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Annual Report ° 2006

Table of contents

  • Page 1
    Annual Report ° 2006

  • Page 2
    ... FROM CEO UNUM US UNUM UK COLONIAL BOARD OF DIRECTORS AND SENIOR MANAGEMENT 02 03 06 08 10 12 O FP This annual report features the introduction of our new corporate logo and identity. These elements are part of Unum's evolving brand which now more clearly conveys our commitment to providing bene...

  • Page 3
    ... prepare businesses - and their employees - for the future. Our benefit programs can help businesses attract and retain quality people, reduce the cost of absenteeism and return employees to work after an illness or injury - creating a more satisfied and productive workforce. We show companies how...

  • Page 4
    ... Protection - Closed Block Restructuring Income (Loss) from Continuing Operations Income (Loss) from Discontinued Operations Net Income (Loss) BALANCE SHEET $ 411.0 $ 1.23 $ 513.6 $ 1.64 $ (253.0) $ (0.86) Assets Total Stockholders' Equity (Book Value) Net Unrealized Gain on Securities...

  • Page 5
    ... balanced business plan, which has positive implications from both a rating agency and stockholder perspective. On this front I'm pleased with our progress to date, as our business and product mix is much more diverse than in the past. Tom Watjen President and Chief Executive Officer Unum Group 3

  • Page 6
    ...80% OF EMPLOYEES PARTICIPATED IN A TRAINING OR DEVELOPMENTAL ACTIVITY IN 2006 This is clear from our 2006 performance - sales of non-disability products within Unum US equaled those of disability products, while the operating earnings contributed by Unum UK and Colonial reached record levels. Again...

  • Page 7
    ...States or the United Kingdom, the needs of our customers and the environment in which we operate are changing. The products and services we provide are well suited for today's complex work environment. ° Continue to improve the profitability of our Unum US group income protection line of business...

  • Page 8
    ...'s customers include thousands of small and mid-sized employers across the country. 2006 RESULTS Unum US generated strong results in most of its product lines last year, including voluntary workplace benefits, group life, long-term care and individual income protection. Additionally, the business...

  • Page 9
    ...along with unparalleled customer service. IN 2006, UNUM RECEIVED A NUMBER OF ACCOLADES, INCLUDING BEING NAMED ONE OF THE BEST PLACES TO WORK IN MAINE AND TENNESSEE, AS WELL AS A RECIPIENT OF THE 2006 SLOAN AWARDS FOR BUSINESS EXCELLENCE IN WORKPLACE FLEXIBILITY. ADDITIONALLY, UNUM REMAINS COMMITTED...

  • Page 10
    ... provider of income and lifestyle protection in the United Kingdom, covering 2 million people. The company holds the top position in group long-term income protection, as well as the number two position in group life and a leading position in the individual income protection market. 2006 RESULTS...

  • Page 11
    ... and demand for income protection products across the workforce. IN 2006, UNUM UK WAS NAMED THE BEST INCOME PROTECTION PROVIDER AT THE HEALTH INSURANCE AWARDS, THE NINTH CONSECUTIVE YEAR THE COMPANY RECEIVED THE AWARD. IN ADDITION TO BEING FOCUSED ON THEIR CUSTOMERS, UNUM UK EMPLOYEES RECOGNIZE THE...

  • Page 12
    ... in sales ° 7% growth in premium income, driven by strong sales and stable persistency ° Introduction of new term life, group cancer and group critical illness products, while also implementing a new enrollment system with online capabilities ° Strong customer satisfaction ratings from plan...

  • Page 13
    ..., enrollment services and supplemental insurance products tailored to each workplace to provide a wider range of solutions for employers and employees - all from one provider. AS A TESTAMENT TO ITS STRONG EMPLOYEE-FOCUSED CULTURE, COLONIAL WAS NAMED IN 2006 TO THE BEST PLACES TO WORK IN...

  • Page 14
    ... Retired Managing Partner, PricewaterhouseCoopers LLP New York, New York William J. Ryan Chairman, TD Banknorth Inc. Portland, Maine Thomas R. Watjen President and Chief Executive Officer of the Company, Chattanooga, Tennessee COMMITTEES OF THE BOARD FINANCE COMMITEE AUDIT COMMITTEE HUMAN CAPITAL...

  • Page 15
    ... No.) 1 FOUNTAIN SQUARE CHATTANOOGA, TENNESSEE 37402 (Address of principal executive offices) 423.294.1011 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common stock, $0.10 par value 7.25% Public Income Notes...

  • Page 16
    ... closing price of those shares on the New York Stock Exchange, Inc., held by non-affiliates was approximately $6.2 billion*. As of February 23, 2007, there were 342,656,811 shares of the registrant's common stock outstanding. * Calculations based on most recent publicly available information and...

  • Page 17
    DOCUMENTS INCORPORATED BY REFERENCE Portions of the information required by Part III of this Form 10-K are incorporated herein by reference from the registrant's definitive proxy statement for its 2007 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission ...

  • Page 18
    ... Risk ...95 8. 9. Financial Statements and Supplementary Data ...96 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...158 9A. Controls and Procedures ...158 9B. Other Information ...158 PART III 10. Directors, Executive Officers of the Registrant, and Corporate...

  • Page 19
    ... connection with implementation of the multistate market conduct regulatory settlement agreements and the California Department of Insurance settlement agreement may deviate from our assumptions. Rating agency actions, state insurance department market conduct examinations and other inquiries, other...

  • Page 20
    ... net income. Retained risks in our reinsurance operations are influenced primarily by the credit risk of the reinsurers and potential contract disputes. Any material changes in the reinsurers' credit risk or willingness to pay according to the terms of the contract may adversely affect our business...

  • Page 21
    ... protection insurance products in the United States and the United Kingdom. We also provide a complementary portfolio of other insurance products, including long-term care insurance, life insurance, employer- and employee-paid group benefits, and other related services. We have three major business...

  • Page 22
    ...-term care products, we use a distribution model which provides independent brokers and consultants with the option of direct access to a sales support center centrally located in our corporate offices. Group Long-term and Short-term Income Protection Group long-term and short-term income protection...

  • Page 23
    ... of the Unum US segment premium income in 2006. Group life and accidental death and dismemberment products are sold to employers as employee benefit products. Group life consists primarily of renewable term life insurance with the coverages frequently linked to employees' wages. Accidental death and...

  • Page 24
    ... UK Segment The Unum UK segment includes group long-term income protection insurance, group life products, and individual income protection products issued by Unum Limited and sold primarily in the United Kingdom through field sales personnel and independent brokers and consultants. Premium income...

