Unum 2006 Annual Report Download - page 148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unum Group and Subsidiaries
130
Note 8 - Income Tax - Continued
The net deferred income tax liability consists of the following:
2006 2005
Deferred Polic
y
Ac
q
uisition Costs $ 542.9 $ 538.3
Invested Assets 144.5 564.2
Polic
y
Reserves 76.0 -
Other 75.0 150.6
838.4 1,253.1
Em
p
lo
y
ee Benefits 188.1 172.0
Polic
y
Reserves - 2.0
Other 89.4 101.7
Gross Deferred Tax Asset 277.5 275.7
Less Valuation Allowance 6.4 6.3
Net Deferred Tax Asset 271.1 269.4
567.3 983.7
8.4 6.0
575.7$ 989.7$
December 31
Deferred Tax Liability from Continuing Operations
(in millions of dollars)
Gross Deferred Tax Liability
Net Deferred Tax Liability from Discontinued Operations
Total Net Deferred Tax Liability
Net Deferred Tax Liability from Continuing Operations
Deferred Tax Asset from Continuing Operations
Under the Life Insurance Company Tax Act of 1959, U.S. stock life insurance companies were required to maintain
a policyholders’ surplus account containing the accumulated portion of income which had not been subjected to
income tax in the year earned. The Deficit Reduction Act of 1984 required that no future amounts be added after
1983 to the policyholders’ surplus account and that any future distributions to shareholders from the account would
become subject to federal income tax at the general corporate federal income tax rate then in effect. During 2004,
the Homeland Investment Act of 2004 was enacted. The Homeland Investment Act of 2004 provided, in part, that
distributions from policyholders’ surplus accounts during 2005 and 2006 would not be taxed.
The amount of the policyholders’ surplus accounts of our U.S. insurance subsidiaries at December 31, 2004, was
approximately $228.8 million. Distributions made during 2005 by these life insurance subsidiaries, including
dividend distributions, were deemed to occur first from the policyholders’ surplus accounts. As a result, our U.S.
life insurance subsidiaries distributed as dividends the remaining balance of their policyholders’ surplus account to
the holding company during 2005. This resulted in the elimination of a future potential tax of approximately $80.1
million which had not previously been provided for in current or deferred taxes because we considered the
conditions under which such a tax would be paid to be remote.
The Homeland Investment Act of 2004 also provided a deduction of 85 percent of certain foreign earnings that were
repatriated during 2005, up to a maximum of $500.0 million. For the portion of unremitted foreign earnings of our
non-U.S. operations that had been considered to be permanently reinvested, we had not previously provided U.S.
income taxes. During the fourth quarter of 2005, we repatriated $454.8 million in unremitted foreign earnings from
our U.K. subsidiary. We recorded current taxes payable of approximately $15.3 million on those previously
unremitted foreign earnings and recorded a tax benefit of approximately $18.6 million as a result of the reversal of
the deferred tax liability related to the unremitted earnings. We consider the remaining amounts of unremitted
earnings as permanently invested in our foreign subsidiaries, and we have therefore not provided taxes on those
amounts.