<PAGE>
                       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)
 
<TABLE>
<S>                                       <C>
                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)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (207) 770-2211
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
      TITLE OF EACH CLASS          NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------  -------------------------------------------
<S>                               <C>
 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
</TABLE>
 
        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.
<PAGE>
                               TABLE OF CONTENTS
                                     PART I
 
<TABLE>
<CAPTION>
ITEM                                                                                                                  PAGE
----                                                                                                                  ----
 
<C>   <C>                                                                                                             <C>
  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
</TABLE>
 
                                       2
<PAGE>
                                     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.
 
                                       3
<PAGE>
    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.
 
                                       4
<PAGE>
    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.
 
                                       5
<PAGE>
    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.
 
    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.
 
    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.
 
                                       6
<PAGE>
    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.
 
                                       7
<PAGE>
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:
 
<TABLE>
<CAPTION>
                        GEOGRAPHIC REGION
                                                    1995    1994
                                                    -----   -----
<S>                                                 <C>     <C>
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%
                                                    -----   -----
                                                    -----   -----
</TABLE>
 
<TABLE>
<CAPTION>
                          PROPERTY TYPE
                                                    1995    1994
                                                    -----   -----
<S>                                                 <C>     <C>
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%
                                                    -----   -----
                                                    -----   -----
</TABLE>
 
    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):
 
<TABLE>
<CAPTION>
                       GEOGRAPHIC REGION
                                                    1995  1994
                                                    ----  -----
<S>                                                 <C>   <C>
New England.......................................  $ --  $15.7
Mid-Atlantic......................................    --    3.5
Pacific...........................................    --    0.9
North Central.....................................   2.8    2.2
                                                    ----  -----
    Total.........................................  $2.8  $22.3
                                                    ----  -----
                                                    ----  -----
</TABLE>
 
<TABLE>
<CAPTION>
                         PROPERTY TYPE
                                                    1995  1994
                                                    ----  -----
<S>                                                 <C>   <C>
Office Building...................................  $2.2  $22.3
Medical...........................................   0.6     --
                                                    ----  -----
    Total.........................................  $2.8  $22.3
                                                    ----  -----
                                                    ----  -----
</TABLE>
 
    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):
 
<TABLE>
<CAPTION>
                       GEOGRAPHIC REGION
                                                    1995   1994
                                                    -----  -----
<S>                                                 <C>    <C>
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
                                                    -----  -----
                                                    -----  -----
</TABLE>
 
<TABLE>
<CAPTION>
                         PROPERTY TYPE
                                                    1995   1994
                                                    -----  -----
<S>                                                 <C>    <C>
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
                                                    -----  -----
                                                    -----  -----
</TABLE>
 
    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.
 
                                       8
<PAGE>
    Impaired loans by  geographic region and  property type were  as follows  at
December 31, 1995 (dollars in millions):
 
<TABLE>
<CAPTION>
                       GEOGRAPHIC REGION
                                                         1995
                                                       ---------
<S>                                                    <C>
New England..........................................  $    14.9
Mid-Atlantic.........................................       15.2
Southwest............................................       12.4
North Central........................................        2.8
Oil Patch............................................        4.8
                                                       ---------
    Total............................................  $    50.1
                                                       ---------
                                                       ---------
</TABLE>
 
<TABLE>
<CAPTION>
                         PROPERTY TYPE
                                                         1995
                                                       ---------
<S>                                                    <C>
Office Building......................................  $    23.3
Retail...............................................       16.0
Industrial...........................................        5.4
Medical..............................................        5.4
                                                       ---------
    Total............................................  $    50.1
                                                       ---------
                                                       ---------
</TABLE>
 
    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):
 
<TABLE>
<CAPTION>
                       GEOGRAPHIC REGION
                                                         1994
                                                       ---------
<S>                                                    <C>
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
                                                       ---------
                                                       ---------
</TABLE>
 
<TABLE>
<CAPTION>
                         PROPERTY TYPE
                                                         1994
                                                       ---------
<S>                                                    <C>
Office Building......................................  $    17.2
Retail...............................................        0.7
Residential..........................................        2.2
Medical..............................................        4.6
Hotel/Motel..........................................       11.5
                                                       ---------
    Total............................................  $    36.2
                                                       ---------
                                                       ---------
</TABLE>
 
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
 
                                       9
<PAGE>
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.
 
                                       10
<PAGE>
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.
 