  • Page 25
    ... the Unum UK segment premium income in 2006. Group life products are sold to employers as employee benefit products. Group life consists primarily of renewable term life insurance with the coverages frequently linked to employees' wages. Premiums for group life are generally based on expected claims...

  • Page 26
    ... insurance for income protection products, life products, and cancer and critical illness products issued primarily by Colonial and marketed to employees at the workplace through an agency sales force and brokers. Premium income for this segment totaled $842.1 million in 2006. The income protection...

  • Page 27
    ... segment represent individual income protection insurance which was written on a noncancelable basis and issued or assumed by Unum America, Provident, and Paul Revere Life. Under a noncancelable policy, as long as the insured continues to pay the fixed annual premium for the policy's duration, we...

  • Page 28
    ...under life, accidental death and dismemberment, long-term care, and income protection policies. Our catastrophic coverage is for any accident involving seventeen, twenty-eight, and fifty-five or more lives for the three layers, respectively, in a single event. In total, the three layers provide $110...

  • Page 29
    The consolidated statements of operations include the annual change in reserves for future policy and contract benefits. The change reflects a normal accretion for premium payments and interest buildup and decreases for policy terminations such as lapses, deaths, and benefit payments. For further ...

  • Page 30
    ... our business are integrated product choices, price, quality of customer service and claims management, financial strength, and claims-paying ratings. In the individual and group income protection markets, we compete in the United States with a limited number of major companies and regionally...

  • Page 31
    ... insurance regulators upon conclusion of a multistate market conduct examination led by Maine, Massachusetts, and Tennessee relating to our disability claims handling practices. A total of 48 states and the District of Columbia were parties to the settlement agreements, which provide for changes...

  • Page 32
    ... policies, any customer who wants specific broker compensation related information can obtain this information by contacting our Broker Compensation Services toll-free number. Other changes include requiring customer approval of compensation paid by us to the broker when the customer is also paying...

  • Page 33
    ... to changing interest rates, and (iv) business risks. The formula is used as an early warning tool to identify companies that are potentially inadequately capitalized. The formula is intended to be used as a regulatory tool only and is not intended as a means to rank insurers generally. Unum Limited...

  • Page 34
    ... of Unum UK's operating results. Employees At December 31, 2006, we had approximately 11,100 full-time employees, including approximately 1,600 at GENEX, the sale of which we expect to close during the first quarter of 2007. Available Information Our internet website address is www.unum.com...

  • Page 35
    ... the additional Risk Management responsibilities in November 1999. Mr. Watjen originally joined a Unum Group predecessor company as Executive Vice President and Chief Financial Officer in 1994. Mr. Zubretsky became Senior Executive Vice President, Finance, Investments, and Corporate Development in...

  • Page 36
    ... manage employee benefit plans in the United States. Most group long-term and short-term income protection plans administered by the Company are governed by ERISA. Changes to ERISA enacted by Congress or via judicial interpretations could adversely affect the risk of managing employee benefit plans...

  • Page 37
    ... by state insurance departments have generally involved a review of complaints from policyholders or insureds on a range of subjects and a review of disability claim files and associated materials from group long-term and individual income protection product lines. Because of the number of market...

  • Page 38
    ...value of future profits recorded in connection with the acquisition of a block of insurance policies. Deferred policy acquisition costs and VOBA are amortized based primarily upon expected future premium income of the related insurance policies. Recoverability testing for deferred policy acquisition...

  • Page 39
    ..., changes in economic and external conditions may not manifest themselves in claims experience for an extended period of time. The pricing actions available in the individual income protection market differ between product classes. The nature of that portion of our outstanding insurance business...

  • Page 40
    ... and Unum Limited, to make dividend payments on our common stock, meet debt payment obligations, and pay our other obligations. Our insurance company subsidiaries are subject to regulatory limitations on the payment of dividends and on other transfers of funds to affiliates. The level of statutory...

  • Page 41
    ...feet of space at four principal operating centers in Chattanooga, Tennessee; Portland, Maine; Worcester, Massachusetts; and Columbia, South Carolina. We own and occupy two connected buildings in Chattanooga, Tennessee, with approximately 901,000 square feet of office space. We also own substantially...

  • Page 42
    ..., "Liquidity and Capital Resources - Cash Available from Subsidiaries" contained herein in Item 7, and Note 16 of the "Notes to Consolidated Financial Statements" contained herein in Item 8. For information relating to compensation plans under which Unum Group's equity securities are authorized for...

  • Page 43
    ..., except share data) 2006 Statement of Operations Data Revenue Premium Income Net Investment Income Net Realized Investment Gain (Loss) Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits (1) Commissions Interest and Debt Expense and Cost Related to Early...

  • Page 44
    ... regulatory claim reassessment charges and broker compensation settlement expenses of $33.5 million, $22.3 million, and $42.5 million in 2006, 2005, and 2004, respectively, and, in 2004, charges related to the impairment of the individual income protection - closed block deferred policy acquisition...

  • Page 45
    ... debt securities of Unum Group and an increase of $300.0 million in longterm debt. Excludes cumulative effect of accounting principle change. (7) Financial results previously reported were revised in the preceding table for the classification of GENEX Services, Inc. as a discontinued operation, as...

  • Page 46
    ... the large case group business we sold. We also reported sales growth in our Unum US voluntary workplace benefits, individual income protection multi-life, and group long-term care lines of business for 2006 relative to the prior year. In keeping with our sales strategy for multi-life sales, we are...

  • Page 47
    ... is also supported by front-to-back business processes and technology. We have also introduced a new web-based enrollment platform for our workplace benefits products that will help employees fully understand the benefit coverage provided by an employer and the additional insurance options that may...

  • Page 48
    ... income protection is supported by approximately $2.6 billion of allocated capital, and our return on equity for this business generally is in the low single digits. With the successful completion of the securitization of a small block of our group long-term income protection claim reserves in 2006...

  • Page 49
    ... outstanding legal and regulatory issues as described in Note 15 of the "Notes to Consolidated Financial Statements" contained in Item 8. During 2006, we reached an agreement in principle with the plaintiffs (subject to court approval) on the plan beneficiary class action, or 401(k) case, which is...

  • Page 50
    ...decreased before-tax operating results for our Unum US segment group income protection line of business $72.8 million and our Individual Income Protection - Closed Block segment $13.2 million. When we recorded this charge, we based our estimate on the information that existed at that time, which was...

  • Page 51
    ...55 percent already reviewed at that time. The third quarter charge decreased before-tax operating results for our Unum US segment group income protection line of business $291.4 million and our Individual Income Protection - Closed Block segment $34.0 million. As of the end of 2006, we had completed...

