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UNUM • 2014 ANNUAL REPORT 97
Premium Tax Expense: Premium tax expense is included in other expenses in the consolidated statements of income. For the
years ended December 31, 2014, 2013, and 2012, premium tax expense was $139.2 million, $137.0 million, and $136.0 million, respectively.
Stock-Based Compensation: The cost of stock-based compensation is generally measured based on the grant-date fair value of the
award. The Black-Scholes options valuation model is used for estimating the fair value of stock options, and the Monte-Carlo valuation
model is used for estimating the fair value of performance share units. Restricted stock units are valued based on the fair value of common
stock at the grant date, and cash-settled awards are measured each reporting period based on the current stock price. Stock-based awards
are expensed over the requisite service period, or for performance share units over the requisite service period, or remaining service
period, if and when it becomes probable that the performance conditions will be satisfied, with an offsetting increase to additional paid-in
capital in stockholders’ equity. See Note 11.
Earnings Per Share: We compute basic earnings per share by dividing net income by the weighted average number of common shares
outstanding for the period. Earnings per share assuming dilution is computed by dividing net income by the weighted average number of
shares outstanding for the period plus the shares representing the dilutive effect of stock-based awards. In computing earnings per share
assuming dilution, only potential common shares resulting from stock-based awards that are dilutive (those that reduce earnings per share)
are included. We use the treasury stock method to account for the effect of outstanding stock options and nonvested stock awards on the
computation of earnings per share assuming dilution. See Note 10.
Translation of Foreign Currency: Revenues and expenses of our foreign operations are translated at average exchange rates.
Assets and liabilities are translated at the rate of exchange on the balance sheet dates. The translation gain or loss is generally reported in
accumulated other comprehensive income, net of deferred tax. We do not provide for deferred taxes to the extent unremitted foreign
earnings are deemed permanently invested.
Accounting for Participating Individual Life Insurance: Participating policies issued by one of our subsidiaries prior to its 1986
conversion from a mutual to a stock life insurance company will remain participating as long as the policies remain in-force. A Participation
Fund Account (PFA) was established for the benefit of all such individual participating life and annuity policies and contracts. The assets of
the PFA provide for the benefit, dividend, and certain expense obligations of the participating individual life insurance policies and annuity
contracts. The assets of the PFA were $358.6 million and $339.2 million at December 31, 2014 and 2013, respectively.