                                       11
<PAGE>
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:
 
<TABLE>
<CAPTION>
                                                             1995                                        1994
                                          ------------------------------------------  ------------------------------------------
                                             4Q         3Q         2Q         1Q         4Q         3Q         2Q         1Q
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
--------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
 
                                       12
<PAGE>
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)
 
<TABLE>
<CAPTION>
      ------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
                                                                    YEAR ENDED DECEMBER 31,
                                  --------------------------------------------------------------------------------------------
                                    1995      1994       1993         1992      1991      1990      1989      1988      1987
<S>                               <C>       <C>       <C>           <C>       <C>       <C>       <C>       <C>       <C>
------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
 
-------------
(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.
 
                                       13
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                      SELECTED CONSOLIDATED FINANCIAL DATA
                        (DOLLARS AND SHARES IN MILLIONS)
 
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
                                                                    DECEMBER 31,
                      --------------------------------------------------------------------------------------------------------
                        1995       1994       1993       1992       1991       1990       1989      1988      1987      1986
<S>                   <C>        <C>        <C>        <C>        <C>        <C>        <C>       <C>       <C>       <C>
------------------------------------------------------------------------------------------------------------------------------
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)
</TABLE>
 
---------------
(a) In November 1986, UNUM converted to a stock company from a mutual company.
 
                                       14
<PAGE>
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
 
    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. The following
chart provides a summary of the changes 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.
 
                                       15
<PAGE>
CONSOLIDATED OVERVIEW
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER
COMMON SHARE AMOUNTS,
AND PERCENTAGE INCREASE (DECREASE) OVER
PRIOR YEAR)                                        1995              1994          1993
<S>                                           <C>        <C>   <C>        <C>    <C>
------------------------------------------------------------------------------------------
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
</TABLE>
 
------------
nm = not meaningful or in excess of 100%
 
                                       16
<PAGE>
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.
 
                                       17
<PAGE>
SUBSEQUENT EVENTS
 
    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. Including the expected purchase
price of approximately $70 million, management expects to generate approximately
$160 million of statutory  capital from this transaction.  Plans for the use  of
this capital may include repaying debt, investing in new and existing businesses
and stock repurchase.
 
    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%.
 
                                       18
<PAGE>
DISABILITY INSURANCE SEGMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  (DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
  (DECREASE) OVER PRIOR YEAR)                                 1995             1994             1993
  <S>                                                    <C>       <C>    <C>       <C>      <C>
  -----------------------------------------------------------------------------------------------------
  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%
</TABLE>
 
------------
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
 
                                       19
<PAGE>
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.
 
    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. 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.
 
    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.
 
                                       20
<PAGE>
    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
 
                                       21
<PAGE>
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.
 
                                       22
<PAGE>
SPECIAL RISK INSURANCE SEGMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  (DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
  (DECREASE) OVER PRIOR YEAR)                                 1995            1994        1993
  <S>                                                    <C>     <C>      <C>     <C>    <C>
  ---------------------------------------------------------------------------------------------
  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%
</TABLE>
 
------------
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.
 
                                       23
<PAGE>
COLONIAL PRODUCTS SEGMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  (DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
  (DECREASE) OVER PRIOR YEAR)                                 1995            1994         1993
  <S>                                                    <C>     <C>     <C>     <C>      <C>
  ----------------------------------------------------------------------------------------------
  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%
</TABLE>
 
------------
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.
 
                                       24
<PAGE>
RETIREMENT PRODUCTS SEGMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  (DOLLARS IN MILLIONS AND PERCENTAGE INCREASE
  (DECREASE) OVER PRIOR YEAR)                                 1995             1994           1993
  <S>                                                    <C>       <C>    <C>       <C>     <C>
  --------------------------------------------------------------------------------------------------
  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
</TABLE>
 
------------
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
 
                                       25
<PAGE>
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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
  (DOLLARS IN MILLIONS)               1995    1994    1993
  <S>                                <C>     <C>     <C>
  ---------------------------------------------------------
  Loss before income taxes.........  $(28.6) $(28.2) $(17.4)
</TABLE>
 
    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.
 
                                       26
<PAGE>
    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.
 
                                       27
<PAGE>
    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.
 
    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 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 affect on UNUM's results of operations or financial
position.
 
    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
 
                                       28
<PAGE>
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.
 
                                       29
<PAGE>
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:
 
<TABLE>
<CAPTION>
            -------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                                       STANDARD &
                                                                         POOR'S                 MOODY'S             A.M. BEST
<S>                                                                 <C>               <C>                          <C>
-------------------------------------------------------------------------------------------------------------------------------
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)
</TABLE>
 
    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
 
                                       30
<PAGE>
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.
 