  • Page 52
    ...and provide information on our Company website about our broker compensation programs. Under these policies, any customer who wants specific broker compensation related information can obtain this information by contacting our Broker Compensation Services at a toll-free number. Other changes include...

  • Page 53
    ... to group relief benefits recognized from the use of net operating losses in a foreign jurisdiction in which our businesses operate. Accounting Pronouncements Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS 123(R)), Share-Based Payment...

  • Page 54
    ... Statements No. 87, 88, 106, and 132(R). SFAS 158 requires an employer to recognize the overfunded or underfunded status of defined benefit pension and other postretirement plans as an asset or liability in its balance sheet and to recognize changes in that funded status through comprehensive income...

  • Page 55
    ... agreements. Because of this, we do not believe that the California DOI's allegations or its market conduct examination report provide an accurate portrayal of our claim practices today. Under the terms of the settlement, we changed certain provisions specific to California disability policies...

  • Page 56
    ...-tax operating results for the Unum US segment group income protection line of business and supplemental and voluntary lines of business $37.4 million and $3.3 million, respectively, and the Individual Income Protection - Closed Block segment $34.3 million. The ongoing costs of changes in the claims...

  • Page 57
    ... 15, 2015. Closed Block Reinsurance Recapture from Centre Life Reinsurance Ltd. During 2005, we recaptured a closed block of individual income protection business that included approximately $1.6 billion in invested assets and $185.0 million of annual premium. The effective date of the recapture...

  • Page 58
    ... the settlement and closed its investigation on this issue. The reassessment process is a principal feature of the settlement agreements. Under the agreements, we are offering to reassess any individual or group long-term disability claim that was denied or closed since January 1, 2000, except for...

  • Page 59
    ... management of the United Kingdom portion of the group income protection claims portfolio of Swiss Life (UK) plc (Swiss Life), and Swiss Life reinsured this portfolio to Unum UK. Unum UK also became a multi-national pooling partner for Swiss Life Insurance & Pension Company with respect to business...

  • Page 60
    ... and group long-term care, and voluntary workplace benefits products in our Unum US segment; individual income protection products in our Unum UK segment; income protection and cancer and critical illness policies in our Colonial segment; and, the Individual Income Protection - Closed Block segment...

  • Page 61
    ... value of the expected future claims, commissions, and expenses we will pay and the expected future premiums we will receive, with a provision for profit allowed. Policy reserves for our Individual Income Protection - Closed Block segment, which at December 31, 2006, represented approximately 14...

  • Page 62
    ... our long-term best estimate of the present value of the liability for future claim payments and claim adjustment expenses. A claim reserve is based on actual known facts regarding the claim, such as the benefits available under the applicable policy, the covered benefit period, and the age and...

  • Page 63
    ... 31, 2006, and are calculated using generally the same methodology that we use for Unum US income protection and group life reserves. The persistency rates we assume in calculating claim reserves for this line of business are based on standard United Kingdom industry experience, adjusted for Unum UK...

  • Page 64
    ... 30,294.3 Policy Reserves Group Income Protection Group Life and Accidental Death & Dismemberment Individual Income Protection Recently Issued Long-term Care Voluntary Workplace Benefits Unum US Segment Unum UK Segment Colonial Segment Individual Income Protection Closed Block Segment Other Segment...

  • Page 65
    ... investment yield. The claim resolution rate, used for both policy reserves and incurred and IBNR claim reserves, is the probability that a disability claim will close due to recovery or death of the insured. It is important because it is used to estimate how long benefits will be paid for a claim...

  • Page 66
    ... for both the group long-term income protection line of business and the Individual Income Protection - Closed Block segment is the claim resolution rate. We believe that these ranges provide a reasonable estimate of the possible changes in reserve balances for those product lines where we believe...

  • Page 67
    ... % of Initial Deferral Year 10 Year 15 Amortization Period Unum US Group Income Protection Group Life and Accidental Death & Dismemberment Supplemental and Voluntary Individual Income Protection - Recently Issued Long-term Care Voluntary Workplace Benefits Unum UK Colonial 20 15 20 20 15 15 17 25...

  • Page 68
    ... future business prospects and trends of earnings. The valuation of the security's underlying collateral. Relevant industry conditions and trends relative to their historical cycles. Market conditions. Rating agency actions. Bid and offering prices and the level of trading activity. Adverse changes...

  • Page 69
    ... corporate governance issues. Significant changes in credit spreads may occur in the related industry. Significant increases in interest rates may occur and may not return to levels similar to when securities were initially purchased. Adverse rating agency actions may occur. Income Taxes We record...

  • Page 70
    ... Operating Results (in millions of dollars) 2006 Revenue Premium Income Net Investment Income Net Realized Investment Gain (Loss) Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Interest and Debt Expense Cost Related to Early Retirement...

  • Page 71
    ... millions) 2006 Benefits and Change in Reserves for Future Benefits Regulatory Claim Reassessment Charges Restructuring of Individual Income Protection - Closed Block Impairment of Intangible Assets Other Operating Expenses Regulatory Claim Reassessment Charges Broker Compensation Settlements Total...

  • Page 72
    ... protection - closed block business. Excluding these charges, the ratio of benefits and change in reserves for future benefits to premium income was 90.3 percent for 2006 compared to 90.0 percent for 2005 and 2004. See "Segment Operating Results" as follows for discussions of line of business risk...

  • Page 73
    ...) 2006 Unum US Segment Fully Insured Products Group Long-term Income Protection Group Short-term Income Protection Group Life Accidental Death & Dismemberment Individual Income Protection Recently Issued Group Long-term Care Individual Long-term Care Voluntary Workplace Benefits Total Fully Insured...

  • Page 74
    ... of in force policies written in prior years as well as current new sales. Premiums for fully insured products are reported as premium income. Fees for ASO products (those where the risk and responsibility for funding claim payments remain with the customer and we only provide services) are included...

  • Page 75
    ... related to the first quarter of 2004 restructuring of the individual income protection - closed block of business. Unum US Segment Operating Results The Unum US segment includes group long-term and short-term income protection insurance, group life and accidental death and dismemberment products...

  • Page 76
    ... 2006 sales for this line of business occurring in the multi-life market. Long-term care sales were generally in line with our strategy for this product line, with growth in the group product and a decline in sales for individual longterm care. Voluntary workplace benefits sales increased in 2006...

  • Page 77
    ... income protection product requirements for policies issued in California have not materially impacted sales, renewals, or persistency for our Unum US segment. In January of 2006, we began a process of filing a request with various state insurance departments for rate adjustments on one older series...

  • Page 78
    ...of dollars, except ratios) 2006 Operating Revenue Premium Income Group Long-term Income Protection Group Short-term Income Protection Total Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Deferral of Policy...

