9 137.4 165.2
Real estate............................................................................................... 15.2 15.8 12.8
Policy loans.............................................................................................. 8.6 10.2 10.4
Other long-term investments............................................................................... 1.6 0.9 4.5
Short-term investments.................................................................................... 27.1 8.5 7.1
------ ------ ------
Gross investment income............................................................................... 847.9 819.2 842.2
Less investment expenses.................................................................................. (17.0) (23.9) (26.6)
Less investment income on participating individual life insurance policies and annuity contracts.......... (24.6) (25.1) (25.2)
------ ------ ------
Investment income..................................................................................... $806.3 $770.2 $790.4
------ ------ ------
------ ------ ------

NET REALIZED INVESTMENT GAINS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER
31,
----------------------
(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------------------------
Gross realized investment gains:
Fixed maturities:
Held to maturity...................................................................................... $ 0.1 $ 0.2 $ 6.1
Available for sale.................................................................................... 14.2 10.2 8.8
Equity securities available for sale...................................................................... 253.3 93.1 57.8
Mortgage loans, real estate and other..................................................................... 19.4 13.5 12.5
------ ------ ------
Gross realized investment gains....................................................................... 287.0 117.0 85.2
------ ------ ------
Gross realized investment losses:
Fixed maturities:
Held to maturity...................................................................................... (0.7) (6.8) 3.4
Available for sale.................................................................................... (12.8) (28.8) (1.0)
Equity securities available for sale...................................................................... (18.7) (12.2) (9.5)
Mortgage loans, real estate and other..................................................................... (29.7) (23.6) (28.7)
------ ------ ------
Gross realized investment losses...................................................................... (61.9) (71.4) (35.8)
------ ------ ------
Net realized investment gains....................................................................... $225.1 $ 45.6 $ 49.4
------ ------ ------
------ ------ ------

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. INVESTMENTS (CONTINUED)
CHANGE IN UNREALIZED GAINS ON AVAILABLE FOR SALE SECURITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER
31,
----------------------
(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------------------------
Fixed maturities available for sale....................................................................... $612.7 $(60.8) $ --
Equity securities available for sale...................................................................... (131.6) (86.0) 43.2
Unpaid claims adjustment.................................................................................. (261.2) -- --
Deferred taxes............................................................................................ (56.4) 47.3 (15.2)
------ ------ ------
Total change in unrealized gains on available for sale securities, as included in stockholders'
equity................................................................................................. $163.5 $(99.5) $ 28.0
------ ------ ------
------ ------ ------

FIXED MATURITIES

The amortized cost and fair values of fixed maturities at December 31, 1995,
were as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(DOLLARS IN MILLIONS) COST GAINS LOSSES VALUE

- -----------------------------------------------------------------------------------------------------------------------------------
Available for sale:
U.S. Government................................................................ $ 402.6 $ 10.3 $ -- $ 412.9
States and municipalities...................................................... 670.5 23.7 (0.7) 693.5
Foreign governments............................................................ 229.4 26.1 (0.5) 255.0
Public utilities............................................................... 1,617.8 117.6 (0.6) 1,734.8
Corporate bonds................................................................ 5,617.9 377.3 (2.7) 5,992.5
Redeemable preferred stocks.................................................... 27.8 1.5 (1.2) 28.1
Mortgage-backed securities..................................................... 17.5 1.1 -- 18.6
----------- ----------- ----------- ---------
Total available for sale..................................................... $ 8,583.5 $ 557.6 $ (5.7) $ 9,135.4
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. INVESTMENTS (CONTINUED)
The amortized cost and fair values of fixed maturities at December 31, 1994,
were as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(DOLLARS IN MILLIONS) COST GAINS LOSSES VALUE

- -----------------------------------------------------------------------------------------------------------------------------------
Held to maturity:
U.S. Government................................................................ $ 10.9 $ -- $ -- $ 10.9
States and municipalities...................................................... 631.8 9.1 (31.3) 609.6
Foreign governments............................................................ 176.1 12.4 (1.4) 187.1
Public utilities............................................................... 1,375.5 12.8 (46.8) 1,341.5
Corporate bonds................................................................ 4,014.3 92.7 (106.8) 4,000.2
Mortgage-backed securities..................................................... 10.8 0.5 -- 11.3
Other debt securities.......................................................... 7.8 0.2 -- 8.0
----------- ----------- ----------- ---------
Total held to maturity....................................................... $ 6,227.2 $ 127.7 $ (186.3) $ 6,168.6
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
Available for sale:
U.S. Government................................................................ $ 353.2 $ 0.8 $ (7.5) $ 346.5
States and municipalities...................................................... 433.2 2.3 (13.9) 421.6
Foreign governments............................................................ 58.9 0.2 (1.5) 57.6
Public utilities............................................................... 229.4 3.8 (9.6) 223.6
Corporate bonds................................................................ 552.1 0.8 (31.8) 521.1
Redeemable preferred stocks.................................................... 63.2 2.9 (7.0) 59.1
Mortgage-backed securities..................................................... 11.4 0.1 (0.4) 11.1
----------- ----------- ----------- ---------
Total available for sale..................................................... $ 1,701.4 $ 10.9 $ (71.7) $ 1,640.6
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------

The amortized cost and fair value of fixed maturities at December 31, 1995,
by contractual maturity date, are shown below. Expected maturities will differ
from contractual maturities since certain borrowers have the right to call or
prepay obligations with or without call or prepayment penalties.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AMORTIZED FAIR
(DOLLARS IN MILLIONS) COST VALUE

- ----------------------------------------------------------------------------------------------------------------------------------
Available for sale:
Due in one year or less................................................................................. $ 742.9 $ 753.1
Due after one year through five years................................................................... 3,325.4 3,481.5
Due after five years through ten years.................................................................. 3,672.5 3,958.0
Due after ten years..................................................................................... 825.2 924.2
----------- ---------
8,566.0 9,116.8
Mortgage-backed securities (primarily due after 10 years)............................................... 17.5 18.6
----------- ---------
Total available for sale.............................................................................. $ 8,583.5 $ 9,135.4
----------- ---------
----------- ---------

During 1995, UNUM sold fixed maturities of two issuers classified as held to
maturity with an amortized cost of $4.0 million due to evidence of significant
deterioration of the issuers' creditworthiness, as evidenced by bankruptcy
filings. These sales resulted in a net realized loss of $1.2 million.

During 1994, UNUM sold fixed maturities of five issuers classified as held
to maturity with an amortized cost of $49.8 million due to evidence of
significant deterioration of the issuers' creditworthiness. These sales resulted
in a net realized loss of $3.0 million.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. INVESTMENTS (CONTINUED)
EQUITY SECURITIES

The fair values, which also represent carrying amounts, and the cost of
equity securities available for sale were as follows at December 31, 1995:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

FAIR
(DOLLARS IN MILLIONS) COST VALUE

- ------------------------------------------------------------------------------------------------------------------------------------
Common stocks:
Industrial, miscellaneous and all other............................................................................. $21.1 $25.2
----- -----
----- -----

Gross unrealized investment gains on equity securities available for sale
totaled $5.5 million and $158.7 million and losses totaled $1.4 million and
$23.0 million, at December 31, 1995, and 1994, respectively.

MORTGAGE LOANS

Effective January 1, 1995, UNUM adopted Financial Accounting Standard
("FAS") No. 114, "Accounting by Creditors for Impairment of a Loan," and FAS No.
118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures," which defined the principles to measure and record an impaired
loan. When it is probable that UNUM will be unable to collect all amounts of
principal and interest due according to the contractual terms of a loan
agreement, the loan is deemed impaired. Once a loan is determined to be
impaired, an allowance for probable losses is established for the difference
between the carrying amount of the loan and its estimated value. The estimated
value is based on either the present value of expected future cash flows
discounted using the loan's effective interest rate, the loan's observable
market price or the fair value of the collateral. The adoption of FAS 114 and
FAS 118 did not have a material effect on UNUM's results of operations or
financial position.

At December 31, 1995, the recorded investment in impaired loans amounted to
$50.1 million. Included in the $50.1 million was $38.4 million of loans which
had a related allowance for probable losses of $7.1 million, and $11.7 million
of loans which had no related allowance for probable losses. Mortgage loans that
were restructured prior to the adoption of FAS 114 amounted to $59.9 million and
$73.6 million at December 31, 1995, and 1994, respectively. Troubled debt
restructurings represent loans that are refinanced with terms more favorable to
the borrower. Interest foregone on these loans was not material for the years
ended December 31, 1995, 1994 or 1993.