    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.
 
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
 
<TABLE>
<CAPTION>
INDEX                                                                                                                         PAGE
----------------------------------------------------------------------------------------------------------------------------  ---
<S>                                                                                                                           <C>
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
</TABLE>
 
                                       31
<PAGE>
                       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
 
                                       32
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
              (DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
 
<TABLE>
<CAPTION>
             -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                        YEAR ENDED DECEMBER 31,
                                                                                                      ----------------------------
                                                                                                        1995      1994      1993
<S>                                                                                                   <C>       <C>       <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                      --------  --------  --------
                                                                                                      --------  --------  --------
</TABLE>
 
See notes to consolidated financial statements.
 
                                       33
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN MILLIONS)
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                              DECEMBER 31,
                                                                                                         ----------------------
                                                                                                            1995        1994
<S>                                                                                                      <C>         <C>
-------------------------------------------------------------------------------------------------------------------------------
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.
</TABLE>
 
                                       34
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              (DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                           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
<S>                        <C>      <C>          <C>                 <C>             <C>          <C>       <C>            <C>
-----------------------------------------------------------------------------------------------------------------------------------
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
                           ------   ----------        ------         -------------   ----------   --------     ------      --------
                           ------   ----------        ------         -------------   ----------   --------     ------      --------
</TABLE>
 
See notes to consolidated financial statements.
 
                                       35
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN MILLIONS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                         -------------------------------------
                                                                            1995         1994          1993
<S>                                                                      <C>           <C>          <C>
--------------------------------------------------------------------------------------------------------------
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
</TABLE>
 
See notes to consolidated financial statements.
 
                                       36
<PAGE>
                       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.
 
                                       37
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                       YEAR ENDED DECEMBER 31,
                                                                                                   -------------------------------
(DOLLARS IN MILLIONS)                                                                                1995       1994       1993
<S>                                                                                                <C>        <C>        <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                   ---------  ---------  ---------
                                                                                                   ---------  ---------  ---------
</TABLE>
 
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.
 
                                       38
<PAGE>
                       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:
 
<TABLE>
<S>                                                                              <C>
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%
</TABLE>
 
    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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                  1995                1994
<S>                                                                                        <C>                 <C>
---------------------------------------------------------------------------------------------------------------------------------
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%
</TABLE>
 
    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.
 
                                       39
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)                                                                             1995       1994       1993
<S>                                                                                             <C>        <C>        <C>
-------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                ---------  ---------  ---------
                                                                                                ---------  ---------  ---------
</TABLE>
 
    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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)                                                                                        1995    1994    1993
<S>                                                                                                         <C>     <C>     <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                            ------  ------  ------
                                                                                                            ------  ------  ------
</TABLE>
 
    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
 
                                       40
<PAGE>
                       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.
 
                                       41
<PAGE>
                       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.
 
    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
 
                                       42
<PAGE>
                       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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                             YEAR ENDED DECEMBER
                                                                                                                     31,
                                                                                                            ----------------------
(DOLLARS IN MILLIONS)                                                                                        1995    1994    1993
<S>                                                                                                         <C>     <C>     <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                            ------  ------  ------
                                                                                                            ------  ------  ------
</TABLE>
 
NET REALIZED INVESTMENT GAINS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                             YEAR ENDED DECEMBER
                                                                                                                     31,
                                                                                                            ----------------------
(DOLLARS IN MILLIONS)                                                                                        1995    1994    1993
<S>                                                                                                         <C>     <C>     <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                            ------  ------  ------
                                                                                                            ------  ------  ------
</TABLE>
 
                                       43
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2.  INVESTMENTS (CONTINUED)
CHANGE IN UNREALIZED GAINS ON AVAILABLE FOR SALE SECURITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                             YEAR ENDED DECEMBER
                                                                                                                     31,
                                                                                                            ----------------------
(DOLLARS IN MILLIONS)                                                                                        1995    1994    1993
<S>                                                                                                         <C>     <C>     <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                            ------  ------  ------
                                                                                                            ------  ------  ------
</TABLE>
 
FIXED MATURITIES
 
    The amortized cost and fair values of fixed maturities at December 31, 1995,
were as follows:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                   GROSS        GROSS
                                                                                    AMORTIZED   UNREALIZED   UNREALIZED     FAIR
(DOLLARS IN MILLIONS)                                                                 COST         GAINS       LOSSES       VALUE
<S>                                                                                <C>          <C>          <C>          <C>
-----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                   -----------  -----------  -----------  ---------
                                                                                   -----------  -----------  -----------  ---------
</TABLE>
 
