Unum 2008 Annual Report Download - page 27

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Legal and Regulatory Issues
On January 12, 2009, in a two-to-one decision, the Sixth Circuit Court of Appeals reversed the District Court’s earlier ruling certifying
a class in the case styled, In re UnumProvident Corp. ERISA Benefits Denial Actions. On January 26, 2009, the plaintiffs filed a petition for
rehearing of this decision by the full court. The District Court has yet to rule on our pending motions for judgment on the pleadings or for
summary judgment.
During 2008, we reached a settlement in the Shareholder Derivative action that was originally filed in 2002. Under the terms of the
settlement, which is subject to approval of the court, we have agreed to implement or continue certain corporate governance measures
and pay plaintiffs’ attorneys’ fees in an amount to be determined by the court.
Also during 2008, we reached a settlement with the U.S. Attorney in San Diego regarding broker compensation disclosure practices
dating back several years. While this settlement was only recently finalized, it covers issues that were resolved several years ago with other
regulators. We have worked cooperatively with the U.S. Attorney’s office since its inquiry into the industry’s compensation practices
began. As part of the settlement, we agreed to a payment of $5.6 million and included this expense in our 2008 results. Compliance with
the terms of the settlement agreement will not require any further changes in our business practices, as we previously made changes to
our broker compensation program.
During 2007, we completed the claim reassessment process required by the 2004 and 2005 regulatory settlement agreements. The
lead regulators conducted a final examination and presented their findings to Unum Group’s board of directors and management on April 14,
2008. The report of the multistate market conduct examination for the Maine Bureau of Insurance, Massachusetts Division of Insurance,
New York State Insurance Department, Tennessee Department of Commerce and Insurance, and other participating jurisdictions as well as
the report of the California Department of Insurance market conduct examination both provided that we satisfactorily complied with each
of the agreements’ mandates and that no fines will be assessed.
We continue to work closely with our regulators and also continue to work toward resolution of other outstanding legal and regulatory
issues. See Note 14 of the “Notes to Consolidated Financial Statements” contained herein for information on our legal proceedings.
Financing
During 2007, Unum Group’s board of directors authorized the repurchase of up to $700.0 million of Unum Group common stock. During
2008, we completed our share repurchase program and purchased 29.9 million shares of Unum Group common stock for $700.0 million.
During the second quarter of 2008, we retired the remaining $175.0 million of our 5.997% senior notes. During 2008, we made principal
payments of $59.3 million and $10.0 million on our senior secured non-recourse variable rate notes issued by Northwind Holdings and
Tailwind Holdings, respectively. We also purchased and retired $36.6 million of our 6.85% senior debentures due 2015 and $17.8 million of
our outstanding 5.859% senior notes due in May 2009.
In December 2008, we obtained a new credit facility. The current facility establishes a $250.0 million unsecured revolving line of
credit and replaces an existing facility. We intend to use any drawn borrowings from the facility for general corporate purposes. Any actions
that we may take will be consistent with our stated capital management strategy.
See “Liquidity and Capital Resources” contained herein and Note 8 of the “Notes to Consolidated Financial Statements” for
additional information.
Other
During the first quarter of 2008, we established a new non-insurance company, Unum Ireland Limited, which is an indirect wholly-
owned subsidiary of Unum Group. The purpose of Unum Ireland Limited is to expand our information technology resource options to
ensure that our resource capacity keeps pace with the growing demand for information technology support. This subsidiary, which is located
in Carlow, Ireland, had approximately 40 full-time employees at the end of 2008.