OTHER

Real estate acquired in satisfaction of debt cumulatively amounts to $107.6
million at December 31, 1995. Real estate held for sale amounted to $35.5
million at December 31, 1995, and $31.0 million at December 31, 1994.

Mortgages with an amortized cost of $1.9 million, real estate with a
depreciated cost of $4.7 million and no bonds were non-income producing for the
twelve months ended December 31, 1995. Interest lost on these investments was
not material in 1995, 1994 or 1993.

UNUM was committed at December 31, 1995, to purchase fixed maturities and
other invested assets in the amount of $91.2 million.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. ALLOWANCE FOR PROBABLE LOSSES ON INVESTED ASSETS AND REAL ESTATE HELD
FOR SALE
Changes in the allowance for probable losses on invested assets and real
estate held for sale were as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

BALANCE AT BALANCE
BEGINNING AT END
(DOLLARS IN MILLIONS) OF YEAR ADDITIONS DEDUCTIONS OF YEAR

- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
Mortgage loans.................................................................... $43.2 $ 9.2 $(13.2) $39.2
Real estate held for sale......................................................... 13.2 6.3 (0.4) 19.1
----- --------- ---------- -------
Total........................................................................... $56.4 $15.5 $(13.6) $58.3
----- --------- ---------- -------
Year Ended December 31, 1994
Fixed maturities held to maturity and available for sale.......................... $ 0.3 $ -- $ (0.3) $ --
Mortgage loans.................................................................... 48.6 8.5 (13.9) 43.2
Real estate held for sale......................................................... 20.9 0.8 (8.5) 13.2
----- --------- ---------- -------
Total........................................................................... $69.8 $ 9.3 $(22.7) $56.4
----- --------- ---------- -------
Year Ended December 31, 1993
Fixed maturities held to maturity and available for sale.......................... $ 4.1 $(3.8) $ -- $ 0.3
Mortgage loans.................................................................... 51.5 4.8 (7.7) 48.6
Real estate held for sale......................................................... 13.6 18.8 (11.5) 20.9
----- --------- ---------- -------
Total........................................................................... $69.2 $19.8 $(19.2) $69.8
----- --------- ---------- -------
----- --------- ---------- -------

Additions represent charges to net realized investment gains less
recoveries, and deductions represent reserves released upon disposal or
restructuring of the related asset.

Subsequent to January 1, 1994, adjustments for other than temporary declines
in value of all fixed maturities are recorded as a direct adjustment to the
securities' carrying value.

NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS
UNUM periodically uses common derivative financial instruments such as
options, futures and forward exchange contracts to hedge certain risks
associated with future investments and certain payments denominated in foreign
currencies, primarily British pound sterling, Canadian dollar and Japanese yen.
These derivative financial instruments are used to protect UNUM from the effect
of market fluctuations in interest and exchange rates between the contract date
and the date on which the hedged transaction occurs. In using these instruments,
UNUM is subject to the off-balance-sheet risk that the counterparties to the
transactions will fail to completely perform as contracted. UNUM manages this
risk by only entering into contracts with highly rated institutions and listed
exchanges. UNUM does not intend to hold derivative financial instruments for the
purpose of trading. At December 31, 1995, and 1994, UNUM had no open derivative
financial instruments.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5. REINSURANCE
UNUM, through its life insurance subsidiaries, is involved in both the
cession and assumption of reinsurance with other companies. Risks are reinsured
with other companies to reduce UNUM's exposure to large losses and permit
recovery of a portion of direct losses. UNUM remains liable to the insured for
the payment of policy benefits if the reinsurers cannot meet their obligations
under the reinsurance agreements. Deferred policy acquisition costs, premiums
and expenses are stated net of reinsurance ceded to other companies.

The effect of reinsurance on premiums earned and written for the years ended
December 31, 1995, 1994 and 1993 was as follows:

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(DOLLARS IN MILLIONS) 1995 1994 1993

- -------------------------------------------------------------------------------------------------------------------------------
Premiums earned:
Direct...................................................................................... $ 2,842.9 $ 2,663.1 $ 2,331.5
Assumed..................................................................................... 241.5 170.7 192.6
Ceded....................................................................................... (66.2) (112.5) (50.0)
--------- --------- ---------
Premiums earned........................................................................... $ 3,018.2 $ 2,721.3 $ 2,474.1
--------- --------- ---------
Premiums written:
Direct...................................................................................... $ 2,877.2 $ 2,702.7 $ 2,335.6
Assumed..................................................................................... 250.4 170.9 196.2
Ceded....................................................................................... (64.4) (112.6) (50.5)
--------- --------- ---------
Premiums written.......................................................................... $ 3,063.2 $ 2,761.0 $ 2,481.3
--------- --------- ---------
--------- --------- ---------

For the years ended December 31, 1995, 1994 and 1993, recoveries recognized
under reinsurance agreements reduced benefits to policyholders by $58.9 million,
$53.3 million, and $28.9 million, respectively.

NOTE 6. BUSINESS RESTRUCTURING AND OTHER CHARGES
Charges of $8.4 million and $14.4 million were recorded in 1995 and 1994,
respectively, related to the acceleration of organizational changes within UNUM
Life Insurance Company of America and the decision to discontinue the individual
disability non-cancellable product. Partially offsetting the charge recorded in
1995 was a $3.4 million curtailment gain, related to workforce reductions in
UNUM Corporation's noncontributory defined benefit pension plan.

The following is a summary of restructuring and other charges:

- -------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994............................................................... 379 $ 9.2 $ 5.2 $ 14.4
1995 Charge............................................................................. -- 4.5 3.9 8.4
Amounts paid in 1995.................................................................... (373) (13.3) (2.6) (15.9)
--- --------- ----- ------
Balance December 31, 1995............................................................... 6 $ 0.4 $ 6.5 $ 6.9
--- --------- ----- ------
--- --------- ----- ------

Exit costs, which relate to certain leased facilities and equipment, are
expected to be paid as follows: $3.0 million in 1996; $3.2 million in 1997; and
$0.3 million in 1998.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. EMPLOYEE BENEFIT PLANS

PENSION PLANS

UNUM has a noncontributory defined benefit pension plan covering
substantially all domestic employees, excluding employees of Colonial Companies,
Inc., and Duncanson & Holt, Inc., who are covered under separate plans. The plan
provides benefits based on the employee's years of service and compensation
during the highest five consecutive years out of the last ten years of
employment. UNUM funds the plan in accordance with the requirements of the
Employee Retirement Income Security Act of 1974, as amended. Plan assets consist
primarily of group annuity contracts and include 224,392 shares of UNUM
Corporation common stock.

Net pension cost included the following components:

- --------------------------------------------------------------------------------------------------------------------------
Service cost -- benefits earned during the year................................................... $ 7.7 $ 9.2 $ 8.6
Interest cost on projected benefit obligation..................................................... 12.3 11.6 10.9
Actual return on plan assets...................................................................... (42.5) 3.3 (16.5)
Net amortization and deferral..................................................................... 28.2 (16.5) 5.2
Curtailment gain.................................................................................. (3.4) -- --
------ ------ ------
Net pension cost.............................................................................. $ 2.3 $ 7.6 $ 8.2
------ ------ ------
------ ------ ------

The funded status of the plan and amounts recognized in UNUM's Consolidated
Balance Sheets, as determined by the plan's actuaries, were as follows:

- ----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefit obligation................................................................................. $ 174.4 $ 96.2
--------- ---------
--------- ---------
Accumulated benefit obligation............................................................................ $ 178.7 $ 99.1
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date................................................... $ (183.9) $ (141.9)
Plan assets at fair value................................................................................... 192.7 153.5
--------- ---------
Projected benefit obligation less than plan assets.......................................................... 8.8 11.6
Unrecognized net gain....................................................................................... (0.7) (26.2)
Unrecognized prior service cost............................................................................. (17.0) (3.3)
Unamortized net obligation.................................................................................. 2.1 2.7
--------- ---------
Accrued pension cost.................................................................................... $ (6.8) $ (15.2)
--------- ---------
--------- ---------

The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 4.70%, respectively, at December 31,
1995, and 8.25% and 5.20%, respectively, at December 31, 1994. The expected
long-term rate of return on plan assets was 9.0% in 1995 and 1994, and 8.25% in
1993. Prior year service costs are being amortized on a straight-line basis over
expected employment periods for active employees.

In December 1995, the Board of Directors of UNUM Corporation approved an
amendment to the pension plan that included a new benefit formula.