                                       44
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                   GROSS        GROSS
                                                                                    AMORTIZED   UNREALIZED   UNREALIZED     FAIR
(DOLLARS IN MILLIONS)                                                                 COST         GAINS       LOSSES       VALUE
<S>                                                                                <C>          <C>          <C>          <C>
-----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                   -----------  -----------  -----------  ---------
                                                                                   -----------  -----------  -----------  ---------
</TABLE>
 
    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.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                             AMORTIZED     FAIR
(DOLLARS IN MILLIONS)                                                                                          COST        VALUE
<S>                                                                                                         <C>          <C>
----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                            -----------  ---------
                                                                                                            -----------  ---------
</TABLE>
 
    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.
 
                                       45
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                                                               FAIR
(DOLLARS IN MILLIONS)                                                                                                   COST   VALUE
<S>                                                                                                                     <C>    <C>
------------------------------------------------------------------------------------------------------------------------------------
Common stocks:
  Industrial, miscellaneous and all other.............................................................................  $21.1  $25.2
                                                                                                                        -----  -----
                                                                                                                        -----  -----
</TABLE>
 
    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.
 
                                       46
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                      BALANCE AT                            BALANCE
                                                                                      BEGINNING                             AT END
(DOLLARS IN MILLIONS)                                                                  OF YEAR     ADDITIONS   DEDUCTIONS   OF YEAR
<S>                                                                                   <C>          <C>         <C>          <C>
-----------------------------------------------------------------------------------------------------------------------------------
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
                                                                                        -----      ---------   ----------   -------
                                                                                        -----      ---------   ----------   -------
</TABLE>
 
    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.
 
                                       47
<PAGE>
                       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:
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)                                                                             1995       1994       1993
<S>                                                                                             <C>        <C>        <C>
-------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                ---------  ---------  ---------
                                                                                                ---------  ---------  ---------
</TABLE>
 
    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:
 
<TABLE>
<CAPTION>
            -------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                                                          NUMBER OF   SEVERANCE   EXIT
(DOLLARS IN MILLIONS)                                                                     EMPLOYEES     COST      COST   TOTAL
<S>                                                                                       <C>         <C>         <C>    <C>
-------------------------------------------------------------------------------------------------------------------------------
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
                                                                                             ---      ---------   -----  ------
                                                                                             ---      ---------   -----  ------
</TABLE>
 
    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.
 
                                       48
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
                                                                                                     YEAR ENDED DECEMBER
                                                                                                             31,
                                                                                                    ----------------------
(DOLLARS IN MILLIONS)                                                                                1995    1994    1993
<S>                                                                                                 <C>     <C>     <C>
--------------------------------------------------------------------------------------------------------------------------
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
                                                                                                    ------  ------  ------
                                                                                                    ------  ------  ------
</TABLE>
 
    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:
 
<TABLE>
<CAPTION>
             -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  DECEMBER 31,
                                                                                                              --------------------
(DOLLARS IN MILLIONS)                                                                                           1995       1994
<S>                                                                                                           <C>        <C>
----------------------------------------------------------------------------------------------------------------------------------
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)
                                                                                                              ---------  ---------
                                                                                                              ---------  ---------
</TABLE>
 
    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.
 
                                       49
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
    -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
                                                                                                    YEAR ENDED
                                                                                                     DECEMBER
                                                                                                        31,
                                                                                                    -----------
(DOLLARS IN MILLIONS)                                                                               1995   1994
<S>                                                                                                 <C>    <C>
---------------------------------------------------------------------------------------------------------------
Service cost......................................................................................  $ 4.2  $3.8
Interest cost.....................................................................................    5.8   4.4
                                                                                                    -----  ----
    Postretirement benefits expense...............................................................  $10.0  $8.2
                                                                                                    -----  ----
                                                                                                    -----  ----
</TABLE>
 
    The  following represents  the unfunded  accumulated postretirement benefits
obligation as determined by the plans' actuaries:
 
<TABLE>
<CAPTION>
    -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
                                                                                                     DECEMBER
                                                                                                        31,
                                                                                                    -----------
(DOLLARS IN MILLIONS)                                                                               1995   1994
<S>                                                                                                 <C>    <C>
---------------------------------------------------------------------------------------------------------------
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
                                                                                                    -----  ----
                                                                                                    -----  ----
</TABLE>
 
    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
 
                                       50
<PAGE>
                       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.
 