  • Page 79
    ... settlement agreement with the California DOI. Excluding these charges, the 2006 benefit ratio of 94.8 percent was higher than the prior year ratio of 93.8 percent due primarily to higher paid claims in both group long-term and short-term income protection, partially offset by a higher rate of claim...

  • Page 80
    ...of dollars, except ratios) 2006 Operating Revenue Premium Income Group Life Accidental Death & Dismemberment Total Premium Income Net Investment Income Other Income (Loss) Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Deferral of Policy Acquisition Costs...

  • Page 81
    ...of assets supporting these lines of business. The group life line reported a slightly increased benefit ratio in 2006 due primarily to an increased average claim size and a decrease in the waiver recovery rate, offset partially by a lower submitted and paid claim incidence rate. The accidental death...

  • Page 82
    ...lines. (in millions of dollars, except ratios) 2006 Operating Revenue Premium Income Individual Income Protection Recently Issued Long-term Care Voluntary Workplace Benefits Total Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future...

  • Page 83
    ...-life cases which terminated during 2005. Multi-life business, which constitutes approximately 60 percent of the individual income protection - recently issued block of business, has consistently had lower claim incidence rates than the non multi-life business. The benefit ratio for long-term care...

  • Page 84
    ... issued and long-term care lines of business, offset somewhat by higher levels of deferral for the voluntary workplace benefits product lines due to increased sales. Amortization of deferred policy acquisition costs was higher for 2005 due to the termination during 2005 of two large multi-life cases...

  • Page 85
    Unum UK Segment Operating Results Unum UK includes insurance for group long-term income protection, group life, and individual income protection products sold primarily in the United Kingdom through field sales personnel and independent brokers and consultants. Shown below are financial results and ...

  • Page 86
    ...of a lower level of claim resolutions on an acquired block of group long-term income protection business. Group life reported favorable paid claim experience. Individual income protection had favorable claim resolution experience during 2006. Commissions decreased in 2006 due to the ongoing increase...

  • Page 87
    ... acquired block of group long-term income protection business. The benefit ratio for the group life line of business decreased in comparison to 2004 due to favorable claim experience in 2005 and recent renewal activity which resulted in terminations during 2005 of less profitable business. Operating...

  • Page 88
    ...of dollars, except ratios) 2006 Operating Revenue Premium Income Income Protection Life Cancer and Critical Illness Total Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Deferral of Policy Acquisition Costs...

  • Page 89
    ... rate as well as the average claim payment for hospital income. For cancer, the incidence increased in 2006 relative to 2005, but the incurred loss ratio decreased due to the introduction of a new cancer product. The life line of business reported a slight increase in the number of paid claims...

  • Page 90
    ... Individual Income Protection - Closed Block segment. (in millions of dollars, except ratios) 2006 Operating Revenue Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits Commissions Impairment of Intangible Assets Operating...

  • Page 91
    ...-tax operating income ratio for 2006, 2005, and 2004 would have been 11.1%, 11.3%, and 15.5%, respectively. During the third quarter of 2005, we recaptured a closed block of individual income protection business with approximately $1.6 billion in invested assets and $185.0 million of annual premium...

  • Page 92
    ...protection business is supported by approximately $2.6 billion of allocated capital, and our return on equity for this business generally is in the low single digits. With the successful completion of the securitization of a small block of our group long-term income protection claim reserves in 2006...

  • Page 93
    ... the capital supporting these lines of business in the future growth of our Unum US, Unum UK, and Colonial segments. (in millions of dollars) 2006 Operating Revenue Premium Income Net Investment Income Other Income Total Benefits and Expenses Benefits and Change in Reserves for Future Benefits...

  • Page 94
    ... assumed in the pricing of our insurance products. Assets are invested predominately in fixed maturity securities, and the portfolio is matched with liabilities so as to eliminate as much as possible our exposure to changes in the overall level of interest rates. Changes in interest rates may affect...

  • Page 95
    ... can be held in publicly traded investment-grade corporate securities, mortgage-backed securities, asset-backed securities, and U.S. government agencies and municipal securities. We intend to manage the risk of losses due to changes in interest rates by matching asset duration with liabilities, in...

  • Page 96
    ...-backed securities. Net investment income is also higher in 2006 compared to last year because of the investment income related to the bonds transferred to one of our insurance subsidiaries in conjunction with the 2005 recapture of a ceded closed block of individual income protection business. The...

  • Page 97
    ... investments. During 2005, we recognized a loss of $14.6 million on the sale of securities issued by a major U.S. based automotive parts supplier. The company had experienced declining sales and production levels, along with higher steel prices and growing employee health care and retirement costs...

  • Page 98
    ... sale on securities issued by a major U.S. based automotive manufacturer. The company had experienced declining sales due to competition and the increase in gasoline prices, along with higher raw material costs and growing employee health care and retirement costs. These securities were investment...

  • Page 99
    ...274.7 Financial Institutions 3,628.0 Mortgage/Asset-Backed 3,973.8 Sovereigns 864.3 Technology 477.5 Transportation 993.8 U.S. Government Agencies and Municipalities 2,620.5 Utilities 6,420.9 Total $ 34,567.9 $ The above chart excludes DIG Issue B36 embedded derivatives, which at December 31, 2006...

  • Page 100
    ... Subtotal Mortgage/Asset-Backed Securities Total Of the $650.8 million in gross unrealized losses at December 31, 2006, $590.2 million, or 90.7 percent, are related to investment-grade fixed maturity bonds. The following table shows the length of time the investment-grade fixed maturity bonds had...

  • Page 101
    ... Mortgage Funding Company U.S. Government Sponsored Mortgage Funding Company Principal Protected Equity Linked Note Total Fair Value $ 456.8 725.1 50.9 $ 1,232.8 Unrealized losses on investment-grade fixed maturity securities principally relate to changes in interest rates or changes in market...

  • Page 102
    ... is likely to occur over the life of the security. We have the ability to hold this security to the earlier of recovery or maturity. The principal protected equity linked note is a zero coupon bond, issued by a large, well capitalized Fortune 500 financial services company, the return of which is...

  • Page 103
    ... for real estate was $7.6 million. Derivatives We use derivative financial instruments to manage reinvestment risk, duration, and currency risk. Historically, we have utilized interest rate futures contracts, current and forward interest rate swaps and options on forward interest rate swaps...

  • Page 104
    ...individual and group long-term care and the individual and group income protection products. All other product portfolios are periodically reviewed to determine if hedging strategies would be appropriate for risk management purposes. During 2006, we completed a program to reset the interest rates of...