UNUM also administers certain supplemental retirement plans for eligible
employees and officers and certain other pension plans. The cost of these plans
was not significant for the years ended December 31, 1995, 1994 and 1993.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
RETIREMENT SAVINGS PLANS

UNUM has several retirement savings and profit sharing plans for
substantially all full-time and part-time employees who work 1,000 hours a year
and have been employed for at least one year. Dependent upon which plan the
employee participates in, eligible employees may contribute primarily up to 10%
of their annual base salary, and UNUM matches a portion of each employee's
contribution up to 6% of the employee's bi-weekly compensation. Participants may
become 100% vested immediately upon becoming eligible to participate, or
incrementally over a five year period. In 1995, 1994 and 1993, expense for these
plans amounted to $8.4 million, $8.4 million and $8.3 million, respectively.

UNUM intends to introduce single pension and retirement savings plans for
all domestic employees effective January 1, 1997.

POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

UNUM provides certain health care and life insurance benefits for retired
employees and covered dependents. Substantially all domestic employees of UNUM
may become eligible for these benefits if they meet minimum age and service
requirements, if they are eligible for retirement benefits and if they agree to
contribute a portion of the cost. UNUM has the right to modify or terminate
these benefits. The underlying plans are not currently funded.

Effective January 1, 1993, UNUM adopted Financial Accounting Standard
("FAS") No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," which changed the method for recognition of the cost of these
benefits from a cash basis to an accrual basis over the years in which the
employees render the related services. UNUM elected to immediately recognize the
FAS 106 liability at January 1, 1993, of $48.8 million as a cumulative effect of
an accounting change, which decreased net income by $32.1 million, or $0.40 per
share, during 1993.

Postretirement benefits expense included the following components:

-------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER
31,
-----------
(DOLLARS IN MILLIONS) 1995 1994

- ---------------------------------------------------------------------------------------------------------------
Service cost...................................................................................... $ 4.2 $3.8
Interest cost..................................................................................... 5.8 4.4
----- ----
Postretirement benefits expense............................................................... $10.0 $8.2
----- ----
----- ----

The following represents the unfunded accumulated postretirement benefits
obligation as determined by the plans' actuaries:

- ---------------------------------------------------------------------------------------------------------------
Retirees.......................................................................................... $21.5 $21.3
Active employees fully eligible................................................................... 9.3 4.5
Other active participants......................................................................... 41.5 38.9
----- ----
Accumulated postretirement benefits obligation.................................................... 72.3 64.7
Unrecognized other amounts........................................................................ 0.1 (1.0)
----- ----
Accrued postretirement benefits cost.......................................................... $72.4 $63.7
----- ----
----- ----

Under UNUM's plans, the cost of covered health care benefits is assumed to
increase 8.75% for retirees less than 65 years old, and 6.67% for retirees 65
years and older for 1996. These rates are assumed to decrease incrementally to
5.00% by 2001, and remain at that level thereafter. The weighted average
discount rates used in determining the accumulated

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
postretirement benefits obligation were 7.25% at December 31, 1995, and 8.00%
and 8.25%, at December 31, 1994. The rates of increase in future compensation
levels used in determining the accumulated postretirement benefits obligation
were 4.7% and 5.2%, at December 31, 1995 and 1994, respectively.

At December 31, 1995, a 1% increase in the trend rate for health care costs
would increase the accumulated postretirement benefits obligation by $17.3
million and postretirement benefits expense by $2.7 million.

NOTE 8. STOCK BASED COMPENSATION AND INCENTIVE PLANS

LONG-TERM STOCK INCENTIVE PLAN AND EXECUTIVE STOCK OPTION PLAN

The 1990 Long-Term Stock Incentive Plan ("Incentive Plan") provides for
granting of restricted shares of UNUM Corporation common stock to key officers.
The Incentive Plan also provides for granting of options to officers, non-
employee directors of UNUM Corporation and key employees, to purchase UNUM
Corporation common stock over ten years at a price not less than 100% of the
fair market value on the date of grant. The maximum number of shares reserved
for issuance under the Incentive Plan was 6,800,000 in 1995, 1994 and 1993. At
December 31, 1995, 1994 and 1993, 1,680,235 shares, 2,511,145 shares, and
3,316,734 shares, respectively, were available for grant under the Incentive
Plan.

The restriction period for each restricted stock award under the Incentive
Plan is in excess of three years, with the restrictions lapsing as a result of
the achievement of prescribed financial performance objectives during each three
year period, with the exception of 20,200 shares granted in 1995 and 10,000
shares granted in 1994, on which restrictions will lapse upon the grantee
remaining in the employ of UNUM for a prescribed period of time. Plan
participants are entitled to cash dividends and voting rights on their
respective shares. All other restricted stock shares issued remained subject to
restrictions.

The market value of the restricted shares issued under the Incentive Plan
has been recorded as deferred compensation and is included as a reduction of
stockholders' equity in the Consolidated Balance Sheets.

The 1987 Executive Stock Option Plan ("Option Plan") provided for granting
to officers and key employees options to purchase UNUM Corporation common stock
over ten years at a price not less than 100% of the fair market value on the
date of grant. Options outstanding under the Option Plan are included in the
summary of stock options.

Between 1991 and 1994, certain officers were granted limited stock
appreciation rights ("LSARs") in tandem with their outstanding options. LSARs
afford the optionee the right to receive payment upon a change in control as
defined in the plans equal to the higher of the excess of the highest price per
share paid in connection with such change in control or the fair market value
per share, over the option price per share. As an underlying stock option is
exercised, the LSARs are automatically canceled. At December 31, 1995, 1994 and
1993, there were 480,825 LSARs, 590,275 LSARs, and 556,500 LSARs outstanding,
respectively.

THE 1998 GOALS STOCK OPTION PLAN

The 1998 Goals Stock Option Plan ("1998 Option Plan") was introduced in
January 1995. The 1998 Option Plan provides for granting to all eligible
employees up to 150 options to purchase UNUM Corporation common stock at a price
not less than 100% of the fair market value on the date of the grant. The
options will vest to the employee in nine years from the date of the grant;
however, if UNUM achieves its 1998 goals, vesting will be accelerated to early
1999. During 1995, 1,105,350 shares were granted under the 1998 Option Plan.
Options outstanding under the 1998 Option Plan are included in the summary of
stock options.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. STOCK BASED COMPENSATION AND INCENTIVE PLANS (CONTINUED)
The following is a summary of stock options and restricted stock
information:

- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at January 1, 1993........................................................................ 3,126,882 115,400
1993 Activity:
Granted at $52.88 to $57.75 per share............................................................... 1,031,650 --
Granted for restricted stock........................................................................ -- 32,525
Exercised at $9.03 to $36.75 per share.............................................................. (655,300) --
Canceled/reissued................................................................................... (100,278) (1,500)
---------- -----------
Outstanding at December 31, 1993...................................................................... 3,402,954 146,425
---------- -----------
1994 Activity:
Granted at $38.00 to $51.31 per share............................................................... 884,375 --
Granted for restricted stock........................................................................ -- 46,850
Lapse of restrictions on restricted stock........................................................... -- (80,800)
Exercised at $9.03 to $47.88 per share.............................................................. (282,729) --
Canceled/reissued................................................................................... (151,578) (2,525)
---------- -----------
Outstanding at December 31, 1994...................................................................... 3,853,022 109,950
---------- -----------
1995 Activity:
Granted at $38.00 to $54.75 per share............................................................... 2,200,000 --
Granted for restricted stock........................................................................ -- 70,950
Lapse of restrictions on restricted stock........................................................... -- (33,100)
Exercised at $10.81 to $56.38 per share............................................................. (541,188) --
Canceled/reissued................................................................................... (314,200) (5,600)
---------- -----------
Outstanding at December 31, 1995...................................................................... 5,197,634 142,200
---------- -----------
---------- -----------

The number of exercisable shares as of December 31, 1995, 1994 and 1993, was
2,108,060 shares, 1,975,219 shares, and 1,396,182 shares, respectively.

ANNUAL INCENTIVE PLANS

UNUM has several annual incentive plans for certain employees and executive
officers, that provide additional compensation based on achievement of
predetermined annual corporate and affiliate financial and non-financial goals.
In 1995, 1994 and 1993, expense for these plans was $19.9 million, $7.5 million
and $27.9 million, respectively.