                                       51
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
            -------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                         OPTIONS    RESTRICTED
                                                                                                                       STOCK
<S>                                                                                                     <C>         <C>
-------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                        ----------  -----------
                                                                                                        ----------  -----------
</TABLE>
 
    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.
 
                                       52
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
        -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                                                                                                   YEAR ENDED DECEMBER
                                                                                                           31,
                                                                                                  ----------------------
(DOLLARS IN MILLIONS)                                                                              1995    1994    1993
<S>                                                                                               <C>     <C>     <C>
------------------------------------------------------------------------------------------------------------------------
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
                                                                                                  ------  ------  ------
                                                                                                  ------  ------  ------
</TABLE>
 
    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:
 
<TABLE>
<CAPTION>
             -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 DECEMBER 31,
                                                                                                             --------------------
(DOLLARS IN MILLIONS)                                                                                          1995       1994
<S>                                                                                                          <C>        <C>
---------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                             ---------  ---------
                                                                                                             ---------  ---------
</TABLE>
 
    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.
 
                                       53
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
    -------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
                                                                                            YEAR ENDED DECEMBER
                                                                                                    31,
                                                                                            --------------------
(DOLLARS IN MILLIONS)                                                                       1995   1994    1993
<S>                                                                                         <C>    <C>    <C>
----------------------------------------------------------------------------------------------------------------
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
                                                                                            -----  -----  ------
                                                                                            -----  -----  ------
</TABLE>
 
    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:
 
<TABLE>
<CAPTION>
             -------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 DECEMBER 31,
                                                                                                             --------------------
(DOLLARS IN MILLIONS)                                                                                          1995       1994
<S>                                                                                                          <C>        <C>
---------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                             ---------  ---------
                                                                                                             ---------  ---------
</TABLE>
 
                                       54
<PAGE>
                       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.
 
    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
 
                                       55
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
        -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                                                                                                   YEAR ENDED DECEMBER
                                                                                                           31,
(DOLLARS IN MILLIONS, EXCEPT                                                                      ----------------------
PER COMMON SHARE DATA)                                                                             1995    1994    1993
<S>                                                                                               <C>     <C>     <C>
------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
 
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.
 
                                       56
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
                                                                                            1995                  1994
                                                                                    --------------------  --------------------
                                                                                    CARRYING     FAIR     CARRYING     FAIR
(DOLLARS IN MILLIONS)                                                                AMOUNT      VALUE     AMOUNT      VALUE
<S>                                                                                 <C>        <C>        <C>        <C>
------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
 
    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.
 
                                       57
<PAGE>
                       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.
 
                                       58
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
                                                                                                 YEAR ENDED DECEMBER 31,
                                                                                            ----------------------------------
(DOLLARS IN MILLIONS)                                                                          1995        1994        1993
<S>                                                                                         <C>         <C>         <C>
------------------------------------------------------------------------------------------------------------------------------
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
                                                                                            ----------  ----------  ----------
                                                                                            ----------  ----------  ----------
</TABLE>
 
<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
                                                                                                       DECEMBER 31,
                                                                                            ----------------------------------
(DOLLARS IN MILLIONS)                                                                          1995        1994        1993
<S>                                                                                         <C>         <C>         <C>
------------------------------------------------------------------------------------------------------------------------------
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
                                                                                            ----------  ----------  ----------
                                                                                            ----------  ----------  ----------
</TABLE>
 
                                       59
<PAGE>
                       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:
 
<TABLE>
<CAPTION>
              -------------------------------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   1995
                                                                                                      ------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER COMMON SHARE DATA)                                                    4TH     3RD     2ND     1ST
<S>                                                                                                   <C>     <C>     <C>     <C>
------------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                      ------  ------  ------  ------
                                                                                                      ------  ------  ------  ------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                                                   1994
                                                                                                      ------------------------------
                                                                                                       4TH     3RD     2ND     1ST
<S>                                                                                                   <C>     <C>     <C>     <C>
------------------------------------------------------------------------------------------------------------------------------------
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
                                                                                                      ------  ------  ------  ------
                                                                                                      ------  ------  ------  ------
</TABLE>
 
                                       60
<PAGE>
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:
 
<TABLE>
<CAPTION>
                             AGE (AS OF                                                                           AN OFFICER
         NAME              MARCH 22, 1996)                         POSITION HELD WITH UNUM                          SINCE
-----------------------  -------------------  ------------------------------------------------------------------  ----------
<S>                      <C>                  <C>                                                                 <C>
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
</TABLE>
 
------------
*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.
 