  • Page 105
    ... established an investment strategy that we believe will provide for adequate cash flows from operations. Our policy benefits are primarily in the form of claim payments, and we have minimal exposure to the policy withdrawal risk associated with deposit products such as individual life policies or...

  • Page 106
    ... tax liabilities related primarily to group relief benefits recognized from the use of net operating losses in a foreign jurisdiction. Included in 2004 is a tax benefit related to the restructuring charges associated with our individual income protection - closed block business. Investing Cash Flows...

  • Page 107
    ... investment management fees, and/or dividends. At December 31, 2006, Unum Group had outstanding from one of its insurance subsidiaries a $100.0 million 8.25% surplus debenture due in 2027. Semi-annual interest payments are conditional upon the approval by the insurance department of the applicable...

  • Page 108
    ... initial annual rate of 5.085%, payable quarterly. Upon settlement of the common stock purchase contract and successful remarketing of the senior note element of the units, Unum Group will receive proceeds of approximately $300.0 million and will issue between 17.7 million and 20.4 million shares of...

  • Page 109
    ...% senior notes due December 15, 2028. In 1998, Provident Financing Trust I issued $300.0 million of 7.405% capital securities in a public offering. These capital securities, which mature on March 15, 2038, are fully and unconditionally guaranteed by Unum Group, have a liquidation value of $1,000 per...

  • Page 110
    ... strength ratings for our U.S. domiciled insurance company subsidiaries as of the date of this filing. AM Best Senior Debt Ratings Financial Strength Ratings Provident Life & Accident Provident Life & Casualty Unum Life of America First Unum Life Colonial Life & Accident Paul Revere Life Paul Revere...

  • Page 111
    ... all four rating agencies, with each agency issuing a public comment in early November 2006. On November 1, 2006, Fitch affirmed its ratings for our companies and maintained its outlook at "stable." Also on November 1, 2006, S&P affirmed its counterparty credit and financial strength ratings for our...

  • Page 112
    ...defined benefit plans for the employees of our Canadian branch operation. As a result of the sale of the Canadian branch, we froze the Canadian defined benefit pension plans during 2004 and recorded a curtailment loss of $0.7 million. We are currently in the process of terminating the Canadian plans...

  • Page 113
    ...our long-term debt would increase approximately $210 million and $240 million, respectively. The effect of a change in interest rates on asset prices was determined using a duration implied methodology for corporate bonds, private placement securities, and government and government agency securities...

  • Page 114
    ... over financial reporting. The Company's internal control over financial reporting encompasses the processes and procedures management has established to (i) maintain records that, in reasonable detail, accurately and fairly reflect the Company's transactions and dispositions of assets; (ii) provide...

  • Page 115
    ... the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that Unum Group and subsidiaries maintained effective internal control over financial reporting as...

  • Page 116
    ... respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, Unum Group changed its method of accounting for defined benefit pension and other postretirement plans as of December 31, 2006 in accordance with Statement of Financial Accounting Standards...

  • Page 117
    ... Unum Group and Subsidiaries December 31 2006 2005 (in millions of dollars) Assets Investments Fixed Maturity Securities - at fair value (amortized cost: $33,414.1; $32,062.1) Mortgage Loans Real Estate Policy Loans Other Long-term Investments Short-term Investments Total Investments Other Assets...

  • Page 118
    ... Unum Group and Subsidiaries December 31 2006 2005 (in millions of dollars) Liabilities and Stockholders' Equity Liabilities Policy and Contract Benefits Reserves for Future Policy and Contract Benefits Unearned Premiums Other Policyholders' Funds Income Tax Payable Deferred Income Tax Long-term...

  • Page 119
    CONSOLIDATED STATEMENTS OF OPERATIONS Unum Group and Subsidiaries Year Ended December 31 2006 2005 2004 (in millions of dollars, except share data) Revenue Premium Income Net Investment Income Net Realized Investment Gain (Loss) Other Income Total Revenue Benefits and Expenses Benefits and Change ...

  • Page 120
    ...(net of tax benefit of $3.3) Change in Minimum Pension Liability Adjustment (net of tax benefit of $18.3) Total Comprehensive Income Issuance of Equity Security Units Common Stock Activity Dividends to Stockholders Balance at December 31, 2004 Comprehensive Income Net Income Change in Net Unrealized...

  • Page 121
    ... Unum Group and Subsidiaries Common Stock Additional Paid-in Capital Accumulated Other Retained Treasury Comprehensive Income Earnings Stock (in millions of dollars) $ 1,163.5 $ 4,610.4 411.0 $ (54.2) Deferred Compensation Total Balance at December 31, 2005 Comprehensive Loss Net Income Change...

  • Page 122
    ... Value of Business Acquired Depreciation Impairment of Intangible Assets Cash Transferred to Reinsurer for Individual Income Protection - Closed Block Restructuring Transaction Other, Net Net Cash Provided by Operating Activities Cash Flows from Investing Activities Proceeds from Sales of Available...

  • Page 123
    ... Policyholder Accounts Short-term Debt Repayments Issuance of Long-term Debt Long-term Debt Repayments Cost Related to Early Retirement of Debt Issuance of Common Stock Dividends Paid to Stockholders Other, Net Net Cash Provided (Used) by Financing Activities Effect of Foreign Exchange Rate Changes...

  • Page 124
    ...of group and individual income protection products in the United States and the United Kingdom. We also provide a complementary portfolio of other insurance products, including long-term care insurance, life insurance, employer- and employee-paid group benefits, and other related services. We market...

  • Page 125
    ...-sale. Changes in the fair value of available-for-sale fixed maturity securities are reported as a component of other comprehensive income. These amounts are net of income tax and valuation adjustments to reserves for future policy and contract benefits which would have been recorded had the related...

  • Page 126
    ... management's best estimates of future experience. Value of Business Acquired: Value of business acquired represents the present value of future profits recorded in connection with the acquisition of a block of insurance policies. The asset is amortized based upon expected future premium income...

  • Page 127
    ... to be paid on insured claims in excess of the policyholders' policy fund balances. Policy and Contract Benefits Liabilities: Active life reserves for future policy and contract benefits on traditional life and accident and health products have been provided on the net level premium method. The...

  • Page 128
    ...-benefits and fixed-benefits pension plans. The contract purchase payments and the assets of the separate accounts are segregated from other funds for both investment and administrative purposes. Contract purchase payments received under variable annuity contracts are subject to deductions for sales...

  • Page 129
    ... TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 1 - Significant Accounting Policies - Continued Had we applied the fair value recognition provisions of SFAS 123 as of its original effective date, pro forma net income (loss) and net income (loss) per share would be...