NOTE 9. INCOME TAXES
Effective January 1, 1993, UNUM adopted Financial Accounting Standard No.
109, "Accounting for Income Taxes," which changed the method for calculating and
reporting deferred income taxes in the financial statements from the deferred
method to the liability method. The liability method requires that deferred tax
liabilities or assets at the end of each period be determined using the tax rate
expected to be in effect when taxes are actually paid or recovered. Under this
method, income tax will increase or decrease in the same period in which a
change in tax rate is enacted. The cumulative effect of this accounting change
amounted to a $20.0 million increase in net income, or $0.25 per share, for the
year ended December 31, 1993.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9. INCOME TAXES (CONTINUED)
A reconciliation of income taxes computed by applying the federal income tax
rate to income before income taxes and the consolidated income tax expense
charged to operations follows:

- ------------------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate of 35%............................................................ $133.7 $ 69.5 $161.1
Tax-exempt income............................................................................... (30.0) (32.0) (29.4)
Prior years' taxes.............................................................................. (6.6) -- (2.0)
State income tax................................................................................ 3.8 2.2 3.9
Adjustment to deferred tax liability due to tax rate increase................................... -- -- 7.8
Realized investment gains....................................................................... (5.0) (1.3) --
Other........................................................................................... 4.9 5.5 6.9
------ ------ ------
Income taxes................................................................................ $100.8 $ 43.9 $148.3
------ ------ ------
------ ------ ------

On August 10, 1993, legislation was enacted to increase the federal
corporate income tax rate of 34% to 35%, retroactive to January 1, 1993. The tax
rate increase resulted in a charge to net income totaling $11.4 million, or
$0.15 per share, which included $3.6 million, or $0.05 per share, related to
1993 pretax income, and a $7.8 million, or $0.10 per share, adjustment to the
deferred income tax liability.

Deferred income tax liabilities and assets consist of the following:

- ---------------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs........................................................................ $ 321.6 $ 298.9
Policy reserve adjustments............................................................................... -- 59.3
Net unrealized gains..................................................................................... 174.0 27.1
Value of business acquired............................................................................... 17.7 17.9
Invested assets.......................................................................................... 10.9 28.9
Other.................................................................................................... 16.0 10.6
--------- ---------
Gross deferred tax liabilities......................................................................... 540.2 442.7
--------- ---------
Deferred tax assets:
Alternative minimum tax credit carryforwards............................................................. 29.0 45.3
Policy reserve adjustments............................................................................... 65.9 --
Net realized losses...................................................................................... 25.1 15.0
Postretirement benefits.................................................................................. 22.1 20.3
Loss carryforward........................................................................................ 1.0 5.9
Other.................................................................................................... 11.1 7.6
--------- ---------
Gross deferred tax assets.............................................................................. 154.2 94.1
Less valuation allowance................................................................................... 6.0 --
--------- ---------
Net deferred tax assets................................................................................ 148.2 94.1
--------- ---------
Net deferred tax liability................................................................................. $ 392.0 $ 348.6
--------- ---------
--------- ---------

Deferred income taxes relating to cumulative net unrealized gains on
available for sale fixed maturity and equity securities were $174.0 million,
$27.1 million and $79.4 million at December 31, 1995, 1994 and 1993,
respectively.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9. INCOME TAXES (CONTINUED)
A valuation allowance is established when it is more likely than not that
deferred tax assets will not be realized. UNUM established a valuation allowance
of $6.0 million in 1995 to reflect the estimated amount of deferred tax assets
which may not be realized related to certain reported foreign subsidiaries'
losses.

As of December 31, 1995, deferred U.S. income taxes have not been provided
on the accumulated earnings of UNUM's foreign subsidiaries. These earnings could
generate additional U.S. tax if remitted to UNUM Corporation.

Prior to the Tax Reform Act of 1984 ("1984 Act"), half the excess of the tax
basis gain from operations of a life insurance company over its taxable
investment income was currently taxable. The other half was set aside in a
Policyholders Surplus Account, together with certain special life insurance
company deductions. The cumulative amount in the Policyholders Surplus Account
as of December 31, 1983, was frozen by the 1984 Act and amounted to $31.8
million at December 31, 1995. Any direct or indirect distributions from this
account would be taxed at current tax rates; however, no provision has been made
for related taxes. If the amount set aside in this account were taxed at the
current rate at December 31, 1995, for all life insurance subsidiaries, the tax
would have amounted to $11.1 million.

UNUM's Consolidated Statements of Income for 1995, 1994 and 1993, included
the following amounts of foreign income and related income tax expense:

-------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER
31,
--------------------
(DOLLARS IN MILLIONS) 1995 1994 1993

- ----------------------------------------------------------------------------------------------------------------
Foreign income............................................................................ $(1.2) $24.2 $ 20.9
----- ----- ------
----- ----- ------
Income tax expense (credit):
Current................................................................................. $ 1.4 $ 0.7 $(12.5)
Deferred................................................................................ (0.2) 9.7 20.2
----- ----- ------
Total................................................................................. $ 1.2 $10.4 $ 7.7
----- ----- ------
----- ----- ------

UNUM subsidiaries had operating loss carryforwards totaling $2.5 million and
alternative minimum tax ("AMT") credit carryforwards totaling $29.0 million as
of December 31, 1995. The operating loss carryforwards will expire, if not
utilized, in 1999 through 2002. The AMT credits can be carried forward
indefinitely.

NOTE 10. NOTES PAYABLE
Notes payable consisted of the following at December 31, 1995, and 1994:

- ---------------------------------------------------------------------------------------------------------------------------------
Short-term debt:
Commercial paper......................................................................................... $ 82.4 $ 216.5
Other notes payable, with weighted average interest rate of 1.0% in 1995 and 2.7% in 1994................ 29.1 30.1
Medium-term notes payable, due 1996, with interest rate of 6.2%.......................................... 15.0 --
--------- ---------
Total short-term debt.................................................................................. 126.5 246.6
--------- ---------
Long-term debt:
Medium-term notes payable due 1997 to 2024 with interest rates ranging from 5.1% to 7.5%................. 290.4 180.8
Monthly income debt securities, due 2025, with interest rate of 8.8%
$172.5 million issued net of unamortized offering costs of $5.6 million................................. 166.9 --
Other notes payable...................................................................................... -- 1.3
--------- ---------
Total long-term debt................................................................................... 457.3 182.1
--------- ---------
Total notes payable.................................................................................... $ 583.8 $ 428.7
--------- ---------
--------- ---------

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10. NOTES PAYABLE (CONTINUED)
At December 31, 1995, UNUM Corporation had a $500 million committed
revolving credit facility that expires on October 1, 1999. UNUM's commercial
paper program is supported by the revolving credit facility and is available for
general liquidity needs, capital expansion, acquisitions or stock repurchase.
The committed revolving credit facility contains certain covenants which, among
other provisions, require maintenance of certain levels of stockholders' equity
and limits on debt levels. The commercial paper outstanding at December 31,
1995, and 1994, had a weighted average interest rate of 5.88% and 6.34%,
respectively.

Aggregate maturities of notes payable are as follows: 1996-$126.5 million;
1997-$48.5 million; 1998-$68.0 million; 1999-$21.5 million; 2000-$60.0;
thereafter-$259.3 million.

NOTE 11. CAPITAL STOCK AND PREFERRED STOCK PURCHASE RIGHTS
At December 31, 1995, approximately 2.7 million shares of common stock
remained authorized for stock repurchase. During 1995, UNUM did not acquire any
shares in the open market. During 1994 and 1993, UNUM repurchased 3.9 million
and 3.7 million shares, respectively, in the open market. The aggregate cost of
the 1994 and 1993 repurchases was $183.3 million and $192.5 million,
respectively, which was primarily funded through additional borrowings.

Under the Long-Term Stock Incentive Plan and Executive Stock Option Plan and
the plans of Colonial Companies, Inc. (see Note 8 "Stock Based Compensation and
Incentive Plans"), 612,138 shares, 329,579 shares, and 687,825 shares were
issued in 1995, 1994 and 1993, respectively.

UNUM adopted a Shareholder Rights Plan on March 13, 1992. Under the Plan,
each Right, under certain specific circumstances, entitles the holder to
purchase one one-hundredth of a share of Series A Junior Participating Preferred
Stock at a purchase price of $150. The Rights become exercisable at a specified
time after (1) a person or group acquires 10% or more of UNUM Corporation common
stock or (2) a tender or exchange offer for 10% or more of UNUM Corporation
common stock. The Rights expire at the close of business on March 13, 2002,
unless earlier redeemed by the Company under certain circumstances at a price of
$0.01 per Right.

