The loss ratio of 72.7% in fourth quarter 2013 declined from 77.0% in fourth quarter 2012, a 4.3 point improvement principally due to improved group disability results. The group disability loss ratio, which includes both short-term and long-term disability, improved by 10.1 points to 75.7% from 85.8% in fourth quarter 2012, reflecting favorable long-term disability recoveries and incidence trends and improved pricing. As a result of improved loss trends, the core earnings after-tax margin rose to 5.9% from 3.8% in fourth quarter 2012.

In fourth quarter 2013, fully insured premiums in Group Benefits were $821 million, a 10% decrease compared with $915 million in fourth quarter 2012. The reduction in premiums was expected and was primarily the result of the previously disclosed non-renewal of the largest account in this segment due to pricing and other considerations, continued pricing discipline, and management actions on the Association - Financial Institutions block of business.

MUTUAL FUNDSFourth Quarter 2013 Highlights:
  • Core earnings were $20 million, up 25% compared with fourth quarter 2012
  • Total Mutual Funds assets under management totaled $70.9 billion at Dec. 31, 2013, up 15% since Dec. 31, 2012
  • Mutual Funds gross sales rose 13% versus fourth quarter 2012, while net flows improved to $(0.4) billion
MUTUAL FUNDS              
($ in millions)       Three Months Ended
        Dec. 31 2013     Dec. 31 2012     Change
Core earnings       $20     $16     25%
Total Mutual Funds sales       $3,555     $3,153     13%
Total Mutual Funds net flows       $(442)     $(1,057)     58%
Total Mutual Funds assets under management       $70,918     $61,611     15%
Average Mutual Funds assets under management (AUM)       $68,839     $61,447     12%
Annuity AUM       $25,817     $26,036     (1%)
Total AUM       $96,735     $87,647     10%
Average AUM       $94,566     $87,884     8%

Fourth quarter 2013 core earnings grew 25% to $20 million compared to $16 million in fourth quarter 2012 while fourth quarter 2013 net income was $19 million, up 27% from $15 million in fourth quarter 2012. The increase in earnings was driven by growth in the retail and defined contribution mutual funds business, while earnings from annuity mutual funds remained stable. Earnings growth was driven by higher assets under management due to favorable market conditions, partially offset by increased expenses. The change in operating expenses was driven by higher variable distribution-related expenses combined with higher state taxes.

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