Unum 2008 Annual Report Download - page 29

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4. These second quarter of 2007 adjustments to our claim reassessment costs decreased 2007 before-tax operating earnings for our
Unum US group disability line of business $66.2 million and increased 2007 before-tax operating earnings for our Individual Disability —
Closed Block segment $13.2 million.
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.
Throughout 2007, we repaid an additional $619.5 million of our outstanding debt, for total long-term debt repayments of $769.5 million.
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.
On October 31, 2007, Northwind Holdings 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
Reinsurance Company (Northwind Re), the sole subsidiary of Northwind Holdings. See “Liquidity and Capital Resources” contained herein
and Notes 8 and 15 of the “Notes to Consolidated Financial Statements” for additional information on Northwind Holdings and Northwind Re.
In December 2007, we established a $400.0 million unsecured revolving credit facility.
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.
Accounting Pronouncements
Effective January 1, 2007, we adopted the provisions of Statement of Position 05-1 (SOP 05-1), Accounting by Insurance Enterprises for
Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts. SOP 05-1 provides guidance on accounting
by insurance enterprises for deferred acquisition costs (DAC) on internal replacements of insurance and investment contracts other than
those specifically described in Statement of Financial Accounting Standards No. 97, Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. The cumulative effect of applying the
provisions of SOP 05-1 decreased our 2007 opening balance of retained earnings $445.2 million.
Effective January 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (SFAS 109). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. Unlike SFAS 109, FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The cumulative effect of applying the provisions of FIN 48 increased our 2007 opening balance of retained earnings
$22.7 million.