NOTE 12. DIVIDEND RESTRICTIONS
UNUM is subject to various state insurance regulatory restrictions that
limit the maximum amount of dividends available from its United States domiciled
insurance subsidiaries without prior approval. Under current law, during 1996
approximately $135 million will be available for payment of dividends to UNUM
Corporation without state insurance regulatory approval. Dividends in excess of
this amount may only be paid with state insurance regulatory approval. The
aggregate statutory capital and surplus of the United States domiciled insurance
subsidiaries of UNUM Corporation was approximately $1,149 million and $840
million, at December 31, 1995, and 1994, respectively. The aggregate statutory
net income of UNUM Corporation's United States domiciled insurance subsidiaries
was approximately $290 million, $70 million and $216 million for 1995, 1994 and
1993, respectively. State insurance regulatory authorities prescribe statutory
accounting practices that differ in certain respects from generally accepted
accounting principles. The significant differences relate to deferred
acquisition costs, deferred income taxes, non-admitted asset balances, required
investment risk reserves and reserve calculation assumptions.

UNUM Corporation also has the ability to draw a dividend of approximately
$19 million from its United Kingdom based affiliate, UNUM Limited, subject to
certain U.S. tax consequences.

NOTE 13. LITIGATION
In the normal course of its business operations, UNUM is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of lawsuits were pending at December 31, 1995. In the opinion of
management, the ultimate liability, if any, arising from this litigation is not
expected to have a material adverse effect on the consolidated financial
position or the consolidated operating results of UNUM.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13. LITIGATION (CONTINUED)
and stock distributed to policyholders in connection with the 1986 conversion of
Union Mutual Life Insurance Company to a stock company. Although UNUM believes
its claims are meritorious, the United States is aggressively resisting the
claims and the ultimate recovery, if any, cannot be determined at this time.

NOTE 14. SUBSEQUENT EVENT
On January 24, 1996, UNUM America entered into an agreement for the sale of
its group tax-sheltered annuity ("TSA") business to The Lincoln National Life
Insurance Company ("Lincoln Life"), a part of Lincoln National Corporation, and
to a new New York insurance subsidiary of Lincoln Life. The agreement also
contemplates that First UNUM will enter into a similar agreement with Lincoln
Life's New York insurance subsidiary. The sale, which is subject to regulatory
approvals, involves approximately 1,700 group contractholders and assets under
management of approximately $3 billion. The agreement initially contemplates the
reinsurance of these contracts under an indemnity reinsurance arrangement. These
contracts will then be reinsured pursuant to an assumption reinsurance
arrangement upon consent of the TSA contractholders and/or participants. The
purchase price (ceding commission) at closing is expected to be approximately
$70 million. It is anticipated that it will take several months (perhaps six to
nine months) to obtain the necessary approvals and otherwise close the sale.
There is no guarantee that the sale will close.

Historical results of the TSA business included in UNUM's Consolidated
Statements of Income were as follows:

- ------------------------------------------------------------------------------------------------------------------------
Revenues........................................................................................ $247.6 $238.1 $250.2
Net income...................................................................................... $ 31.1 $ 29.9 $ 24.7
Net income per common share..................................................................... $ 0.43 $ 0.40 $ 0.31

NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values are based on quoted market prices, when available. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. These valuation techniques
require management to develop a significant number of assumptions, including
discount rates and estimates of future cash flow. Derived fair value estimates
cannot be substantiated by comparison to independent markets or to disclosures
by other companies with similar financial instruments. These fair value
disclosures do not purport to be the amount that could be realized in immediate
settlement of the financial instrument.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table summarizes the carrying amounts and fair values of
UNUM's financial instruments at December 31, 1995, and 1994:

- ------------------------------------------------------------------------------------------------------------------------------
Financial assets:
Fixed maturities:
Available for sale............................................................ $ 9,135.4 $ 9,135.4 $ 1,640.6 $ 1,640.6
Held to maturity.............................................................. -- -- 6,227.2 6,168.6
Equity securities available for sale............................................ 25.2 25.2 627.9 627.9
Mortgage loans.................................................................. 1,163.4 1,274.9 1,216.3 1,265.4
Policy loans.................................................................... 219.2 219.2 201.0 201.0
Short-term investments.......................................................... 896.7 896.7 291.9 291.9
Cash............................................................................ 42.5 42.5 36.1 36.1
Accrued investment income....................................................... 208.5 208.5 195.9 195.9
Financial liabilities:
Other policyholder funds:
Investment-type insurance contracts:
With defined maturities..................................................... $ 400.0 $ 440.0 $ 667.0 $ 685.0
With no defined maturities.................................................. 3,031.0 2,967.0 3,013.0 2,948.0
Individual annuities and supplementary contracts not involving life
contingencies................................................................ 81.4 81.4 84.6 84.6
Notes payable................................................................... 583.8 610.8 428.7 414.5

The following methods and assumptions were used in estimating fair value
disclosures for financial instruments:

FIXED MATURITIES: Fair values for fixed maturities are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are estimated using values obtained from independent pricing services or,
in the case of private placements, are estimated by discounting expected future
cash flows using a current market rate applicable to the yield, credit quality
and maturity of the investments.

EQUITY SECURITIES AVAILABLE FOR SALE: Fair values for equity securities
available for sale are based on quoted market prices and are reported in the
Consolidated Balance Sheets at these values.

MORTGAGE LOANS: Fair values for mortgage loans are estimated based on
discounted cash flow analyses using interest rates currently being offered for
similar mortgage loans to borrowers with similar credit ratings and maturities.
Mortgage loans with similar characteristics are aggregated for purposes of the
calculations.

POLICY LOANS, SHORT-TERM INVESTMENTS, CASH AND ACCRUED INVESTMENT
INCOME: Fair values for these instruments approximate the carrying amounts
reported in the Consolidated Balance Sheets.

INVESTMENT-TYPE INSURANCE CONTRACTS: Fair values for liabilities under
investment-type insurance contracts with defined maturities are estimated using
discounted cash flow calculations based on interest rates that would be offered
currently for similar contracts with maturities consistent with those remaining
for the contracts being valued. Fair values for liabilities under
investment-type insurance contracts with no defined maturities are the amounts
payable on demand after surrender charges at the balance sheet date.

The estimated fair values of liabilities under all insurance contracts
(investment-type and other than investment-type) are taken into consideration in
UNUM's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
INDIVIDUAL ANNUITIES AND SUPPLEMENTARY CONTRACTS NOT INVOLVING LIFE
CONTINGENCIES: Fair values approximate the carrying amounts reported in other
policyholder funds in the Consolidated Balance Sheets.

NOTES PAYABLE: Fair values of short-term borrowings approximate the
carrying amount. Fair values of long-term notes are estimated using discounted
cash flow analyses based on UNUM's current incremental borrowing rates for
similar types of borrowing arrangements.

NOTE 16. SEGMENT INFORMATION
UNUM's markets for its insurance, special risk and retirement income
products are the United States, its principal market, Canada, the United Kingdom
and the Pacific Rim. Through its affiliates, UNUM is the leading provider of
group long term disability insurance, its principal product, in the United
States and the United Kingdom. Products are marketed through sales personnel,
independent contractors and brokers, and specialty agents. UNUM targets sales of
its disability products to executive, administrative and management personnel,
and other professionals such as doctors, attorneys, accountants and engineers.

To more clearly reflect UNUM's management of its businesses and to more
appropriately group its product portfolios, UNUM began reporting its operations,
effective January 1, 1995, principally in four business segments: Disability
Insurance, Special Risk Insurance, Colonial Products and Retirement Products.
For comparative purposes, prior period information has been restated to reflect
reporting in these segments.

The Disability Insurance segment includes disability products offered in
North America, the United Kingdom and Japan including: group long term
disability, individual disability, group short term disability, association
group disability, disability reinsurance and long term care insurance. The
Special Risk Insurance segment includes group life, special risk accident
insurance, non-disability reinsurance operations, reinsurance underwriting
management operations and other special risk insurance products. The Colonial
Products segment includes Colonial Companies, Inc. and subsidiaries, which offer
payroll-deducted, voluntary employee benefits including personal accident and
sickness, cancer and life insurance products to employees at their worksites.
The Retirements Products segment includes tax sheltered annuities and products
which are no longer actively marketed by UNUM including guaranteed investment
contracts, deposit administration accounts and 401(k) plans. Corporate includes
transactions that are generally non-insurance related.

