Unum 2006 Annual Report Download - page 172

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unum Group and Subsidiaries
154
Note 15 - Commitments and Contingent Liabilities - Continued
Miscellaneous Matters
In September 2003, United States of America ex. rel. Patrick J. Loughren v. UnumProvident Corporation and
GENEX Services, Inc., was filed in the United States District Court for the District of Massachusetts. This is a qui
tam action to recover damages and civil penalties on behalf of the United States of America alleging violations of
the False Claims Act by us and our GENEX subsidiary. In accordance with the False Claims Act, the action was
originally filed under seal to provide the government the opportunity to investigate the allegations and prosecute the
action if they believed that the case had merit and warranted their attention. The government declined to prosecute
the case and the case became a matter of public record on December 23, 2004. The complaint alleges that we
defrauded the government by inducing and or assisting disability claimants to apply for disability benefits from the
Social Security Administration (SSA) when we allegedly knew that the claimants were not disabled under SSA
criteria. A motion to dismiss the complaint was unsuccessful. We intend to vigorously defend the action.
In certain of our reinsurance businesses there are disputes among the pool members, reinsurance participants, and/or
reinsurers concerning the scope of their obligations and liabilities within the reinsurance contracts, including the
reinsurance pools for which our subsidiaries acted either as pool managers or underwriting agents, as pool members,
or as reinsurers. We or our subsidiaries either have been or may in the future be brought into disputes, arbitration
proceedings, or litigation with other pool members or reinsurers in the process of resolving the various claims.
Various other lawsuits against us have arisen in the normal course of its business. Contingent liabilities that might
arise from such other litigation incurred in the normal course of business are not deemed likely to materially
adversely affect our consolidated financial position or results of operations in a period, depending on our results of
operations for the particular period.
Note 16 - Statutory Financial Information
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. For the years ended December 31, 2006, 2005, and 2004, our U.S. insurance subsidiaries’ statutory
combined net income, excluding Tailwind Re, was $307.4 million, $641.8 million, and $607.6 million, respectively,
and statutory combined net gain from operations was $371.5 million, $650.0 million, and $662.1 million,
respectively. Statutory capital and surplus, excluding Tailwind Re, was $4,232.0 million and $4,270.2 million at
December 31, 2006 and 2005, respectively. Tailwind Re, our South Carolina domiciled special purpose financial
captive insurance subsidiary, had statutory net income and statutory net gain from operations of $14.1 million for the
year ended December 31, 2006. Statutory capital and surplus for Tailwind Re at December 31, 2006 was $136.2
million.
Restrictions under applicable state insurance laws limit the amount of ordinary dividends that can be paid to a parent
company from its insurance subsidiaries without prior approval by regulatory authorities. For life insurance
companies domiciled in the United States, that limitation typically 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 further limited to the amount
of statutory surplus as it relates to policyholders. Based on the restrictions under current law, $506.2 million is
available for the payment of ordinary dividends from our U.S. insurance subsidiaries, excluding Tailwind Re, during
2007. The ability of Tailwind Re to pay dividends to its parent, Tailwind Holdings, a wholly-owned subsidiary of
Unum Group, will depend on its satisfaction of applicable regulatory requirements and on the performance of the
block of claims reinsured by Tailwind Re.