Unum 2014 Annual Report Download - page 76
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74 UNUM • 2014 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Transfers of Financial Assets
Our investment policy permits us to lend fixed maturity securities to unaffiliated financial institutions in short-term securities
lending agreements, which increase our investment income with minimal risk. We account for all of our securities lending agreements
and repurchase agreements as secured borrowings. We had $58.4 million of securities lending agreements outstanding which were
collateralized by cash at December 31, 2014 and were reported as other liabilities in our consolidated balance sheets. The cash received
as collateral was reinvested in short-term investments. The average balance during the year ended December 31, 2014 was $65.5 million,
and the maximum amount outstanding at any month end was $94.0 million. In addition, at December 31, 2014, we had $128.5 million of
off-balance sheet securities lending agreements which were collateralized by securities that we were neither permitted to sell nor control.
The average balance of these off-balance sheet transactions during the year ended December 31, 2014 was $116.5 million, and the
maximum amount outstanding at any month end was $153.6 million.
We had no repurchase agreements outstanding at December 31, 2014. The average balance during the year ended December 31,
2014 was $1.6 million, and the maximum amount outstanding at any month end was $12.8 million. Our use of repurchase agreements and
securities lending agreements can fluctuate during any given period and will depend on our liquidity position, the availability of long-term
investments that meet our purchasing criteria, and our general business needs.
During 2014, we were approved for membership of the Federal Home Loan Bank System (FHLB). As a member, we obtain access
to low-cost funding and also receive dividends based on our stock ownership. Membership requires that we purchase a minimum amount
of FHLB common stock based on a percentage of our total assets. Additional common stock purchases are required based upon the amount
of funds borrowed from the FHLB. We will be required to post mortgage-related assets, U.S. Treasury securities, or other acceptable forms
of collateral for any borrowings we make from the FHLB. As of December 31, 2014 we had not funded any FHLB common stock purchases
or obtained any advances from the FHLB. Our initial common stock membership purchase will be funded in the first quarter of 2015.
See Note 3 of the “Notes to Consolidated Financial Statements” contained herein for additional information.