Unum 2007 Annual Report Download - page 26

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
24 Unum 2007 Annual Report
Financing
The scheduled remarketing of the senior note element of our 2004 adjustable conversion-rate equity units (units) occurred in February
2007, as stipulated by the terms of the original offering, and we reset the interest rate on $300.0 million of senior notes due May 15, 2009
to 5.859%. We purchased $150.0 million of the senior notes in the remarketing which were subsequently retired. In May 2007, we settled
the purchase contract element of the 2004 units by issuing 17.7 million shares of common stock. We received proceeds of approximately
$300.0 million from the transaction.
In June 2007, we purchased and retired $34.5 million of our 6.85% senior debentures due 2015.
On October 31, 2007, Northwind Holdings, a newly formed Delaware limited liability company and a wholly-owned subsidiary of
Unum Group, issued $800.0 million of floating rate, insured, senior, secured notes due 2037 in a private offering. The notes bear interest at
a floating rate equal to the three month London Interbank Offered Rate (LIBOR) plus 0.78%. Recourse for the payment of principal, interest,
and other amounts due on the notes will be dependent principally on the receipt of dividends from Northwind Re, the sole subsidiary of
Northwind Holdings. The ability of Northwind Re to pay dividends to Northwind Holdings will depend on its satisfaction of applicable
regulatory requirements and on the performance of the business of Paul Revere Life, Provident, and Unum America (collectively, the ceding
insurers) reinsured by Northwind Re. None of Unum Group, the ceding insurers, Northwind Re, or any other affiliate of Northwind Holdings
is an obligor or guarantor on the notes. See “Liquidity and Capital Resources” contained herein and Notes 9 and 16 of the “Notes to Consolidated
Financial Statements” for additional information on Northwind Holdings and Northwind Re.
In November 2007, we purchased and retired $17.5 million of our outstanding 6.75% notes scheduled to mature in 2028.
During December 2007, pursuant to a tender offer, we purchased and retired $23.5 million aggregate liquidation amount of the 7.405%
junior subordinated debt securities due 2038; $99.9 million aggregate principal amount of the 7.625% notes due 2011; $210.5 million
aggregate principal amount of the 7.375% notes due 2032; and $66.1 million aggregate principal amount of the 6.75% notes due 2028.
We also called and retired all $150.0 million principal amount of our outstanding 7.25% notes scheduled to mature in 2032.
Throughout 2007, we made principal payments of $17.5 million on our senior secured non-recourse notes issued by our wholly-owned
subsidiary Tailwind Holdings.
The cost related to the early retirement of debt during 2007 decreased our 2007 operating results approximately $58.8 million before
tax, or $38.3 million after tax.
In December 2007, we established a $400.0 million unsecured revolving credit facility.
During 2007 our board of directors authorized the repurchase of up to $700.0 million of Unum Group’s common stock. During January
2008, we repurchased approximately 14.0 million shares for $350.0 million, using an accelerated share repurchase agreement. Under the
terms of the repurchase agreement, we may receive, or be required to pay, a price adjustment based on the volume weighted average
price of our common stock during the term of the agreement. Any price adjustment payable to us will be settled in shares of our common
stock. Any price adjustment we are required to pay will be settled, at our option, in either cash or common stock. We expect the price
adjustment to settle on or before the completion of the agreement in May 2008.
See “Liquidity and Capital Resources” contained herein and Note 9 of the “Notes to Consolidated Financial Statements” for
additional information.
Dispositions
During the first quarter of 2007, we completed the sale of our wholly-owned subsidiary, GENEX Services, Inc. (GENEX), a leading workers’
compensation and medical cost containment services provider. Our growth strategy is focused on the development of our primary markets,
and GENEX’s specialty role in case management and medical cost containment related to the workers’ compensation market was no
longer consistent with our overall strategic direction. We recognized an after-tax gain on the transaction of approximately $6.2 million.
See Note 2 of the “Notes to Consolidated Financial Statements” for additional information.