                                       61
<PAGE>
    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.
 
<TABLE>
<CAPTION>
                                                                                                        PAGE OF
                                                                                                      THIS REPORT
                                                                                                      -----------
<S>                                                                                                   <C>
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
</TABLE>
 
    2.  Financial Statement Schedules
 
<TABLE>
<S>   <C>                                                                                               <C>
II    Condensed Financial Information of UNUM Corporation (Registrant)...............................     64
 
III   Supplementary Insurance Information............................................................     68
 
IV    Reinsurance....................................................................................     69
</TABLE>
 
    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.
 
                                       62
<PAGE>
                                   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.
 
<TABLE>
<CAPTION>
                          NAME                                                       TITLE                                 DATE
---------------------------------------------------------  ---------------------------------------------------------  --------------
<C>                                                        <S>                                                        <C>
                        /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)
</TABLE>
 
                                       63
<PAGE>
                       UNUM CORPORATION (PARENT COMPANY)
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                              STATEMENTS OF INCOME
                             (DOLLARS IN MILLIONS)
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
                                                                         YEAR ENDED DECEMBER
                                                                                 31,
                                                                        ----------------------
                                                                         1995    1994    1993
<S>                                                                     <C>     <C>     <C>
----------------------------------------------------------------------------------------------
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
                                                                        ------  ------  ------
                                                                        ------  ------  ------
</TABLE>
 
------------
*Eliminated in consolidation
 
See note to condensed financial statements.
 
                                       64
<PAGE>
                       UNUM CORPORATION (PARENT COMPANY)
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                 BALANCE SHEETS
                             (DOLLARS IN MILLIONS)
 
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
                                                                                     DECEMBER 31,
                                                                                  ------------------
                                                                                    1995      1994
<S>                                                                               <C>       <C>
----------------------------------------------------------------------------------------------------
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
</TABLE>
 
See note to condensed financial statements.
 
                                       65
<PAGE>
                       UNUM CORPORATION (PARENT COMPANY)
          SCHEDULE II -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 
                            STATEMENTS OF CASH FLOWS
                             (DOLLARS IN MILLIONS)
 
<TABLE>
<CAPTION>
  -------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
                                                                                   YEAR ENDED DECEMBER 31,
                                                                                  -------------------------
                                                                                   1995     1994     1993
<S>                                                                               <C>      <C>      <C>
-----------------------------------------------------------------------------------------------------------
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  $    --
</TABLE>
 
------------
*Eliminated in consolidation
 
See note to condensed financial statements.
 
                                       66
<PAGE>
                       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.
 
                                       67
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
              SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
                             (DOLLARS IN MILLIONS)
 
<TABLE>
<CAPTION>
              -------------------------------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------------------------------------------------------
                                            (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
<S>                        <C>           <C>            <C>          <C>           <C>           <C>          <C>         <C>
------------------------------------------------------------------------------------------------------------------------------------
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:
</TABLE>
 
<TABLE>
<CAPTION>
         -------------------------------------------------
   -------------------------------------------------------------
                                            DECEMBER 31,
                                ------------------------------------
           SEGMENT                 1995         1994         1993
<S>                             <C>          <C>          <C>
--------------------------------------------------------------------
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.
</TABLE>
 
    Certain 1994 and 1993 amounts have been reclassified in 1995 for comparative
purposes.
 
                                       68
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                           SCHEDULE IV -- REINSURANCE
                             (DOLLARS IN MILLIONS)
 
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                                                                           ASSUMED                     PERCENTAGE
                                                            CEDED TO        FROM                        OF AMOUNT
                                                  GROSS       OTHER         OTHER          NET           ASSUMED
                                                  AMOUNT    COMPANIES     COMPANIES       AMOUNT         TO NET
<S>                                             <C>         <C>         <C>             <C>         <C>
---------------------------------------------------------------------------------------------------------------------
 
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.
</TABLE>
 
                                       69
<PAGE>
                       UNUM CORPORATION AND SUBSIDIARIES
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
 NUMBER                        DESCRIPTION                                       METHOD OF FILING                   PAGE NO.
---------   --------------------------------------------------  --------------------------------------------------  --------
<C>         <S>                                                 <C>                                                 <C>
    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.
</TABLE>
 
                                       70