  • Page 130
    ... adjustment to the opening balance of retained earnings for 2007. We estimate that the cumulative effect adjustment will increase retained earnings by up to $25.0 million. Statement of Financial Accounting Standards No. 157 (SFAS 157), Fair Value Measurements, was issued in September 2006. SFAS 157...

  • Page 131
    ... STATEMENTS - Continued Unum Group and Subsidiaries Note 2 - Discontinued Operations As discussed in Note 1, in January 2007, we entered into a definitive agreement for the sale of GENEX and expect to close the transaction during the first quarter of 2007, subject to customary closing conditions...

  • Page 132
    ... received or paid if the contracts had been settled or closed as of the last day of the year. DIG Issue B36 Embedded Derivatives: Fair values are estimated using internal pricing models and represent the hypothetical value of the duration mismatch of assets and liabilities, interest rate risk, and...

  • Page 133
    ... of dollars) 2006 Carrying Amount Assets Fixed Maturity Securities Available-for-Sale Derivatives Hedging Available-for-Sale DIG Issue B36 Embedded Derivatives Mortgage Loans Policy Loans Other Long-term Investments Liabilities Policyholders' Funds Deferred Annuity Products Other Long-term Debt Fair...

  • Page 134
    ...and Political Subdivisions Foreign Governments Public Utilities Mortgage/Asset-Backed Securities Derivatives Hedging Available-for-Sale All Other Corporate Bonds Redeemable Preferred Stocks Total Fair Value of DIG Issue B36 Embedded Derivatives Total Fixed Maturity Securities Fair Value 2,587.0 42...

  • Page 135
    ... Loss Fair Value Loss Description United States Government and Government Agencies and Authorities Foreign Governments Public Utilities Mortgage/Asset-Backed Securities Derivatives Hedging Available-for-Sale All Other Corporate Bonds Redeemable Preferred Stocks Total $ $ 1,068.3 278.4 871.3 165...

  • Page 136
    ... is likely to occur over the life of the security. We have the ability to hold this security to the earlier of recovery or maturity. The principal protected equity linked note is a zero coupon bond, issued by a large, well capitalized Fortune 500 financial services company, the return of which is...

  • Page 137
    ... future business prospects and trends of earnings. The valuation of the security's underlying collateral. Relevant industry conditions and trends relative to their historical cycles. Market conditions. Rating agency actions. Bid and offering prices and the level of trading activity. Adverse changes...

  • Page 138
    ... also holds a defeasance swap contract for highly rated bonds to provide principal protection for the investments. The fair values of the underlying forward and swap contracts equaled $177.3 million as of December 31, 2006, and are reported as fixed maturity securities in the consolidated balance...

  • Page 139
    ...231.4 19.9 23.2 2,188.3 $ 2006 2004 Fixed Maturity Securities Mortgage Loans Real Estate Policy Loans Other Long-term Investments Short-term Investments Gross Investment Income Less Investment Expenses Less Investment Income on PFA Assets Net Investment Income $ $ 2,262.0 54.6 1.0 12.6 8.4 21...

  • Page 140
    ...use swaps, forwards, futures, and options to hedge interest rate and currency risks and to match assets with our insurance liabilities. Derivative Risks The basic types of risks associated with derivatives are market risk (that the value of the derivative will be adversely impacted by changes in the...

  • Page 141
    ... and protect us from the potential adverse impact of declining interest rates on the associated policy reserves. We plan on terminating these forward interest rate swaps and forward contracts at the time the projected cash flows are used to purchase fixed income securities. As of December 31, 2006...

  • Page 142
    ... assets a deposit asset for the applicable reinsurance contract. At the time of recapture, the receivable in the deposit asset was settled, the derivative was terminated, and the assets were recorded using the market value of $1,621.7 million that existed on that date. The difference in the book...

  • Page 143
    ... Unum Group and Subsidiaries Note 5 - Derivative Financial Instruments - Continued During 2006, we completed a program to reset the interest rates of several receive fixed, pay variable forward starting interest rate swaps by terminating various existing swaps and adding new swaps at current market...

  • Page 144
    ...and management of the United Kingdom portion of the group income protection claims portfolio of Swiss Life (UK) plc (Swiss Life), and Swiss Life reinsured this portfolio to us. We also became a multi-national pooling partner for Swiss Life Insurance & Pension Company with respect to business written...

  • Page 145
    ... state insurance regulators in the fourth quarter of 2004 and with the California Department of Insurance (DOI) in the third quarter of 2005. In connection with these settlement agreements, we increased our income protection claim reserves $84.5 million in 2004 and $52.7 million in 2005. During 2006...

  • Page 146
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 7 - Liability for Unpaid Claims and Claim Adjustment Expenses - Continued In 2004, we completed an analysis of the assumptions related to our individual income protection - closed block claim reserves. The ...

  • Page 147
    ... (benefit) as included in the consolidated statements of operations, is as follows. Year Ended December 31 2004 2005 35.0 % (6.6) 0.5 (0.8) (0.2) (0.5) 27.4 % 35.0 % (26.3) 15.0 2.1 (2.0) 1.6 3.2 (1.7) 26.9 % 2006 Statutory Income Tax Goodwill Impairment Prior Year Tax Settlements Tax Basis on Sale...

  • Page 148
    ...- Continued Unum Group and Subsidiaries Note 8 - Income Tax - Continued The net deferred income tax liability consists of the following: December 31 2006 2005 (in millions of dollars) Deferred Tax Liability from Continuing Operations Deferred Policy Acquisition Costs Invested Assets Policy Reserves...

  • Page 149
    ... Unum Group and Subsidiaries Note 8 - Income Tax - Continued Our consolidated statements of operations include the following amounts of income subject to foreign taxation, including the results of the Canadian branch discontinued operations, and the related foreign income tax expense (benefit...

  • Page 150
    ... tax benefit for these losses. The $0.1 million change from 2005 in the valuation allowance is due to fluctuations in foreign exchange rates. Total income taxes paid during 2006, 2005, and 2004 were $129.2 million, $93.4 million, and $91.5 million, respectively. Note 9 - Debt Long-term debt consists...

  • Page 151
    ... reinsured a quota share portion of Unum Life Insurance Company of America's (Unum America) liability with respect to certain specified long-term disability claims incurred between January 1, 1999 and December 31, 2001 that were in payment status on January 1, 2006 (reinsured claims). Assets held in...

  • Page 152
    ... to purchase, for $25, shares of Unum Group's common stock on May 15, 2006 and which entitled the holder to contract adjustment payments at the annual rate of 2.25 percent, payable quarterly, and (b) a 1/40, or 2.5 percent, ownership interest in a senior note issued by Unum Group due May 15, 2008...

