Unum 2009 Annual Report Download - page 78

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Unum
2009
Long-term debt repayments include the 2009, 2008, and 2007 principal payments of $10.0 million, $10.0 million, and $17.5 million,
respectively, on Tailwind Holdings’ floating rate, senior secured non-recourse notes. Debt repayments in 2009 and 2008 include principal
payments of $48.0 million and $59.3 million, respectively, on Northwind Holdings’ floating rate, senior secured non-recourse notes. Long-
term debt repayments also include the purchase and retirement of $1.2 million aggregate principal of our 7.19% medium-term notes and
$0.6 million aggregate principal of our 6.75% notes in 2009 as well as $36.6 million of our 6.85% notes in 2008. During 2007, we also
repurchased and/or made principal payments of an additional $752.0 million aggregate principal amount of outstanding debt and paid
debt repurchase costs of $34.2 million.
During 2007, we received proceeds of approximately $300.0 million and issued 17.7 million shares of common stock upon the
settlement of the common stock purchase contract element of the adjustable conversion-rate equity security units issued in 2004.
During 2008, we completed a $700.0 million authorized share repurchase program by purchasing 29.9 million shares.
See “Debt” contained herein for further information.
Cash Available from Subsidiaries
Unum Group and certain of its intermediate holding company subsidiaries depend on payments from subsidiaries to pay dividends to
stockholders, to pay debt obligations, and/or to pay expenses. These payments by our insurance and non-insurance subsidiaries may take
the form of interest payments on loans from the parent to a subsidiary, operating and investment management fees, and/or dividends.
During 2008, Unum Group received $100.0 million from an insurance subsidiary for the repayment of a surplus debenture issued to
Unum Group in 1997 with a maturity date of October 2027.
Restrictions under applicable state insurance laws limit the amount of ordinary dividends that can be paid to a parent company from its
insurance subsidiaries in any 12-month period without prior approval by regulatory authorities. For life insurance companies domiciled in the
United States, that limitation generally equals, depending on the state of domicile, either ten percent of an insurer’s statutory surplus with
respect to policyholders as of the preceding year end or the statutory net gain from operations, excluding realized investment gains and
losses, of the preceding year.
The payment of ordinary dividends to a parent company from its insurance subsidiaries is generally further limited to the amount of
statutory surplus as it relates to policyholders. Although it is unlikely we will utilize the entire amount of available dividends, based on the
restrictions under current law, $719.7 million is available during 2010 for the payment of ordinary dividends to Unum Group from its traditional
U.S. insurance subsidiaries, excluding Northwind Reinsurance Company (Northwind Re) and Tailwind Reinsurance Company (Tailwind Re).
Northwind Holdings’ and Tailwind Holdings’ ability to meet their debt payment obligations will be dependent upon the receipt of dividends
from Northwind Re and Tailwind Re, respectively. The ability of Northwind Re and Tailwind Re to pay dividends to their respective parent
companies will depend on their satisfaction of applicable regulatory requirements and on the performance of the reinsured business.
Unum Group and/or certain of its intermediate holding company subsidiaries may also receive dividends from its United Kingdom-based
affiliate, Unum Limited, subject to applicable insurance company regulations and capital guidance in the United Kingdom. Approximately
£198.5 million is available for the payment of dividends from Unum Limited during 2010, subject to regulatory approval. However, in order to
preserve Unum Limited’s capital at a reasonable level, it is unlikely that we will utilize the entire amount available during 2010.
The amount available during 2009 for the payment of ordinary dividends from Unum Group’s traditional U.S. insurance subsidiaries was
$653.3 million, of which $90.0 million was declared and paid. The traditional U.S. insurance subsidiaries also paid extraordinary dividends of
$110.0 million in 2009. The amount available during 2009 from Unum Limited was £145.5 million, of which £28.5 million was declared and
paid. During 2009, Northwind Re received regulatory approval from the insurance department of its state of domicile to pay dividends of
$32.7 million to Northwind Holdings, and Tailwind Re received regulatory approval from the insurance department of its state of domicile to
pay dividends of $14.2 million to Tailwind Holdings. The payment of dividends to the parent company from our subsidiaries also requires the
approval of the individual subsidiary’s board of directors.
The ability of Unum Group and certain of its intermediate holding company subsidiaries to continue to receive dividends from their insurance
subsidiaries without regulatory approval generally depends on the level of earnings of those insurance subsidiaries as calculated under law.
In addition to regulatory restrictions, the amount of dividends that may be paid by insurance subsidiaries will depend on additional factors,