Investment income and net realized investment gains are allocated to the
segments based on designation of ownership of assets identified to the segments.
Operating expenses are allocated to the segments based on direct association
with a product whenever possible. If, however, the expense cannot be readily
associated with a particular product, the costs are allocated based on ratios of
the relative time spent, extent of usage or varying volume of work performed for
each segment.

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16. SEGMENT INFORMATION (CONTINUED)
Summarized financial information for the four business segments and
Corporate is as follows:

- ------------------------------------------------------------------------------------------------------------------------------
Revenues:
Disability Insurance.................................................................... $ 2,472.8 $ 2,116.5 $ 1,917.7
Special Risk Insurance.................................................................. 750.7 647.8 594.2
Colonial Products....................................................................... 527.3 473.9 448.8
Retirement Products..................................................................... 357.8 369.4 430.1
Corporate............................................................................... 14.3 5.0 6.2
---------- ---------- ----------
Total revenues........................................................................ $ 4,122.9 $ 3,612.6 $ 3,397.0
---------- ---------- ----------
---------- ---------- ----------
Income (loss) before income taxes and cumulative effects of accounting changes:
Disability Insurance.................................................................... $ 217.0 $ 56.2 $ 314.1
Special Risk Insurance.................................................................. 60.3 65.9 38.9
Colonial Products....................................................................... 87.7 62.7 70.4
Retirement Products..................................................................... 45.5 42.0 54.3
Corporate............................................................................... (28.6) (28.2) (17.4)
---------- ---------- ----------
Income before income taxes and cumulative effects of accounting changes............... 381.9 198.6 460.3
Income taxes.............................................................................. 100.8 43.9 148.3
---------- ---------- ----------
Income before cumulative effects of accounting changes.................................... 281.1 154.7 312.0
Cumulative effects of accounting changes.................................................. -- -- (12.1)
---------- ---------- ----------
Net income............................................................................ $ 281.1 $ 154.7 $ 299.9
---------- ---------- ----------
---------- ---------- ----------

- ------------------------------------------------------------------------------------------------------------------------------
Identifiable Assets:
Disability Insurance.................................................................... $ 7,280.3 $ 6,131.9 $ 5,403.0
Special Risk Insurance.................................................................. 1,056.5 846.8 735.4
Colonial Products....................................................................... 996.5 846.2 819.2
Retirement Products..................................................................... 4,717.4 4,504.0 4,684.6
Corporate............................................................................... 372.9 451.3 452.3
Individual Participating
Life and Annuity...................................................................... 364.2 347.0 342.8
---------- ---------- ----------
Total assets.......................................................................... $ 14,787.8 $ 13,127.2 $ 12,437.3
---------- ---------- ----------
---------- ---------- ----------

UNUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
1995 and 1994:

- ------------------------------------------------------------------------------------------------------------------------------------
Premiums............................................................................................ $817.0 $738.0 $729.2 $734.0
Investment income................................................................................... 207.3 207.8 199.3 191.9
Net realized investment gains....................................................................... 3.2 2.9 208.1 10.9
Benefits to policyholders........................................................................... 634.8 568.7 717.7 571.8
Net income.......................................................................................... $ 62.1 $ 66.7 $ 88.9 $ 63.4
------ ------ ------ ------
------ ------ ------ ------
Net income per common share......................................................................... $ 0.85 $ 0.92 $ 1.22 $ 0.87
------ ------ ------ ------
------ ------ ------ ------

1994
------------------------------
4TH 3RD 2ND 1ST

- ------------------------------------------------------------------------------------------------------------------------------------
Premiums............................................................................................ $702.6 $667.4 $698.6 $652.7
Investment income................................................................................... 194.4 192.3 192.4 191.1
Net realized investment gains....................................................................... 9.6 11.6 12.5 11.9
Benefits to policyholders........................................................................... 537.5 705.7 516.5 479.3
Net income (loss)................................................................................... $ 54.0 $(61.7) $ 85.3 $ 77.1
------ ------ ------ ------
------ ------ ------ ------
Net income (loss) per common share.................................................................. $ 0.75 $(0.84) $ 1.14 $ 1.02
------ ------ ------ ------
------ ------ ------ ------

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

No disagreements with accountants on any matter of accounting principles or
practices or financial statement disclosure have been reported on a Form 8-K
during the past two years prior to the date of the most recent financial
statements.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A. DIRECTORS OF THE REGISTRANT

The information under the caption "Election of Directors" included in UNUM's
proxy statement dated March 25, 1996, is incorporated by reference.

B. EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of UNUM are as follows:

AGE (AS OF AN OFFICER
NAME MARCH 22, 1996) POSITION HELD WITH UNUM SINCE
- ----------------------- ------------------- ------------------------------------------------------------------ ----------

James F. Orr III 53 Chairman, President and Chief Executive Officer 1986
Thomas G. Brown 51 Executive Vice President 1992
Stephen B. Center 58 Executive Vice President 1972
Robert W. Crispin 49 Executive Vice President and Chief Financial Officer 1995
Peter J. Moynihan 52 Senior Vice President 1979
Kevin P. O'Connell 50 Executive Vice President 1987
Elaine D. Rosen* 43 Executive Vice President, UNUM America 1983
Robert E. Staton* 49 Chairman and Chief Executive Officer, Colonial Life 1993

- ------------
*Denotes an officer of a subsidiary who is not an officer of the Corporation but
who is considered an "executive officer" under regulations of the Securities
and Exchange Commission.

The officers are elected annually and hold office until their respective
successors have been chosen and qualified, or until death, resignation or
removal. The UNUM Board may also appoint or delegate the appointment of
officers, assistant officers and agents as it may deem necessary for such
periods as the By-Laws, the UNUM Board, or the delegatee may prescribe.

Mr. Orr was elected Chairman of the Board of UNUM in February 1988. In
addition, he has served as President and Chief Executive Officer since September
1987. He joined UNUM in 1986.

Mr. Brown was elected Executive Vice President of UNUM in January 1995. In
addition, he continues to serve as Chairman of the Board, President and Chief
Executive Officer of Duncanson & Holt, Inc. ("D&H"), a post he has held since
1987. D&H became a wholly-owned subsidiary of UNUM in July 1992.

Mr. Center was elected President of UNUM America and Executive Vice
President of UNUM in September 1992. Previously, he served as Group Executive
Vice President of UNUM America from May 1990 to August 1992. He joined UNUM
America in 1963.

Mr. Crispin was elected Executive Vice President of UNUM in January 1995 and
additionally as Chief Financial Officer in August 1995. Prior to joining UNUM,
Mr. Crispin served as Vice Chairman and Chief Investment Officer of The
Travelers Insurance Companies, from July 1991 to January 1995 and as Executive
Vice President of Lincoln National Corporation from 1986 to 1991.

Mr. Moynihan was elected Senior Vice President of UNUM in September 1993 and
Senior Vice President of UNUM America in October 1987. He joined UNUM America in
1973.

Mr. O'Connell was elected Executive Vice President of UNUM America in May
1995 and Executive Vice President of UNUM in February 1996. Previously, he
served as Senior Vice President of UNUM America from November 1988 to May 1995.
He joined UNUM America in 1968.

Ms. Rosen was elected Executive Vice President of UNUM America in May 1995.
Previously, she served as Senior Vice President of UNUM America from November
1988 to May 1995. She joined UNUM America in 1975.

Mr. Staton was elected Chairman of Colonial Companies in December 1993 and
additionally as Chief Executive Officer in July 1995. Previously, he served as
Senior Vice President from February 1990 to December 1993 and Vice President
from August 1985 to February 1990; and additionally as General Counsel from
August 1985 to November 1993, and Corporate Secretary from February 1992 to
August 1993. Colonial Companies merged with UNUM in March 1993.

ITEM 11. EXECUTIVE COMPENSATION

The information under the captions "Compensation of Directors", "Board
Compensation Report on Executive Compensation", and "Executive Compensation"
included in UNUM's proxy statement dated March 25, 1996, is incorporated by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information under the caption "Security Ownership" included in UNUM's
proxy statement dated March 25, 1996, is incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the captions "Executive Compensation" and "Other
Agreements and Transactions" included in UNUM's proxy statement dated March 25,
1996, is incorporated by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Index of documents filed as part of this report:

1. The following Consolidated Financial Statements of UNUM Corporation and
subsidiaries are included in Item 8.

PAGE OF
THIS REPORT
-----------

Report of Independent Accountants................................................................... 32
Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993.............. 33
Consolidated Balance Sheets as of December 31, 1995 and 1994........................................ 34
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and
1993............................................................................................... 35
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993.......... 36
Notes to Consolidated Financial Statements.......................................................... 37

2. Financial Statement Schedules

II Condensed Financial Information of UNUM Corporation (Registrant)............................... 64

III Supplementary Insurance Information............................................................ 68

IV Reinsurance.................................................................................... 69

3. Exhibits. See Index to Exhibits on page 70 of this report.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed by the Registrant during the fourth
quarter of 1995.