  • Page 153
    ...FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 10 - Pensions and Other Postretirement Benefits - Continued branch, we froze the Canadian defined benefit pension plans during 2004 and are currently in the process of terminating these plans. The following tables provide the changes...

  • Page 154
    ...% 4.86% Postretirement Benefits 2006 2005 5.50% 5.75% 5.70% 5.75% - We currently set the discount rate assumption annually for each of our pension-related benefit plans at the measurement date to reflect the yield of a portfolio of high quality long-term fixed income securities matched against the...

  • Page 155
    ... FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 10 - Pensions and Other Postretirement Benefits - Continued For measurement purposes at December 31, 2006 and 2005, the annual rate of increase in the per capita cost of covered postretirement health care benefits assumed...

  • Page 156
    ... FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 10 - Pensions and Other Postretirement Benefits - Continued Our funded pension plans' weighted average asset allocations, by asset category, are as follows: U.S. Plans 2006 Actual Target Equity Securities Fixed Income Securities...

  • Page 157
    ... Share Common Stock Dividends paid per common share were $0.30 for each of the years ended December 31, 2006, 2005, and 2004. During 2006, we settled the purchase contract element of the adjustable conversion-rate equity security units issued in 2003 by issuing 43.3 million shares of Unum Group...

  • Page 158
    ... to our employees, officers, consultants, and brokers, excluding certain senior officers and directors. Prior to terminating the plan in February 2004 for purposes of any further grants, we granted 2,007,375 shares in the form of stock options with a maximum term of ten years after the date of grant...

  • Page 159
    ... the explicit service period (subject to acceleration upon actual retirement) for awards issued prior to 2006. We pay cash dividend equivalents on outstanding nonvested stock awards. Dividend equivalents paid on nonvested stock awards are charged to expense when paid. At December 31, 2006, we had...

  • Page 160
    ... companies either rated below A- by A.M. Best Company or not rated. Reinsurance activity is accounted for on a basis consistent with the terms of the reinsurance contracts and the accounting used for the original policies issued. Premium income and benefits and change in reserves for future benefits...

  • Page 161
    ... independent brokers and consultants with the option of direct access to a sales support center centrally located in our corporate offices. The Unum UK segment includes group long-term income protection, group life, and individual income protection products sold primarily in the United Kingdom...

  • Page 162
    ... from Unum US insured products not actively marketed (with the exception of the individual income protection products in the Individual Income Protection - Closed Block segment), including individual life and corporate-owned life insurance, reinsurance pools and management operations, group pension...

  • Page 163
    ... Life Accidental Death & Dismemberment Supplemental and Voluntary Individual Income Protection - Recently Issued Long-term Care Voluntary Workplace Benefits Unum UK Group Long-term Income Protection Group Life Individual Income Protection Colonial Income Protection Life Cancer and Critical Illness...

  • Page 164
    ... Unum Group and Subsidiaries Note 14 - Segment Information - Continued Selected operating statement data by segment is presented as follows: Individual Income Protection Closed Colonial Block Other (in millions of dollars) Unum US Year Ended December 31, 2006 Total Premium Income Net Investment...

  • Page 165
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 14 - Segment Information - Continued The following table provides the changes in deferred policy acquisition costs by segment: Individual Income Protection Closed Unum UK Colonial Block (in millions of dollars) ...

  • Page 166
    ... FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 14 - Segment Information - Continued Assets by segment are as follows: December 31 2006 2005 (in millions of dollars) Unum US Unum UK Colonial Individual Income Protection - Closed Block Other Corporate Discontinued Operations...

  • Page 167
    ... Class Actions On July 15, 2002, Rombeiro v. Unum Life Insurance Company of America, et al., was filed in the Superior Court of California and subsequently was removed to federal court, alleging that the plaintiff was wrongfully denied disability benefits under a group long-term disability plan...

  • Page 168
    ... STATEMENTS - Continued Unum Group and Subsidiaries Note 15 - Commitments and Contingent Liabilities - Continued on behalf of a putative class of individuals that were denied or terminated from benefits under group long-term disability plans, seeking injunctive and declaratory relief and payment...

  • Page 169
    ... state insurance regulators upon conclusion of a multistate market conduct examination led by Maine, Massachusetts, and Tennessee relating to disability claims handling practices. A total of 48 states and the District of Columbia were parties to the settlement agreements, which provide for changes...

  • Page 170
    ... rarely a single act or series of actions, which can properly be addressed by a class action. Nevertheless, we monitor these cases closely and defend ourselves appropriately where these allegations are made. Broker Compensation, Quoting Process, and Related Matters Examinations and Investigations In...

  • Page 171
    ... of directors alleging claims on behalf of us against the director defendants for breach of duty, mismanagement, and corporate waste, challenging certain compensation paid to insurance brokers and alleging insider trading against certain director defendants. A motion to dismiss the complaint remains...

  • Page 172
    ... Statutory Net Income, Capital and Surplus, and Dividends Statutory net income for U.S. life insurance companies is reported in conformity with statutory accounting principles prescribed by the National Association of Insurance Commissioners (NAIC) and adopted by applicable domiciliary state laws...

  • Page 173
    ... FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 16 - Statutory Financial Information - Continued We also have the ability to draw a dividend from our United Kingdom insurance subsidiary, Unum Limited. Such dividends are limited based on insurance company legislation in the United...

  • Page 174
    ... TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Unum Group and Subsidiaries Note 17 - Quarterly Results of Operations (Unaudited) The following is a summary of our unaudited quarterly results of operations for 2006 and 2005: 2006 4 th 3 2nd (in millions of dollars, except share data) $ 1,969...

  • Page 175
    ... reported were revised in the preceding table for the classification of GENEX, our disability management services business, as a discontinued operation, as discussed in Notes 1 and 2. Premium income, net investment income, net realized investment gain (loss), and net income (loss) did not change...

  • Page 176
    ... 31, 2006, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein in Item 8. In the ordinary course of business, our internal control over financial reporting changes as we modify and enhance our processes and...

  • Page 177
    ... to "Executive Officers of the Registrant" contained herein in Item 1. Code of Ethics Our internet website address is www.unum.com. We have adopted corporate governance guidelines, a code of business practices and ethics, and charters for our board of directors' audit, human capital, governance...

  • Page 178
    ... plans: the UNUM Corporation 1990 Long-Term Incentive Plan, the UNUM Corporation 1998 Goals Plan, and the UNUM Corporation 1996 Long-Term Incentive Compensation Plan. As of December 31, 2006, a total of 1,081,664 shares of the Company's common stock were issuable upon exercise of outstanding options...

  • Page 179
    ... price of options awarded under this plan is the fair market value of the stock on the date of grant. The term of any option issued under the plan cannot exceed ten years. There are provisions for early vesting and/or early termination of the options in the event of retirement, death, disability...

