Unum 2006 Annual Report Download - page 52

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Since October 2004, we have received subpoenas or information requests from the NYAG, a Federal Grand Jury in
San Diego, the District Attorney for the County of San Diego, insurance departments, and/or other state regulatory or
investigatory agencies of at least seven additional states including Connecticut, Florida, Maine, Massachusetts, North
Carolina, South Carolina, and Tennessee. The subpoenas and information requests sought information regarding,
among other things, quoting processes, broker compensation, solicitation activities, policies sold to state or municipal
entities, and information regarding compensation arrangements with brokers, particularly with regard to Universal
Life Resources, Inc. We have cooperated fully with these investigations.
With respect to the states listed, other than Florida and other than those with whom settlements have been reached,
we have not received any further inquiries in the past 12 months and consider those investigations to be dormant.
We have also had discussions with the DOL regarding compliance with the Employee Retirement Income Security
Act (ERISA), relating to our interactions with insurance brokers and relating to regulations concerning insurance
information provided by us to plan administrators of ERISA plans, including specifically the reporting of fees and
commissions paid to agents, brokers, and others in accordance with the requirements of Schedule A of Form 5500.
The DOL is pursuing an investigation of the Company concerning these issues, both generally and specifically in
connection with certain brokers, including Universal Life Resources, Inc. We are cooperating fully with the DOL’s
investigation.
We previously announced that we support the full disclosure of compensation paid to both brokers and agents. We
have implemented policies to facilitate customers obtaining information regarding broker compensation from their
brokers. Additionally, we provide appropriate notices to customers stating our policy surrounding disclosure 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 requiring customer approval of
compensation paid by us to the broker when the customer is also paying a fee to the broker and strengthening certain
policies and procedures associated with new business and quoting activities.
In addition to various regulatory agencies investigating issues relating to broker compensation and quoting practices,
the Company has been named as a defendant, along with other insurers and brokers, in litigation brought by
regulatory agencies or private parties in putative class actions making allegations arising out of broker compensation
arrangements or quoting practices. For further information on the various lawsuits, see Note 15 of the “Notes to
Consolidated Financial Statements” contained in Item 8.
In February 2006, we received from the Financial Services Authority (FSA) in the U.K. the results of the FSA’s risk
assessment review of Unum Limited. The FSA now conducts risk assessment reviews on a regular basis in the
normal course of its regulatory role. We have responded to all of the recommendations contained in the 2006
review results and continue to cooperate fully with the FSA in its regular review of risks in our U.K. regulated
businesses.
Beginning in March 2005, several of our insurance subsidiaries received requests from various regulatory agencies
seeking information relating to finite reinsurance. The requests seek information on such matters as our use of finite
reinsurance, controls relating to proper accounting treatment, existence of side agreements, and maintenance of
underwriting files on the reinsurance agreements. We have responded to all requests.
In March 2006, we received a subpoena from the Securities and Exchange Commission (SEC) seeking information
regarding certain reinsurance transactions and transactions regarding “Non Traditional Products” entered into after
January 1, 2002. We are cooperating fully with the SEC in its investigation.
Financing
The scheduled remarketing of the senior note element of our 2003 adjustable conversion-rate equity security units
(units) occurred in February 2006, as stipulated by the terms of the original offering, and we reset the interest rate on
$575.0 million of senior notes due May 15, 2008 to 5.997%. We purchased $400.0 million of the senior notes in the
remarketing which were subsequently retired. The associated write-off of deferred debt costs decreased 2006
income by $5.3 million before tax, or $3.4 million after tax. In May 2006, we settled the purchase contract element