Schedules and exhibits required by Article 7 of Regulation S-X other than
those listed are omitted because they are not required, are not applicable, or
equivalent information has been included in the financial statements, and notes
thereto, or elsewhere herein.

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, IN THE CITY OF
PORTLAND, STATE OF MAINE, ON MARCH 27, 1996.
UNUM Corporation
By /s/ JAMES F. ORR III
------------------------------------
James F. Orr III (Chairman, President
and Chief Executive Officer)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.

NAME TITLE DATE
- --------------------------------------------------------- --------------------------------------------------------- --------------

/s/ JAMES F. ORR III Chairman, President and Chief Executive Officer March 27, 1996
-------------------------------------------
(James F. Orr III)

/s/ ROBERT W. CRISPIN Executive Vice President and Chief Financial Officer March 27, 1996
-------------------------------------------
(Robert W. Crispin)

/s/ STEPHEN D. ROBERTS Vice President and Corporate Controller March 27, 1996
-------------------------------------------
(Stephen D. Roberts)

* Director March 27, 1996
-------------------------------------------
(Gayle O. Averyt)

* Director March 27, 1996
-------------------------------------------
(Robert E. Dillon, Jr.)

* Director March 27, 1996
-------------------------------------------
(Gwain H. Gillespie)

* Director March 27, 1996
-------------------------------------------
(Ronald E. Goldsberry)

* Director March 27, 1996
-------------------------------------------
(Donald W. Harward)

* Director March 27, 1996
-------------------------------------------
(George J. Mitchell)

* Director March 27, 1996
-------------------------------------------
(Cynthia A. Montgomery)

* Director March 27, 1996
-------------------------------------------
(James L. Moody, Jr.)

* Director March 27, 1996
-------------------------------------------
(Lawrence R. Pugh)

* Director March 27, 1996
-------------------------------------------
(Lois Dickson Rice)

Director March 27, 1996
-------------------------------------------
(John W. Rowe)

*/s/ JOHN-PAUL DEROSA
-------------------------------------------
(John-Paul DeRosa, as Attorney-in-fact
for each of the persons indicated)
(Assistant Secretary)

UNUM CORPORATION (PARENT COMPANY)
SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)

- ----------------------------------------------------------------------------------------------
Revenues
Dividends from subsidiaries*........................................ $ 23.6 $102.0 $131.8
Investment income................................................... 0.4 0.1 0.2
Interest income on loans to subsidiaries*........................... 5.5 -- --
Fees and other income............................................... 0.3 0.8 --
------ ------ ------
Total revenues.................................................. 29.8 102.9 132.0
Expenses
Operating expenses.................................................. 2.3 8.7 11.6
Interest expense.................................................... 37.2 18.6 12.4
Interest expense on loans from subsidiaries*........................ 3.9 2.3 0.1
------ ------ ------
Total expenses.................................................. 43.4 29.6 24.1
------ ------ ------
Income (loss) before income taxes..................................... (13.6) 73.3 107.9
Income tax benefit.................................................... 13.1 6.2 5.7
------ ------ ------
Income (loss) before equity in undistributed net income of
subsidiaries......................................................... (0.5) 79.5 113.6
Equity in undistributed net income of subsidiaries*................... 281.6 75.2 186.3
------ ------ ------
Net income............................................................ $281.1 $154.7 $299.9
------ ------ ------
------ ------ ------

- ------------
*Eliminated in consolidation

See note to condensed financial statements.

UNUM CORPORATION (PARENT COMPANY)
SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(DOLLARS IN MILLIONS)

- ----------------------------------------------------------------------------------------------------
Assets
Investments
Investment in subsidiaries*................................................. $2,836.1 $2,386.0
Short-term investments...................................................... 0.6 0.5
-------- --------
Total investments......................................................... 2,836.7 2,386.5
Cash.......................................................................... -- 2.0
Amounts receivable from subsidiaries, net*.................................... 6.6 18.4
Notes receivable from subsidiary*............................................. 50.0 --
Property and equipment, net................................................... 18.1 16.7
-------- --------
Total assets.............................................................. $2,911.4 $2,423.6
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Liabilities
Notes payable............................................................... $ 583.8 $ 427.4
Notes payable to subsidiary*................................................ 10.0 60.0
Income taxes................................................................ 4.8 2.7
Other liabilities........................................................... 9.9 18.1
-------- --------
Total liabilities......................................................... 608.5 508.2
Stockholders' Equity
Preferred stock, par value $0.10 per share, authorized 10,000,000 shares,
none issued
Common stock, par value $0.10 per share, authorized 120,000,000 shares,
issued 99,987,958 shares................................................... 10.0 10.0
Additional paid-in capital.................................................. 1,065.7 1,062.4
Unrealized gains on available for sale securities of subsidiaries, net...... 235.6 67.7
Unrealized foreign currency translation adjustment.......................... (23.1) (23.7)
Retained earnings (including undistributed earnings of subsidiaries of
$1,395.9 million and $1,114.3 million in 1995 and 1994, respectively)...... 1,713.2 1,507.2
-------- --------
3,001.4 2,623.6
Less:
Treasury stock, at cost (1995-26,980,331 shares; 1994-27,575,430
shares)................................................................... 691.6 706.6
Restricted stock deferred compensation.................................... 6.9 1.6
-------- --------
Total stockholders' equity................................................ 2,302.9 1,915.4
-------- --------
Total liabilities and stockholders' equity................................ $2,911.4 $2,423.6
-------- --------
-------- --------
<FN>
- ------------
*Eliminated in consolidation

See note to condensed financial statements.

UNUM CORPORATION (PARENT COMPANY)
SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)

- -----------------------------------------------------------------------------------------------------------
Operating activities:
Net income.................................................................... $ 281.1 $ 154.7 $ 299.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in income tax liability............................................ 2.1 0.4 2.3
(Increase) decrease in amounts due to/from subsidiaries*.................... 11.8 (6.0) 7.5
Other....................................................................... (3.1) 11.1 4.6
Equity in undistributed net income of subsidiaries*......................... (281.6) (75.2) (186.3)
------- ------- -------
Net cash provided by operating activities................................. 10.3 85.0 128.0
------- ------- -------
Investing activities:
Purchases of investments...................................................... -- -- 0.3
Investment in subsidiaries, net*.............................................. (1.1) (30.6) 0.9
Issuance of notes receivable from subsidiaries*............................... (100.0) -- --
Repayment of notes receivable from subsidiaries*.............................. 50.0 -- --
Net (increase) decrease in short-term investments............................. (0.1) 3.9 (2.3)
Net additions to property and equipment....................................... (5.4) (3.3) (2.4)
------- ------- -------
Net cash used in investing activities..................................... (56.6) (30.0) (3.5)
------- ------- -------
Financing activities:
Dividends to stockholders..................................................... (75.1) (68.3) (61.4)
Treasury stock acquired....................................................... -- (183.3) (192.5)
Proceeds from notes payable................................................... 291.5 54.7 51.5
Repayment of notes payable.................................................... -- -- (50.0)
Net increase (decrease) in short-term debt.................................... (135.1) 136.7 58.1
Proceeds from notes payable to subsidiaries*.................................. -- -- 60.0
Repayment of notes payable to subsidiaries*................................... (50.0) -- --
Other......................................................................... 13.0 5.9 10.4
------- ------- -------
Net cash provided by (used in) financing activities....................... 44.3 (54.3) (123.9)
------- ------- -------
Net increase (decrease) in cash................................................. (2.0) 0.7 0.6
Cash at beginning of year....................................................... 2.0 1.3 0.7
------- ------- -------
Cash at end of year............................................................. $ -- $ 2.0 $ 1.3
------- ------- -------
------- ------- -------
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Income taxes................................................................ $ (15.1) $ (6.6) $ (8.1)
Interest.................................................................... $ 36.2 $ 18.1 $ 12.1
Interest to subsidiaries*................................................... $ 4.0 $ 2.2 $ --

- ------------
*Eliminated in consolidation

See note to condensed financial statements.

UNUM CORPORATION (PARENT COMPANY)
SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTE TO CONDENSED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements and notes of UNUM
Corporation and subsidiaries, which are included in Item 8.