  • Page 180
    ... below the level of Vice President and who are not officers, directors, or otherwise considered to be affiliates of the Company within the meaning of Rule 144 of the Securities Act of 1933. The plan is administered by the Chief Executive Officer. The total number of shares available for grant under...

  • Page 181
    ... of the annual retainer and/or fees that the director elects to have paid in deferred share rights, divided by (ii) the fair market value per share on the grant date. The aggregate number of shares which can be issued under the plan is 500,000. The plan is administered by the Human Capital Committee...

  • Page 182
    ...and internal control over financial reporting, the interim reviews of the financial statements included in our quarterly reports on Form 10-Q, and services provided in connection with statutory and regulatory filings were $7,460,931 and $7,423,203, respectively, for fiscal years 2006 and 2005. Audit...

  • Page 183
    ... of this report: (1) Financial Statements The following report and consolidated financial statements of Unum Group and Subsidiaries are included in Item 8. Management's Report on Internal Control over Financial Reporting ...Report of Ernst & Young LLP, Independent Registered Public Accounting Firm...

  • Page 184
    ... dates indicated. Name Title Date /s/ Thomas R. Watjen Thomas R. Watjen President and Chief Executive Officer and a Director (principal executive officer) Executive Vice President, Chief Financial Officer and Chief Actuary (principal financial officer and principal accounting officer) Director...

  • Page 185
    ... A. S. MacMillan, Jr. * Edward J. Muhl * Michael J. Passarella * William J. Ryan * By: /s/ Susan N. Roth Susan N. Roth Attorney-in-Fact Director Director Title Date February 28, 2007 Director February 28, 2007 Director February 28, 2007 February 28, 2007 Director February 28, 2007 For all of the...

  • Page 186
    .../Asset-Backed Securities Derivatives Hedging Available-for-Sale DIG Issue B36 Embedded Derivatives All Other Corporate Bonds Redeemable Preferred Stocks Total Mortgage Loans Real Estate Acquired in Satisfaction of Debt Other Real Estate Policy Loans Other Long-term Investments Short-term Investments...

  • Page 187
    SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT Unum Group (Parent Company) BALANCE SHEETS December 31 2006 2005 (in millions of dollars) ASSETS Fixed Maturity Securities Available-for-Sale--at fair value (amortized cost: $145.1; $400.6) Short-term Investments Investment in Subsidiaries ...

  • Page 188
    ... II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) Unum Group (Parent Company) STATEMENTS OF OPERATIONS 2006 Year Ended December 31 2005 (in millions of dollars) $ 784.2 21.1 63.0 868.3 207.9 14.5 222.4 $ 2004 Dividends from Subsidiaries Interest from Subsidiaries Other Income Total...

  • Page 189
    ... INFORMATION OF REGISTRANT (Continued) Unum Group (Parent Company) STATEMENTS OF CASH FLOWS 2006 Year Ended December 31 2005 (in millions of dollars) $ 767.3 $ 2004 CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales of Available-for-Sale Securities...

  • Page 190
    ... 31, 2005, Unum Group also held a $150.0 million surplus debenture which was redeemed at maturity in December 2006. Semi-annual interest payments are conditional upon approval by the insurance departments of the subsidiaries' states of domicile. The weighted average interest rate for surplus notes...

  • Page 191
    SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued) Unum Group (Parent Company) NOTES TO CONDENSED FINANCIAL INFORMATION - CONTINUED In June 2006, pursuant to a cash tender offer, we purchased $50.0 million of our outstanding 7.405% junior subordinated debt securities due 2038 ...

  • Page 192
    ...Group and Subsidiaries Segment Deferred Policy Acquisition Costs Future Policy Benefits, Losses, Claims, and Unearned Loss Premiums (in millions of dollars) Other Policy Claims and Benefits Payable Year Ended December 31, 2006 Unum US Unum UK Colonial Individual Income Protection - Closed Block...

  • Page 193
    ... Amortization of Deferred Policy Acquisition Costs Net Premium Segment Income Investment Income (1) Other Operating Expenses (2) Premiums Written (3) (in millions of dollars) Year Ended December 31, 2006 Unum US Unum UK Colonial Individual Income Protection Closed Block Other Corporate Total Year...

  • Page 194
    ...REINSURANCE Unum Group and Subsidiaries Gross Amount Ceded Assumed to Other from Other Companies Companies (in millions of dollars) Net Amount Percentage Amount Assumed to Net Year Ended December 31, 2006 Life Insurance in Force Premium Income: Life Insurance Accident and Health Insurance Total...

  • Page 195
    ... ACCOUNTS Unum Group and Subsidiaries Description Balance at Beginning of Period Additions Charged to Costs and Expenses Additions Charged to Other Deductions (1) Accounts (in millions of dollars) Balance at End of Period Year Ended December 31, 2006 Mortgage Loan Loss Reserve Real estate...

  • Page 196
    ...Company and Provident Life and Accident Insurance Company (Provident) dated November 18, 2003 (incorporated by reference to Exhibit 2.1 of the Company's Form 10-K filed March 12, 2004). Transition Services Agreement Between RBC Life Insurance Company and Provident and UnumProvident Corporation dated...

  • Page 197
    ... Life and Accident Insurance Company of America's Form 10-K filed for the fiscal year ended December 31, 1992). Terminated effective December 31, 1993. Provident and Subsidiaries Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.8 of Provident Life Capital Corporation...

  • Page 198
    ....21) Administrative Reinsurance Agreement between Provident and Reassure America Life Insurance Company dated to be effective July 1, 2000 (incorporated by reference to the Registrant's Form 8-K filed March 2, 2001). (10.22) Provident Companies, Inc. Employee Stock Option Plan of 1998 (incorporated...

  • Page 199
    ... Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. _____ * Management contract or compensatory plan required to be filed as an exhibit to this form pursuant to Item 15(c) of...

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  • Page 203
    ... York Provident Life and Casualty Insurance Company Chattanooga, Tennessee Provident Investment Management, LLC Chattanooga, Tennessee Unum Limited Dorking, England Thomas A. H. White Senior Vice President Investor Relations 1 Fountain Square Chattanooga, TN 37402 423 294 8996 CORPORATE INFORMATION...

  • Page 204
    UNUM GROUP 1 FOUNTAIN SQUARE, CHATTANOOGA, TN 37402 WWW.UNUM.COM ©2007 UNUM GROUP. ALL RIGHTS RESERVED. UNUM IS THE MARKETING BRAND OF UNUM GROUP'S INSURING SUBSIDIARIES. G-73975 (4-07)