UNUM CORPORATION AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
(DOLLARS IN MILLIONS)

-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1)(2)
FUTURE
POLICY AMORTIZATION
BENEFITS, BENEFITS TO OF
DEFERRED AND UNPAID (4)(5) POLICYHOLDERS DEFERRED (5)
POLICY CLAIMS AND (3) NET AND POLICY OTHER (6)
ACQUISITION CLAIM PREMIUM INVESTMENT INTEREST ACQUISITION OPERATING PREMIUMS
SEGMENT COSTS EXPENSES REVENUE INCOME CREDITED COSTS EXPENSES WRITTEN

- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
Disability Insurance... $ 758.3 $5,130.6 $1,879.9 $ 592.9 $1,711.2 $ 90.6 $454.0 $1,853.2
Special Risk
Insurance............. 99.8 476.5 702.3 48.4 492.3 35.5 162.6 223.6
Colonial Products...... 250.5 372.0 475.1 52.2 241.6 66.7 131.3 417.5
Retirement Products.... 33.7 596.0 34.1 323.7 275.3 0.8 36.2 23.3
Corporate.............. -- -- 0.1 14.2 -- -- 42.9 --
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
Total................ $1,142.3 $6,575.1 $3,091.5 $1,031.4 $2,720.4 $193.6 $827.0 $2,517.6
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
Year Ended December 31, 1994
Disability Insurance... $ 695.6 $4,175.9 $1,716.2 $ 400.3 $1,572.1 $ 70.7 $417.5 $1,705.5
Special Risk
Insurance............. 84.1 357.7 607.1 40.7 394.4 19.2 168.3 156.8
Colonial Products...... 224.8 330.5 441.3 32.6 226.1 60.6 124.5 388.1
Retirement Products.... 30.7 581.9 31.4 338.0 289.1 2.3 36.0 21.6
Corporate.............. -- (0.5) 0.8 4.2 -- -- 33.2 --
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
Total................ $1,035.2 $5,445.5 $2,796.8 $ 815.8 $2,481.7 $152.8 $779.5 $2,272.0
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
Year Ended December 31, 1993
Disability Insurance... $ 572.8 $3,526.0 $1,547.9 $ 369.8 $1,144.9 $ 68.1 $390.6 $1,528.7
Special Risk
Insurance............. 70.9 324.9 559.4 34.8 366.0 11.4 177.9 149.5
Colonial Products...... 206.0 282.2 407.4 41.4 211.7 56.1 110.6 365.4
Retirement Products.... 29.4 571.4 42.5 387.6 334.1 12.1 29.6 26.1
Corporate.............. -- (0.5) -- 6.2 -- -- 23.6 --
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
Total................ $ 879.1 $4,704.0 $2,557.2 $ 839.8 $2,056.7 $147.7 $732.3 $2,069.7
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
----------- ------------ ---------- ----------- ----------- ---------- --------- ----------
<FN>
- -------------
(1) Excludes other policyholder funds, as follows:

-------------------------------------------------
-------------------------------------------------------------
DECEMBER 31,
------------------------------------
SEGMENT 1995 1994 1993

- --------------------------------------------------------------------
Disability Insurance.......... $ 3.1 $ 2.1 $ 2.0
Special Risk Insurance........ 14.6 8.4 8.9
Colonial Products............. 128.0 100.1 76.0
Retirement Products........... 3,694.6 3,948.2 4,163.8
---------- ---------- ----------
Total..................... $ 3,840.3 $ 4,058.8 $ 4,250.7
---------- ---------- ----------
---------- ---------- ----------
<FN>
(2) Includes unearned premiums, other policy claims and benefits payable.
(3) Includes fees and other income (expense).
(4) Includes investment income (expense) and net realized investment gains.
(5) Investment income and net realized investment gains are allocated to the
segments based on designation of ownership of assets identified to the
segments. Operating expenses are allocated to the segments based on direct
association with a product whenever possible. If, however, the expense
cannot be readily associated with a particular product, the costs are
allocated based on ratios of the relative time spent, extent of usage or
varying volume of work performed for each segment.
(6) Premiums written for health and disability income policies.

Certain 1994 and 1993 amounts have been reclassified in 1995 for comparative
purposes.

UNUM CORPORATION AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(DOLLARS IN MILLIONS)

- ---------------------------------------------------------------------------------------------------------------------

Year Ended December 31, 1995
Life insurance in force..................... $164,478.4 $4,119.5 $ -- $160,358.9 --
---------- --------- ------ ----------
---------- --------- ------ ----------
Premiums
Life insurance and individual annuities... $ 571.4 $ 19.3 $ 2.0 $ 554.1 0.4%
Accident and health insurance............. 2,248.4 46.9 239.5 2,441.0 9.8%
Group annuities........................... 23.1 -- -- 23.1 --
---------- --------- ------ ----------
Total premiums........................ $ 2,842.9 $ 66.2 $ 241.5 $ 3,018.2
---------- --------- ------ ----------
---------- --------- ------ ----------
Year Ended December 31, 1994
Life insurance in force................... $145,425.9 $4,425.3 $ -- $141,000.6 --
---------- --------- ------ ----------
---------- --------- ------ ----------
Premiums
Life insurance and individual annuities... $ 517.9 $ 15.7 $ 1.6 $ 503.8 0.3%
Accident and health insurance............. 2,123.9 96.8 169.1 2,196.2 7.7%
Group annuities........................... 21.3 -- -- 21.3 --
---------- --------- ------ ----------
Total premiums........................ $ 2,663.1 $ 112.5 $ 170.7 $ 2,721.3
---------- --------- ------ ----------
---------- --------- ------ ----------
Year Ended December 31, 1993
Life insurance in force..................... $130,323.4 $2,247.9 $ -- $128,075.5 --
---------- --------- ------ ----------
---------- --------- ------ ----------
Premiums
Life insurance and individual annuities... $ 487.2 $ 11.9 $ 1.6 $ 476.9 0.3%
Accident and health insurance............. 1,818.6 38.1 191.0 1,971.5 9.7%
Group annuities........................... 25.7 -- -- 25.7 --
---------- --------- ------ ----------
Total premiums........................ $ 2,331.5 $ 50.0 $ 192.6 $ 2,474.1
---------- --------- ------ ----------
---------- --------- ------ ----------

Certain 1994 amounts have been reclassified in 1995 for comparative
purposes.

UNUM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS

NUMBER DESCRIPTION METHOD OF FILING PAGE NO.
- --------- -------------------------------------------------- -------------------------------------------------- --------

3.1 Certificate of Incorporation of UNUM Corporation, Filed as Exhibit 3.1 to the Registrant's Annual
as amended Report on Form 10-K dated March 25, 1992, and
incorporated herein by reference.
3.2 By-Laws of UNUM Corporation Filed as Exhibit 3.2 to the Registrant's Annual
Report on Form 10-K dated March 25, 1992, and
incorporated herein by reference.
4 Rights Agreement Filed as Exhibit 1 to the Registrant's Current
Report on Form 8-K dated March 18, 1992, and
incorporated herein by reference.
10.1 Deferred Compensation Plan Filed herewith.
10.2 Annual Incentive Plan Filed as Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K dated March 29, 1993, and
incorporated herein by reference.
10.2.1 Annual Incentive Plan-Summary of Significant Filed herewith.
Changes
10.3 1987 Executive Stock Option Plan Filed herewith.
10.4 1990 Long-Term Stock Incentive Plan Filed herewith.
10.5 1996 Long-Term Stock Incentive Plan Filed herewith.
10.6 Supplementary Retirement Plan Filed as Exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (Registration
No. 33-6571) dated June 18, 1986, and incorporated
herein by reference.
10.7 Supplemental Executive Retirement Plan Filed as Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K dated March 26, 1991, and
incorporated herein by reference.
10.8 Form of Executive Severance Agreement Filed as Exhibit 10.7 to the Registrant's Annual
Report on Form 10-K dated March 25, 1992, and
incorporated herein by reference.
10.9 Employment Agreement Filed herewith.
10.10 Employment Letter Filed herewith.
10.11 $500 Million Revolving Credit Agreement Filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K dated March 24, 1995, and
incorporated herein by reference.
10.12 Asset Transfer and Acquisition Agreement Filed herewith.
12 Computation of Ratio of Earnings to Fixed Charges Filed herewith.
21 Subsidiaries of UNUM Corporation Filed herewith.
23 Consent of Independent Accountants Filed herewith.
24 Power of Attorney Filed herewith.
27 Financial Data Schedule Filed herewith.